Fintech sector’s growth is shaping Pakistan’s future – Opinion

by James · September 3, 2022

Pakistan is ideally positioned for the fintech revolution, and investors are eyeing the significant opportunities in the country’s fintech landscape. Increasing smartphone penetration, internet connectivity and government policies aimed at the use of digital financial technology have already set the stage for fintech’s growth.

According to Irfan Iqbal Sheikh – Head of the Federation of Pakistan Chambers of Commerce and Industry, there are approximately 269 startups specializing in the fintech sector and many of them are highly successful and sustainable.

The country’s fintech sector is experiencing a massive revolution, and the opportunities to partner with Pakistani professionals to establish new ventures are endless. In recent years, regulatory support for fintech has improved considerably with increased interest from the State Bank of Pakistan (SBP) and the Securities and Exchange Commission of Pakistan (SECP).

The SBP in its Digital Financial Services -Innovation Challenge Facility guideline paper stated that it is estimated that the market potential of Digital Finance services in Pakistan will cross $36 billion by 2025, adding 7 percent to GDP, and creating 4 million new jobs.

During the Covid-19 pandemic, the pace of digitization in Pakistan accelerated beyond imagination, with the fintech industry claiming much of the credit for its growth. According to a Pakistani consulting firm – Invest2Innovate – fintechs in Pakistan have raised $486 million in global capital since January 2021. It reports that in 2021, 83 Pakistani startups raised $350 million.

Over the past decade, Pakistan’s digital financial services sector has been on an accelerated upward spiral. As high-bandwidth (3G/4G) penetration increases over 43%, and mobile penetration increases over a staggering 77%, the PTA estimates that this number will double by 2024. The number of mobile internet users is growing exponentially by about a million a month, it will not as any surprise that Pakistan has become a hotspot for fintech transformation.

Harnessing the true potential of fintech, digital payment provider Easypaisa managed a throughput of PKR 1.7 trillion in the first half of 2022. Money transfers worth PKR 859 billion were made through the platform, which is almost 100% increase compared to last year. More than 10% of the total telecommunications industry’s airtime sales are now paid through the app. The platform offers a wide selection of over 250 payment cases.

In February 2022, payment app NayaPay raised $13 million in a seed round led by Zayn Capital, MSA Novo and early-stage Silicon Valley investor Graph Ventures. NayaPay, which initially focused on the student and freelance market, received a license from the SBP in August 2021.

Fintechs play a significant role in offering customers seamless access to credit that is easy, competitive and quick to deploy. Recognizing the importance of fintech in supporting the country’s economic progress, the SBP has become a progressive regulator, creating a financial ecosystem that supports innovation and ultimately seeks to improve the customer experience. Recent initiatives by the SBP include the development of a “Customer Digital Onboarding Framework” for banks outlining the basic parameters for opening bank accounts through digital channels in Pakistan.

During the first quarter of 2022, digital payment service provider, JazzCash recorded 90 million financial transactions, witnessing a growth of over 100 percent in terms of mobile account transactions compared to the corresponding quarter last year. During the same time, customer balances on mobile accounts also increased by over 100 per cent.

UPaisa has achieved 25.0% year-on-year growth in its revenue during the first quarter of 2022. The balance sheet of the platform reached Rs 114 billion.

A significant driving force in the transformation of Pakistan’s digital financial services is ultimately the customers. Consumers now demand their digital experience to be top-notch, prompting banks and financial institutions to create intuitive, engaging and user-centric customer channels.

Fintech is not just about giving people financial tools to better manage their finances. In emerging markets, fintech is a symbol of a wider social and cultural transformation that challenges preconceptions about modern banking, empowers the population and promotes financial inclusion.

Emerging markets like Pakistan are ideally positioned to benefit from fintech innovations – they must constantly ensure that everything is done across the private and public sectors to encourage fintech adoption. Doing so will digitally empower a new generation of consumers, investors and businesses, who in turn can fulfill their full potential.