AKD Securities Limited – AKD Daily (14-01-2021)

Karachi, January 14, 2021 (PPI-OT): Pakistan Banks: Digital disruptions will far outlive the virus

The digital revolution has been painfully slow to come to Pakistan however the PTI-led Govt. has put wheels in motion and brought to fruition major initiatives capitalizing on prevalent catalysts (increased teledensity, mobile broadband penetration) to upgrade major economic pillars.

Digital payments are the latest of these pillars to be upgraded, tying into a wider stream of initiatives already in place at SBP, with Roshan Digital Account (RDA) and now ‘Raast’ – an instant payment system is the latest bid to promote digitalization in the country.

These initiatives tie into wider imperatives of FATF compliance and combatting money laundering while enhancing the tax net. In this regard, COVID related disruptions while certainly a dampener in terms of social/health costs, has accelerated digital financial services adoption via e-banking channels.

For Banks, investments in digitalization are likely to raise upfront costs in the medium run (although much lower than previous tech adoptions) while consequent returns would be long-term in our view.

Evolving digital lending space (HBL has begun entertaining/disbursing personal loans digitally) provide greater opportunities for the banking space to target smaller segments (and in return, yield higher returns).

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