The State Bank of Pakistan (SBP) has unveiled the granting of no objection certificates (NOCs) to five applicants of its digital banking license, moving these entities closer to securing the regulatory greenlight they need to eventually launch their digital banking outfits.

Consortia Easy Paisa DB, Hugo Bank and KT Bank, as well as Mashreq Bank and Raqami are the five entities that received a NOC.

A NOC is a type of legal certificate delivered by an agency, organization, institute or, in certain cases, an individual, which says that the issuer has no objection to the details mentioned in the document. The document, however, does not object to the covenants of an actual certificate or license.

The five winners of the NOCs comprise bank-backed and government-backed entities, joint ventures between telcos and tech giants, as well as collaborations between fintech companies and domestic firms.

Hugo Bank is a partnership between pharmaceutical company Getz Bros, Pakistani courier M&P Pakistan, and Atlas Consolidated, the owner of the Hugosave brand, a wealthcare and savings app in Singapore that claims more than 60,000 customers.

The new bank, which will be targeted towards “financially underserved customers in Pakistan,” will provide services such as online account opening, fund transfer, bill payments, customer credit products, peer-to-peer payments, and other financial transactions, Atlas Consolidated said in a statement.

Next, KT Bank is a joint venture between two Pakistani companies, namely Fatima Fertilizer and City School, and digital banking startup Kuda Technologies.

Kuda Technologies is a fintech company operating in Nigeria and the UK that provides easy and free to low-cost transactions, instant lending, debit card services, and international money transfer services. The startup, which has raised more than US$90 million and is worth a reported US$500 million, claims five million users in Nigeria.

The third entity, Mashreq Bank, is an incumbent bank from the United Arab Emirates (UAE) and one of the Middle East’s biggest financial institutions.  In its home country, Mashreq Bank has been one of the most active industry players on the fintech front, having invested in startups like NymCard and F&B Payment Fintech Touché but also launched solutions like Mashreq Neo, a mobile banking offering.

Next, Easy Paisa DB is a consortium comprising Telenor Pakistan, the second largest cellular and digital services provider in the country, and Alipay, a leading third-party mobile and online payment platform from China that’s owned by the Ant Group. The group, which is the fintech affiliate of Alibaba, has been pursuing digital banking opportunities all over Asia, launching in 2022 Anext, its small business offering, in Singapore.

Finally, the fifth and last entity is Raqami. Raqami is a consortium of sovereign wealth fund the Kuwait Investment Authority (KIA) through the Pakistani Kuwait Investment Company, a joint venture between the governments of Pakistan and Kuwai, and Enertech, a fully owned subsidiary of Kuwai’s National Technology Enterprises Company.

These five organizations now need to corporate a public limited company with the Securities and Exchange Commission of Pakistan, after which they will be able to apply for In-Principle Approval from SBP after demonstrating operational readiness, the central bank said in a statement. This will be followed by the commencement of their operations under a pilot phase, and will eventually culminate with a commercial launch after obtaining SBP’s formal approval.

SBP chose the five players out of the 20 applications the central bank received last year, which, according to the regulator, included propositions from commercial banks, microfinance banks, electronic money institutions and fintech firms. SBP said it witnessed strong interest in the new licensing regime from both local and international players, reflecting their confidence in the growth prospect of the country’s digital banking sector.

The central bank introduced in January 2022 its licensing and regulatory framework for digital banks. The new regulation, which sets up digital banks as a separate and distinct category in Pakistan’s banking sector, aims to encourage fintech innovation, boost competition and help promote financial inclusion. More than half (53%) of Pakistan’s population of 220 million were unbanked in 2015, data from Access to Finance show.

Similar to Singapore, Pakistan’s digital banking framework offers two types of licenses: the Digital Retail Bank license, which focuses on serving the needs of retail customers; and the Digital Full Bank license, which allows licensees to serve retail customers as well as business and corporate entities.

Featured image credit: Edited from Unsplash