Since 2009, Omar Moeen Malik has been a core part of Mobile Financial Services team at Telenor, designing and deploying the OTC and Wallet businesses for Easypaisa. He has previously served as the Head of Strategy, Easypaisa. As the Head of Digital Payments for Telenor Bank, Omar launched online and retail payment products and was also responsible for the Digital Wallet and the Easypaisa App products. He has a B.Sc. in Computer Sciences from the University of Texas at Austin and an MBA from the Lahore University of Management Sciences. Omar also holds qualifications in Strategic Marketing from the London Business School and Strategic Management from INSEAD.

Below are selected excerpts from BR Research’s recent interview with the Easypaisa Business Head, focusing on developments taking place in Pakistan’s digital financial services ecosystem.

BR Research: You have been associated with local digital financial services (DFS) / branchless banking (BB) space almost since its inception over a decade ago. In your view, how far along has this ecosystem developed over the past 10 to 12 years?

Omar Moeen Malik: Pakistan’s branchless banking and digital financial ecosystem has come a long way in the last decade. This is evident from the fact that from 10 percent in 2011, Pakistan’s financial inclusion ratios only rose to 14 percent by 2017. However, with the introduction of comprehensive digital payment solutions, the financial inclusion rose to 21 percent by the end of 2020.

At Easypaisa, for instance, we started off as a simple peer-to-peer money transfer service back in 2009. Today, Easypaisa has become a digital payments platform offering all sorts of financial services, various merchant payments, mobile top-ups and bundles to grocery deliveries and various other use cases. Have we achieved our objective? Absolutely not. There are still approximately 50 million adults in this country who don’t use any sort of formal financial services or a bank account. So there is a long way to go and the coming years will witness a lot more services and products being tailor-made for different people in Pakistan.

BRR: In the past, we used to hear telecom executives say that every person who had a mobile phone in their hand was a potential DFS/BB customer. Is this kind of thinking still guiding the selection of the target market? Or is there a different lens now for the target market?

OMM: We firmly believe that mobile phones, especially smartphones, will continue to become the dominant channel for conducting all sorts of financial transactions in the coming years and overtake transactions at bank branches, internet banking as well as cards. We’ve seen that happening in markets like China and India and we believe that is exactly what will happen in Pakistan. Over the last few years, our smartphone usage has gone up significantly and will continue to do so in the coming years with cheaper smartphones flooding the market. Telco 3G/4G coverage and SIM penetration are ever-growing and all financial institutions are scrambling to use smartphone apps to serve their customers.

With Easypaisa, we identified this opportunity almost five years ago and were the first ones to build and offer smartphone Apps to our customers. Today, we have almost 10 million users using our Android and iOS apps every month.

BRR: What kind of DFS products do you currently offer in the realms of credit, savings and insurance?

OMM: Easypaisa started off as a simple Over-the-Counter (OTC) money transfer service in 2009, but over the years we transformed into a complete digital payments platform. In the realm of digital lending, we offer multiple lending products to customers, including nano loans and SME loans. We offer saving products as well and we also have various insurance products related to health, life, mobile screen, and theft.

But most importantly, we have focused on building and offering different payment products to our customers. Today, we have one of the largest online payment services for merchants who wish to collect payments online, as well as Debit Cards and QR payments available for offline/retail payments. In addition, we have partnered up with a variety of third-party services to offer payments for their services directly inside the Easypaisa App.

BRR: Speaking of nano loans, what is the scope of alternative lending models in the Pakistani market?

OMM: Digital lending is showing promising results even though it is still in its nascent stages. As the leader of the fintech revolution, we are continuously growing our digital lending portfolio for the past couple of years, facilitating various individuals in the process who were previously not in the fold of financial inclusion. With more than 70 percent of Pakistanis financially excluded and the hurdles that they face in obtaining credit, we believe that alternative lending models, such as digital lending and Buy Now Pay Later (BNPL), has immense potential to become the next big financial empowerment tools.

