The Interledger Community 🌱: Muhammad Arif

Paysys Labs — ILF Grant Final Report

Muhammad Arif — Wed, 08 Apr 2026 11:59:19 +0000

Brief Project Description

RafikiRemit is a collaborative initiative between Paysys Labs and Allied Bank Limited (ABL) to modernise Pakistan's cross-border remittance ecosystem by integrating with the Interledger Protocol (ILP) through a Rafiki node. The project enables instant, low-cost, and transparent international money transfers — replacing legacy banking processes that routinely impose 3–7 day settlement delays and 5–10% transaction fees.

The solution is built on a microservices architecture comprising three primary components:

ABL Core Banking Service (CBS) — manages accounts, customers, transactions, wallet lifecycle, webhook processing, and AML/sanctions screening.
OpenConnect (OC) Middleware — functions as the API gateway, request router, and queue manager between services and the Rafiki node.
Internet Banking Service — provides a web-based digital interface enabling customers to view account balances, manage payment pointers, and initiate transfers.

Together, these components create a production-ready pipeline connecting a regulated Pakistani commercial bank to the open Interledger network.

Architectural Overview

The RafikiRemit system is built on a modern microservices architecture, consisting of three distinct services that work in concert to deliver comprehensive remittance capabilities. Each service operates independently on its own port, ensuring scalability, maintainability, and fault isolation.

Project Update

This is the final report submitted for the RafikiRemit grant. The project remained on track and met proposed timelines across all major milestones.

The following are the interim reports that were submitted during this project:

First Interim Report: Click here
Second Interim Report: Click here

Over the course of the grant, the team completed:

Full design and architecture of the three-service banking microservices system
Integration of ABL with a Rafiki node via authenticated GraphQL mutations
AML and sanctions screening infrastructure with a 92-entity block list
Live USD→PKR currency conversion using a real-time exchange rate API
Webhook processing pipeline with idempotency, HMAC verification, and retry logic
A functioning web interface for account and wallet management
End-to-end testing and documentation of the complete payment flow

What We Built and How

Architecture and Technical Approach

The RafikiRemit system was designed from the outset with isolation, resilience, and auditability as core principles. Rather than extending a monolith, we split responsibilities across three independent microservices communicating over a shared internal Docker network:

Core Banking Service (CBS) runs on Next.js 15 with TypeScript and connects to a PostgreSQL 15 database. It handles all stateful operations — account and customer records, transaction history, wallet address metadata, AML screening, and webhook events. The database schema was designed to be ILP-aware from the start, with dedicated fields for Rafiki wallet address IDs, URLs, and public names directly on account records.

OpenConnect (OC) Service is a TypeScript/Node.js API gateway that decouples the internet-facing layer from core banking operations. It maintains a request queue with configurable retry logic (three retries for critical CBS calls, two for internet banking) and implements the HMAC-SHA256 signing protocol required by Rafiki's authenticated backend API. All outbound Rafiki GraphQL calls are routed and signed by OC, keeping credentials and signing logic in a single, auditable location.

Internet Banking Service provides the customer-facing web interface built with Next.js and Tailwind CSS. It communicates exclusively through the OC middleware, ensuring that no service can reach the database layer directly.

Rafiki Integration

Connecting ABL to a Rafiki node was the central technical challenge of this project. The integration uses Rafiki's CreateWalletAddress GraphQL mutation to provision payment pointers in the format https://abl-backend/{IBAN}, directly tying Interledger identifiers to ABL account IBANs.

Every request to Rafiki's backend API is authenticated using HMAC-SHA256 with a canonicalised JSON payload — following the exact signature scheme Rafiki requires. The signature includes a millisecond-precision timestamp to prevent replay attacks. The implementation was built from scratch using Node.js's native crypto module alongside json-canonicalize to ensure deterministic payload serialisation regardless of field ordering.

Wallet status synchronisation was also implemented: when an account's status changes between active and inactive in the CBS, the system automatically calls Rafiki's UpdateWalletAddress mutation to reflect the change in the Rafiki node. This ensures the Interledger-visible state always mirrors the bank's authoritative record.

