Digital Banks in Pakistan

State Bank of Pakistan (SBP) is currently working on introduction of a separate category of banking services that they are calling Digital Banks. “Move will help achieving the maximum target of financial inclusion”, said sources.

Once allowed, Banks will be allowed to operate through internet only, i.e. they will be allowed to on-board customers through internet — without having any physical presence — while customers will be allowed to do all sorts of financial transactions while staying online through websites or mobile apps.

The Regulatory Framework, that SBP is yet to finalize, would ideally encompass following broader areas among others:

• Entry criteria for the establishment of Digital Banks
• Minimum Capital Requirement (MCR) for establishment of a Digital Bank and
• Customer on boarding criteria as well as digitization support for an Omni Channel Banking Paradigm

“Digital bank incorporates new and developing technologies throughout a financial services entity, in concert with associated changes in internal and external relationships, to provide enhanced customer services and experiences effectively and efficiently”, the SBP director said.

SBP Officials said that customers demand towards banking services are changing as they need more choices, immediate availability and direct access to ready-to-use services. Pakistan has come a long way from traditional banking services to create modern banks and a digital future.

“SBP is working on development of a concept paper on Digital Banks. This concept paper would include the international experiences of Digital Banks, regulatory framework available, best international practices etc”, told us sources.

SBP would develop a Regulatory Framework on Digital Banks after inviting feedback on the concept paper, he confirmed

It should be noted that millions of customers are using mobile banking services in Pakistan especially after the launch of branchless banking. The number of users is on the rise with the adoption of new services and availability of 3G and 4G services in different cities of Pakistan.

The central bank is also working to further streamline the operation and service level of mobile banking with the introduction of Third Party Service Providers (TPSP) in the sector. These operators will act as an aggregator and accelerator in the digital banking.

Also, the concept of digital bank branches have been introduced in the country as Standard Chartered Bank and United Bank Limited are separately operating their two branches in Karachi. These banks have plans to add more digital branches in future.

The central bank devised a plan named National Financial Inclusion Strategy (NFIS) with the target of 50% account ownership for the adult population and 25% for total adult women population by 2020.​