Governor : Mr. Tariq Bajwa
Title : Keynote address by Mr. Tariq Bajwa at launching ceremony of international remittance through block
chain technology
Date : January 8, 2019
Event : Launching Ceremony of International Remittance through Block Chain Technology
Venue : Serena Hotel Islamabad
Mr. Yao Jing, Honorable Ambassador to the People's Republic of China , Mr. Eric
Jing, Chairman & CEO, ANT Financials, Mr. Roar Bjaerum, SVP, Head of Financial
Services, Telenor Group & Chairman Valyou and Mr. Shahid Mustafa, President &
CEO, Telenor Microfinance Bank,
Ladies and Gentlemen!
Assalam o Alaikum and Good Evening!
1. It is indeed very exciting for me to launch this initiative by Telenor Pakistan
that would enable the transfer of cross border remittances using BlockChain
technology in near real time. This would bring convenience and efficiency for
both remitters and their beneficiaries. For this, I would like to congratulate
ANT Financial, Telenor Microfinance Bank and other key stakeholders such as
Standard Chartered Bank for being the pioneers in the adoption of new
technologies for providing a payment solution, which many other market
players have only been thinking of. This puts Pakistan on the map of few
countries in the world that have launched International Remittance using
Block Chain Technology.
2. Though this initiative, Valyou in Malaysia and Easypaisa in Pakistan will
facilitate cross-border remittance service through e-wallet platforms, which is
based on block chain technology developed by Alipay, a subsidiary of ANT
Financial. This block chain based wallet-to-wallet remittance service provides
instant and secure way for Pakistani emigrants to transfer money from
Malaysia to Pakistan and will significantly improve the current amount of USD
1 billion received from Malaysia in home remittances.
3. Ladies and Gentlemen! As you all know that remittances are considered a vital
component in our economy since they play an important role in reducing the
current account deficit and improve the level of our foreign exchange reserves.
Pakistan received US$ 19.6 billion remittances during fiscal year 2017-18,
which is equal to over 6% of our GDP, equivalent to over 50% of our trade
deficit, 85% of exports and over one-third of imports. Home remittances from
abroad therefore play an extremely important role in our economic and fiscal
management. Pakistan is ranked among the top ten countries in the world in
terms of receiving remittances. I have therefore no doubt in my mind that
overseas Pakistanis are the silent heroes of our nation as their hard earned
income is a major contributor to our economy. However, there is still
considerable movement of remittances through illegal/informal channels. The
thrust of the GOP and SBP policies is to divert this stream to the formal
channel.
4. In the last few years, Government of Pakistan and State Bank of Pakistan have
taken a number of initiatives to promote the transfer of home remittances
using formal financial channels and it is showing positive results. Since the
launch of Pakistan Remittance Initiative (PRI), there has been an upward trend
of receiving remittances using formal financial channels that were previously
sent through informal means of hawala and hundi. The Government of
Pakistan have also announced another scheme to promote remittances using
m-wallets where if the beneficiary choose to receive remittances in their m-
wallet, they will receive airtime worth of Rs. 2 for every one USD equivalent
remittance. Further, GoP and SBP have also introduced a performance based
scheme for financial institutions in order to encourage them to make
extraordinary efforts to achieve the higher targets of remittances. I am
confident that such initiatives and products would increase remittances
through formal channels and accelerate financial inclusion in the country.
Ladies and Gentlemen!
5. Despite all these efforts it remains a fact that we are still competing against
very efficient and effective mode of remittance transfers such as hundi and
hawala which because of their convenience and ease have remained a
preferred choice of people especially who are less literate or live in far flung
areas of the country. I think, one of the main reasons for this is that formal
channels are based on centralized transaction processing, messaging and
reconciliation systems, which inherently makes them slow. On top of it, if
these transfer systems are paper based, they become even slower. This is
where new technologies like the Distributed Ledger Technology (DLT) comes
to our aid. Probably the biggest use case for these technologies is cross border
remittance transactions, including not just remittances, but import, exports
and other services as well. It is noteworthy that a number of banks and non-
bank entities around the world have started experimenting with the block
chain technology for such cross border transactions and transfers.
