TAG Innovation is set to become Pakistan’s first digital bank when it starts operations this month in the world’s fifth most populous nation where 70 per cent of adults don’t have a bank account.

The Islamabad-based FinTech start-up will launch with a limited number of customers and start commercial operations in two to three months, chief executive Talal Gondal said in an interview. It aims to have millions of customers in the first few years, he said.

The company has raised about $5.5 million in pre-seed funding, making it one of five biggest deals in the Middle East, Africa and Pakistan region, according to data from Crunchbase. The funding round was led by Quiet Capital Management, Liberty City Ventures and Fatima Gobi Ventures. TAG also received strategic angel investments from general partners of Andreessen Horowitz, Khosla Ventures, Canaan Partners and Mercury’s Immad Akhund.

TAG joins other digital payment start-ups in raising funds as digital banks take off in emerging markets where millions lack access to banking services.

Razorpay, an Indian start-up that facilitates digital payments, said in April it was raising $160m, while Egyptian digital banking app Telda raised $5m last month.

Pakistan has the third largest unbanked adult population globally with about 100 million adults without a bank account, according to the World Bank. About 70 per cent of the population doesn’t have a bank account, according to Raza Jafri, head of equities at Intermarket Securities. Potential customers complain about the lengthy documentation process and multiple branch visits needed to open an account.

“In Pakistan, the system is broken,” said Mr Gondal. “Some banks don’t even have a banking app. It’s that bad.”

TAG plans to make the process simple with potential customers needing just a copy of their national identification card and a selfie. Accounts should be opened within three minutes, Mr Gondal said.

The start-up received a provisional electronic money institution licence from the central bank last year that allows basic banking services such as cash transfer, online shopping and a debit card.

Pakistan’s central bank governor Reza Baqir said in April that he welcomes digital banks in the country, including full-fledged digital banks and smaller ones to constructively shape the industry.