AML and Sanctions Screening

A dedicated AML block-list module was built into the CBS. The system maintains a database table of sanctioned entities with severity levels on a 0–10 scale (10 = CRITICAL). At payment ingestion, every incoming payment is screened against the active block list using a three-tier matching algorithm:

Exact match — normalised string equality
Fuzzy/contains match — substring containment in either direction
Word-level partial match — triggered when more than 60% of the name tokens align

Blocked payments are rejected immediately, logged to a dedicated blocked_payments audit table with full metadata, and never forwarded to Rafiki. The system shipped with 92 pre-loaded sanctioned entities including OFAC-listed individuals and organisations. Legitimate names clear the check in under a millisecond.

Currency Conversion

Pakistan's remittance corridor is primarily USD inbound, PKR credited locally. The CBS integrates with FreeCurrencyAPI to fetch live exchange rates at payment processing time. The conversion result — including the source amount, target amount, exchange rate used, and timestamp — is stored on the transaction record for full auditability. A hardcoded fallback rate is used if the external API is unreachable, ensuring the system degrades gracefully.

Webhook Processing

The CBS exposes a webhook endpoint for incoming Rafiki payment events. Each webhook is validated using HMAC signature verification, checked for idempotency against previously processed event IDs, and processed transactionally. Failed webhooks are queued for retry with exponential back-off. This ensures that network interruptions or transient Rafiki-side errors do not result in missed or double-processed payments.

Outcomes and Deliverables

Objective	Status	Notes
Network Integration with ILP	Completed	ABL successfully registered payment pointers with Rafiki
Rafiki GraphQL API Integration	Completed	CreateWalletAddress and UpdateWalletAddress mutations implemented
Cost and Speed Optimisation	Achieved	60–70% lower fees; near-instant settlement vs. 3–7 day SWIFT
Core Microservices Development	Completed	CBS, OC, and Internet Banking fully operational
AML/Sanctions Screening	Completed	92-entity block list with fuzzy matching and audit trail
Currency Conversion	Completed	Live USD→PKR rates with fallback and full transaction auditability
Secure Webhook Processing	Completed	Idempotency, HMAC verification, and retry logic implemented
Digital Wallet Deployment	Completed	Payment pointers tied to ABL IBANs, QR code sharing enabled
Compliance and Security	Completed	JWT authentication, bcrypt, HMAC-SHA256, rate limiting
Documentation and Testing	Completed	API documentation, integration tests, and UAT finalised

Challenges Encountered and How We Addressed Them

Rafiki Authentication Protocol
The Rafiki backend API requires a specific HMAC-SHA256 signing scheme using a canonicalised JSON body with a timestamp prefix. The absence of a client SDK for this signing protocol meant we had to reverse-engineer the exact format from the Rafiki source code and documentation. After several failed authentication attempts, we isolated the issue to JSON serialisation ordering — resolved by introducing json-canonicalize to produce deterministic payloads before signing.

Wallet Status Synchronisation
We initially assumed wallet status would be managed entirely within Rafiki. In practice, we found that account lifecycle events in the CBS (deactivating a customer, freezing an account) needed to be reflected in Rafiki in real time to prevent stale payment pointers from accepting inbound payments. We built a synchronisation hook into both the PUT and PATCH account routes that fires the UpdateWalletAddress mutation whenever a status change is detected. Crucially, we wrapped this in error isolation so that a Rafiki connectivity failure does not roll back the account update — the local state is always preserved.

AML Matching Precision
A naïve exact-match approach to sanctions screening produced false negatives for common name variants (e.g., "Usama" vs. "Osama"). Conversely, overly aggressive fuzzy matching generated false positives for legitimate names. We iterated through three matching tiers — exact, substring, and word-level with a 60% threshold — which eliminated false negatives on known variants while keeping false positives at zero across our test set of legitimate names. All matching is case-insensitive and operates on normalised strings.

Microservice Network Configuration
The OC service needed to route traffic to both the internal banking services and the Rafiki node, which runs on a separate Docker network (rafiki). This required the OC service container to be a member of both banking-network and rafiki simultaneously — a Docker Compose configuration detail that initially caused silent connection failures. Resolving this clarified our understanding of multi-network container attachment and is now documented in the deployment setup.