BRR: The mobile wallet transactions in the BB segment are overwhelmingly dominated by funds transfer of different types, mobile top-ups, and utility bill payments. And those numbers are growing, which is encouraging. However, why does it seem that the service providers have so far been unable to develop an ecosystem where wallets actually become marketplaces of sorts?

OMM: Over the years, digital financial platforms have evolved significantly. Easypaisa, for one, offers basic services like mobile top-ups and utility bill payments, but at the same time, the service offering is diversifying quite rapidly. We’ve incorporated solutions like bus and train ticket purchases, payments for ride-hailing services, and even initiated a path for customers to order groceries directly from within the app. With our partners, we are working towards developing a digital ecosystem that is beneficial for all. At the heart of our strategy is an ambition to make Easypaisa App a platform that everyone can use to their benefit and we are progressing towards it with each passing day.

We have recently embarked upon a platform approach whereby any third party can reach out to us and work with us to embed their services quickly and easily into the Easypaisa App. In the coming years, most of the new services being offered will be offered directly from within payment apps.

BRR: Data from the central bank show that mobile wallets have overtaken the value and volume pies of BB transactions. What does this mean for the relevance of over-the-counter (OTC) channels in the future?

OMM: Pakistan is still a cash-dominant economy where more than two-thirds of the population is still unbanked, preferring to do the bulk of their transactions in cash. However, it’s worth appreciating that the central bank and all financial institutions have really worked hard to invest in and migrate a large chunk of these OTC users towards wallets. At Easypaisa, we have the largest country-wide agent network of 170,000+ Easypaisa agents and these agents are a critical piece of the equation because they are the ones converting physical cash into digital money by depositing funds into customer wallets. We feel that a lot more agents need to be deployed quickly to facilitate more uptake in wallets.

The Covid-19 pandemic has shown the significance of what digital payment platforms have to offer in terms of convenience and security of transactions. As the overall ecosystem evolves, we will definitely see a shift in user preferences as well.

BRR: Why do you think it is that only about half of mobile wallet users in the BB segment are found ‘active’ at any given time? (SBP has previously qualified ‘active’ accounts as those which were either opened in the past 180 days or performed at least one transaction in the past 180 days). What steps can be taken by service providers to drive engagement and usage of this platform?

OMM: The number of active wallets in Pakistan has experienced very fast growth in the last few years. At Easypaisa, for instance, we measure our active wallets by transactional activity over the last 30 days, and Easypaisa active wallet users have grown from nearly 6.3 million in 2017 to close to 10 million today. It is, therefore, evident that users are shifting to digital payments.

However, a lot of people still do not have all their payment needs digitized and offered by payment wallets today. For example, a utility bill payment is a once-a-month payment. Until and unless we bring more frequent use-cases into our payment wallets, we will always carry a large dormant base of users. Another reason for inactivity is that customers still don’t have a clear incentive for digital payments or transactions. So it’s easy for them to swing back to the cash-based payments whenever they want to.

To get more active customers, we need to work on and try to digitize as many payment use-cases as possible and we’re working with the SBP and the Government to try to incentivize digital payments over cash to see a radical change in behavior from customers.

BRR: There is this criticism that mobile wallets in the BB segment mostly have their uptake among males in urban areas. How can the regional and gender imbalances be corrected?

OMM: According to the latest financial inclusion figures, a gap does exist in account ownership with the division being 20 percent (males) to 5 percent (females). However, collective efforts are being made to address this challenge. One of the reasons for this gender gap is, of course, mobile phone ownership. According to data from PTA as well as telco’s, the vast majority of active SIM users are male. So, unless females start owning mobile phones, getting them onboard for mobile-based financial inclusion will always remain a challenge.

The State Bank of Pakistan recently instructed financial institutions to develop tailor-made solutions for women, and Easypaisa itself has been active in creating these facilities as well as avenues for the female segment in society. We’ve partnered with government organizations to enhance financial literacy among women, especially in rural areas. Our solutions have been empowering women in far-flung areas to make informed financial decisions and join the fold of financial services.

BRR: User trust in the digital ecosystem is critical. Cybercrime is a nuisance worldwide and it has been rearing its head more frequently in Pakistan. Although tactics in this country are simpler, the consequences are quite damaging for customers. What efforts are DFS providers making in this regard? Are these actions bearing fruit?

