1. Interoperability: A Synopsis of Pakistan’s Experience
ITU Workshop on Digital Financial Services and Financial Inclusion 14 December 2015 Geneva, Switzerland
Interoperability: A Synopsis of Pakistan’s Experience
Syed Sohail Javaad
Additional Director, State Bank of Pakistan

2. Pakistan – Demographics & Institutions
Surface Area: 796,095 Sq. km
Population 190 million
GDP (FY 15): USD 270 billion
Per Capita Income: USD 1427
Total Labor Force: million

3. Financial Inclusion
1Link Provides Interoperability to banks for ATMs and Inter Bank Fund Transfer (IBFT)

4. Digital Financial Inclusion
Branchless Banking
Safety, security and soundness of technology and agents.
Bank-led approach
Licensed and regulated by SBP
Risk-based KYC and other AML requirements
Mobile being banking account.
Convenient for customers
Developing & maintaining public confidence
Digital Financial Inclusion
Enabler of Financial Inclusion but…
80% of transactions are Cash in Cash Out (80%) only 20% are through m-wallets
The share of Telco dominated BB platform is 80% in transaction and agents
Lack of Interoperability in Branchless Banking

5. Interoperability and its Levels*
Interoperability at platform and customer level doesn’t exist
*Defined by CGAP.
Picture credit: CGAP

6. Challenges for Interoperability
Reluctance of MNOs to share
Fear of cannibalization?
Lack of regulatory framework
Balanced regulatory approach may be required
USSD and SMS channels for financial services by Telcos
Non-collaboration between banks & MNOs
Non availability of financial products at MNO level
Interchange?
Can good regulations improve the situation?

7. Regulations
Rules for Payment System Operators (PSOs) and Payment Service Provider(PSPs)
Allows private sector non-banks to establish Payment Systems
To be authorized by SBP Authorize Financial Institutions (AFIs)
Draft Regulations for Branchless Banking Interoperability
Allows establishment of new class of Third Party Interoperability Service Providers (TPSPs) to be licensed by Pakistan Telecommunication authority (PTA) for branchless banking
Power of SBP to Authorize Financial Institutions (AFIs) to enter into agreement with TPSPs for interoperability
Defines the roles and responsibilities of TPSPs and AFIs
Sharing of fee/revenue and liability
Consumer Protection, Dispute Resolution
Service Standards
The arrangement to be jointly regulated by PTA and SBP

8. Supportive Regulatory Environment
Future Prospects
Youth Population
NADRA Database
3G/4G Spectrum
Supportive Regulatory Environment
Majority of population consists of young people
40% are under age group 20
22% lie in the age group 20-34
NADRA’s has one of the largest, fully integrated databases in the world
More than 95 million CNIC issued
Supports biometric verification for account opening
3G/4G spectrum auction in 2014
20 million 3G/4G subscribers in one year
100 mn mobile phones sets with 31% being Smartphone
Widely recognized regulatory framework that support
Interoperability
Flexibility of BB models
Prospects of licensing e-money issuers under PS&EFT ACT 2007