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Fintech in Pakistan

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Lately we all have heard the word FINTECH going around but what does is really mean? Financial technology (FINTECH) as the word suggests are computer programs and technology that supports banks and improves the uses as well as the delivery of financial services to consumers. Its main aim is to compete and replace the traditional method of banking. Although it is still an emerging industry it had been able to secure USD 3.6 trillion in 2017 and is estimated to reach a USD 8.3 trillion by 2022.
Fintechs allow users to make transactions through their mobile phones. It is an efficient way to provide products and services to consumers with lower costs. It has also helped in keeping the market transparent and making information available to everyone hence decreasing information asymmetries. Notable international companies such as PayPal and eBay are prime and often heard examples of fintech. Cryptocurrencies such as Bitcoin also fall under the umbrella of fintech.
Pakistan being a country in which 73% of the country have access to cellular services, makes it an ideal place for the growth of fintech. While country already has ATMs, credit cards, and debit cards available, what it lacks it the new class of fintech which has recently emerged. Banks have always been the one to introduce fintech to the Pakistani environment but now non-bank players also provide a few services and we all have heard them by the name of Jazz cash and Easypaisa. Both of these are provided by mobile phone service operators the former belonging to Mobilink while the latter to Telenor. They provide the facility of opening bank accounts, withdrawal and depositing cash, fund transfer and bill payments. Karandaaz is another non-bank player that promotes economic growth through financial inclusion of individuals. The company has backup support form United Kingdom’s Foreign, Commonwealth and Development office (FDCO) and Bill and Melinda Gates Foundation (BMGF). Other top fintech companies operating in Pakistan include: Creditfix, Finja, UBL Omni, HBL Konnect, Bank Alfalah and Meezan Bank.
The list of fintech operators may seem advantageous but that doesn’t exclude the fact that Pakistan doesn’t has its own fair share of challenges. Fintech operators are very few in Pakistan and those present only oprate in major cities of Karachi, Lahore, and Islamabad. The fintech industry also does not have adequate investment to thrive and the fact that the IT sector is of substandard quality does not help at all towards the development of fintech. 93% of the adult Pakistani population remains unbanked and so the country maintains a low rank of financial inclusion. High costs and financial illiteracy has put fintech out of reach of small and medium enterprises which contributes in high operational costs and makes the future bleak for them. The nation also faces many socioeconomic challenges with high illiteracy rates and high unemployment rates.
These challenges may dampen ones spirit it is still good to know that not all hope is lost. However we need to play our cards right to make it work. The existing technology that Pakistan does have needs to be used to enlarge geographical outreach. This same technology will help increase literacy. Partnerships between banks and non-banks can make services more widely available, less complicated, and presented in such a way that it is easy for the common man to understand. The government will also need to support the fintech industry to boost growth and take the country towards innovation and development.