The State Bank of Pakistan (SBP) has approved digital banking licenses for five banks after issuing no-objection certificates (NOCs) to five applicants out of 20 for establishing digital banks in the country amid efforts to promote financial inclusion and encourage digital financial services in the country. These five are EasyPaisa, Hugo Bank, KT Bank, Mashreq Bank, and Raqami.
The following financial services providers received digital banking NOCs:
- EasyPaisa DB (owned by Telenor Pakistan B.V & Ali Pay Holding Ltd)
- Hugo Bank (Getz Bros & Co, Atlas Consolidated Pte Ltd. and M & P Pakistan Pvt Ltd)
- KT Bank (Kuda Technologies Ltd, Fatima Fertilizer Ltd. and City School Pvt Ltd)
- Mashreq Bank (UAE-based Mashreq Bank)
- Raqami (Kuwait Investment Authority through – PKIC and Enertech Holding Co)
“The five applicants were selected after a thorough and rigorous assessment process as per the requirements of the Licensing and Regulatory Framework for Digital Banks,” the SBP said in a statement issued on January 13.
Purpose of establishing digital banks
As per SBP’s regulatory framework, digital banks are required to contribute to
- Enhancement of financial inclusion
- Provision of affordable/cost-effective digital financial services primarily to unserved and underserved segments of society, and
- Fostering a new set of customer experience
Regulatory Framework for Digital Banks
The central bank, in January 2022, introduced a licensing and regulatory framework for digital banks, which it called “the first step” towards introducing full-fledged digital banks in Pakistan. The digital banks, as the name suggests, will provide all the banking services to their customers through digital means without requiring them to visit the bank branches physically.
In response to SBP’s Licensing and Regulatory Framework for digital banks, some 20 parties, including commercial banks, microfinance banks, electronic money institutions and Fintech firms, submitted applications.
A number of foreign players including venture capital firms already operating in the digital banking space also expressed their interest to venture into the Pakistani market directly or in collaboration with local partners, the SBP said.
What next?
In the next step, the NOC holders will incorporate public limited companies with the Securities and Exchange Commission of Pakistan (SECP). After setting up PLCs, they will seek In-Principle Approval from SBP to show operational readiness and commence operations under the pilot phase. After successfully running pilot operations, these digital banks would be allowed to commercially launch their operations after obtaining SBP’s approval.
Cost-effective digital banking services
The SBP expects that after their operations’ commencement, these digital banks will promote financial inclusion by providing affordable/cost-effective digital financial services including credit access to unserved and underserved segments of society.