6. While this block chain based wallet-to-wallet remittance service will likely
provide an instantaneous and secure way for Pakistani migrants to transfer
money from Malaysia to Pakistan, the success of this product will depend on
the implementation of an effective and aggressive marketing and awareness
creation strategy for customers both in Malaysia and Pakistan. Further, I
would urge ANT Financials to launch this product from other countries to
Pakistan also. I have been told that ANT Financials is already offering similar
service for Hong Kong - Philippines corridor; and I would recommend starting
this block chain based remittance services for Hong Kong - Pakistan as well. I
am also confident that this Blockchain based arrangement will work well with
our PRI system of tie-ups too.
Ladies and Gentlemen!
7. Now, I would like to take this opportunity to share few of my thoughts on
emerging technologies and how these could reshape the financial sector and
the way financial services are delivered to ordinary citizen. Since the first
decade of this millennium, emergence of new technologies especially in the
domain of banking and payments are not only transforming the overall
business landscape and bringing efficiency in the business models but
providing convenience to the consumers as well. Technology is disrupting
conventional models and methods of doing business; it is changing the way we
used to look at our customers and the manner in which we used to build
businesses and deliver services. The ubiquitous proliferation of mobile devices
and enhancements in tele-density is now enabling customers to demand
services not just on their doorsteps but from the comfort of their living rooms.
Millennials who are teenagers have different attitudes; they are more at ease
in interacting with their devices rather than with formally dressed officials
sitting in their bank branches. Unfortunately, I feel that traditional banks in
Pakistan are not taking this challenge with the urgency that it deserves and
have yet to come up with innovative solutions to satisfy their customer needs.
And this is where I feel that innovative companies like AliPay can bring radical
change to our industry.
Ladies and Gentlemen!
8. Let me also share my thoughts on few disruptive technological trends that I
believe are radically disrupting and transforming the financial industry
worldwide;
i. First is the rise of open platforms that are enabling buyers and sellers of a
core service to come together without the help of any intermediary
institutions. E-commerce, ride hailing and food services companies are a
few examples of these platforms. On one hand these platforms enable
businesses to quickly onboard using application programing interfaces
commonly known as APIs and on the other, they enable customers to
quickly search and avail their desired services.
ii. Second, cloud based hosting services are enabling quick and low cost
deployment of complex systems using tools that are open source and
easily available to anyone. These cloud-based arrangements can offer
extremely cost effective fully managed solutions including hardware and
software as a service. It is now very easy for any entity including Fintechs
to offer innovative products to their customers thus putting them in
direct competition with banks.
iii. Third, advancements in artificial intelligence (AI) and machine learning
are set to transform the financial industry in many ways especially in
areas of intelligent customer relationship management, fraud detection
and prevention, e-commerce and detection of AML/CFT issues.
Developments in big data analytics combined with AI and Machine
Learning are providing deeper insights about customer behavior, needs
and wants and radically changing the way in which services are designed,
delivered and consumed.
iv. However, the Distributed Ledger Technology is truly likely to disrupt the
financial sector. Block chain, which is one implementation of Distributed
Ledger Technology, will introduce a new era of disintermediation leading
to openness, decentralization and global inclusion that will give us
unprecedented capabilities of efficiently creating and trading value in
society. The block chain technology will play a major role in the
transformation of financial industry across all value chain in the economy
especially where asset holding and transfers are concerned.
Ladies and Gentlemen!
9. As you all are aware that financial inclusion is one of the two cross cutting
themes of policy initiatives of State Bank of Pakistan. Financial inclusion
would lead to empowerment of these segments of society. We believe that
technology could be a great enabler of financial inclusion and as a progressive
regulator; SBP has always been a great supporter of innovation and
technology. I am sure that digitization of banking and payments using the
technologies mentioned earlier presents a huge potential for us to provide
service delivery to those who are at the bottom of the pyramid. For me,
financial inclusion is not just about account opening; rather it is about
enabling people to conduct their day-to-day transactions through digital
means instead of relying on cash. You will appreciate that digitizing economic
transactions carries the benefit of enhanced efficiency in the overall economy
and has the potential to increase our GDP. It is therefore imperative that we
take all efforts to enable our people to use formal financial services using
digital means so that their productivity is enhanced and wastages for the
economy are reduced.
