State Bank of Pakistan (SBP) Director Payment Systems Department Sohail Javaad took a dig at commercial banks on Wednesday and blamed them for treating customers with contempt “which is a leading reason why many people choose to remain financially excluded.”

Speaking at 4th Digital Banking and Payments Summit & Expo - DigiBAP2023 at a local hotel in Karachi, he said that banks only treated priority customers with respect.

“When an ordinary customer walks into a bank, they don’t get the service they deserve.”

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The event discussed financial inclusion of the unbanked population of Pakistan. In a bid to boost financial inclusion, the SBP granted licenses to five digital banks.

These financial institutions have promised to enhance financial inclusion among the unbanked masses and investment in technology and customer services to aid the growth of the financial sector.

Top officials of Mashreq Bank, Raqami and Easypaisa DB reiterated their resolve towards this aim in future. These three financial institutions recently secured the digital banking licence from SBP.

Speaking as a regulator, Javaad spoke at length about the pitfalls in Pakistan’s banking industry and discussed the drawbacks that should be addressed. He expected the digital banks to work towards alleviation of the problems.

Javaad added that when customers contact banks to complain about frauds or scams, they are told that it was their fault since they gave away vital information related to their accounts.

He pointed out that bank call centres make customers wait for hours and even when they are able to connect to bank officials, their grievances are rarely addressed.

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“I think that this attitude is one of the leading reasons why people choose to remain financially excluded,” he added.

The SBP official said that if banks failed to respect customers and serve them, then SBP will launch a Central Bank Digital Currency (CBDC) “and I would not want banks to be a part of the digital currency”.

A CBDC is virtual money that is backed and issued by a central bank.

“The CBDC technology is disruptive, which means that it will revolutionise the entire system.”

He further said that many kinds of banking frauds are taking place in the country and urged banks to respond to it.

“I don’t mean to say that banks aren’t doing anything however, fraudsters remain ahead of the system and come up with new techniques all the time.”

“What SBP doesn’t like is banks telling customers that it was their fault because that they gave their passwords.”

“We are thinking of changing the liability structure. In case of frauds, we are asking banks to agree to return the money in a few days.”

According to Javaad, a huge problem of Pakistan’s economy was the presence of large quantities of cash.

“It shows that people are choosing to remain financially excluded,” he said. “People are okay with using cash because it’s free and easy. The language and terminologies that banks use also turn the potential customers away.”

Speaking on the occasion, Mashreq Bank CEO Irfan Lodhi said that his organisation had entered the Pakistani market with long term vision and plans to achieving greater market penetration and financial inclusion.

He was of the opinion that new entrants to the financial sector should focus on creating a place in the market by filling the gaps in services rather than yearning for immediate profits.

In his address, former SBP governor Dr. Ishrat Husain said that financial reforms are an ongoing process.

“SBP has encouraged new initiatives over the years like Islamic banking, microfinance banking and banking for women,” he said. “It also provided financial services to traditionally unserved sections of the society from agriculture and small and medium enterprises.”

“Digital banks are the future and they have the means and opportunity to promote financial inclusion and fill gaps which conventional banks cannot,” he said.

Raqami Executive Director Nadeem Hussain said that people chose not to save money in banks because the returns did not offset the inflation.

UBL President and Chief Executive Shazad Dada was of the opinion that cultural change in the organization is a huge challenge.

He said that his bank was moving forward on basis of design thinking and data analytics to enter the future of banking with increased services to customers.