Pakistan fintech looks promising

Written by Kapronasia || May 02 2019

Among Asian countries, Pakistan is a relatively slow adopter of fintech, but it also has great need for easy-to-access digital financial services. Pakistan has a population of more than 210 million people, just 7% who have a bank account. High banking infrastructure costs have excluded most people from the formal financial system.There are several factors that make Pakistan an especially promising future fintech market. First, Pakistan's smartphone penetration is forecast to reach 50% by 2020 - that's more than 105 million potential customers. Second, Pakistan is one of the youngest countries in the world. 64% of the population is younger than 30 and 29% is aged 15-29, according to the United Nations' National Human Development Report. Young people are typically more willing to bank with their smartphones.

"Pakistani consumers’ general perception regarding the (in)significance of formal finance in their daily lives, difficult banking procedures, low outreach, and unsuitable products provides an opportunity for fintechs to design personalized products," according to a 2018 report in the Lahore Journal of Economics.

Nascent cooperation between traditional Pakistani banks and fintechs augurs good prospects for the country's fintech ecosystem. For instance, the fintech startup FINJA is cooperating with Pakistan's FINCA Microfinance Bank to develop a mobile wallet application. FINCA has the branchless banking license that allows FINJA to providing banking services.

"Under this collaboration, FINCA has created a partnership with FINJA on a revenue-sharing basis and both the companies co-own the SimSim brand. This is a new model of innovation and partnership," FINCA CEO Mudassar Aqil told Business Recorder in an April interview.

China's tech giants are also entering the Pakistan fintech market. In January, Pakistan launched a remittance service to Malaysia - its first cross-border remittance service - supported by Ant Financial's blockchain technology. The virtual wallet allows Pakistanis living in Malaysia to send money home instantly and securely via Valyou, a Malaysia-based remittance service provider.

"The new remittance service is one of the examples of how emerging technologies can help countries meet their digital and financial inclusion goals," Eric Jing, chairman and CEO of Ant Financial, said in a statement.

Looking ahead, Pakistan's fintech community hopes for a regulatory sandbox that would allow startups to experiment with a wide variety of new products and services without falling afoul of existing regulations.

FINCA's Aqil urges the Pakistani government to incentivize traditional banks to digitize their consumer-facing operations and back-end financial processes. "That would consequently encourage fintechs to assist banks in rapid digitization," he told Business Recorder. "Banks in this way will build internal capability to work with external partners for tangible benefits."