Digital banking in Pakistan: Cure or Curse?

According to Data Darbar, HBL has the largest customer base (36M+ to be exact) but 20% of its customers use the app only.

Digital banking has taken a turn among Pakistanis, and more and more people are relying on it, but still, is it a cure for our financial system or just a ho-ha?

But first, let’s see how the banks are doing currently. For this, I have picked four banks according to the Data Darbar.

What’s the stat say about digital banking in Pakistan?

So, let’s break down digital banking stats among the banks:

Coming in at number 4 is Alfalah Bank in mobile and internet banking in 1H2023, with values of Rs1tr and 29m.

HBL is ranked third, with a throughput of Rs2 trillion.

There was a rearrangement for the second position as UBL surpassed HBL at Rs2.1T.

And wearing the king’s throne is……., any guesses?

It’s Meezan!

Yes, Meezan was significantly ahead of the competition in the first half of 2023, with mobile and internet banking throughput of Rs5.36 trillion and 122.9 million transactions, representing more than a quarter of the industry total.

Ok, now that we have analyzed the digital banking stats for the first half of 2023, let’s find out if any of this is helpful.

Oh the digital banks

The State Bank of Pakistan (SBP) issued no-objection certificates (NOCs) in January for the formation of five digital banks in Pakistan as part of SBP’s drive to improve financial inclusion and the economy.

The SBP stated in its announcement of the NOCs that the winning bidders will “promote financial inclusion by providing affordable/cost-effective digital financial services, including credit access, to unserved and underserved segments of society.”

Bravo to SBP!

At present, the country’s thriving fintech landscape is filling the hole in customer centricity and technology in the banking industry. According to estimates, there are around 269 fintech businesses active in Pakistan.

These firms generally fulfill the requirements of previously neglected or unserved parts of the financial industry through mobile banking, digital payments, and lending.

Similarly, the future of the fintech business in Pakistan is positive, with a projected $35 million by 2025 and the potential to be a major employment generator, providing an extra 4 million jobs to the economy.

This possibility has driven the regulator to adopt a firm position on banking digitalization.

But this is Pakistan, so there are some challenges to digital banking.

The hurdles

• To begin, cybersecurity for the country’s digital banking systems may be exposed to cyberattacks, putting consumers’ personal and financial information in jeopardy.
• Secondly, rising prices and currency devaluation may have a detrimental influence on digital advancement.
• Third, Pakistanis’ financial literacy. According to the Global Financial Literacy Survey, it is 26%.

There are many others as well and if I mention here, it’ll eat a lot of my time (gotta do some other things too, you know).

Conclusion

So, to fully realize Pakistan’s growth potential, we must prioritize digital inclusion. By getting more people online, securing personal data, curbing inflation and interest rates, and enhancing financial literacy, digital banking can become a cure.

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