FINANCE Minister Muhammad Aurangzeb has stressed the need for financial innovation to reduce the cost of doing business and bring more people into the formal economy. Addressing an event virtually he also emphasized that digital assets and emerging technologies must deliver tangible economic benefits before becoming part of Pakistan’s financial system. His remarks highlight an important aspect of the country’s economic transformation: the need to modernize financial services to support businesses, encourage investment and promote inclusive growth.
Our economy faces some structural challenges, including a narrow tax base, limited access to formal financing and widespread reliance on cash. Financial innovation can help address these problems by making banking services more accessible, transactions faster and payments more affordable. Small businesses, entrepreneurs and individuals, particularly those in underserved areas, stand to benefit from a more efficient digital financial system. Remittances provide a significant opportunity in this regard. Pakistan receives billions of dollars annually from overseas workers. The use of modern financial technologies could improve the speed of transfers and encourage more remittances to flow through formal channels. This would not only benefit recipient families but also strengthen foreign exchange inflows. Similarly, digital payments and innovative financing mechanisms can help small and medium-sized enterprises access capital, expand operations and contribute to employment generation. A transparent digital financial system can also improve documentation of economic activity, broaden the tax base and reduce the informal economy. However, innovation must be accompanied by effective regulation and strong safeguards. Digital assets carry different levels of risk, making it essential to distinguish between tokenized bank deposits, stablecoins and unbacked cryptocurrencies. The establishment of the Pakistan Virtual Assets Regulatory Authority is a step towards developing an organized regulatory environment. Its success, however, will depend on effective implementation, institutional coordination and professional expertise. Cybersecurity, data protection and public confidence must also remain central to this transition. Banks and regulators need to strengthen their capacity to prevent financial fraud, money laundering and increasingly sophisticated cyberattacks. Ultimately, the value of financial innovation will lie in its ability to reduce business costs, expand financial inclusion, attract investment and improve productivity. Technology must translate into real economic opportunities for the country and its people.