Currency Rate Reliability
Relying on a live external API for exchange rates introduces a failure point in every payment. We addressed this by implementing a layered fallback: the system first attempts the live API, then falls back to a configurable hardcoded rate if the API is unreachable. All conversions, including which rate source was used, are recorded on the transaction.

Key Learnings and Insights

ILP is ready for production in emerging markets — but integration depth matters. The protocol itself is stable and well-specified. The challenge lies in how deeply a financial institution chooses to integrate. Surface-level integration (wallet creation only) is straightforward. Deep integration — two-way status synchronisation, webhook-driven credit posting, real-time AML screening — requires careful design of the boundary between Rafiki and the bank's internal systems.

Banks need a mediation layer. Core banking systems are not designed to speak GraphQL or to handle the asynchronous, event-driven patterns that ILP uses. The OC service proved its value immediately — it absorbed the protocol translation, retry logic, and credential management that would otherwise have polluted the CBS or required modifications to ABL's production system.

AML cannot be bolted on. We initially planned AML screening as a post-integration enhancement. When we assessed the compliance requirements for a regulated bank processing international transfers, it became clear that screening must happen before any payment is forwarded to Rafiki, not after. Redesigning the webhook ingestion pipeline to put block-list checking first was the right architectural decision.

Open source protocol adoption in regulated banking requires regulatory framing. Several conversations with ABL's compliance team centred not on the technology but on how ILP-based transfers fit within SBP (State Bank of Pakistan) reporting frameworks. This is an area where the broader Interledger community can contribute significantly — practical compliance guides for regulated institutions in emerging markets.

Project Impact and Target Audience

Who This Serves

Overseas Pakistanis — an estimated 9 million expatriates who collectively remit over $30 billion annually, many paying 5–8% in fees through traditional corridors.
Local Recipients — households and small businesses that depend on remittance inflows, who gain faster access to funds and clearer transaction tracking.
Allied Bank Limited — gains a production-ready ILP integration point and positions itself as a digital-first institution in the remittance corridor.
Regulators and Policy Makers — the project demonstrates a compliant, auditable, open-protocol pathway for cross-border payments within Pakistan's regulatory framework.

Impact Delivered

Speed: Near-instant settlement compared to 3–7 business days via SWIFT
Cost: 60–70% reduction in transaction fees
Transparency: Real-time payment status and transaction history via the web interface
Compliance: Full AML screening, audit trails, and HMAC-secured webhook processing
Institutional Milestone: ABL is now connected to the ILP network via a production Rafiki node, a first for any Pakistani commercial bank

Communications and Marketing

The project launch was shared across multiple channels and received strong engagement from Pakistan's fintech community:

Paysys Labs LinkedIn Announcement: View post
Fintech News Pakistan Coverage: Featured in a dedicated article by Pakistan's leading fintech publication (27,000+ followers): View post
Paysys Labs Website Feature: Rafiki Remit — Advancing Seamless Remittances in Pakistan
Interledger Foundation Summit 2025 (Mexico): The RafikiRemit project was presented at the global ILF Summit, representing Pakistan's contribution to open payments innovation. View post

The response across all channels has been strongly positive. The Fintech News Pakistan coverage in particular validated the ecosystem relevance of the project — ILP-based remittances are a genuinely novel concept in Pakistan's financial market, and the ABL partnership gave the announcement credibility with institutions that might otherwise dismiss open protocol experiments.

What's Next?

The completion of this grant phase establishes the foundational infrastructure for ILP-based remittances in Pakistan. The next phase of RafikiRemit focuses on three areas:

1. Deepening the ABL Partnership

The current implementation covers the full technical integration stack. The next stage with ABL involves connecting this infrastructure to live payment corridors — starting with the UAE-to-Pakistan remittance route, which is the single largest source of remittance inflows for Pakistan. This means working with ABL's treasury and compliance teams to activate real settlement flows and move from a demonstration environment to production transactions.

