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Fintech edition: From the Editor

In 2009, a microfinance bank and a telecom giant collaborated with a goal of promoting financial inclusion among millions of unbanked people in Pakistan. The two companies introduced a unique instant money transfer service enabling cell phone users to send and receive funds as low as PKR 500 to any place in the country with access to cellular phone service. Long distances were cut short and there was no worry of banking hours, long queues, or tedious paperwork. The service was an instant hit.

As of June 30, 2016, total transaction volume stood at PKR 4.4 Trillion. This is the story of Easypaisa—jointly launched by Telenor Pakistan and Tameer Microfinance Bank (now wholly-owned entity of the Telenor Group).

With their simple and faster inventions, firms using technology to deliver financial services, or fintech firms, have started leaving their mark on market leaders the world over.

For its Global FinTech Report 2017, PricewaterhouseCoopers carried out a survey that found “88 percent incumbents in the financial industry are increasingly concerned about losing revenue to innovators.” Similarly, “82 percent expect to increase fintech partnerships in the next three to five years.”

Accenture’s data tells us that global investment in financial technology firms grew 10 percent in 2016, reaching $23.2 billion. In China alone, fintech investment more than tripled to $10 billion last year.

Easypaisa is just one example of how technology is transforming financial services in Pakistan. The country has traditionally had a cash-based economy. A World Bank report puts the number of unbanked population at just over 100 million – five percent of the world’s unbanked population. But the good news is that in South Asia the country is leading the way in digital finance. The report notes that six percent of Pakistani adults have mobile accounts compared to South Asia’s average of less than two percent.

More than 60 percent of the country’s population is under the age of 30. Currently over 18 percent of the population uses the internet, and most of them are young people. Internet penetration is fast growing after the arrival of 3G/4G and LTE technologies as well as because of government initiatives like setting up free public Wi-Fi hotspots and provision of free laptops to the youth.

This rapidly transforming landscape has pushed financial institutions in Pakistan to reposition themselves by introducing technology-enabled business models.

Umair Rasheed’s article explores the evolving fintech landscape in Pakistan. Among many other startups, he introduces Finja, a fintech that’s raised $1 million to market a digital wallet minimizing reliance on hard currency. Another fintech, Inov8, is set to launch a super app Fonepay that enables use of smartphones to make transactions with funds deposited at any of the major commercial banks on its panel.

In her article on digital payment system, Mahrukh Sarwar explains the development of world’s first decentralized digital currency — bitcoin – and its arrival in Pakistan.

One of the encouraging business propositions in the article is that Pakistani freelancers are likely to see between two and five percent raise in incomes if they bring their earnings back home using bitcoins. Nonetheless, the big question remains: “Can cryptocurrency work in Pakistan?”

The article “Making Digital Lending Work” explains why a supporting policy structure is crucial to shift consumer behavior in favor of digital payments.

Qasif Shahid and Lubna Razaq underscore the importance of ‘fintegration’— partnership between banks and fintech startups to tap new and exciting opportunities.

Nadeem Hussain, founder and coach at Planet N Group of Companies, explains how the country’s microfinance industry can better tap a potential market of 30 million by leveraging big data and machine learning.

In his Q+A with MIT Technology Review Pakistan, banking tycoon Mian Mohammad Mansha sees in the China-Pakistan Economic Corridor “an opportunity for banks to introduce innovative lending products”.

Happy reading!

Dr. Umar Saif, Editor in Chief

Umar Saif tweets @umarsaif

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