HugoBank gets SBP pilot approval as Pakistan’s digital banking race heats up — but does the sector have the financial muscle for so many new entrants?

SBP has granted HugoBank pilot operations approval, making it the latest digital bank entering Pakistan’s crowded market alongside ABHI Microfinance Bank — as Pakistan’s top five banks collectively earned Rs671 billion in 2025.

By Imran Malik | Banking & Finance Desk | MediaBites.com.pk

Pakistan’s banking sector is getting crowded — and fast.

The State Bank of Pakistan has granted HugoBank, a Karachi-based digital retail bank, approval to begin pilot operations — making it one of the most significant new banking entrants in recent months, following closely on the heels of ABHI Microfinance Bank’s launch earlier this year.

The question Pakistan’s financial sector is quietly asking is whether the market has sufficient depth, customer base, and profitability potential to sustain so many new entrants arriving in such quick succession.

What HugoBank’s Pilot Approval Means

Under the pilot approval granted by the State Bank of Pakistan, HugoBank will test its products, banking systems, and operational readiness with a limited number of customers in a real-world environment before its full public launch.

The purpose of this controlled phase is to ensure that security measures, regulatory compliance, and customer experience meet the highest standards — a process the SBP has made mandatory for all new digital banking entrants before granting full operational licenses.

HugoBank received its in-principle approval (IPA) from the SBP back in 2023, when the central bank selected it as one of five new digital retail banks under the licensing and regulatory framework for digital banks introduced in 2022. The path from IPA to pilot operations has taken three years — reflecting the rigor the SBP demands before any new digital bank touches customer funds.

Asim Hassan, CEO of HugoBank, expressed the bank’s commitment to its mission. “We believe that true financial freedom begins with simplicity and convenience,” he said. “We are pleased to demonstrate our commitment to expanding access to secure digital financial services for customers across the country, anytime and anywhere.”

New Entrants in Quick Succession — Is Pakistan Ready?

HugoBank’s pilot approval comes within months of ABHI Microfinance Bank’s formal launch — itself a significant new entrant backed by the fintech credentials of ABHI, one of Pakistan’s most celebrated Y Combinator-backed startups.

Two new digital banking entities entering the market in rapid succession raise a legitimate structural question. Pakistan’s banking sector is large by developing world standards but remains heavily concentrated at the top, with five major banks commanding the vast majority of deposits, loans, and profitability.

New digital entrants are betting on the estimated 100 million-plus unbanked Pakistanis as their primary market — a genuine opportunity, but one that requires patient capital, sophisticated technology, and the ability to build customer trust from scratch in a country where banking penetration remains structurally low.

Pakistan’s Top Five Banks — The Financial Muscle That Exists

To understand whether Pakistan’s sector can absorb new entrants, the profitability of its established players provides essential context.

Pakistan’s banking sector collectively reported a cumulative profit of Rs671 billion in 2025. The sector’s top performers paint a picture of extraordinary financial strength at the establishment level.

United Bank Limited (UBL) emerged as the most profitable bank by a massive margin, becoming the first banking institution in Pakistan’s history to surpass the Rs130 billion profit milestone.

Meezan Bank followed with a profit of Rs90.7 billion, while National Bank of Pakistan posted Rs85 billion — achieving a remarkable 227% year-on-year increase.

Habib Bank Limited (HBL) reported a profit of Rs66.8 billion in 2025, maintaining the highest deposit base in the industry exceeding Rs5.5 trillion. MCB Bank recorded Rs54.2 billion in profit, offering the highest dividend in the industry at Rs36 per share.

Top 5 Pakistan Banks — Profit Snapshot 2025

The Real Question — Two Different Markets

The critical insight Pakistan’s new digital banking entrants must grapple with is that they are not competing with UBL, Meezan, or HBL for the same customers.

Established banks earn their extraordinary profits primarily through government securities, corporate lending, and the spread between deposit rates and lending rates — a model that requires massive balance sheets built over decades.

Digital banks like HugoBank and ABHI Microfinance are targeting Pakistan’s financially excluded population — gig workers, small traders, rural communities, and young urban professionals who either cannot access or choose not to use traditional banking. This is a massive potential market but one that requires completely different business models, lower margins, and longer timelines to profitability.

The financial muscle of Pakistan’s top five banks demonstrates the sector’s established strength. Whether that strength creates enough ecosystem depth — in payment infrastructure, credit bureaus, digital literacy, and smartphone penetration — to support multiple new digital entrants simultaneously is the question 2026 and 2027 will begin to answer.