The State Bank of Pakistan (SBP) has raised concerns about commercial banks allowing unauthorised mobile phone applications to offer online banking services, putting depositors’ money at risk.
?In a notification to its regulated entities (REs) providing digital banking services, the central bank highlighted the usage of unauthorised and unlicensed digital lending mobile apps that integrate with bank accounts for loan disbursement, collection, and creditworthiness checks. This poses consumer protection concerns and reputational risks for banks.
The regulated entities encompass commercial banks, microfinance banks (MFBs), payment system operators, payment service providers, and electronic money institutions (EMIs).
The SBP stated that REs should not provide services such as deposits, lending products, mobile application integration, payment gateway services, credit scoring, creditworthiness checks, wallet services, or API integration to unauthorised and unlicensed digital lending platforms directly or indirectly.
IT expert Noman Ahmad emphasized the need for the central bank to disclose the names of financial institutions offering banking services through unlicensed applications. This would allow depositors to withdraw their funds and protect their deposits in case of any unforeseen events. He expressed surprise that unauthorised mobile platforms were able to offer banking services despite the SBP’s regulatory oversight.
The banking sector in Pakistan manages deposits worth approximately Rs23 trillion and has 67.52 million depositors’ accounts in a population of 227 million. There are 103 million branchless banking accounts and 1.60 million accounts managed by EMIs (e-wallets).
The SBP’s notification advised REs to verify the licensing status and authorization of digital lending platforms/mobile applications from relevant regulatory bodies, including the Securities and Exchange Commission of Pakistan and the central bank itself, as part of their know-your-client and customer due diligence processes.
?It also urged REs to implement measures during customer onboarding and transaction monitoring to prevent unauthorised financial service providers from using their banking channels and platforms, directly or indirectly.