Sunday, 4 June 2023

State Bank to Issue New Licenses to 5 New Digital Banks

The State Bank of Pakistan (SBP) will soon embark upon a journey toward an advanced banking system in the country by issuing licenses for setting up digital banks. In the first phase, the regulatory authority will issue five licenses to different entities for setting up digital banks.

This revelation was made by top SBP management while addressing a webinar titled, “Digital Banks – A New Era in Pakistan,” hosted by SBP on Friday.

In his welcome address, Executive Director, Banking Policy and Regulation Group, SBP Arshad Mehmood Bhatti informed the audience that SBP will grant up to five licenses for digital banks, as it intends to promote digital banks with a strong value proposition, robust technological infrastructure, sufficient financial strength, technical expertise, and effective risk management culture.

In his keynote address, Governor SBP Dr. Reza Baqir highlighted the potential of digital financial services to become ubiquitous in the banking industry and its significance in terms of inclusion and innovation. Shedding light on the prospects of digital banks in Pakistan, he emphasized that one of the key goals of SBP was to promote inclusion, innovation, and modernization of the financial sector of Pakistan.

Dr. Baqir highlighted how the digitization of financial services was picking up pace and was transforming the way banking was done for both individuals and businesses. He mentioned that Pakistan’s journey for digital financial services started in the early 2000s, and since then, a number of enabling regulatory initiatives were launched, notably, Branchless Banking Regulatory Framework, Electronic Money Institutions Regulations, Roshan Digital Account, RAAST, Customers’ Digital Onboarding Framework, and Asaan Mobile Accounts etc.

A digital bank has been defined as a bank that offers all kinds of financial products and services primarily through digital platforms or electronic channels instead of physical branches. Under the plan, SBP may grant two types of digital bank licenses:

  • Digital Retail Bank (DRB)
  • Digital Full Bank (DFB)

The event was attended by prominent members of the banking community, fintech, business fraternity and government agencies.

It also covered a panel discussion moderated by Nadeem Hussain, founder Planet-N. The panelists included Muhammad Aurangzeb, Chairman Pakistan Banks’ Association, Tania Aidrus, former Executive of Google and Special Assistant to Prime Minister, Qasif Shahid, CEO & Co-Founder of M/s Finja, and Muhammad Akhtar Javed, Director Banking Policy & Regulations Department of SBP.

The panelists were of the view that digital banks would offer a faster, cheaper and more efficient solution for meeting the financial requirements of unserved and underserved segments of the society.

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