Digitising the country’s financial services system

Published: August 14, 2016
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Fin-techs are hopeful that their business will thrive due to the untapped 100 million population that remains outside the financial services sector. PHOTO: FINJA FACEBOOK PAGE

Fin-techs are hopeful that their business will thrive due to the untapped 100 million population that remains outside the financial services sector. PHOTO: FINJA FACEBOOK PAGE

LAHORE: The gradual success of start-ups and increased awareness is making way for a new breed of entrepreneurial ventures.

Such ventures, commonly known as Fin-Techs, are solely designed to digitise the country’s banking network or financial services systems, a glimpse of which already exists in shape of mobile wallets, internet banking, and other such solutions.

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Such Fin-Techs are working to tap the growing penetration of smartphones thereby aligning their interests with innovative digital financial solutions, in partnerships with various banks. Qasif Shahid, a banker, founder and chief executive of FINJA, a Lahore-based fin-tech, believes that the next three years could change the landscape and convert the country to a cash-light economy.

“Nearly every bank in Pakistan is now preparing for upcoming innovations in the banking industry,” Shahid told The Express Tribune. “In the struggle to co-exist with the incumbent organisations, the collaboration between fin-techs and small banks will disrupt the previously existing traditional banking systems.”

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However, he believes that though outsourcing innovations to fin-techs could equally benefit small and big banks, it is easiest to coordinate with smaller banks. “The nature of smaller banks leaves them in a unique position where their customer base and capital invested present a situation in which they have little to lose but much to gain. Large commercial banks have a bureaucratic structure and tend to miss newer opportunities if they are smaller in size.”

The banking industry can offer new services but cannot introduce innovation, since it is not their core business. The burden has now shifted to open market where new innovations are being done by some 20,000 fin-techs around the globe, Shahid added.

Pakistan has around 43 million bank accounts, which constitutes only 15% of the total population, out of which 33 million have plastic cards. In recent years, many banks have introduced mobile wallets, but high transactions costs mean the adoption rate is low.

Shahid, however, said that he is introducing a mobile wallet, which will not charge any fee, allowing the account holder to make as many transactions as he wants.

“Revolutionary changes came for free; social media apps have changed the world due to their free access, we have to follow the same model,” he said, adding that this model might annoy the banks initially, but free services will boost the customers’ confidence, encouraging them to put their money in the banks, fin-tech can share the profits via banking spreads.

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FINJA recently raised $1 million in a $1.5-million bridge seed financing round from a major international venture capital firm. Shahid said that this money is sufficient to implement its plan.

“Mobile wallets will increase financial literacy in the country and would ultimately lead to documentation of the economy – the biggest problem of Pakistan,” said financial analyst Mubashar Basher.

He said people love innovative solutions, and free services will go a long way in increasing the adoption rate, helping increase the average transaction size of a mobile wallet account, which is currently Rs4,760 in Pakistan.

Fin-techs are hopeful that their business will thrive due to the untapped 100 million population that remains outside the financial services sector.

Published in The Express Tribune, August 14th, 2016.

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Reader Comments (4)

  • Fareed
    Aug 14, 2016 - 1:59PM

    Pakistan has around 43 million bank accounts, which constitutes only 15% of the total population.

    I always thought Pakistan population was 180 million. 15% of 180 million is 27 million, no?Recommend

  • Eirabie
    Aug 15, 2016 - 6:02PM

    It is a welcome news for a Pakistani company to develop innovative solutions, however I would recommend that they market it to countries other than Pakistan to be successful. While the rest of the world is moving to paper-less transactions for a documented economy, the munshies of GOP are trying to move Pakistan back into cash transactions, so that they can help their masters in whitening the black. Till such time GOP removes indirect taxation on financial transactions, new innovative solutions like above will not succeed.Recommend

  • Hassan
    Aug 21, 2016 - 11:18PM

    @Fareed:
    43 Million account holders are not unique. On average one customer is holding more than one bank account.Recommend

  • Fareed
    Aug 22, 2016 - 9:04AM

    @Hassan:
    Ok thanks, perhaps the sentence could have been better written.Recommend

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