The digital banks are expected to provide all banking services through digital means without any need for their customers to visit the bank branches physically.
For the first time, the State Bank of Pakistan (SBP) has issued no-objection certificates to five entities seeking to establish full-fledged digital banks.
Easy Paisa DB, Hugo Bank, KT Bank, Mashreq Bank, and Raqami are among the five entities. In January 2022, the central bank introduced a licencing and regulatory framework for digital banks in line with international best practises and decided to issue up to five (05) licences to digital banks.
The Framework was first step toward establishing full-fledged digital banks in Pakistan. The digital banks are expected to provide all banking services through digital means without any need for their customers to visit the bank branches physically.
SBP received twenty (20) applications from a diverse range of interested players, such as commercial banks, microfinance banks, electronic money institutions, and fintech firms, in response to SBP’s Licensing and Regulatory Framework for digital banks by March 31, 2022.
A number of foreign players, including venture capital firms that are already active in the digital banking space, have expressed an interest in entering the Pakistani market directly or in collaboration with local partners. The five applicants were chosen following a thorough and rigorous assessment process in accordance with the framework’s requirements.
Applicants were evaluated based on a variety of criteria, including fitness and propriety, experience and financial strength, a business plan, an implementation plan, a funding and capital plan, an IT and cybersecurity strategy, and outsourcing arrangements, among others.
In the future, the entities will establish a public limited company with the Securities and Exchange Commission of Pakistan. Following that, they will apply to SBP for In-Principle Approval to demonstrate operational readiness and begin operations under the pilot phase.
After receiving SBP approval, they will commercially launch their operations. SBP anticipates that once these digital banks begin operations, they will promote financial inclusion by providing affordable and cost-effective digital financial services, including credit access, to unserved and underserved segments of society.