New central bank rules push Pakistan’s banks towards digital payments
The State Bank of Pakistan (SBP) has introduced a new series of rules for banks in a bid to push them away from manual processes and towards digital services.
The rules cover both the banks’ customer-facing offerings, and their internal operations. They require every bank to house a set of minimum services via their internet banking and mobile banking channels.
As well as calling for each bank – if they haven’t already – to create a chief digital office (CDO) role.
The SBP hopes the new rules will nudge banks to use more digital platforms when settling transactions.
In a circular, the SBP lists the exact minimum requirements for banks’ digital banking suites.
They include “bill payments, funds transfer, beneficiary management, limit management, credit and debit card management, [and the ability to] stop [a] cheque payment.”
As the SBP points out, end-to-end payment digitalisation won’t work if banks only allow their customers to make transactions to recipients registered with that same bank.
Which is why the rules stipulate customers should be able to make online payments to a maximum number of billers.
The central bank also specifies that “banks will not levy any activation, subscription or annual charges on their customers for using such services”.
It hopes that removing online fees will speed up the country’s adoption of digital banking services.
All Pakistani banks will need to provide debit cards to users who don’t already have one – unless they don’t want one.
This allows banks and microfinance banks to replace customer authentication via paperwork and signatures, with chip-and-pin cards and Two Factor Authentication (2FA).
A sea change
With some 216 million inhabitants, over half of which are unbanked, Pakistan is still in the embryonic stages of digital banking disruption.
Fintechs are emerging in the region to speed up digitalisation. Fintech start-up Oraan focuses on digitising a more than millennia-old financial concept – ROSCAs, or rotating savings and credit associations. Such “committees” are popular in India and the Caribbean, as well as Pakistan.
Whilst SadaPay, a Pakistan-based digital wallet, is hoping to emulate the success of Indonesia’s super app Gojek.
“I am excited by the prospects of digital payments in Pakistan,” Gojek’s former chief technology officer, Jon Sheppard, said last July. “I see the digitisation of payments as still in its infancy.”
Despite the SBP unifying QR payment standards across the country in 2019, and the launch of a new instant payment system in January, the market is still in its early stages.
“Mandating interoperability of QR payments was a watershed moment in Pakistan,” SadaPay’s founder Brandon Timinsky told FinTech Futures in May 2020.
“It’s the perfect regulatory conditions, with a bunch of legacy competitors.”
The SBP’s latest initiatives are only the beginning. It confirms there is more to come to ensure banks maintain comprehensive digital banking offerings for the foreseeable future.