Navigating the EMI Regulations: Challenges and Opportunities

A Comparative and Critical Analysis of the Changes in the EMI Regulations Introduced by State Bank of Pakistan in 2023

Publish Date: 19 Sep 2023

Navigating the EMI Regulations: Challenges and Opportunities

Executive Summary

On 1st April 2019, the State Bank of Pakistan announced EMI regulations targeting fintech for the first time to open Stored Value Accounts (Wallets) in an Open Loop Environment. These regulations were considered revolutionary for an innovation-suppressed market, marred by financial exclusion. The SBP has given approval to four (04) EMIs to launch commercial operations while six (06) EMIs are at different licensing stages. Besides, the license of one operator has been revoked due to non-compliance with regulations and one UK-based EMI withdrew its license this year.  As of March 2023, the operational EMIs have opened close to 1.6 million e-money wallets with a total outstanding e-money of Rs. 2 billion. 

It is pertinent to note that in March 2022, the State Bank of Pakistan announced the award of the Digital Banking licensing regime which was perceived as a superset of EMI-permitted activities, and hence eligibility of EMIs to apply for the Digital Bank license was also notified. Considering the changes in the financial landscape around the world, the State Bank considered it pertinent to announce the changes in the EMI regulations on June 21st, 2023.

We consider these regulatory changes to be aimed at enhancing the security and efficiency of the digital financial landscape in Pakistan while ensuring compliance with global standards and are applicable to both, existing and EMI license applicants in Pakistan. Through these changes, the State Bank aims to foster greater transparency, prudence, and innovation within the EMI sector and includes the below details:




  • An additional “Initiation Phase” included at the start of the application processing.
  • Increased documentary requirements
  • Detailed business plan required during the In Principle stage of the application process
  • Rigorous Fit & Proper Test requirements
  • Expanded Scope of Work for EMIs, enabling a more diversified range of financial services.

  1. An additional “Initiation Phase” is included at the start of the application processing.
  2. Additional Documentary Requirements during the EMI application process are designed to ensure that EMIs have the necessary financial resources, technical expertise, and risk management capabilities to operate safely and soundly.
  3. The updated regulations now require EMIs to submit a detailed business plan during the In Principle stage of the application process. This plan should include Comprehensive Financial Statements, Business & Operational Strategies including a well-defined Market Segmentation and Geographic Reach Strategy within Pakistan, and a Robust Customer Due Diligence Framework. Furthermore, EMIs must now incorporate an Exit Plan into their business model, ensuring an orderly and responsible cessation of operations if required. 
  4. The updated regulations introduce rigorous Fit & Proper Test requirements for the shareholders of both the local entity in Pakistan and the parent company of the EMI.
  5. The updated regulations also provide an Expanded Scope of Work for EMIs, opening doors for a more diversified range of financial services.

By adapting to these changes and demonstrating compliance, EMIs can communicate their relevant experience, clear understanding of the exact problem and their approach to how to solve the problem while remaining economically viable and relevant to the industry and contribute significantly to Pakistan’s burgeoning digital financial landscape. For example, enhanced Scope of Work empowers EMIs to offer services like Cross-Border Payments, Remittances, Increased Wallet Limits and Wallets for Minors. The increased scope of work can now be explored to create innovative solutions like cross-border payments for freelancers which allows them to receive funds in their wallet account or use minor accounts to give access to funds and more control over their own finances as well as promote financial responsibility at an early age. 

Key Changes in the EMI Regulations by State Bank of Pakistan in 2023

With the SBP requiring adherence to the regulatory changes, immediate challenges may arise for all existing and new EMI players and adapting to the changes may require some time, demanding diligence and resources. However, overcoming these hurdles will yield long-term benefits, strengthening Partnerships & consumer trust and conferring a competitive edge. 

Embracing these changes and seizing the opportunities offered will enable EMIs to tap into new revenue streams and broaden their customer base for example by targeting the freelance segment of the market which attracted export remittances of nearly $400 million in fiscal year 2022 and according to a recent report by Payoneer, stands at over 3 million freelancers, and the number is expected to reach 5 million by 2025. The broadening of the scope of activities that EMIs are allowed to engage in is a significant development for the industry. It will allow EMIs to compete more effectively with traditional financial institutions and will help to promote the growth of the digital payments ecosystem in Pakistan. 

