The State Bank of Pakistan (SBP) has expressed concern about the risks associated with unauthorized mobile applications offering online banking services.
These applications have been using the banking channels of commercial banks for loan disbursements and collections, which the SBP says could pose significant threats to consumer protection.
The central bank has identified a reputational risk for the banks associated with these services.
Regulated entities (REs) under the SBP’s purview, which include commercial banks, microfinance banks, payment system operators, payment service providers, and electronic money institutions (EMIs), were the recipients of this notification from the central bank.
SBP On Unauthorized Apps
The SBP strongly advises its regulated entities not to offer deposits, lending products, credit checks, wallet services, or API integrations to unauthorized or unlicensed digital lending platforms. These services are not to be offered either directly or indirectly, according to the SBP’s directives.
Noman Ahmad Said, an IT expert, suggests that the central bank should publicize the names of the financial institutions that are providing services through unlicensed applications. This move would enable depositors to withdraw their funds and safeguard their deposits in case of unforeseen circumstances.
Unauthorized Mobile Banking Platforms
The presence of unauthorized mobile banking platforms providing services despite the SBP’s stringent regulatory measures has raised eyebrows. Banks in Pakistan manage approximately Rs23 trillion in deposits across 67.52 million depositors’ accounts, a significant figure given the country’s population of 227 million.
Additionally, there are around 103 million branchless banking accounts and 1.60 million e-wallet accounts managed by EMIs.
In response to these concerns, the SBP advised REs to verify the licensing status of digital lending platforms and their authorization to conduct business from the relevant regulatory bodies. This advice is part of their “know-your-client” and customer due diligence processes. Furthermore, the SBP emphasized the need to implement measures to prevent unauthorized financial service providers from using their banking channels and platforms.
