Earlier last year, Plan9 launched a Startup Challenge calling for FinTech apps. But there are still very few startups in Pakistan that are rising up to the challenge. Why? What is FinTech and why is there a need for it in Pakistan? Let’s explore.
What is FinTech?
FinTech is short for financial technology which is an economic industry composed of companies that use technology to make financial services more efficient. Financial technology companies are generally startups founded with the purpose of disrupting incumbent financial systems and corporations that rely less on software.
Why is there a need for innovation in FinTech in Pakistan?
In a conference in Islamabad last year, Anusha Rehman, Pakistan’s Minister for State for IT and Telecom told that the government will soon invite PayPal, Amazon and Ebay to start operations in Pakistan. However, a company like PayPal is not likely to fully operate in Pakistan until 2018 simply because of Pakistan’s low market potential as compared to India.
Although HBL and MCB do offer Internet payment gateways, they are expensive and not suitable for small businesses or someone who’s just starting his e-commerce business. Then there’s EasyPay, which allows customers to pay directly to an online merchant through their Easypaisa Mobile Account, or make payment at any of the Easypaisa shops across Pakistan. But it’s is still to allow online merchants to transact via a credit or debit card. Right now, the only feasible option seems to be 2Checkout, which charges a 3.9% commission on everything purchased via your store. Other viable payment gateways in Pakistan are Skrill & Payoneer.
Many people don’t know that globally the investors are making huge Investments in FinTech across the Asia-Pacific region. The investment volume rose from $880 million in 2014 to an incredible $3.5 billion in the first nine months of 2015, according to Accenture.
40% of these investment deals was occupied by payments companies. Venture capitalists around the world are clearly seeing financial technology companies as a great growth opportunity, as more and more of these companies innovate in cloud technology and mobile wallets. The business models have been completely altered. The investors worldwide are interested in startups that are disrupting the traditional business models and providing new payment gateway solutions. So the demand is far more than the supply. The Pakistani entrepreneurs should wake up to this opportunity. Because not only can they invite International investment but easily create monopoly in Pakistan.
If finance is your thing, and you got experience under your belt, here’s how you can start a Fintech company:
With many International Banks like Barclays and Standard Chartered leaving Pakistan, perhaps FinTech startups in Pakistan might lure those banks in again, even if indirectly.