Paysys Labs has significant operational presence in the UAE, and this geographic footprint creates a natural entry point for a bilateral corridor connecting UAE-based senders (using UAE financial institutions integrated with ILP) to Pakistani recipients via ABL's Rafiki node.

2. Regional Expansion — Africa

Paysys Labs operates across multiple African markets. The architectural patterns developed for RafikiRemit — the three-service microservices model, the OC middleware, the AML integration approach — are designed to be reusable. The plan is to adapt RafikiRemit for African corridor banks, initially targeting remittance routes from the UAE and UK to East and West African nations where Paysys Labs has existing institutional relationships.

The common challenge across these markets mirrors Pakistan's: legacy correspondent banking infrastructure, high fees, and underserved populations who depend on remittances. The ILP-based approach offers the same benefits — and the code base is now proven and auditable.

3. Broader Pakistan Rollout

Beyond ABL, RafikiRemit's architecture is bank-agnostic. The CBS, OC, and Internet Banking services can be deployed for any Pakistani commercial bank with minimal reconfiguration. Paysys Labs intends to leverage the ABL proof of concept to engage additional Pakistani banks and fintechs, building a domestic ILP network that enables real-time PKR settlement between multiple institutions — not just inbound remittances, but domestic interbank transfers as well.

This connects to the broader national financial inclusion agenda. The State Bank of Pakistan has committed to expanding digital payments infrastructure, and an open-protocol interbank layer built on ILP would directly support those goals.

Community Support

RafikiRemit has been built through strong collaboration:

Interledger Foundation — technical support, protocol guidance, and this grant funding
Allied Bank Limited — infrastructure, compliance expertise, operational readiness, and customer insight
Paysys Labs — engineering, product design, AML architecture, and innovation leadership

This partnership is a concrete example of what ILF grant funding makes possible: a regulated bank and a fintech together building open-protocol infrastructure that neither would have prioritised independently.

Additional Comments

RafikiRemit represents a meaningful milestone in Pakistan's open payments journey. It demonstrates that regulated commercial banks can integrate with the Interledger Protocol in a production-credible way — with full AML compliance, authenticated API communication, real-time currency conversion, and resilient webhook processing.

The team is committed to carrying this work forward. The infrastructure is built; the next challenge is activating real payment flows, expanding to new corridors, and sharing what we have learned with the broader Interledger and open payments community.

Relevant Links

Paysys Labs website: paysyslabs.com
Paysys Labs LinkedIn: linkedin.com/company/paysys-labs
Allied Bank website: abl.com
Allied Bank LinkedIn: linkedin.com/company/allied-bank-limited
GitHub Repository: github.com/psl-copilot/ILF-PROJECT

Paysys Labs — Second Interim Report

Muhammad Arif — Wed, 12 Nov 2025 11:21:14 +0000

Brief Project Description

RafikiRemit is a collaborative initiative between Paysys Labs and Allied Bank Limited (ABL) to modernize Pakistan’s cross-border remittance ecosystem. By integrating with the Interledger Protocol (ILP) through the Rafiki node, the project enables instant, low-cost, and transparent international money transfers.

The solution replaces legacy banking delays of 3–7 days and high transaction fees of 5–10% with a real-time, cost-effective remittance experience. Built on a microservices architecture, RafikiRemit comprises three key components:

ABL Core Banking Service (CBS) – manages accounts, transactions, and webhook processing.
OpenConnect Middleware (OC) – functions as the secure API gateway and request router.
Wallet Service – provides the digital interface for customers to view balances and share payment pointers.

Architectural Overview

Project Update

Our project has continued to progress as planned and remains on track with the proposed timeline. The previous report, which can be viewed here, primarily focused on the initial stages of the project and the groundwork we established.

Since then, we have successfully completed several key documentation, planning, and technical milestones that form the foundation for RafikiRemit’s implementation.

Completed Documentation and Development

Project Charter
Stakeholder Map
Initial Project Timeline
Customer Needs and Remittance Service Flows for customers in Pakistan
Regulatory Compliance Plan (KYC, AML, and CFT for Inward Remittances to Pakistan)
Technical Specification Document and System Architecture
Risk Assessment Report
Security Framework
Implemented core features to demonstrate the incoming remittance flow in Pakistan

Following these submissions, the development phase has also concluded successfully. All three core services are complete and fully integrated with the Rafiki ILP network.

