The COVID-19 pandemic has dramatically impacted the world in countless ways – medicine has evolved, targeted ads show up in feeds and businesses have realized the inescapable requirement of ‘being online’. One significant by-product has been the increased need for digitization – businesses and organizations have been forced to adopt new ways of working and communicating, often relying on technology and digital platforms to stay operational. Hence, unfolding the need for online payments.
Accelerating the shift towards a cashless society, a surge in online transactions has progressed, with people switching to e-commerce, online banking, and digital payment platforms for shopping and bill payments. Digital payments became a preferred method of settlement and companies realized that they had to pivot their businesses and operations and be ever-present digitally if they wanted to survive the digital age. While mature economies picked up on global trends swiftly, developing countries were slowly but surely feeling the effects of the digital era. In Pakistan, the State Bank of Pakistan (SBP) has been very supportive and the gradual rise of fintech solutions is proving to be the catalyst of change for a growing digital financial landscape.
According to a survey conducted by Karandaaz, the country’s financial inclusion rate increased from 12% in 2008 to 30% in 2022, largely due to the contribution of fintech companies. Mobile banking and digital wallets have made it possible for the unbanked segment to access financial services and the increasing popularity of financial lending platforms is making credit more accessible and affordable for small and medium-sized enterprises.
Fintech solutions are also creating opportunities for financial institutions to improve their efficiency and profitability. A report by the World Bank established that digital financial services could reduce transaction costs by up to 90%, while also improving the speed and accuracy of financial transactions. This is particularly relevant for Pakistan, where the larger population lives in remote or underserved areas, with limited access to traditional banking services.
Additionally, Fintech solutions are driving innovation by leveraging emerging technologies such as blockchain, artificial intelligence, and machine learning. Such technologies enable companies to create new products and services that cater to the specific needs of consumers and businesses. Take blockchain, for instance, which is being used to create secure and transparent peer-to-peer transactions, whilst artificial intelligence creates personalized financial products and services.
With POS transactions witnessing notable growth in the past few years, reaching a volume of 44M by Q1 2023, and POS deployments standing in at just over 108,000, as reported by datadarbar.io – an enormous untapped potential continues to exist in the POS space. To drive online payment acceptance in Pakistan, Paymob is providing online and offline retailers with easy-to-deploy POS terminals and payment gateways, making the process comfortable and simpler for small merchants and businesses to accept card payments. A growing market for fintech solutions also creates jobs; propelling economic growth, and has the potential to create up to 2 million jobs by 2025 in the region, according to a report by PwC.
In order to fully realize the capability of fintech, it is essential to address the existing regulatory and policy challenges. SBP has taken several steps to support the growth of the said sector, such as introducing a regulatory sandbox and issuing electronic money institution licenses. According to the World Bank’s Global Findex, in 2021, only 21% of adults in Pakistan were recorded as financially included, compared to the global average of 69%. This reveals that a lot more needs to be done to enable an environment that fosters innovation, whilst protecting consumers.
Paymob’s journey has been simple, yet innovative – with the company empowering merchants and businesses with state-of-the-art digital payment options. Since its inception, the payments enabler has continued to disrupt the existing payments landscape. In 2022 the Egyptian Fintech expanded into Pakistan announcing its vision – to onboard and enable 150,000+ merchants to collect digital payments by 2024.
However, where there are opportunities, challenges shall exist. Digital payment acceptance in Pakistan continues to be hindered by cumbersome registration processes. Consequently, this further prevents the adoption of digital services especially by cash-dependent businesses who work with suppliers and vendors daily. Paymob’s solutions eliminate such barriers and provide a simple and effective solution – a friendly UI and swift settlement. Any merchant who is comfortable with technology can self-onboard their business, integrate, and start accepting payments within a matter of minutes. Cash-dependent businesses can receive settlements in their accounts by the next working day. In lieu of this cycle, it is integral to eliminate barriers to adopting digital payments and digitize the merchant onboarding process across the spectrum, just so that digital payment acceptance becomes widely adopted by the SME segment.
Technologies like soft POS, which have never been introduced in Pakistan before, will effectively eliminate lengthy registrations, and improve the merchant-technology experience. The ease of receiving payments conveniently via an NFC-enabled phone in near-real time paints a desirable prospect. Such technologies will revolutionize payment acceptance across the board, and provide true value, in the form of acceptance through multiple instruments and swift settlements for SMEs, which rely solely on cash.
Pakistan continues to present an extraordinary market opportunity, with over four million SMEs using just over 100,000 POS terminals, and less than 3,000 e-commerce gateways. This ripe region is plucking ground for Paymob; which is perfectly poised to bridge this gap for SMEs. The company aims to replicate the success it has achieved in Egypt by implementing similar impactful strategies in Pakistan until the widespread acceptance of digital payments for SMEs becomes the standard norm.
Writer is Head of Products at Paymob Pakistan and can be reached at https://www.linkedin.com/in/ghulam-rabbani-51902b18/