A move for the new neighborhood children – Journal


In August last year, an online payment of 100,000 rupees was made from the payroll account of a world famous bank to pay off the credit card bill of another reputable bank for its discounts. Imagine the dismay when the money flew away – numbers on the screen that vanished into the dark.

Months of frantic calls and emails later, including to State Bank Mohtasib, the amount was finally credited, but not before the person vowed to do online banking and comes back to the cumbersome comfort of ringing and stumbling money. As Twitterati regularly deplores, this case is not isolated in Pakistan. If the basic online banking infrastructure is so weak, then what about the licenses for digital banks that are in the works?

Go out with the old one

“Only the front is digital, the system at the back is analog,” explains Fawad Abdul Kader, head of digital financial services at National Institutional Facilitation Technologies. “They’re building their architecture on switches bought for ATMs in the 2000s. When you build new technology stacks based on older architectures, it has to do with conflict and therefore the challenge of online banking. not according to customers’ needs.

A digital banking license is the next evolutionary step for unicorn fintechs, but it is premature in the Pakistani market

Banks have traditionally moved from stage to stage, from check books and ATMs to internet banking and mobile banking. But the legacy architecture has not been improved. “All the more reason for the licenses to go to banks that were built from scratch on a digital framework,” he says.

“Those who will make significant changes are those who will start from scratch,” confirms Paysys Labs CEO Karim Jindani. “The adoption of new technologies is not the strong point of traditional banks. It would be difficult to scale one of the top five banks compared to organizations like Telenor’s Easy Paisa – one of their stakeholders is Ali Baba, which allows them to bring their technology very easily. Adds Mr. Jindani.

More variety in your kiryana store

“The local trader can buy products worth Rs 5,000 to Rs 10,000 from three to five distributors at a time as that is all he can afford,” said the CEO of OneLoad , Muhammad Yar Hiraj. “They are not guaranteed to borrow or finance their working capital needs.”

His company has received approval in principle for an Electronic Money Institution (EMI) license and also intends to apply for a digital banking license.

“We are focusing on micro-retailers. Your neighborhood kiryana store will be able to accept digital payments if and when we obtain a digital banking license. Currently we have 55,000 active stores and believe the number is 10 times that. We will be able to use the digital banking license to increase financial inclusion for small businesses and aim to reach half a million in the next three years or so. “

“Traditional institutions have failed to meet the needs of the mass market such as small stores. If you re-license similar institutions, that defeats the purpose. To really leave more room for innovation, there should be more room for experimentation, ”he adds.

A premature stage?

Not everyone is convinced that digital banking licenses will lead to change at every level.

“A digital banking license is the next evolutionary step for unicorn fintechs, but it is premature in the Pakistani market,” said Omer bin Ahsan, CEO of Haball and head of regulation for the Pakistan Fintech Association.

“Payment system operators / payment service providers, IMEs and unregulated fintechs are still in the creation phase. International digital banks, branchless banks and some traditional banks with an appetite for risk should be the first to try it, ”he said.

A consensus among the various stakeholders seems to be that the digital game belongs to the newcomers and not to the big traditional banks which seem unable to always successfully transfer money from one bank account to another. And why should they invest in technology beyond optics when their existing business models are so magnificently profitable. On the other hand, fintechs may be too young at this point.

While it remains to be seen whether digital licensing is more than a move by the State Bank to appear more progressive in theory than in fact, it is also true that digital payments are a growing business and attracting a lot. of foreign capital. At the very least, growth in this space will make some fintech founders very wealthy.

Posted in Dawn, The Business and Finance Weekly, January 10, 2022


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