Pakistan's steady but firm movement into the realm of digital payments.
Covid-19 has disrupted the entire world. It has put into chaos all aspects of life. Do you remember Game of Throne's track named "Chaos is a ladder" by Ramin Djawadi? This song catches the sentiment of our current times. Many companies from different industries have taken advantage of the prevailing Covid-19 crisis and have improved their operations and solidified their position in the market. One only needs to look at the education sector. An entire generation of students has been taken from traditional place-based learning to an online one. Those educational institutes that were better poised to adapt to this situation gained widespread repute and praise in their local communities. Similar is the case with laptops. Those manufacturers who predicted high demand due to home-based work, education, and businesses and were able to restructure their production lines accordingly not only reaped high dividends but even crystallized their market position.
The effect of Covid-19 has not been only in industries within its immediate sphere of influence. It has had a strong linkage with the secondary industries as well. The prime example is the microfinance sector. Covid-19 was able to act as a catalyst for change in the telecom and IT sector because people had to access the internet, buy laptops and phones to work/learn from home. A lot of records were broken in the process. For example, the number of network subscribers and internet users went well beyond expectations. As a result, the reach and opportunity for engagement with first-time users greatly increased. With the augmented number of new users, the microfinance sector has benefited not only from enhancement in loan disbursements (to people who needed to buy tech gadgets) but also in terms of the new opportunities.
The greatest challenge that was faced by the microfinance sector was the maintenance of a vast distribution network that made operations costly. However, as the outreach of networks and internet services increased and reached underserved or unserved areas, the dilemma of costly disbursement was resolved. The inclusion of remote areas in the digital realm has encouraged online banking and many microfinance bigshot players such as the First Microfinance Bank, JazzCash and Easypaisa have created digital units to aid clients.
Ghazanfar Azzam who is the President and CEO of Mobilink Microfinance Bank said that digital wallets significantly reduce the cash handling of clients and recovery officers. This leads to a great reduction in cost, overhead expenses, and most importantly; risk. The more a company is able to persuade people to opt for digital wallers, the smaller its risk for going-concern remains. Resultantly, the reduction in the probability of errors and sound audits all leads to greater trust and more clients; a wonderful virtuous cycle. Mr. Azzam also said that traditional banks do not (sometimes cannot) operate in remote areas. And people there do not have bank accounts. But the ready availability of fintech companies and opening of digital wallets has ensured that these unique "banks" have carved a significant presence in Pakistan. Fintech is here to stay.
These digital wallets have inadvertently also caused female economic inclusion. A lot of women were not able to visit banks physically but can now make and receive payments while at home. This makes it easier for support programs like BISP to disburse payments. This system is also a boon for accountability. A new kind of job, that of agents, has been created as well. “The digital platforms play a proactive role towards increasing microfinance clientele across the country,” says Mudassar Aqil, CEO Easypaisa, and Telenor Microfinance Bank.
Pakistan's fintech sphere was first created by Easypaisa in 2009 and was later penetrated by JazzCash and Upaisa. Despite the latter being late entrants, JazzCash has been able to surpass Easypaisa as a cell-based banking platform. The increase in digital wallets has been 28pc since 2019. Online banking is complementing the traditional banking channels and bringing depth to the economy. “Providing financial services to the under-banked and the unbanked segments of society is a colossal task that no one can achieve alone. In the fintech space, like all other markets, new entrants can help evolve local trends and the consumers will also have a wide variety of services to choose from,” Mr. Aqil, CEO Easypaisa, said