SBP Planning to Enhance & Digitize the Domestic Banking Sector

State Bank of Pakistan (SBP) plans to transform the domestic banking sector into an advanced, digitized, convenient and risk-free financial system for the public.

There is a need for reviewing the prevailing banking business models to effectively address the challenges of rapidly changing financial and technological landscape.

This was the crux of the speech by Deputy Governor, State Bank of Pakistan (SBP), Jameel Ahmad, at 29th Annual Convention of Association of Professional Bankers (APB)—Sri Lanka, held at Cinnamon Grand, Colombo on 21st November, 2017.

The financial industry, especially banks and their regulators, should acknowledge that traditional restructuring will not help in these changing times and that banks must reinvent their business models based on cost efficiency, technical innovation and customer orientation.

He said that innovations such as Cloud Computing, Block Chain Technology, Artificial Intelligence, Machine Learning and Big Data analytics are set to transform the financial industry in diverse areas from intelligent customer relationship management systems to proactive risk management, fraud detection and prevention.

He also shared SBP’s proactive approach in using the National Identity System, NADRA, for allowing digital on-boarding of customers, especially the un-banked population, and mitigating the risks relating to Money Laundering and Terrorist Financing.

However, he cautioned the financial industry about the aggravated threats related to cyber security and emphasized the adoption of a proactive and cooperative approach to address the risk of rising cyber attacks.

In order to mitigate growing risks to the banking sector, SBP took certain measures like continuous improvements in regulatory framework, building of Financial Stability Architecture and addressing concerns about Systemic Risks using macro-prudential actions like Developing frameworks for Large Exposures, Domestic Systemically Important Banks (DSIBs) and Consolidated Supervision.

He also recommended that banks, including Central Banks, must work towards creating a strong and enabling legal and regulatory environment that is commensurate with the new and emerging realities of future and work towards building capacity and skill-set of their staff to adequately respond to these challenges.

With the rise of internet and social media and availability of low cost mobile and other smart devices, bank customers are demanding enhanced and more customized services. If banks fail to address them, they may face extensive competition from non-banks and fintechs who are rapidly making inroads in the domain of financial intermediation, he concluded.