10. On the other hand, if adopted without giving due thought, technology is likely
to follow the law of unintended consequences and has the potential of
becoming a cause of spreading systemic and financial instability. We have
seen how social media can spread false rumors and negative news like
wildfire thus creating panic and instability in financial markets. Further,
technology also presents some very unconventional challenges that pertains
to electronic identification, data privacy and cyber security, etc. The more
financial systems depends on electronic platforms and digital records, the
more susceptible they are to cyber-attacks, which can disrupt the flow of
funds across the economy, cease economic activity and threaten the overall
financial stability. With this in mind, SBP has issued various regulations and
guidelines including the frameworks for Enterprise Technology Governance
and Risk Management, Security of Internet Banking and Payment Cards,
Prevention against Cyber-Attack, and Risk Management in Outsourcing
Arrangements by Financial Institutions.
11. To promote the adoption of technology, SBP has continuously been taking
initiatives on the infrastructure side, to promote the adoption of technology
for facilitation of masses. SBP has worked with FBR and customs and other
provincial tax authorities like Sindh Revenue Board for collection of taxes and
custom duties using alternate delivery channels. SBP is in the process of
launching a knowledge management system that will facilitate the interaction
of general public with SBP. We are also working with Bill & Melinda Gates
Foundation and Karandaaz Pakistan to build a micro payment gateway that
will introduce fully interoperable faster payments for consumers and
businesses alike. This initiative will not only help to modernize the clearing
and settlement infrastructure for reducing cost, improving efficiency,
enhancing security, but will also help in digital on-boarding of customer using
open API based platforms and directory services.
Ladies and Gentlemen!
12. To adopt innovative technologies and promote the digitization of economy,
SBP has always encouraged the role of banks and non-banks in the financial
sector of Pakistan. We believe that non-banks like Fintechs and Bigtechs can
play a big role in transforming the economic landscape of Pakistan. China is a
great example for us where entities like Alibaba, Tencent and JD.com have
innovatively used technology to provide efficient services to the masses. SBP
is also facilitating the entrance of non-banks particularly in payments and
banking and in the past have issued enabling regulations on Branchless
Banking and Payment System Operators and Service Providers. Right now, we
are in the final stage of issuing regulations for e-money institutions. SBP is
cognizant of the fact that Fintechs may find certain regulations as inhibiting
for their offering so we are in the process of establishing a regulatory
sandbox to identify such issues and find ways of supporting and facilitating
innovative ideas.
Ladies and Gentlemen!
13. I am confident that the challenges that I have mentioned earlier will provide
great opportunity and space to banks like Telenor and companies like ANT
Financials, who have great experience of transforming payments and banking
landscape in China thus promoting digitization and financial inclusion. I am
hopeful that based on its experience, ANT Financial will provide out of the
box solutions for challenges being faced by the industry and consumers in
Pakistan. Especially I expect that ANT Financials will bring innovative ideas to
Pakistan especially to assist SBP in areas like financial inclusion, digitization of
payments, e-commerce, SME Finance, increasing access points, partnerships
with non-bank FinTechs and using innovative technologies further to bring
efficiency in banking and payments.
14. For my colleagues from banking industry in Pakistan, I would like to say that
we have to adapt to the changing realities of times. We shall take the
challenge and use the opportunities provided by technology to deliver the best
of best to our citizens. I expect that the financial sector will take advantage of
current favorable market environment by investing in innovative technologies
and product offerings to expand services and broaden access to financial
services in the country.
15. I would once again like to congratulate Telenor Microfinance Bank and ANT
Financial for launching this initiative to facilitate cross border remittances. I am
confident that ANT Financials will play its role in the economic development of
Pakistan and would further strengthen Sino Pak ties in the fields of Banking,
Finance and payments. I shall ensure that State Bank of Pakistan would
continue to extend possible support to facilitate them.
Thank you for your attention! Pakistan Zindabad.
*****