Core Banking Service (CBS): Handles incoming payment webhooks and updates account balances in under 500 milliseconds.
OpenConnect Middleware (OC): Authenticates and routes requests with sub-200 millisecond latency.
Wallet Service: Provides a responsive web-based interface enabling real-time balance viewing and transaction visibility.

Deployment Status

On-premises deployment completed successfully
End-to-end testing validated integration across CBS, OC, and Rafiki ILP
System confirmed stable, secure, and ready for limited production

Video Demonstration

A recorded end-to-end walkthrough is available: View Video

Project Impact, Challenges & Target Audience(s)

Challenges

Regulatory and Compliance

Stringent AML/CFT Requirements: Anti–Money Laundering and Counter–Terrorism Financing checks are necessary but slow down onboarding and transaction approvals.
KYC Delays: Manual Know Your Customer (KYC) processes often result in significant delays, especially for customers in remote areas without formal identification systems.

Operational Limitations

Legacy Banking Infrastructure: Many institutions still depend on outdated core systems that are not optimized for real-time international settlement.
Limited Rural Coverage: Restricted branch networks and low digital adoption make it difficult to serve rural and unbanked populations effectively.

Customer Experience Barriers

Cumbersome Processes: Traditional remittance channels require multiple steps, excessive paperwork, and in-person branch visits during limited business hours.
Delayed Settlements: Cross-border payments can take up to five business days or longer, depending on intermediary bank efficiency.
High Transaction Costs: Average transfer fees hover around 7%, with an additional 2–3% lost due to poor exchange rate margins.
Lack of Transparency: Customers have little to no visibility into where their funds are during the transfer process—whether they’re in transit, pending, or received.
Collection Inconvenience: Even after funds arrive, recipients must often visit a branch in person to withdraw the money, adding travel and time costs.

Financial Exclusion

Unbanked and Underbanked Population: A significant percentage of Pakistan’s population remains outside the formal banking system, limiting access to regulated remittance services.
Dependence on Informal Channels: Many senders and recipients continue to rely on informal mechanisms such as Hawala or Hundi, which, although faster, pose risks related to compliance, security, and transparency.

These challenges underscore the need for a secure, transparent, and accessible remittance platform like RafikiRemit. One that combines regulatory compliance with a frictionless digital experience.

Target Audience

RafikiRemit has been developed to serve a diverse ecosystem of users and stakeholders within Pakistan’s remittance landscape:

Overseas Pakistanis: Millions of expatriates who send money home regularly to support families, education, and small businesses.
Local Recipients: Individuals and households who depend on these inflows as a primary source of income, often located in semi-urban or rural areas with limited banking access.
Financial Institutions: Banks and fintech providers seeking to modernize their cross-border payment systems and adopt interoperable, digital-first infrastructure.
Regulators and Policy Makers: Institutions interested in advancing national goals for financial inclusion, compliance, and innovation.

Impact

Speed: Instant transfers compared to traditional 3–7 day processing
Cost: 60–70% reduction in transaction fees
Transparency: Real-time payment tracking and notifications
Accessibility: Digital wallet interface eliminating branch visits
Institutional Benefit: ABL’s transition into a node on the ILP network, improving efficiency and competitiveness

RafikiRemit positions Pakistan as a regional leader in digital remittances and contributes to national goals for financial inclusion.

Progress on Objectives and Key Activities

Objective	Status	Key Achievements
Network Integration with ILP	Completed	ABL successfully registered payment pointers with Rafiki
Cost and Speed Optimization	Achieved	60–70% lower fees, near-instant transactions
Core System Development	Completed	CBS, OC, and Wallet fully operational
Secure Webhook Processing	Completed	Implemented idempotency, HMAC verification, retry logic
Digital Wallet Deployment	Completed	Real-time wallet with QR code and pointer sharing
Compliance and Security	Completed	JWT, and rate limiting implemented
Documentation and Testing	Completed	API documentation, integration tests, and UAT finalized

Communications and Marketing

The announcement of our partnership and the launch of the RafikiRemit project have been very well received by the fintech community, generating significant engagement and positive feedback across multiple platforms.

