By Qudsia Bano

Banking professionals say Pakistan's rapid expansion of digital banking and payments has built a robust technology and data foundation, paving the way for the next stage of financial modernisation driven by artificial intelligence in foreign-exchange forecasting, liquidity management and treasury operations,.

State Bank of Pakistan data show retail payments reached 3.7 billion transactions worth Rs168.8 trillion during January-March 2026. Digital channels accounted for 92% of transactions by volume, handling 3.4 billion payments worth around Rs68 trillion, while mobile banking and digital-wallet registrations had crossed 132 million by March.

The banking sector also has considerable financial capacity to invest in more advanced technology. The Pakistan Economic Survey 2025-26 shows banking assets rose 17.8% to Rs63.2 trillion by end-December 2025, while deposits increased 24.7%.

After-tax profit rose to Rs716 billion from Rs644 billion a year earlier, while the capital adequacy ratio improved to 20.8%.

Banking professionals say these advances provide an opportunity for the sector to move beyond customer-facing digitisation and apply data-intensive technologies to core internal functions like treasury, liquidity and risk-management.

The opportunity is becoming increasingly relevant as major international banks expand the use of AI in such operations.

Ant International recently said Citi, HSBC, Deutsche Bank, Standard Chartered and Barclays were among six major banks partnering on its upgraded Falcon time-series AI model, designed for financial forecasting and liquidity-risk management.

Ant International said more precise forecasting could reduce foreign-exchange hedging and allocation costs by over 60%, although the figure represents the company's estimate rather than an independently verified industry benchmark.

The development follows a broader international shift towards AI-supported banking operations. In June, Bank of America said increasingly complex trade and capital flows, elevated FX volatility and liquidity risks were driving demand in Asia-Pacific for AI-led treasury, trade and currency solutions. The bank said it spends more than $13 billion annually on technology.

In July, Reuters reported that major Wall Street banks were expanding agentic AI into functions including trading and treasury, while a KPMG survey cited by Reuters found that 51% of banks were already piloting AI agents.

Pakistan has meanwhile built substantial digital transaction infrastructure, although official 2025-26 disclosures do not indicate a comparable sector-wide deployment of specialised AI models for FX forecasting, hedging or intraday liquidity decisions.

The potential application is particularly relevant because foreign-exchange liquidity management remains a core banking function.

SBP data put Pakistan's total liquid foreign-exchange reserves at $22.59 billion on August 21, while the weighted-average dollar rate on August 27 stood at Rs277.2321 bid and Rs277.6572 offer.

Banking professionals say AI-based forecasting would not eliminate exchange-rate risk but could help treasury desks analyse currency flows, anticipate liquidity requirements and make better-informed hedging decisions.

Muhammad Zafar, Treasury Manager at Soneri Bank, told Wealth Pakistan that Pakistani banks should initially treat AI as a decision-support tool rather than move directly towards autonomous FX execution.

AI models, he said, could help treasury desks forecast intraday dollar demand, identify recurring corporate payment patterns and improve hedge timing, while experienced dealers retained final authority over pricing and execution.

Zafar said effective deployment would depend on clean historical transaction data, integration with treasury-management systems and rigorous model validation.

Any pilot should include audit trails, exposure limits and human sign-off so that faster forecasting did not introduce new model-risk or compliance problems, he added.

Tahir Awan, Assistant Manager at Wallstreet Exchange Company, told Wealth Pakistan that Pakistan's principal challenge was likely to be data architecture rather than access to AI technology itself.

Banks had rapidly digitised payments, he said, but treasury, trade-finance and risk information could still be distributed across separate systems, limiting the quality of real-time inputs required by specialised forecasting models.

Awan said banks and the regulator could begin with controlled pilots for AI applications in liquidity forecasting and foreign-exchange risk management, supported by common standards for data governance, cybersecurity and model accountability.

He said the next phase of banking technology would increasingly depend on institutions leveraging their digital infrastructure and transaction data to drive faster, better-informed and well-governed financial decisions.

Credit: INP-WealthPk