A significant transformation has been taking place in Pakistan’s banking sector over the past three years. It all began in March 2022, when the State Bank of Pakistan (SBP) unveiled its digital banking framework, signaling a new era in banking.
The announcement sent shockwaves through the banking industry. This was a golden opportunity for institutions to establish themselves as pioneers in the future of banking. With the rise of digital payments and Electronic Money Institutions (EMIs) in Pakistan, it became evident that the future lay in digital banking. The prospect of operating a full-fledged bank without the substantial capital expenditure required for physical branches made this venture even more appealing.
The Race to Digital Banking
The SBP’s announcement sparked a flurry of activity, with 20 applications flooding in from various entities. Leading commercial banks like HBL, UBL, Alfalah, and JS joined the fray alongside microfinance banks, domestic and international fintech companies, and large business groups that partnered with banking experts.
From this pool of applicants, the SBP undertook a rigorous selection process. After nine months of evaluation, in January 2023, five institutions were shortlisted and granted No Objection Certificates (NOCs). These included Easypaisa, Hugo Bank, KT Bank, Mashreq Bank, and Raqami Bank. By September 2023, these institutions received in-principle approval to establish digital banks. At this stage, all five were still in close competition.
Mashreq Bank Takes the Lead
Nearly two years after the initial shortlisting, a clear leader has emerged. Last week, Mashreq Bank became the first institution to receive a restricted license to begin pilot operations in Pakistan. This license allows the bank to operate within a controlled group under the close supervision of the SBP.
Mashreq Bank’s strong position in the race comes as no surprise. While it may not have the brand recognition of Easypaisa, which is a household name, it boasts robust credentials. As one of the largest conventional banks in the Middle East, Mashreq Bank also has a physical presence in Pakistan. Its digital banking solutions in the Middle East cater to startups and SMEs, earning it the title of “Best Digital Bank” in the region.
A Glimpse into the Future
Mashreq Bank’s pilot operations mark a significant milestone in Pakistan’s banking landscape. The SBP’s close monitoring will ensure a smooth transition as digital banking becomes a reality, paving the way for a tech-driven financial ecosystem. With Mashreq Bank’s expertise and strong backing, Pakistan’s first digital bank is set to shape the future of banking in the country.