Industry and Community Engagement:

Paysys Labs Official Announcement: We shared the project launch on our Paysys Labs LinkedIn Page, which received strong engagement from professionals across the banking and technology sectors.
Media Coverage: Fintech News Pakistan — one of the country’s leading fintech publications with over 27,000 followers — featured our collaboration with Allied Bank Limited in a dedicated article highlighting its innovation and impact: Fintech News Pakistan LinkedIn Post.
Official Website Feature: A detailed overview of the project was also published on our website: Rafiki Remit – Advancing Seamless Remittances in Pakistan.

Global Representation:

We had the privilege of representing Paysys Labs and the RafikiRemit project at the Interledger Foundation Summit 2025 in Mexico, where we showcased Pakistan’s progress in open payments innovation. The event and our participation were highlighted in this post: Paysys-Inteledger Mexico Summit Post.

These communications have substantially raised awareness of RafikiRemit and strengthened its visibility within the global fintech ecosystem. The response from industry peers, partners, and the broader Interledger community has been highly encouraging, reflecting strong confidence in our approach and the project’s potential to transform remittance services in Pakistan.

What’s Next?

During the remainder of the funded grant period, our efforts will focus on delivering the next set of core project components. These include the following key deliverables:

Submission of Source Code and other supporting documents like user guides, admin manuals, and API Documentation.
Provide a Lessons learnt document along with proposal for consideration in Rafiki APIs. Conduct Training Sessions for internal team and partners

These deliverables will be submitted progressively, in alignment with the project timeline. Our final report will be submitted by April 14, 2026.

Community Support

The RafikiRemit initiative has been made possible through strong collaboration:

Interledger Foundation: Technical support and protocol guidance
Allied Bank Limited: Infrastructure, operational readiness, and customer insight
Paysys Labs: Engineering, design, and innovation leadership

This partnership demonstrates the strength of community-led innovation in transforming financial services for emerging markets.

Additional Comments

RafikiRemit marks a significant milestone in Pakistan’s journey toward digital financial inclusion. It demonstrates that established banks and fintech innovators can collaborate to deliver secure, scalable, and user-centric payment systems.

The project team remains committed to expanding ILP-based capabilities, driving financial inclusion, and ensuring that families across Pakistan can receive money instantly, safely, and affordably.

Paysys Labs — ILF Grant Progress Report

Muhammad Arif — Wed, 02 Jul 2025 08:00:08 +0000

Brief Project Description

Paysys Labs, a leading fintech company known for its innovative digital payment and financial service solutions, is partnering with Allied Bank Limited (ABL) to transform the remittance landscape in Pakistan. Banks in Pakistan currently face challenges such as high costs and delays in cross-border payments, which impact customer satisfaction.

The RafikiRemit project aims to revolutionize cross-border payments by integrating Allied Bank Limited (ABL) into the global Interledger Payment (ILP) network through the implementation of Open Connect Middleware by Paysys Labs. This will establish ABL's node on the ILP network, allowing customer accounts to function as digital wallets within the ILP ecosystem.

This arrangement will enable ABL to offer faster, more cost-effective remittance services, enhancing customer experience and expanding financial inclusion in Pakistan.

Project Update

Our project is progressing as planned and remains on track with the proposed timeline. So far, we have successfully submitted the following information for establishing a strong foundation for project alignment, communication, and stakeholder engagement.

Project Charter
Stakeholder Map
Initial Project Timeline

In the next phase, we delivered the following documents which outlined key user needs, remittance service flows, and regulatory compliance obligations for RafikiRemit.

Customer Needs and Remittance Service Flows for the customers in Pakistan
Regulatory Compliance Plan (KYC-AML-CFT for Inward Remittances to Pakistan)
Technical Specification Document & Architecture

A key milestone achieved has been the clear articulation of both the customer needs and compliance scope early in the project, which has helped streamline cross-functional collaboration.

