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Fintech prospect promising in Pakistan

Fintech prospect promising in Pakistan

Interview with Mr. Shaham Ahmad — Honorary Secretary, ICMA Pakistan

PAGE: Tell me something about yourself, please.

Shaham Ahmad: I am a Fellow member of ICMA and a member of the current National Council of the Institute for the three-year term from 2021 to 2023. The Council has nominated me as the ‘Honorary Secretary’ of the Institute in which capacity I am responsible to look after those affairs of the Institute as envisaged in the CMA Act and Regulations. Furthermore, I have been nominated by the ICMA National Council to the Board of Governors of the Pakistan Institute of Public Finance Accountants (PIPFA), on which I am serving as its Joint Secretary.

I held the office of the Chairman of the Karachi Branch Council (KBC) of ICMA during 2013 and 2014 and have also been heading the CPD Committee of KBC for quite a long time. In this role, I took several initiatives to promote and strengthen Institute’s relationship with the corporate sector.

Currently, I am visiting faculty at several renowned business schools and academic institutions like SZABIST, MAJU, and PAF-KIET and playing role in imparting professional education to the younger generation. The CMA professional degree, coupled with my practical experience of working for almost over twenty years in the private sector, has helped me to perform the role of a teacher and mentor. I am presently working in a senior executive finance position in Pakistan’s leading automobile manufacturing company where I have been employed since 2002.

PAGE: Could you give your perspective on digital banks in Pakistan?

Shaham Ahmad: Digital banks are the future of the banking industry, leveraging digital technologies to provide convenient, secure, and cost-effective services to customers through online platforms and mobile applications. They have the potential to promote financial inclusion by reaching unbanked and underbanked populations that conventional banks cannot access.

In January 2022, the State Bank of Pakistan (SBP) introduced a Licensing and Regulatory Framework for Digital Banks. This framework allows up to five digital banks to operate in the country, including Easypaisa and four international players. The aim is to offer comprehensive banking services exclusively through digital channels, eliminating the need for physical branch visits.

The new digital banks promise to focus on financial inclusion, investing in technology and customer services to contribute to the growth of the financial sector. The SBP believes that these new entrants should prioritize meeting unfulfilled needs in the market rather than seeking immediate profits. I think that with the rise of digital banks in Pakistan promises a more accessible and empowering future for both individuals and businesses in the financial landscape.

For customers, it means easy access to a wide range of banking services from their smartphones or computers, empowering them to manage finances and make transactions with convenience. On the other hand, small businesses and entrepreneurs can also take advantage of digital banks, as they offer seamless access to financial services, helping them focus on their core strengths without the complexities of traditional banking. This opens up exciting possibilities for growth and contributes to the country’s economic development.

PAGE: What is your standpoint on the technological progress of the financial services industry in Pakistan?

Shaham Ahmad: In my opinion, the technological progress in the financial services industry in Pakistan has been transformative. The emergence of technology has made financial services more accessible and convenient for users. Real-time payments, transparent insurance advice, quick loan disbursals, and peer-to-peer lending are just a few examples of the benefits that fintech has brought to customers.

Additionally, services like e-KYC, digital signatures, and biometric identity verification have further streamlined processes and enhanced the overall customer experience. According to a report by McKinsey & Company, digital banking could bring significant economic benefits to Pakistan, adding up to $36 billion to the GDP, creating four million jobs, and bringing millions of people into the formal financial system. Several drivers, such as increasing smartphone penetration, growing digital literacy, a supportive regulatory environment, and rising demand for convenience and efficiency, are propelling digital banking growth in the country. These estimations are not an exaggeration, as today we are witnessing a notable rise in Pakistan’s financial landscape, with many fintech companies operating in the country. The focus remains on serving previously underserved segments with mobile banking, digital payments, and lending services.

The future prospects for fintech in Pakistan are promising, with estimates projecting a significant contribution to the economy and job creation. The supportive regulatory environment provided by the State Bank of Pakistan acts as a solid foundation for fintech growth. However, to ensure sustained growth and security in this digital era, embracing advanced technologies like analytics and artificial intelligence becomes imperative. These technologies can effectively help build trust in digital channels, improve infrastructure and connectivity, mitigate cybersecurity risks, and address cultural and behavioral factors. By leveraging technology and collaboration, digital banks can offer greater convenience and benefits to customers, while driving financial inclusion and empowering millions of people with access to formal financial services.

PAGE: Has branchless banking altered the financial landscape of Pakistan?

Shaham Ahmad: Branchless banking has indeed significantly altered the financial landscape of Pakistan, with a particular focus on driving financial inclusion and expanding digital financial services to previously underserved segments of the population.

Prior to the emergence of branchless banking and digital financial services, Pakistan faced challenges with a large unbanked population, limited access to formal financial institutions, and a heavy reliance on cash transactions and informal financial services. Though these challenges still persist, to some extent, however, we are swiftly moving towards digital banking. The Covid-19 pandemic served as a catalyst for the growth of digital banking in Pakistan, as it prompted a significant shift in customer behavior towards digital channels.

The statistics from the Pakistan Banks’ Association (PBA) show a remarkable increase in Internet banking users, mobile banking users, and e-commerce transactions in 2020 compared to the previous year. Furthermore, the government’s relief package for Covid-19 was disbursed through mobile and other digital modes to discourage the physical use of cash, showcasing the growing acceptance and adoption of digital financial services.

The establishment of the first digital banks in Pakistan is poised to revolutionize the financial landscape further. These banks are expected to provide affordable and cost-effective digital financial services, including credit access, to previously unserved and underserved segments of society. In conclusion, it can be said that branchless banking in Pakistan offers immense potential for transforming the financial landscape. With a young population, widespread internet and smartphone usage, and a growing digital payment ecosystem, it opens doors to financial inclusion for millions. Moreover, regulatory support from institutions like the State Bank of Pakistan further accelerates fintech growth, creating accessible financial services for all and boosting economic development.

PAGE: EasyPaisa by all counts is a big success story in financial services and has managed to substantially increase financial inclusion in the country. Your views:

Shaham Ahmad: Without a doubt, EasyPaisa stands as the vanguard of Pakistan’s fintech revolution, having an impressive 12 million monthly active users and a network of 180,000 registered agents. Among the five companies granted digital bank licenses by the SBP, EasyPaisa stands alone in its current operation within the country, establishing itself as a frontrunner in the market with a ‘Digital First’ approach.

A recent report by Data Darbar highlighted that EasyPaisa was the most downloaded app in 2022, further confirming its widespread popularity and a strong foothold in the financial services ecosystem.

ICMA had the chance to interview Mr. M. Mudassar Aqil, CEO of EasyPaisa/Telenor Microfinance Bank, featured in the Mar-Apr 2023 issue of the Chartered Management Accountant, ICMA’s official flagship journal. During the interview, he revealed that currently, one in four Pakistani adults holds an EasyPaisa account, and one in ten Pakistani use EasyPaisa monthly. Mr. Aqil also mentioned that EasyPaisa is a frontrunner in various initiatives led by the State Bank of Pakistan, including RAAST.

In my opinion, EasyPaisa has the potential to make full use of the digital banking license to provide financial services to underserved individuals and MSMEs, covering areas like payments, loans, savings, and insurance. With this, they are well-positioned to offer exceptional customer experiences and foster financial inclusion throughout Pakistan.

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