Pakistan okays opening of first ‘full-fledged’ digital banks

Pakistan okays opening of first 'full-fledged' digital banks

KARACHI – The State Bank of Pakistan (SBP) has granted permission to five entities to establish full-fledged digital banks for first time in history of the country.

The central, according to an official statement, has issued no objection certificates Easy Paisa DB, Hugo Bank, KT Bank, Mashreq Bank and Raqami after a thorough and rigorous assessment process.

The development comes a year after SBP introduced a Licensing and Regulatory Framework for Digital Banks in line with international best practices and decided to issue up to five digital banks’ licenses.

The Framework was the first step towards introducing full-fledged digital banks in Pakistan. The digital banks are expected to provide all the banking services through digital means without any need for their customers to visit the bank branches physically, it said in a press release.

In response to SBP’s Licensing and Regulatory Framework for digital banks, SBP received twenty applications from a diverse range of interested players such as commercial banks, microfinance banks, electronic money institutions and Fintech firms by March 31, 2022.

Further, a number of foreign players including venture capital firms already operating in the digital banking space also expressed their interest to venture into Pakistani market directly or in collaboration with local partners.

It said the successful applicants were assessed on various parameters that included fitness and propriety, experience and financial strength; business plan; implementation plan; funding and capital plan; IT and cybersecurity strategy and outsourcing arrangements, etc.

“Going forward, each of these five applicants will incorporate a public limited company with Securities and Exchange Commission of Pakistan. Afterwards, they will approach SBP for In-Principle Approval for demonstrating operational readiness and for commencement of operations under the pilot phase. Subsequently, they will commercially launch their operations after obtaining SBP’s approval,” the official statement reads.

SBP expects that after commencement of their operations, these digital banks will promote financial inclusion by providing affordable/cost effective digital financial services including credit access to unserved and underserved segments of the society.