The global ascent of FinTech is heralding a transformative era in financial landscapes worldwide. Pioneering technologies such as mobile wallets, digital payment platforms and block chain are reshaping traditional norms, bringing convenience to consumers and businesses. As per the recent report from Boston Consulting Group (BCG), investors anticipate FinTech revenues to grow exponentially from the current USD 245 billion to a staggering USD 1.5 trillion by 2030.
Pakistan, a country at the crossroads of economic modernization, presents a ripe environment for a FinTech revolution with startups evolving into established brands. In 2023 investors pumped in a whopping USD 200 billion in FinTech start-ups, a substantial increase from previous years.
However, beyond financial investments, the true potential of FinTech lies in digitally empowering population that have yet to access new generations of banking technologies. In this context, Pakistan emerges as a realm of exciting opportunities. Pakistan, being an emerging economy is strategically positioned for the said transformation. Moreover, concerns over inflation and financial inclusion have prompted the State Bank of Pakistan to focus on digital challenger banks as a part of a long-term economic strategy.
Understanding Pakistan’s financial landscape reveals three pivotal trends. First, only 21% of the adult population owns a bank card, highlighting a vast un-tapped market as with 181 million mobile subscribers in a population of over 220 million, FinTech can overcome accessibility issues by allowing mobile phones to serve a s gateway to banking services.
Second, access to formal credit lines is limited, with only 3% borrowing from formal channels. FinTech can address this vacuum by providing seamless access to credit through tech-driven solutions. Lastly, Pakistan’s cash-based economy with currency in circulation at around 15% of the GDP, presents an opportunity for FinTech to foster digital transactions and reduces reliance on cash.
Recognising these opportunities, the State Bank of Pakistan has already launched a licensing and regulatory framework for digital banks in 2022, allowing five initial digital banks to begin operations in the country.
In a ground-breaking move, the Middle East, North Africa and Pakistan (MENAP)-based FinTech achieved a major milestone by securing a Payment Service Provider (PSP) license from Central Bank of Oman. Positioned as the inaugural international FinTech, it is poised to revolutionize online and in-store payment infrastructure.
Pakistan is also setting a unique example, given demand of Shariah Compliant products. Of the 375 Islamic FinTech present globally, Pakistan ranks 8th among top 10 countries that produce 50% of Islamic FinTechs in the top five sub-sectors. Additionally, Pakistan is considered to be amongst the top five growing Islamic FinTech ecosystem as revealed by Global Islamic FinTech Report. The fact is also affirmed by a study conducted by United Nations Development Programme in 2023.
As Pakistan experiences an unparalleled FinTech revolution, collaborations between traditional banks and FinTech, as well as among Fintech entities, emerge as pivotal catalysts for growth and innovation. The strategic partnerships in the industry exemplify the accelerating digital transformation, benefiting financial inclusion, enhanced money transfer and accessing global payment partners. Visionary initiatives by regulatory bodies and industry leaders underscore Pakistan’s commitment to a digital financial future, setting the stage for a revolutionary era in country’s economic backdrop.
Copyright Business Recorder, 2024
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