This whitepaper is aimed at highlighting these changes that offer both challenges and opportunities for EMI players. By adapting, innovating, and working together, the future holds immense potential for EMIs to thrive and contribute to Pakistan’s growing digital financial landscape.

Following is a comparative analysis of the Key Changes in the EMI Regulations:

Comparative Analysis of the Key Changes in the EMI Regulations.

EMI 1.0 (2019)

EMI 2.0 (2023)

  • 3 phased application process
  • Documentation required only while submitting the application
  • Business feasibility report consisting of business plan and  financial projections
  • Limited scope of activities
  • Supportive Governance overview
  • Additional Initiation Phase included in the application process, total 4 phases of the application
  • Increased documentary requirements for each phase of the application as per Annexure A
  • Detailed Business Plan of EMIs shall at least cover the Strategic Plan, Operational Plan & Financial Projections (Annexure G)
  • Enhanced Scope of Activities
  • Greater visibility requirements from the applicant on Corporate Governance & Shareholding Structure
  1. Detailed Licensing Procedure: To strengthen oversight and ensure a robust regulatory framework, the SBP has included a new phase at the start of the application process named “Initiation Phase”. To improve the applicant and application quality, SBP has moved to a more prescriptive approach to documentary evidence presentation of the applicant’s intent. This phase entails a thorough assessment of the applicant’s financial and operational readiness to ensure consumer protection and market confidence.
  2. Enhanced Documentary Due Diligence: The updated EMI regulations now demand enhanced documentary due diligence during the application process. EMIs are required to furnish comprehensive financial statements including 5-year financial plans and projections, operational plans, and robust due diligence procedures. This move is strategically aligned to enhance transparency and provide more information about their ownership structure, management team, and financials and ensure that all licensed EMIs operate with the utmost integrity.
  3. Changes to the Business Plan: The updated regulations now mandate a clear segmentation strategy to be included in the EMI’s business plan. This empowers EMIs to identify and target specific customer segments and geographic areas of operations effectively, tailoring their services to meet the requirements of each segment and area identified. With a keen eye on ecosystem stability, the updated regulations now also mandate the inclusion of a well-defined Exit Plan in the business model of EMIs. This strategic move prepares EMIs for unforeseen circumstances, ensuring that an orderly and responsible exit strategy is in place if necessary. The exit plan is designed to safeguard the interests of customers, partners, and other stakeholders during any potential discontinuation of operations.
  4. Expanded Scope of Work: One of the most significant developments in the updated regulations is the expansion of the scope of work for EMIs. This transformative change allows EMIs to offer a broader range of financial services, including:
    Cross-border payments (EMI would need prior approval from the SBP) 
    Escrow services (EMIs shall obtain separate approval from SBP) 
    Increased wallet limits & digital wallets for minors 
    By diversifying their service portfolio, EMIs can cater to the varying needs of consumers in all segments(Freelancers, Retail, SMEs) in Pakistan’s rapidly evolving digital economy. 
  5. Enhanced Corporate Governance: The SBP has placed a strong emphasis on strengthening consumer protection & corporate governance measures in the updated regulations through more detailed FPT requirements and increased oversight of the corporate & governance structure of both the local and parent entities. This focus reflects the regulator’s commitment to fostering a secure and reliable digital financial ecosystem, reinforcing trust and confidence among consumers.