We are now entering the next stage, focused on design, development and testing-related deliverables.

Project Impact & Target Audience(s)

Paysys Labs currently operates as a key technology service provider in Pakistan's financial industry, servicing over 20 banks across the country. Our deep involvement in the market has enabled us to thoroughly assess and understand the financial needs of our audience, particularly those of Allied Bank Limited (ABL), which has approximately 9.5 million customers, including a sizable portion from low-income and underserved communities.

Regarding ABL's remittance statistics, ABL currently manages over 600,000 accounts specifically opened for this purpose. The number is even higher if we include regular accounts that also receive remittances. Of the 600,000 accounts, approximately 79% belong to male customers, 20.95% to female customers, and 0.05% to transgender customers. Notably, around 17% of these accounts are held in rural areas, specifically within underserved communities.

Customer Needs

Through extensive market research and direct engagement with stakeholders, we have identified significant challenges faced by Pakistan's customer base, particularly in the remittance landscape. The current cross border payment processes are plagued by high costs and delays impact disproportionately impacting vulnerable groups. For instance, ABL's remittance statistics indicate that some of their transactions involve the underserved communities, further highlighting the need for a more efficient solution.

Integrating Allied Bank Limited (ABL) into the Interledger Network is crucial in realizing our vision. This integration will address key challenges in the remittance sector, such as high costs and delays, by offering a more efficient and cost-effective payment solution. This aligns with our mission and the State Bank of Pakistan's goals to enhance remittance flows and improve financial accessibility across Pakistan. Through these efforts, we aim to foster a more interconnected financial ecosystem, promote greater financial inclusion, and support economic empowerment across diverse communities.

Progress on Objectives, Key Activities

Our use case is around implementing a node of ILP Test network which enables ABL’s consumer accounts to become available as Wallets on the global ILP network. This enables the ABL account holders to receive remittances from other registered and regulated financial institutions on ILP network.

The envisaged high-level architecture of Rafiki integration with ABL’s systems involves the Rafiki Instance connecting to the ILP network and interfacing with ABL’s core banking through the Open Connect middleware, which also integrates with the bank’s compliance systems.

This Architecture diagram shows the components and interaction between them.

Components

- Digital Wallet (used by Sender)
Sender will be using Digital wallet that is integrated with ILP and initiate cross-border payments to ABL customers in Pakistan.

- Rafiki Instance
The Rafiki Instance dispatches various types of webhook events based on the status of each payment, enabling real-time updates and system responsiveness. Additionally, its Admin API plays a key role in generating wallet addresses for ABL customers, linking them to their respective bank accounts for seamless ILP-based remittances.

- Open Connect Middleware
Paysys Open Connect Middleware acts as a bridge between ABL’s systems and external entities, ensuring seamless integration and communication. This component would also handle the webhook events dispatched by Rafiki Instance.

- AML/CFT Screening Platform
This system monitors transactions to ensure compliance with Anti-Money Laundering (AML) and Counter-Financing of Terrorism (CFT) regulations. Once a transaction successfully passes these checks, the Open Connect Middleware forwards the crediting instructions to the ABL Core Banking System, which then credits the amount to the ABL customer’s account.

- ABL Core Banking System
The ABL Core Banking System (T24) is responsible for executing all core banking operations. Once it receives the credit instructions from the Open Connect Middleware, it processes the transaction and credits the corresponding amount to the ABL customer’s account.

- ABL Internet Banking (used by Receiver/ABL Customer)
ABL account holders can use their existing Internet Banking platform to generate a wallet address linked to their bank account number (IBAN). Once a remittance is received via the Interledger Protocol (ILP), the credited transaction will appear in their account, and they can view the complete transaction history through their Internet Banking interface.

- KYC Verification System
This system verifies customer identities in line with Know Your Customer (KYC) regulations while the customer is creating a new account in ABL.

Compliance Requirements

When a sender initiates the request, The bank ABL must run Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) checks through its screening platform. Once the transaction passes this process, the funds in PKR are credited to the ABL customer’s bank account.

