FinTech–shaping the future for the better (Part-II)


THESE Banks still employ outdated systems and have failed to evolve. They have not graduated into 21st century tech-wise. Therefore, incumbents are in a vulnerable position to lose to an innovative, challenger bank.

Unbanked population is larger than Germany’s total population. Opening a bank account with incumbents for youth (75% of Pakistan’s population is under 35) and women (50% of Pakistan’s population) is filled with impediments and takes on average 30 days to successfully open a bank account.

For youth and women (mostly housewives), the main impediment is to show proof of income before beginning the process of opening a bank account. This has led to a huge portion of the population being unbanked (80% or 100 mln).

With a history of 70 years of Banking in Pakistan with 30+ banks operating throughout the country, brick and mortar banks have failed so far to scale up and make banking easy and available to the people. The banking sector needs a game-changer and FinTech appears to be just that.

Technology can scale up and fill this void. FinTech will play an instrumental role in the Government of Pakistan’s initiative of financial inclusion and digitalization of the economy.

Why hasn’t anybody solved this problem so far?Despite the complacency of incumbents, much could not be done to operate like a FinTech in Pakistan before 2019.

To function as a bank or a microfinance bank Minimum capital requirements were very high (50 mln USD).

State Bank implemented the EMI regulation around the end of 2019 predominantly being the reason as to why FinTech is a greenfield in Pakistan.

Also, the advent of tech-powered startups is a recent development in Pakistan. Furthermore, Pakistan has recently embarked on the journey towards digitalization.

Revenue in the eCommerce market is projected to reach US$3,900m in 2020. Revenue is expected to show an annual growth rate (CAGR 2020-2024) of 16.3%, resulting in a projected market volume of US$7,133m by 2024 (Statista).

During the last five years, significant progress has been recorded in the usage of Internet Banking and Mobile Banking channels with an annual transactions growth of 31 percent and 88 percent respectively.

All of these indicators point out that successful operation of a FinTech company in Pakistan wasn’t possible before.

Crossing of 100mln mobile users has only been recently achieved and this critical mass is needed for a FinTech company in Pakistan to successfully operate.

Furthermore, Pakistan remains an untapped market with huge potential and promise, long ignored by foreign investors due to its poor geopolitical situation. This has stabilized and improved drastically recently.

All in all, as of now, Pakistan is the perfect breeding ground for FinTech and any early mover will capture a large market, displace incumbents and possess a unique advantage. TAG aims to fully capitalize on that.

Bringing The Global FinTech Revolution Home.Pakistan’s delay in tech adoption has led Pakistan to become a mere spectator to success stories of FinTechs around the globe.

FinTechs vying to enter Pakistan only have to look at 2FinTechs that operate in comparable economies.

Nu Valued at $30 billion USD as of 2021, is perhaps closest to what TAG aims to deliver. Starting by targeting 30% of the country’s population, Nu provided an e-wallet to the unbanked and underserved with 0 fees. Backed by big-league investors like Warren Buffet, Nu changed Banking in Latin America.

With basic initial services like P2P payments, a credit card and no marketing, it now serves a staggering 40 million people in under 7 years since its inception.

What made Nu so successful? It solved the issues of poor customer service, exorbitant fees, and lack of banking access.

These issues are also prevalent in Pakistan.
India’s leading P2P and e-banking service provider Paytm is set to have India’s third-largest IPO later in 2021 valued at $ 16 billion.

Offering services like QR payment, online transactions, cash in and cash out facilities all through one simple app, Paytmhas been able to capture India’s ever-growing banking sector.

Paytm captures the unbanked and unfacilitated populous in India and has seen exponential growth in under a decade thanks to higher mobile and internet penetration in India.

Paytm is the best example of what TAG promises the Pakistani market; reliable and affordable services all at one’s fingertip.

It has now expanded to diverse services such as retail and loans which makes it a market leader.

One needs to only seePaytm’s success to judge TAG’s potential and what it has to offer its customers and supporters in the years to come.

All this points to a real possibility that a FinTech in Pakistan can not only displace incumbents but also successfully acquire the largest customer base of a bank in Pakistan
FinTech in Pakistan. Currently, there are various FinTechs that have the potential of disrupting Pakistan’s economy.

Three, in particular, have been granted an Electronic Money Institute (EMI) license by the State Bank of Pakistan: TAG, Sadapay and Nayapay. TAG is Pakistan’s first all-in-one super financial app.

TAG’s user-friendly interface makes it easy for a user from any gender, age and background to operate the app, navigate through transactions, monitor scheduled payments and payment history, and send and receive money.

TAG offers a safe and reliable experience while being convenient and transparent. TAG’s use of cutting-edge technology makes it the best in class.

TAG has been granted the approval from State Bank of Pakistan to start its pilot operations in Pakistan. TAG promises to be for the people.

TAG is reimagining the very essence of banking in Pakistan. TAG is on a mission to equip and empower the segments that have long been ignored by brick and mortar banks in Pakistan.The writer is a senior professional banker with varied experience spanning over 25 years.

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