Mashreq Pakistan awaits a green light from SBP to start digital banking operations

KARACHI: Mashreq Pakistan is waiting for approval from the State Bank of Pakistan to launch digital retail banking operations as the bank is eager to capitalise on the exceptionally dynamic country's market driven by sheer youth, tech-savvy populace, and the expanding trend towards financial digitalisation, the chief executive says.

“We have made significant progress towards achieving our digital retail banking license from the State Bank of Pakistan and are now at an advanced stage of the process; in-principle approval has been received, and Mashreq Pakistan is now a registered entity,” CEO Mashreq Pakistan Muhammad Hamayun Sajjad told The News in an interview.

“We are closely collaborating with regulatory authorities to ensure full compliance with their guidelines and our aim is to commence operations soon once we receive the final approval,” he said.“The exact timeline is subject to regulatory processes, but we're optimistic about launching our digital retail banking services in the near future,” he added.

Five players, including Mashreq Bank, received in-principle approval from the SBP in September 2023, which allowed them to get ready to introduce digital financial services in the cash-heavy nation. Four other banks were granted approvals: HugoBank, KT Bank Pakistan,Telenor Microfinance Bank, and Raqami Islamic Digital Bank.

“As a leading global financial institution in the Middle East and North Africa (MENA) region and an international digital leader, Mashreq is excited to announce its foray into Pakistan,” Sajjad said.

To provide a more comprehensive understanding of the bank's digital banking direction, he advocated introducing a concept he refers to as "Digital Darwinism." This concept reinforces the importance of adapting to technological advancements

Citing the SBP report, he stated that the data for the last six years indicates that financial transactions have more than doubled, primarily driven by digital transactions – with a whopping 82 percent of all total transactions being done digitally. This underscores a massive cultural and technological shift.

According to him, the introduction of digital banking licenses is thus, not just a trend; it is a paradigm shift. Indeed, Pakistan's burgeoning digital landscape - evidenced by the surge in mobile and internet banking to a cumulative growth of 70 percent compared to a mere 15 percent for ATMs - highlights the increasing reliance on technology and subsequently, reinforces the importance of building efficient and seamless digital platforms - one in which Mashreq aims to play a critical role.

The introduction of branchless banking in 2008 was a game-changer for Pakistan's financial sector, providing customers with an alternative way to bank, Sajjad noted. However, the digital banking’ of today in Pakistan is a culmination of a host of products and services squeezed into a small mobile screen with complex technology fabric, layer after layer, added over time, with a significant dependency on the plethora of integrations,” he explained.

It has resulted from various transformational, yet fragmented initiatives, instead of being built from scratch using the first principle of design,” he said. “This cumbersome amalgamation has made it challenging for banks to maintain high-quality of services and the cost of providing digital banking services,” he said and added there is, thus, a considerable gap between the potential offered by digital innovations and to what extent our financial industry has been able to leverage it effectively so far.

Sajjad believes that the substantial lack of client trust in digital banking that exists now is a reflection of these issues.“The reliability and availability of these services are still questionable as customers continue seeking reassurance from call service centers about the success of their transactions,” he said. There is a rise in disputes due to poor technology integrations among various service providers within the ecosystem.

“Consequently, not only have a number of cash transactions made a comeback (which had previously declined since 2019), there has also been a significant difference in the value of transactions between digital mobile banking and paper-based transactions, with digital transactions averaging Rs39,000, considerably less than the Rs750,000 on average for paper-based transactions.” When talking about the bank's strategy, Sajjad said Mashreq aims to set new standards in digital banking, both for existing customers and for the previously unbanked, the bank’s strategy is two-fold: First, to provide high-quality, reliable, and scalable digital banking services to the existing banked customers. Second, to establish unparalleled standards of digital banking for newcomers to the banking world. “This dual approach aims not just to keep pace with digital evolution but to lead it, ensuring we meet and exceed the needs and expectations of all our customers in this rapidly changing landscape.”

According to him, the bank plans to provide a full range of digital financial products, such as advanced payment options, digital savings and checking accounts, online credit and lending facilities, and investing instruments that can be accessed via mobile and web platforms. Additionally, the bank is exploring innovative products in the realms of contactless payments, peer-to-peer transfers, and financial management tools that provide value-added services to its clients.

Mashreq is dedicated to being a ‘Bank for All’ in Pakistan; championing financial inclusion, with a special focus on empowering women, youth, small and medium enterprises, and freelancers. “Our solutions and strategies are designed to meet the needs of such groups and be integrated seamlessly into the fabric of Pakistani society,” he said. The bank aims to empower underserved groups, ensure everyone has equal access to the digital banking services, and foster true financial inclusion in Pakistan, he added.

Regarding the Pakistani market, Sajjad stated, “I see the Pakistani market as being uniquely dynamic and full of potential. Distinct aspects include the sheer youthfulness and tech-savviness of the population, and the growing trend towards financial digitalisation, both of which create a strong appetite for digital innovation.”

With initiatives like the 'Raast' instant payment system, which is a big step forward in improving digital transactions, Pakistan's payment systems have evolved significantly in recent years. Like other emerging markets, he thinks there's still a lot of room for growth and innovation.

“At Mashreq, we are keen to contribute to this evolution by bringing our global expertise in payment systems to Pakistan, enhancing the overall efficiency and security of digital transactions,” he said.

“Our dedication to innovation means always staying ahead with technologies such as AI (artificial intelligence) to elevate the banking experience,” he said.“We are harnessing the power of blockchain for secure, transparent transactions, crucial for international trade and remittances. We are committed to creating, rather than just adapting, technologies to redefine banking in Pakistan.”