For this part our technical team is working on the solution to implement Two-phase transfer to hold the payments until the AML/CFT checks are performed or if a bank personnel needs any additional documentation from customer for verification purpose.

Regulatory Context in Pakistan

State Bank of Pakistan (SBP) regulates the policies for Know-Your-Customer (KYC), Anti-Money-Laundering (AML), Combating the Financing of Terrorism (CFT), foreign exchange reporting and incentives for home remittances.

1. SBP AML/CFT & CPF Regulations
Banks and authorized dealers are required to conduct customer due diligence, risk rating, sanctions screening, and reporting. They must keep transaction records for at least ten years and file Suspicious Transaction Reports (STRs) and Currency Transaction Reports (CTRs) with Pakistan’s Financial Monitoring Unit (FMU). Additionally, all cross-border wire transfers must include complete originator and beneficiary information; transfers lacking these details must be refused or held by the beneficiary institution.

2. Pakistan Remittance Initiative (PRI)
A joint program by the State Bank of Pakistan (SBP) and the Government mandates fast, low-cost, and transparent remittance services through formal channels. Banks are incentivized with fee reimbursements and performance bonuses if they deliver credit promptly and submit claim data on time. The initiative also encourages the use of International Bank Account Numbers (IBAN), straight-through processing, and simplified branchless-banking "Home Remittance Accounts."

3. SBP Foreign-Exchange Manual and Exchange-Policy Circulars
Authorized dealers can freely receive home remittances, convert them to Pakistani Rupees (PKR), and credit beneficiaries within 48–96 hours, depending on branch location. They must use accurate purpose codes, provide transaction-level reporting, and conduct enhanced due diligence for unusually large or inconsistent inflows.

4. Governance and Organizational Responsibilities
Allied Bank Limited (ABL) is fully accountable to the State Bank of Pakistan (SBP) for all Anti-Money Laundering (AML) and Counter Financing of Terrorism (CFT) obligations, as funds settle across its books. ABL approves each sending-side counterparty, manages transaction monitoring, and files all regulatory reports, including Suspicious Transaction Reports (STRs), Currency Transaction Reports (CTRs), and PRI returns.

5. Beneficiary KYC and Account Controls in Pakistan
All beneficiaries are existing Allied Bank Limited (ABL) account holders, so SBP-compliant Know Your Customer (KYC) procedures—including photo Computerized National Identity Card (CNIC), biometric verification, address, and source-of-income declaration—are already completed. RafikiRemit middleware checks account status before assigning an ILP payment pointer, automatically excluding dormant, frozen, or sanctioned accounts. Beneficiary names are screened nightly against domestic proscribed-persons lists, with any positive match resulting in immediate account freeze as per SBP’s Targeted Financial Sanctions guidelines.

Communications and Marketing

The announcement of our partnership and the RafikiRemit project has been well received by the community. We, at Paysys Labs, published an article on our official LinkedIn page, which generated significant engagement and positive feedback: Paysys Labs LinkedIn Post. Additionally, Fintech News Pakistan, a prominent industry publication with over 27,000 followers, featured our collaboration in a dedicated post: Fintech News Pakistan LinkedIn Post. Also we posted the updates on our website Rafiki Remit Advancing Seamless Remittances in Pakistan

These communications have helped raise awareness about the project, and the response from the fintech community has been enthusiastic, reflecting strong interest and support for our initiative.

What’s Next?

During the remainder of our funded grant period, our focus will be on delivering the next set of core project components. These include the following deliverables:

Integration Diagram for Digital Wallet, Paysys Open Connect Middleware and ABL Core Banking System
Security Framework and Protocols, and best practices
UI/UX Prototypes for core features
Testing Reports, Bug Reports
Logging Framework

These deliverables will be submitted progressively, in line with our project timeline. Our next formal progress report is scheduled for submission by November 14, 2025.

Community Support

We appreciate the ongoing support from the Interledger community and our partners. To stay updated on our progress, insights, and future initiatives, we invite you to follow Paysys Labs on LinkedIn: Paysys Labs LinkedIn. Your engagement and feedback are valuable as we continue to advance our mission and foster innovation in the fintech sector.