ISLAMABAD: Pakistan's central bank said on Friday it had allowed five entities to establish digital banks for the first time in its history, hoping the move would promote financial inclusion through affordable digital financial services.
A digital bank offers all kinds of financial products and services primarily through digital platforms or electronic channels, essentially giving people access to banking wherever they may be and wherever they have secure Wi-Fi and strong cell signal.
The development comes a year after the State Bank of Pakistan (SBP) introduced a Licensing and Regulatory Framework for Digital Banks in line with international best practices and decided to issue up to five licenses. The move came as part of the SBP initiatives, aimed at introducing new payment solutions in a country with a massive unbanked population.
In response to the regulatory framework, the SBP said, it received 20 applications from a diverse range of interested players such as commercial banks, microfinance banks, electronic money institutions, fintech firms as well as a number of foreign players, including venture capital firms already operating in the digital banking space.
"Each of these five (05) applicants will incorporate a public limited company with Securities and Exchange Commission of Pakistan," the central bank said in a statement.
"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 five entities, Easy Paisa DB, Hugo Bank, KT Bank, Mashreq Bank and Raqami, were selected after a thorough and rigorous assessment process as per the requirements of the framework, according to the SBP.
They were assessed on various parameters, including fitness and propriety, experience and financial strength, business plan, implementation plan, funding and capital plan, IT and cybersecurity strategy and outsourcing arrangements.
"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," the central bank said.