esigned to tighten taxation screws and promote greater formalisation of the economy, the Finance Bill, 2025, promises to turn chaos into order. For digital banking and fin-tech, however, it might just replace innovation with endless compliance checklists.

Once hailed as great equalisers of finance, digital banks were supposed to bring savings and credit to everyone with a phone and a pulse. But the new rules demand that users prove that they’re tax-compliant even before they open an account. If you’re a gig worker, an informal labourer or someone who doesn’t collect income like a salaried office gnome, you are out of luck. The bank door doesn’t just close on you—it slams shut with bureaucratic flair. Digital banks, under the new rules, must now perform financial detective work before onboarding new customers. Exceptions to these restrictions are so narrow they might as well be non-existent. The result is exclusion on a national scale.

If you sell something online, brace yourself. Digital banks are now required to deduct taxes from your transactions in real time. That’s right: the time you were using to fulfill orders, chat with customers and make sure your sibling wasn’t eating your leftover take out. The bill proposes tax withholding responsibilities for digital banks acting as payment processors. Depending on the payment method—digital or cash-on-delivery—the tax rate will vary. For small sellers and freelancers who operate on razor-thin margins, this isn’t just a speed bump; it’s like trying to moonwalk through molasses while juggling flaming torches.

Don’t even think about bypassing this by selling without registering for taxes. The Finance Bill, 2025, wants your name on the taxman’s guest list before you touch a digital wallet, virtual POS system or disbursal tool. If you’re not a tax-registered vendor, you might as well be a ghost. Digital banks are required to restrict access for any unregistered sellers using their embedded financial services. This could cut an entire economy of micro-entrepreneurs—people who sell from their living rooms, WhatsApp groups or local bazaars—from the digital economy.

If you thought your banking data was safe, banks must now report your account behaviour, spending pattern and general financial mischief to tax authorities whenever they ask for it. This isn’t casual oversight—it’s mandated data sharing, with banks acting as real-time informants. Remember that pizza you bought at 2 am? Big Brother noticed, and he’s wondering if you claimed it as a business expense. For new digital users, especially youth and rural women already hesitant to trust financial institutions, this kind of oversight might as well come with a flashing red warning: enter at your own risk.

The compliance costs for digital banks themselves are nightmarish. It’s not just about checking boxes. There are steep penalties for non-compliance not metaphorical slaps on the wrist. We’re talking significant fines for missing reports, letting non-filers slip through, or failing to correctly implement tax deductions. For fin-tech startups still trying to hire their first compliance officer, this is an additional challenge.

Yet, it’s not all doomscrolling and despair. The bill’s emphasis on formalising digital transactions could raise the stature of fin-tech players in the financial ecosystem. Compliant, well-integrated digital banks may find themselves more attractive to investors, partners and regulators. The bill also reintroduces a tax credit for home loan borrowers—something digital banks can leverage to grow their mortgage portfolios, especially in underserved housing markets.

But these are silver linings taped over a gaping hole. Informal workers can’t bank and freelancers have to jump through flaming tax hoops. Women in rural areas face exclusion not due to capability, but because they lack a tax trail. Youth and first-time users now have to weigh every digital transaction against the odds of government snooping. For many, the hurdles to becoming digitally included are now steeper than ever.

Progress in financial inclusion took years to build. It could unravel in months. With such sweeping reforms, one might expect a transitional plan or a support mechanism for new users entering the tax net. Instead, there’s silence—a regulatory shrug that leaves digital banks scrambling to invent workarounds while still technically colouring within the lines.

What can digital banks do in this Kafka-esque maze of compliance? Start by turning their systems into sleek, tax-sniffing cyborgs. Automate everything. Build privacy walls like Fort Knox, then triple-lock the gate. Upgrade their onboarding flows to check tax status on the fly. Integrate real-time vendor screening to weed out unregistered users. Set up compliance command centres like it is Mission Impossible, with lawyers developers, and tax consultants working side by side. Most importantly, they must convince regulators that maybe, just maybe, treating a micro-seller in Sahiwal like a multinational in Singapore isn’t the best path to reform.

The Finance Bill, 2025, is a complex balancing act between fiscal discipline and digital empowerment. While it aims to clean up the economy and plug tax leaks, it risks choking the channels that could democratise finance in Pakistan. In theory, it’s about transparency and structure; in practice, it may just punish the very people who never had the chance to game the system in the first place. If the digital economy is a ladder out of poverty, this bill just covered it in grease and is demanding a biometric scan at every rung.

The challenge now is a kind of triathlon: innovate, comply and still manage to include the people who need it most. Let’s hope the digital banks of Pakistan are wearing their running shoes and carrying the helmets.

The writer is an advocate of the High Courts, governance lead at a fin-tech. She can be reached at minahil.ali12@yahoo.com