Illustrative purpose only Image Credit: Shutterstock

Islamabad: TAG Innovation Pvt. is set to become Pakistan's first digital bank. The Islamabad-based fintech will launch with a limited number of customers and start commercial operations in two to three months, CEO Talal Gondal said.

The company has raised about $5.5 million in pre-seed funding, making it one of five biggest deals from the Middle East, Africa and Pakistan region, according to data from Crunchbase. TAG joins other digital payment startups in raising funds as digital bank ventures take off in emerging markets where millions lack access to banking services. Razorpay, an Indian startup that facilitates digital payments, said in April it was raising $160 million, while Egyptian digital banking app Telda raised $5 million last month.

Cut off from banking

Pakistan has the third largest unbanked adult population globally, with about 100 million adults without a bank account, according to the World Bank. About 70 per cent of the population doesn't have a bank account, according to Raza Jafri, head of equities at Intermarket Securities Ltd.

Potential customers complain about the lengthy documentation process and multiple branch visits needed to open an account. "In Pakistan, the system is broken," said Gondal. "Some banks don't even have a banking app. It's that bad."

TAG plans to make the process simple with potential customers needing just a copy of their national identification card and a selfie. Accounts should be opened within three minutes, Gondal said.

Pakistan's central bank governor Reza Baqir said in April that he welcomes digital banks in the country, including full-fledged digital banks and smaller ones to constructively shape the industry.