  • Compliance with increased documentation: Adapting to the increased documentary requirements may pose initial challenges for EMIs, particularly for new entrants already in the middle of the application process. A newly established EMI with limited resources may face hurdles in compiling the necessary documentation, delaying their entry into the market. To address the challenge of compliance with increased documentation, EMIs can adopt a Regulatory Compliance Toolkit tailored to meet the specific requirements of the updated regulations. Additionally, they can collaborate with regulatory experts well-versed in the regulatory compliance processes. They can guide EMIs in understanding the nuances of the requirements and offer personalized support throughout the application process. As the subject matter expert, Dastak Accelerator offers a fast-track Regulatory Toolkit that enables fintech to adhere to the regulatory guidelines.
  • Changes to the business plan: Identifying and defining target customer segments accurately can be challenging, especially for EMIs with limited market research capabilities. Failure to devise a robust market segmentation strategy may lead to misdirected marketing efforts and reduced customer engagement. The updated regulations also mandate EMIs to integrate an Exit Plan into their business models. This strategy prepares EMIs for unforeseen circumstances and ensures an orderly discontinuation of operations if required. To adequately address these changes to the business plan, EMIs can implement a comprehensive market research and business strategy consulting approach while integrating a reliable exit plan into their business models.
  • Operational Planning: The updated regulations necessitate the inclusion of a detailed operational plan in the business model of EMIs. This plan outlines specific operational areas and strategies for service delivery which can be a time-consuming and resource-intensive endeavour for EMIs. By adopting a streamlined planning approach and integrating process automation, EMIs can efficiently develop a detailed operational plan. This proactive strategy optimizes resource utilization, ensures compliance with regulations, and fosters operational effectiveness, positioning EMIs for sustainable growth and success in Pakistan’s digital financial landscape.


Reach a wider customer base:

  • The updated regulations have increased the monthly wallet limits for customers, including minors and freelancers. This will allow EMIs to reach a wider customer base and provide them with convenient and affordable digital payment solutions.
  •  EMIs can now offer a wider range of payment solutions, including cross-border payments and escrow services for SMEs. This will make it easier for SMEs to do business locally & internationally.
  • To maximize the opportunity, EMIs can implement tailored marketing campaigns and educational initiatives to create awareness. Partnerships with other digital platforms & third-party services should help create new financial products and focus on user-friendly interfaces, enhanced security measures, and incentive programs to drive customer engagement and adoption. 
  • Diversifying services, offering localized support, and gathering user feedback for iterative improvements will further enhance the digital wallet experience.
  • Further by aligning with social impact initiatives like financial inclusion and women empowerment and emphasizing the benefits of digital payments, EMIs can successfully attract a broader customer base, contributing to the growth of digital financial services in Pakistan.

Offer a wider range of payment services:

  • The revised regulations have allowed EMIs to offer a wider range of payment services via APIs to FIs/Fintech/TPSPs, and inward cross-border remittances. This will allow EMIs to meet the diverse needs of their customers and provide them with a one-stop shop for all their digital payment needs. 
  • By developing robust APIs, they can facilitate seamless integration with other service providers, providing services such as payments aggregation, bill/invoice aggregation, payment initiation, account information, and escrow services for domestic e-commerce transactions.
  • Additionally, EMIs can offer inward cross-border remittances, enabling customers to conveniently receive funds internationally. 
  • Customizable service packages for individual and business users, along with streamlined onboarding processes and advanced security measures, will attract a diverse customer base. 

Collaborations and Partnerships:

  • To make the best of the opportunity presented by collaborations and partnerships, EMIs can form strategic alliances with banks and financial institutions to tap into their customer base and offer a wider range of payment options. 
  • Additionally, partnering with e-commerce retailers and merchants can facilitate escrow and payment aggregation services, simplifying online transactions for consumers. 
  • By collaborating with fintech companies and other financial institutions, EMIs can enhance security measures, improve service offerings, and drive innovation in the digital payment space. For example, EMIs can collaborate with banks to share fraud detection and prevention data. This will help them to better protect their customers from fraud or reduce costs through collaboration with other fintech to share the cost of developing and maintaining technology infrastructure.
  • Jointly developing innovative solutions, engaging in co-marketing initiatives, and sharing data insights will further strengthen their market position. For instance, partnering with a fintech specializing in biometric authentication can bolster transaction security.

Disclaimer: Please note that the summary provided here should not be interpreted as regulatory disclosures. The views expressed are the company’s own, and readers should make their decisions independently.



Michael is a partner and the Director of Testing and Insights at SmashBrand.

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