That mirrors a global shift to fintech that has been spurred by mobile-first populations outside Europe and North America.
In Pakistan, the change has been boosted by a government drive for 65 million people to have digital accounts, which could range from digital wallets to online bank accounts – by the end of 2023, up from about 43 million now in the nation of around 213 million.
It has also been given a helping hand as businesses turn to tech to cut costs amid surging inflation and other challenges that are casting long shadows over the nation’s economy.
Traditional banks have not evolved fast enough, leaving a vacuum for the fintech sector to thrive, said financial technology investor Habib Paracha. “The biggest advantage fintech companies have are their minimal costs due to [their] branchless operations.”
NayaPay was Pakistan’s first digital wallet to be rolled out by a startup. Founded by Danish Lakhani, a Stanford graduate who had worked for Cisco Systems in the US, the service began full operations in August 2021 after getting its license.
“We are primarily targeting students, young freelancers and female homemakers who are deprived of normal banking facilities,” CEO Lakhani said.
“Pakistan receives US$400 million in remittances annually for freelancers… there is huge potential for this to grow further and we are tapping it.”
He touted a host of advantages connected with financial technology. “The fintech sector promotes digitalisation, financial transparency, tax accountability, saving fuel on visits to banks and connecting individuals with global financial systems.”
Lakhani added that his company currently has 490,000 users with “double digit” percentage growth month on month.
Digital wallets are not the only fintech taking off in Pakistan. So-called aggregators such as Blinq collect electronic payments on behalf of clients like schools, hospitals and utilities. Blinq chief executive officer Syed Asif Hassan said the company has signed up 150 customers in 14 industries since starting last November.
Meanwhile, experts agree that fintech companies have been far more successful than traditional banks at drawing people into the nation’s formal financial systems.
“As Pakistan [accelerates] its digital transformation journey, digital financial services including payments, credit, savings and investment are going to be critical in unlocking new use cases that will attract people into the digital system and deepening interactions within the [financial] system,” said Naeha Rashid, head of the centre for digital transformation at Islamabad-based think tank Tabadlab.
Pakistan’s financial inclusion ratio stands at 21% compared to an average of 33% in other lower- to middle-income countries, according to Karandaaz, a non-profit company promoting access to finance in the nation.
Pakistan’s fintech progress, however, lags way behind its neighbour and regional rival India, analysts say. Tabadlab’s Rashid said that Unified Payments Interface (UPI), a real-time digital payment system in India, helped the rapid expansion of financial technology after it was introduced in that country in 2016.
Nevertheless, the heads of fintech companies interviewed by Nikkei have big hopes. Hassan said Blinq is looking to develop a credit scoring system for its clients that will make it easier for consumers to get small loans.
Lakhani said NayaPay is working on new saving and investment products for digital wallets.
“We are also in talks with leading money transfer organisations and plan to connect our users to a much wider global payment system.”