OMM: There are strict regulations in place by the authorities for banks to maintain robust cybersecurity mechanisms, and compliance to these guidelines is crucial. However, cybercrime is on the rise around the world. In Pakistan, these frauds mostly occur when users share their one-time-pin (OTP) with others as a result of social engineering tactics.

At Easypaisa, we have invested heavily in state-of-the-art and robust security platforms to ensure that all customer data always remains protected. We have been carrying out extensive communication campaigns to raise awareness amongst customers to mitigate this practice. Our recent ‘PIN Chor’ campaign was designed to stand out and grab customer attention and reinforce the different creative ways used by fraudsters, in order to ensure that customers do not share their confidential information including their OTP/PINs with anybody. We are very happy with the response.

We believe it is the firm responsibility of every financial institution to educate customers on the dangers of cybercrime and invest in robust security platforms to protect every rupee that their customer has entrusted to them.

BRR: It has been more than a year and a half since Covid-19 struck the world in earnest. In your leadership role overseeing digital wallets and payment products for a leading service provider, what was your initial view of the potential impact of a pandemic on the uptake of your products? And now, after some time, where do you assess things are going?

OMM: The Covid-19 pandemic came as a complete surprise to everyone across the globe. However, the shut-down of physical business operations was always going to favor digital financial platforms and thankfully, in Pakistan, the infrastructure to support this shift was in place for the last decade. Consumer behavior changed dramatically as a result of the pandemic, particularly when it comes to digital transactions.

From March to April 2020, during the first wave, Easypaisa alone had a 35 percent increase in new account registrations, while old returning customers saw a 25 percent increase. Simultaneously, daily transactions grew by 17 percent, and bank transfers using wallets increased by a whopping 184 percent. These growing numbers during the pandemic prove that a shift towards digital methods is inevitable and will become the future. However, efforts are required by all players on a national level to sustain this shift.

BRR: As a measure of support, the government initially ordered a fee waiver on digital funds transfer during the pandemic. Recently, the fee waivers have been qualified for transactions totaling up to Rs25,000 per month. What more incentives can the government still offer to support the uptake of digital payments?

OMM: One of the biggest issues with the uptake of digital financial services at present is the pricing that comes with these payments. When IBFT charges were waived during the pandemic, transaction values and volumes both saw a significant rise. This shed light on the fact that consumer behavior is indeed influenced by reduced costs. The government can still offer tax rebates and a host of other incentives such as ensuring frictionless onboarding for all, bringing down costs that are associated with digital payment transactions, and collaborating with partners and other players for new use-cases to bring more people into the fold of financial inclusion.

BRR: Pivoting to Easypaisa, it has been a few years since Ant’s Alipay acquired a 45 percent stake in Telenor Microfinance Bank. How has this strategic partnership fared so far?

OMM: Ant Group acquired a stake in our institution given Easypaisa’s performance in Pakistan over the last decade. The resources provided by our shareholders, coupled with our expertise in the local fintech space, are enabling us to grow at a substantial pace. The technological prowess of Ant Group has enabled us to introduce some of the most innovative, convenient, and secure digital financial solutions for all Pakistanis to enjoy. Through Ant, not only do we have access to state-of-the-art technology platforms, but also their wisdom and knowledge from running wallets in ten similar markets for decades in South Asia.

BRR: In the end, what are some of your priorities for the coming year?

OMM: Going by our mission of making Pakistan a cashless and a financially-inclusive society, we plan to continue our lead in the fintech space of the country with Easypaisa App as the leading payments app in Pakistan. We are also regularly revamping and optimizing our app to provide the best user experience and add new use-cases for customers. Moreover, we strongly believe that partnerships are the key to growing the digital ecosystem in the country and our platform approach to convert the Easypaisa App into a super-app is built around creating exponential value through partnerships.

In short, customers can expect many more use-cases to appear in the Easypaisa App as well as a complete strengthening of the existing financial services use-cases like lending, insurance, investments, etc.