SBP Issues Warning Against Unauthorized Digital Lending Mobile Apps

SBP Issues Warning Against Unauthorized Digital Lending Mobile Apps

Karachi, June 22, 2023 – The State Bank of Pakistan (SBP) has recently raised concerns regarding the usage of unlicensed and unauthorized digital lending mobile applications and platforms that are utilizing banking channels for loan disbursement, collection, and creditworthiness checks by integrating with customers’ bank accounts.

This usage of digital banking channels and integration with mobile banking platforms by these unauthorized digital lending apps poses significant risks to consumer protection and may also pose reputational risks for banks involved.

In response, regulated entities (REs) have been strongly advised by the SBP to ensure that the licensing status of digital lending platforms and mobile applications, as well as their authorization to conduct business, are duly verified from the relevant regulatory bodies such as the Securities and Exchange Commission of Pakistan (SECP) and the SBP itself. These verifications should be conducted as part of the know-your-customer (KYC) and customer due diligence (CDD) processes.

Additionally, REs are urged to review the licensing status and authorization to conduct business of their existing customers who offer digital lending services, following the same verification process mentioned above. To assist in this process, a comprehensive list of currently authorized and licensed entities involved in digital lending businesses can be accessed through the provided web links, including those from the SBP and the SECP.

It is further advised that REs implement reasonable measures, particularly during customer onboarding and transaction monitoring, to ensure that their banking channels and platforms are not utilized by unauthorized financial service providers, either directly or indirectly. Specifically, REs are instructed not to extend services such as deposits or lending products, mobile application integration with third parties, payment gateway services, credit scoring and creditworthiness checks, wallet services, and/or API integration services to unauthorized or unlicensed digital lending platforms, whether they are individuals or businesses.

Furthermore, REs are advised to refrain from providing the aforementioned services to entity types mentioned in SBP-EPD Circular Letter No. 8 of 2022.

These instructions have been issued under Section 3(1) of the Payment Systems and Electronic Fund Transfers Act, 2007 and are effective immediately. Non-compliance with these directives will result in appropriate enforcement action being taken under the applicable laws and regulations.

The SBP remains committed to ensuring consumer protection and maintaining the integrity of the financial system. By adhering to these guidelines, REs can contribute to a secure and regulated environment within the digital lending sector, safeguarding the interests of both consumers and financial institutions.

SBP Directs Banks to Extend Sunday Operations for Convenient Tax Payment