The State Bank of Pakistan (SBP) has allowed Electronic Money Institutions (EMIs) or fintech operators to offer cross-border e-money products/services, for inward remittances or payment through cards, involving the outflow of foreign exchange.
The banking regulator expanded the scope of work for EMIs in its revised regulations which empower the fintech operators to extend cross-border services to their customers besides services in the local market after its prior approval.
In this regard, EMIs may approach SBP’s Exchange Policy Department through an Authorized Dealer, through which such products/services shall be offered/settled, along with the underlying proposal, after obtaining In-Principle approval from the concerned department.
While applying to SBP for approval for offering cross-border e-money products/services at any stage of licensing process, the EMIs through its Authorized Dealer shall submit business proposal, draft agreements, detailed terms and conditions and value proposition regarding arrangements of EMIs with Authorized Dealer.
EMIs are allowed to disburse inward remittances in PKR to their wallet holders, mobilized by Authorized Dealers (under home remittance arrangement), through IBFT functionality or SBP-operated systems via their Trust/Settlement Bank, the regulations stated.
Since issuance of these Regulations, SBP has received an encouraging response from the market participants and a number of entities have been licensed to provide electronic money (e-money) services in the market. SBP’s Regulations for EMIs have also received positive response and acceptance from the foreign investors and the institutions alike.
In order to increase the uptake of e-money services, encourage the new as well as already established EMIs to come up with new business models, use cases and technological solutions, SBP has revised the Regulations for EMIs in light of the indigenous experiences and international best practices.
E-Money Wallet for Minors
After obtaining license for commercial operations, EMIs may apply to PSP&OD for enhanced e-money wallet limits. In this regard, the EMIs shall be allowed to offer increased e-money instrument limits up to PKR 1,000,000 to individual customer subject to the verification with the relevant department of the SBP.
EMIs may offer e-money instruments to minors in addition to the requirements prescribed in regulations. Accordingly, the minors e-money wallets shall be opened in link with parent/guardian’s wallet through parent/guardian’s wallet application only. The aggregate monthly load limit of these wallets shall be Rs. 50,000 on CNIC verification (NADRA VeriSys).
The e-money wallets of minors shall be funded through parent/guardian’s wallet only. v. EMIs shall ensure that customer identification verification requirements are in line with Regulations for EMIs and SBP’s AML/CFT/CPF regime especially for minors.
E-Money Wallet for Freelancers
EMIs may offer enhanced e-money instruments to the minors working as freelancers subject to the following terms and conditions in addition to the requirements prescribed in these Regulations: i. The minor e-money wallets shall be opened in link with parent/guardian’s wallet through parent/guardian’s wallet application only. The aggregate monthly load limit of these wallets shall be Rs. 400,000 on biometric verification through NADRA. Cash withdrawal limit shall be Rs. 10,000 daily against wallet services for minors.
Objectives of Promoting EMIs
The revised regulations issued are in line with SBP’s vision of encouraging non-banking fintech companies’ entry into payments space to promote digitization in the financial sector and accelerate level of outreach of EMI operations for achieving the objective of boosting adoption of digital financial services. The new regulations, issued after detailed consultation with existing and prospective EMIs and relevant stakeholders, would allow customers to avail improved services from these regulated e-money providers.
SBP expects that the revised regulations would attract more fintech companies from Pakistan and across the globe to enter into the EMI business in Pakistan and provide innovative, affordable and improved payment services thus increasing digital financial inclusion in Pakistan.
The revised regulations for EMIs will enhance the outreach and scope of these innovative fintech-enabled payment companies. The updated regulations now allow EMIs to offer their customers, including minors and freelancers, increased monthly wallet limits, offer new payment services such as Payments Aggregation, Bill/Invoice Aggregation, Payment Initiation, Account Information, Escrow Services for domestic e-commerce transactions, Services via APIs to FIs/Fintechs/TPSPs and Inward cross border remittances to their customers.
Till date, State Bank has given approval to four EMIs to launch commercial operations while six EMIs are at different licensing stages. As of March, 2023, these EMIs have opened close to 1.6 million e-money wallets with total outstanding e-money of Rs. 2 billion.
