TiE Advocates for FinTech – The next big thing in Pakistan ?

FinTech is creating a lot of buzz all over the world. Pakistan is not alien to this concept as we too have budding businesses that are revolutionizing the conventional banking and payments system in Pakistan.

FinTech is an amalgamation of two words, Finance and Technology. This concept is not new as banking institutions and some other businesses have been using the technology for efficient operations and execution of transactions.

However, as the small technology start-ups have started to disrupt the traditional banking practices, retail banking is looking to be the most likely victim of this phenomenon.

FinTech is a new concept to most of the Pakistanis and it poses some unique challenges, both for consumers and entrepreneurs. Pakistani population is still largely unbanked and opening a bank account is a struggle at times. We do not have a developed E-Commerce industry and most of the E-Commerce transactions are still done through cash on delivery practices. This is due to a number of reasons; two of which are trust from customers and concern about data theft.

There is a trust deficit between the customers and vendors about the quality of products being delivered. Consumers do not fully trust the vendors and paying cash after taking delivery gives them a lot of control. A lot of customers are also concerned about their debit/credit card data being stolen from these E-Commerce websites. There is certainly a lot that can be done to improve the security features. The trust issue can also be solved by setting up an escrow account where funds can be deposited till the actual delivery happens. This will provide assurance to both parties.

A lot of awareness needs to be created in Pakistan for FinTech to reach its potential. TiE (The Indus Entrepreneurs) organized a workshop on FinTech to create awareness and offer some networking opportunities to entrepreneurs.

The workshop included a number of speakers from the finance industry, government and FinTech entrepreneurs. The government was represented by Dr. Miftah Ismail, chairman board of investment. Dr. Ismail ensured the participants of government’s support and asked the industry experts to offer recommendations.


Speakers such as Hasnain Sheikh from Innov8 Limited took up Dr. Ismail on his offer and requested him to help on the taxation matters regarding FinTech start-ups.

Hasnain Sheikh states that at present, FinTech start-ups are being taxed at 8% of their revenues. This is an area where the government can certainly take some steps to encourage investment in the sector. Tax breaks are needed and the tax rate needs to be lower. Tax should also be levied on taxable profit, not on revenue.

Another challenge for FinTech start-ups is getting through the regulatory process. As the country is marred by terrorism, the government has established strict regulatory procedures. Also, in order to safeguard the consumer interest, State bank has put up some extremely expensive licenses, which makes it difficult for new businesses to enter this space. Speakers were unequivocal in advising the new comers to tread the regulatory waters carefully. Mohammad Yar Hiraj from OneLoad stressed that there were still some areas in the market which were not tightly regulated by SBP, and that these areas could be exploited. Entrepreneurs should look for these areas and exploit them.

OneLoad is looking to bridge the gap between the informal and formal side of the telecom economy by helping in cash collection from easyload and other vendors. According to Mr. Hiraj, this area was still unregulated by SBP which encouraged him to go ahead with his idea.

Most Pakistanis face an issue while paying for shopping online from foreign e-commerce players. It usually takes a herculean effort for an ordinary Pakistani to get a credit card. And, sometimes these credit cards are rejected in online transactions. There needs to be an alternative. FinTech businesses are bridging this gap. UrduBit is a Pakistani start-up that offers bitcoins for international transactions, remittances and many other purposes. UrduBit is a play on the Bitcoin, the cryptocurrency that has changed the landscape of global online transactions. This start-up shows how this untapped potential can be exploited by offering an alternative medium to customers. A large number of population still does not have access to these facilities, and the potential for growth is enormous.

There is certainly a lot of potential for FinTech in Pakistan as the population is largely unbanked. The conventional banking system has failed to fulfill the needs of the customers. New Start-ups are getting recognition. However, there are challenges as well.

New start-ups should look for partnerships with banks and other financial institutions. Workshops like these will play a role in creating awareness and it will take some time for the whole ecosystem to develop.

About the Contributor:
Ishtiaq Ahmed is an equity research and financial analyst. He has been studying the North American, European, and emerging markets. A regular writer for Seekingalpha.com and Motleyfool, two of the most read equity research platforms in North America. His areas of interest are Oil & gas, Utilities, Technology and Telecom. Ishtiaq is a graduate of Lahore School of Economics and currently a candidate for CFA level III”.

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