The State Bank of Pakistan (SBP) is taking its first steps toward bringing a fully digital bank to the country.
The SBP announced Monday (Jan. 3) it had introduced a licensing and regulatory framework for digital banking, with the goal of creating a bank that will offer all the services of a traditional bank without requiring customers to visit a physical branch.
“Digital banks are the culmination of the digital journey on which the banking industry embarked upon many years ago,” the SBP said in a news release. “The framework for digital banks being issued today is the latest in a series of recent initiatives by the State Bank of Pakistan towards digitalization of banking and payments solution in the country.”
Those initiatives include digital onboarding, electronic money institution license, and a 2020 effort to digitize Pakistan’s corporate supply chain.
Under the new framework, the SBP can grant licenses to two types of digital banks, retail banks and full banks, which can serve retail customers and corporate/business clients.
The SBP notes the “demand for banking services is also faith sensitive and there is a large market for Sharia compliant services.”
With the Islamic banking industry gaining a large share of the sector in Pakistan, the SBP says it will offer licenses for both conventional and Islamic banks.
Creating a digital bank will also require less capital compared to brick-and-mortar establishments, “encouraging new technology oriented entrepreneurs to enter this new realm of business,” the bank said.
The minimum capital requirement for digital retail banks is $8.5 million (or 1.5 billion Pakistani rupees) during the pilot phase, although that number will eventually increase to $22.6 million over three years.
“The framework mainly aims to enhance financial inclusion through affordable/cost effective digital financial services and is part of SBP’s comprehensive efforts to promote digital financial services in Pakistan,” the SBP said.
Last year, Pakistan established a government-run instant digital payment system aimed at helping financial including. Known as “Raast” or “direct way,” this system lets merchants, businesses, individuals and government agencies use real time payments via the internet, mobile devices and agents.