In a First, Pakistan Allows Five Entities to Establish Digital Banks

The central bank of Pakistan announced that it had granted permission to five entities to establish digital banks for the first time in its history in an effort to promote financial inclusion through easily accessible digital financial services.

By offering all kinds of financial products and services primarily through digital platforms or electronic channels, a digital bank typically gives customers access to banking anywhere they have secure Wi-Fi and a reliable cell connection.

The State Bank of Pakistan (SBP) made the decision to grant up to five licenses and create a licensing and regulatory framework for digital banks a year ago in accordance with global best practices. Now, a change has been made. The move was made as a part of SBP initiatives, which aimed to offer new payment options in a particular area.

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According to the SBP, 20 applications were submitted in response to the regulatory framework by a range of interested parties, including commercial banks, microfinance institutions, electronic money institutions, fintech companies, and several foreign players, including venture capital firms already active in the digital banking space.

The Securities and Exchange Commission of Pakistan will register a public limited company for each of the five applicants, according to the central bank.
They will then go to SBP for In-Principle Approval to show that they are operationally ready and can begin operating during the pilot period. Once they have the SBP’s approval, they will start doing business.

The five organizations—Easy Paisa DB, Hugo Bank, KT Bank, Mashreq Bank, and Raqami—were picked after a rigorous evaluation process that adhered to the framework’s requirements, claims the SBP.

Their outsourcing agreements, IT and cybersecurity plans, business plans, implementation strategies, capital budgets, moral character, experience, and financial stability were among the many criteria taken into consideration when evaluating them.

When these digital banks are operational, according to the SBP, they will promote financial inclusion by extending credit to underserved and unserved societal groups and providing reasonably priced/cost-effective digital financial services.

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