- Syed Raza Hassan Web Desk
- 13 Minutes ago
SBP governor announces launch of country’s “first digital bank”
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- Web Desk
- Oct 03, 2024
KARACHI: In order to advance the financial sector, the Governor of the State Bank of Pakistan (SBP), Jameel Ahmed, announced that the country’s “first digital bank” is expected to become operational within the “next few months”.
The initiative by SBP will involve the establishment of five digital banks, which have received in-principle approval from the central bank.
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The SBP governor shared his optimism that by the middle of next year, the digital banks will begin operations.
Digital banking refers to the digitisation of traditional banking services, allowing customers to conduct financial transactions online without the need for physical branches.
The shift is expected to improve accessibility and convenience for customers, particularly in a country where a significant portion of the populace remain unbanked.
One primary advantage of this initiative would be its ability to provide financial services to a wider populace. With the proliferation of smartphones and internet access, digital banks can reach customer in remote areas, offering them essential banking services such as savings accounts, loans and money transfers.
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Digital banking also typically offers lower operational costs compared to traditional banking models. Without the need for extensive physical infrastructure, digital banks can pass on these savings to customers in the form of lower fees and better interest rates.
However, the transition to digital banking will not be easy, especially for a country like Pakistan. One major concern should be cybersecurity. As financial transactions increasingly more online, the risk of cyberattacks and data breaches rises.
The digital divide still remains a pressing concern. Wile urban areas may have better access to technology and internet services. rural areas often lag behind. The wide disparity in a country where only 30 per cent of the country is urban, can limit the reach of digital banking.
Literacy rate in Pakistan is defined by anyone able to speak a language. However, most of our financial sector uses English. Many customers even within the urban areas are not educated or cannot speak English. They need to be guided step by step through every banking process. The shift to digital banking will exacerbate this inequality even further.
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While the initiative promises to improve accessibility and efficiency in Pakistan’s banking service, it also begs careful consideration of the associated risks and challenges, and like many projects or initiatives by the many governments before, how much consideration or research went into it is not known to the public.