Regulated for Growth – Licensing as the Cornerstone of the Digital Banking Revolution

Banks integrated technology to address the rising need for quick transactional operations and enabled the smart cellular sphere to become a standing partner in enhancing the documented economy and banked population. All banks gained digital arms, and regulatory requirements ensured transparency and a secure framework. What they saw was an unprecedented rise in customers’ satisfaction, an increase in profitability, and reduced operational costs, while furthering service levels during transaction processing times. Developing economies realized the advantages of digital transactions, which typically have lower overhead costs than brick-and-mortar institutions. This allowed them to pass these savings on to customers through reduced fees and better rates. Digital tools also enabled outreach to larger communities in rural or underdeveloped areas where the physical infrastructure of a bank was not available. Digital transactions grew into digital banks and became the face of evolved inclusivity, conversion of unbanked into banked, and convenience for all tiers of society. From housewives launching entrepreneurial initiatives from the comfort of well-equipped homes to farmers on the fields, and plumbers on sites – the entire diverse social infrastructure became woven in this digital fabric. These banks, sans physical presence became accessible on smart screens through designed apps and gave way to the digitally equitable world. Pakistan is also set to enter this realm officially. The State Bank of Pakistan’s (SBP) licensing initiative is designed to encourage the growth of digital banking while maintaining stringent regulatory standards. By issuing no-objection certificates to entities like easypaisa, Hugo Bank, KT Bank, Mashreq Bank, and Raqami, the SBP has paved the way for a new era of banking in Pakistan. These licenses will allow financial institutions to operate entirely online, without the need for physical branches. This shift will not only reduce operational costs but also enhance accessibility for customers, particularly in rural and underserved areas. SBP aims to foster innovation and improve financial inclusion while maintaining a robust regulatory framework. The licensing framework sets high standards for areas such as capital adequacy, cybersecurity, data protection, and operational resilience. Adherence is a must, ensuring a rather safe and resilient eco-system. Given its proven track record in digital financial services and commitment to innovation, easypaisa emerged as a natural choice for the digital retail banking license. The company’s established infrastructure, robust risk management framework, and demonstrated ability to serve millions of customers set it apart from other applicants. Under SBP’s Licensing and Regulatory Framework for digital banks, SBP received 20 applications from a diverse range of interested players such as commercial banks, microfinance banks, electronic money institutions and Fintech firms. Furthermore, several foreign players including venture capital firms already operating in the digital banking space also expressed their interest to venture into Pakistani market directly or in collaboration with local partners. As the only incumbent institution to secure this license, easypaisa’s selection reflects both its operational excellence, digital-first footprint, and its alignment with SBP’s vision for digital financial inclusion. easypaisa received its branchless banking license in 2009 and has since been a name for transactional convenience – ‘easypaisa kardo.’ In this evolving realm of digital finance, easypaisa seems well positioned to lead the game in the digital retail banking arena. It has already gained a consumer base of over 50 million registered users—equivalent to 1 in 4 Pakistani adults—and a vast agent network exceeding 214,000 across the country. In 2024 alone, easypaisa processed 2.7 billion transactions worth close to PKR 10 trillion which is equivalent to 9% of Pakistan’s GDP. Chris Skinner is a world-renowned strategist who specializes in the future of business, technology, and finance. Talking of the rise of digital banks, he said: “The issue today is that branches were not designed for convenience purpose. They were designed to look after money and process monetary transactions. They were designed to handle physical forms of cash and cheques, as secure transaction centres. This is the core reason why everyone thinks that branches will disappear because they are not retail stores, engaging the brand community, but instead transaction centres run like some administration process.” Chris Skinner, Digital Bank: Strategies to launch or become a digital bank. Nearly 53% of the adult population in Pakistan is unbanked with large segments of women in labor workforce. While this is an excellent potential customer base, it is essential to understand that digital banking is not a linear transactional model only, it is savings and lending too. It generates valuable data that helps banks offer personalized products and services, enhancing customer satisfaction and fostering loyalty. It contributes to sustainability by reducing reliance on paper and physical resources, aligning with environmentally friendly practices, and enabling the most deprived financial access and growth. Additionally, the absence of seams and physical restrictions of geography, the ability to enable cross-border transactions and integrate with international financial systems, digital promotes global connectivity, fostering trade and investment opportunities. We may be looking at the earliest phase of digital finance and as technology evolves, this realm is set to play an even more critical role in personal finance, business operations, and economic growth, becoming the foundation of a financially inclusive and connected future. Pakistanis as a nation, are peoples’ people, and their affinity with their banker is a strong one. Digital will have to gain a personal connection for that. But with more than half of the population having no access to the physical structure of a bank, a strong interface, interactive apps, and expedient transactions, savings, and lending models will be opening up new vistas for economic progress. Point to note is that the future of banking in Pakistan, as in the world is digital, but the journey will need trust, innovation, and inclusion to lead the way. Conformity with the regulatory framework is, but essential. This article is written by Hadia Arif. She is a communications professional, writes about technology, education and social issues. She can be reached at [email protected]