The State Bank of Pakistan’s (SBP) attempt to launch Digital Banks in the country has piqued the interest of over 40 organizations, both domestic and foreign, who have applied for licenses.
According to sources, the interested enterprises include more than ten international corporations and more than 35 domestic companies, including large banks, EMIs, technology, and financial firms, in competition for the five licenses to be awarded by the banking regulator.
Foreign enterprises include Chinese technology firms as well as banks from the Middle East and Central Asian countries, while domestic entities include Habib Bank Limited, United Bank Limited, Allied Bank Limited, Bank Alfalah, and JS Bank.
The overwhelming interest of foreign and local institutions in the battle for five digital bank licenses has heightened rivalry among companies, potentially driving license fees up to Rs. 25 million.
It’s worth noting that the SBP declared that in the first phase, it will give licenses to five digital banks, which will also serve as an experiential stage for the development of a new banking concept under digital banks.
Once the targeted objectives are achieved through the establishment of banks, the banking authority may grant new licenses in the second phase.
A digital bank is one that provides a wide range of financial products and services largely through digital platforms or electronic channels rather than physical branches.
The SBP may issue two types of digital bank licenses under the plan: Digital Retail Bank (DRB) and Digital Full Bank (DFB).
In comparison to present brick-and-mortar banks, setting up digital banks will cost less money, encouraging new technology-oriented entrepreneurs to enter this new field.
During the pilot phase, the minimum capital requirement for digital banks is set at Rs. 1.5 billion, which will gradually climb to Rs. 4 billion over a three-year transition period.
DRBs may graduate to a DFB license after completing the transition period, provided they meet the minimum capital requirement and complete a two-year progression phase.
The SBP expects a few Digital Banks to be operational by 2022, and that they would play an important role in the inclusive and efficient expansion of Pakistan’s financial ecosystem.
To read our blog on “Under the new SBP framework, Tech and IT companies are permitted to establish digital banks,” click here.
