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The most heated topic nowadays is “Fin-Tech” which is revolutionizing the financial world by unbarring new doors for many businesses. The word “Fin-Tech” is not new; it describes the use of technology to deliver financial services and products to consumers. This could be anything related to finance like banking, insurance, investment, commerce, etc. Fin-tech is changing the world of finance for consumers in countless ways. For example, without physically visiting a bank, you can now open a bank account over the internet. You can also link the account to your smartphone and use it to monitor your transactions. You can even turn your smartphone into a “digital wallet” and use it to pay for things using money in your account. The unlimited use of internet on devices like smartphones and tablets has accelerated the speed of this change greatly in recent years.

Pakistan is considered to be almost 73% urban; these areas are connected physically and electronically and promise a high rate of Fin-Tech adoption. According to a report revealed by Karandaaz Pakistan in 2017, Pakistan’s e-tail is expected to grow to EUR 746 million by 2019 and EUR 1.9 billion by 2024 – a 2.3% penetration.

The rapid progress in the financial sector of Pakistan is credited to the increasing invasion of branchless banking, awareness of the internet, the improved income level and undoubtedly, the advancement in communication technology. There are a number of companies, including some startups, offering Fin-Tech applications for smartphones that are linked to bank accounts. Telenor Microfinance has already established the well-known EasyPaisa. Jazz has also introduced digital payment solution, Jazz cash, providing users with more control to transfer money to their loved ones more easily. Ufone has digitalized its services by launching UPaisa. Other well-known startups working to disrupt the financial services sector in Pakistan are Finja and Inov8.

Over the past few years, traditional financial institutions and non-traditional fin-tech firms have begun to understand that collaboration may be the best path for long-term growth. Daraz.pk has been acquired by Alibaba while many big tech firms are proposing financial services in the country. A short time ago, State Bank of Pakistan (SBP) has revealed that three big players are interested to work in Pakistan including FonePay, Monet, and TPL Rupya. The SBP also reported that the financial sector of Pakistan will witness a rise in the business-to-consumer e-Commerce (e-B2C) platforms. The new financial technology will assist people to make online transactions to anyone having mobile wallet account. China’s e-commerce giant Alibaba also runs a major global e-payments platform Alipay. It also owns Ant Financial which has recently announced the purchase of a 45% stake in Pakistan-based Telenor Microfinance Bank. Telenor Pakistan runs its own e-payments platform EasyPay which will likely link up with Alipay global payments platform after the close of the Ant Financial deal.

The fin-tech industry has an immense potential to grow in Pakistan. Currently, we have 152 million mobile phone subscribers in Pakistan, opening up ways towards financial inclusion. Also, Pakistan is among the countries where internet penetration rate is accelerating, giving users more choice to do businesses using the internet. Pakistan is the country with the largest young population that shows the potential of adapting to new financial technologies. A McKinsey and Co analysis shows that adoption of financial technology can help dramatically increase financial inclusion in Pakistan. The widely spread phenomena today is the use of Mobile wallets, also called m-wallets are smartphone applications linked to bank accounts that allow users to make payments for transactions such as retail purchases. According to recent statistics on branchless banking (BB) sector by State Bank, mobile wallets reached a high of 33 million as of September 2017, up 21% over the prior quarter. About 22 percent of these accounts – 7.4 million – are owned by women, up 29% seen in Jul-Sep 2017 over the previous quarter. The share of active m-wallets has also seen significant growth from a low of 35% in June 2015 to 45% in September 2017.

Pakistan is the country that has indicated a tremendous growth in the IT sector. According to the United Nations E-government Survey 2018, Pakistan has shown incredible improvements in e-presence and provision of public service online. According to the ministry of Pakistan, over the previous five years, Pakistan’s IT industry has been growing rapidly at a rate of 150%. Because of the technology growth, Pakistan is also getting popularity internationally. According to FY-2017-18 annual report, Foreign Direct Investment in Pakistan’s business of Information Technology has escalated to $1.9 billion. If Pakistan continues at this pace, then in a very short period of time it will be considered as one of the leading countries with IT development. The use of technology in businesses will also accelerate the economy of the country.

Unquestionably, advancement in Fin-Tech will revolutionize the IT world. However, there are still some places where we are lacking. One key area in which Fintech firms can fall behind traditional financial companies in the absence of the ‘human touch’, with their operating models often leaving clients to feel like they are dealing with some faceless entity. And with the use of AI and machine learning on the rise this issue will be more prevalent.

This can leave many Fin-tech start-ups struggling to persuade clients, particularly older clients, to abandon their traditional banks. So, all the public and private sectors need to build Fin-Tech awareness programs and collaboration platforms. Another main challenge that we face is the lack of security. Involvement of internet in businesses has put data on risk. Just recently, Pakistani Banks have faced a major data breach, exploiting important information of their users. According to the FIA, over 19,000 card details from 22 different banks have been stolen in that cyber-attack. At the same time, the integration of traditional finance and fin-tech gives rise to significant regulatory challenges.

IT sector of Pakistan has exceptional potential to develop the country’s economy and GDP. It is the need of the hour to not only invest and support the local upcoming Fin-Tech in the country but to create an environment encouraging the growth of Fin-Tech in Pakistan. Adoption of Fin-Tech will definitely lead the country towards the betterment and will strengthen the IT sector of Pakistan in no time.


Autor(en)/Author(s): Onsa Mustafa

Quelle/Source: PhoneWorld Magazine, 27.01.2019

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