The gap is huge, to say the least. Pakistani banks and the bankers who run them appear ill-prepared for the challenges being unleashed by rapid technological disruptions, particularly the rise of artificial intelligence (AI). While they are aware of the changes sweeping across the global financial landscape, their traditional banking model—reaping colossal profits through risk-free lending to the government and a handful of large corporations—has made them complacent. However, the critical question remains: how long can they continue to ignore the shifting socioeconomic realities before the inevitable catches up with them?

At the recent Pakistan Banking Summit in Karachi, industry leaders voiced concerns over the excessive tax burden on banks, citing the 54% taxation and the billions extracted by the Federal Board of Revenue (FBR) under the windfall levy. While these concerns are valid, the summit also served as a stark reminder that the real challenge is not taxation alone but the banking sector’s sluggish pace in embracing AI and digital transformation. As the financial world moves towards automation, blockchain, and data-driven decision-making, the conventional banking model is at risk of becoming obsolete. Within the next decade, the banking landscape will look vastly different, and only those institutions that proactively invest in digital technology, human resource development, and innovative financial products will survive.

Pakistan’s banking industry has evolved significantly over the last three and a half decades, transitioning from a state-controlled sector to a thriving private enterprise. It has played a crucial role in financing government deficits and expanding digital banking solutions in response to the rise of smartphones and mobile applications. Yet, despite these advancements, the sector has failed to serve critical segments of the economy. Smallholder farmers, small and medium enterprises (SMEs), low-income urban communities, and women entrepreneurs remain largely excluded from the formal financial system. The absence of accessible financing solutions for these groups has forced them to rely on expensive informal channels, stifling economic growth and development.

The shortcomings of Pakistan’s banking sector have come under increasing scrutiny in recent years, particularly as banks continue to prioritize large-scale corporate clients while neglecting grassroots financial inclusion. The banking industry must recognize that sustainable growth is not possible without integrating marginalized sectors into the financial ecosystem. Expanding credit facilities to SMEs, low-income households, and rural entrepreneurs will not only strengthen the economy but also create long-term profitability for banks through diversified portfolios.

While summits and conferences serve as important platforms to highlight these issues, they are not solutions in themselves. The State Bank of Pakistan must take the lead in fostering regular, proactive engagement with the banking sector to ensure meaningful reforms. A structured, forward-looking strategy that prioritizes digital transformation, financial inclusion, and sustainable economic growth is essential. Without such a course correction, Pakistan’s banking industry risks being left behind in an increasingly technology-driven global financial system.