More fintech companies in the offing: Dr Reza Baqir

In a bid to boost financial inclusion and promote digital payments, the State Bank of Pakistan (SBP) is set to give its green signal to more fintech companies in the coming days.

This was shared by SBP Governor Dr Reza Baqir in his addresses at the DC Fintech Week 2021, the annual Washington forum for fintech policy.

“We have actually given full licences to two fintech (companies) recently and then four more are in the works — all of which are focused in the business of wallets and making it easier for those people particularly who face a hard time finding a traditional bank,” said Dr Baqir.

Sharing his views on the use of financial technology as a factor in the promotion of financial inclusion, the central bank chief shared that there are 186 million mobile subscribers in Pakistan. “It also shows you that using mobile, we can easily push a lot more on our goal of financial inclusion.

“What we are seeing is an explosion in growth of mobile and Internet banking and Covid-19 accelerated it,” said the ex-IMF official, who added that in the last four years the average annual growth of mobile phone banking has been about 44%.

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He said before Covid-19 we used to have 150,000 daily transactions of digital transfer of funds.

During Covid-19 in order to discourage the use of cash Pakistan eliminated all fees on inter-bank transactions, which propelled the figure to 1.1 million within the span of four months, which is a 10 fold increase.”

Sharing a World Bank report, Dr Baqir said Pakistan's conventional bank account density is low at around 376 deposits per 1,000 adults. “But this is missing a very important piece of the financial landscape of Pakistan which is the number of mobile money accounts.”

The SBP chief said that the number of mobile money accounts in Pakistan stands at 257 per 1,000 adults, “so when you add the mobile money accounts you would see that our overall penetration increases from about 35% to about 60%”.

“Mobile banking is a huge part of the financial inclusion landscape of Pakistan,” he said.

The SBP governor also informed that the central bank also monitors financial inclusion across different strata of society across different segments. “One segment, in particular, is gender and Pakistan right now has 82 million unique bank accounts. Of that, 60 million are men and 20 million are women, so we have a big gap,” revealed Dr Baqir.

In order to address this gap, SBP has launched the Banking on Equality initiative which is a policy design specifically to reduce the gender gap in financial inclusion, said SBP chief.

Talking about SBP’s faster payment system called Raast, the central bank chief said “the concept that we are trying to convey with this choice of a faster payment system is that we want to encourage people to use digital form of making payments, to encourage people to come into the formal sector and do it the correct way.”

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Dr Baqir said that the program has already gone into operation for bulk to individual payments and within a few months it will get to the stage of person to person payments and “the alias that we have decided is going to be a cell phone number.”

Dr Baqir also shared that they are providing incentives to the overseas Pakistani community and discouraging the use of informal channels.

He said that in one year alone 260,000 RDA accounts have been opened and an inflow of $2.5 billion was recorded through formal channels.

He shared that learning from the RDA experience, “we have now started digital onboarding of customers in Pakistan using remote biometrics. We worked with NADRA, using its database to allow remote biometrics through mobile app and other devices and this is going to allow banks to send mobile teams in rural and Peri-urban areas to onboard customers.”