'100 million people to reinvent their relationship with money' an interview with Qasif Shahid, CEO Finja

Qasif Shahid is Chief Executive Officer of Finja, a FinTech startup that he helped co-found along with two very able partners Monis Rehman and Umer Munawar. Qasif is also the founder of FinSurgents, a financial services startup consultancy. He has close to 20 years of international experience in building, managing and growing digital financial services, products and businesses. His prior roles include Head of Digital Banking for MCB in Pakistan, Head of Digital Banking at Standard Chartered Pakistan and Head of Marketing and Digital Channels for ABN AMRO Singapore. Following are the edited excerpts of a very detailed conversation with the veteran.
BR Research: What is your view on the current scale of digitization in Pakistan? It hasn't scaled up. Why? Qasif Shahid: Let's first look at why digital financial services will be such a big thing in emerging markets like Pakistan. Pakistan is sandwiched between two of the largest countries China and India, both of them are now highly digitized. China has two large companies WeChat and Ant Financial, which are one of the largest financial services companies in the world - one has nine hundred million users and the other one has eight hundred and fifty million users. These companies have become the largest financial players of the world in just a decade. Similarly, India also is being digitized.
What drives people in emerging markets to change behaviour to digital payments? In my opinion, the biggest use case for the digital financial services adoption in emerging markets is going to be the promise of instantly delivered digital credit. People in Pakistan will change behaviour as they will be able to see how much money they make and spend. And as a consequence, bank lending, crowd funding and p2p lending will pick up.
This can be viewed from another angle. People in Pakistan cannot break class as nobody sees what they are making as everything is happening in cash. And when it can't be seen, no one can get a loan on it.
So in future, a large scale behaviour adoption is ready for Pakistan, and we at Finja and SimSim think that it will happen once we make the digital payment free, frictionless and real-time. Around 100 million people will reinvent their relationship with money in Pakistan in the next 3-4 years, which means around 100 million people would have mobile wallets and they will be making payments, saving money, spending, making investments, buying insurance etc. digitally.
Pakistan is very well positioned to achieve this as we have 40 million people with bank accounts; we have ATMs, branchless players, agents, and more than 120 million people with mobile phones; we have 96 percent of the adult population with the digitized ID card. So the next level of disruption will be built on the shoulders of the infrastructure that we already have.
BRR: Because it's not free right now and probably not as frictionless as you say, is that the reason why digital payments haven't picked up here yet?
QS: That is one of the reasons, but there are others too. Let's first understand the genesis of free. I always use this quote by someone that history doesn't repeat itself, but it rhymes! You need to see what has happened around the world. Large scale behaviour transformation has taken place in the last 20 years, and when you start to peel the onion, you will understand that it has only changed at the back of demonetized technology behaviours, which are free, frictionless and real time. All these Google searches, Facebook likes, Twitter tweets have one thing in common: they are free and frictionless and real time.
The second thing is that anytime when people transit from an old behaviour to a new behaviour, they start to consume this new behaviour at an exponentially higher level because they are frictionless, free and real-time like the change of behaviour from libraries to google search; letters to emails, or analogue photography to the digital one. What we are saying is that digital payments are a similar type technology and it must be made free, frictionless and real time for it to disrupt cash, cheque and plastic.
BRR: What happens when digital payments are not free?
QS: When you price payments, it becomes a need-based payments model. It is an opportunist, need based business model that these telephone companies all around the world have gone into, which has a very slippery moral slope. Today my driver will only send money when his mother really needs it because it its priced- hence only a need-based model.
If you want to go out and change behaviour; if you are serious about digital payments disrupting cash, cheque and plastic; if you want to digitize the economy, then you have to make these payments free and there is good reason when we say that. In the earlier world order, merchants had POS machines and the customers would have these plastic cards to swipe. All of this cost money, which was justified when the customers were charged 2-3 percent on every transaction. Today, none of this is justified because the merchant and the customer has a smart phone; everybody is connected to the internet, and the transactions will be happening in the real time.
The problem right now is that all these large organisations are making money from payments. However, all the incumbents would have to make payments free in Pakistan when SimSim grows to be a few million users; we want to be the catalyst here.
BRR: What else has hindered the rise of digital payments?
QS: Another reason why digital financial services have not taken off in Pakistan is that there are not enough use cases; we have to go out and create those use cases. It's a fallacy to think that those use cases are going to be created by the incumbents (telcos and banks in this case). The burden of innovation is moving to fintechs and startups and they will come on top of banks and telcos, and the use cases will come from there.
So now all incumbents are at different levels are opening themselves up and wanting to bring in fintechs and startups. Finca and Finja startup is a forerunner partnership in this category. SimSim is the brand which is co-owned by Finca and Finja; the trade mark is shared, and whatever money is made is split between us and the bank. What is special about us is that we are free; we are also a platform and we let the fintechs and startups build on top of us.
There is going to be a revolution where in the next 3 to 4 years, 100 million people will re-invent their relationship with money for a few key reasons. One, there is a promise of instantly delivered digital credit with e-money. Second, Platforms have realised that they cannot innovate; they are opening themselves up and new cases are being created. And finally, making on boarding process easy and seamless is becoming a necessity - even more important than functionality. SimSim had invented a process in which you can download the app in less than two minutes where you put your ID card, picture and information in the app and your wallet is instantly opened.
.BRR: How do you view the new EMI regulations?
QS: In 2007 and 2008, similar regulations came in China, and as a consequence about 200 companies came in. But the money they were asking as capital was much less. I think it was half a million dollars to come in. Here, the State bank is asking for $2 million as paid up capital. Very few fintechs and startups will have that kind of money. People who have this type of money are incumbents and large player; and incumbents don't do innovation. Small companies innovate, but where would those small companies bring that much money. State Bank needs to look at lowering these barriers to bring in fintechs and startups. It also needs to consider that when a fintech or a startup is coming on top of a bank, it doesn't need to become a PSP or PSO. Hence, they should make a regulation and tell the banks that they should work with the fintechs.
In the entire world, all the progressive regulators have changed their structures, and they have a fintech chief. There is no fintech chief in SBP. All the progressive regulators have opened offices in different cities where fintechs and startups can come and take advice. That is also not present here.
In my view, these electronic money regulations are very good, but it is way too late. They should have come 4-5 years earlier. Had that been the case, Pakistan would now have 10-15 startups and they would have millions of wallets.
BRR: Now that Ant Financial is coming in, how would the local market react?
QS: If Pakistan has to progress, it has to become cash light economy from a cash heavy economy. Finja has the mission to make Pakistan cash light in the next few years. In this context, if the Chinese are coming, it will speed up things, because they will bring mega money. They will wake up the banks and the future will be fast forwarded for us. We should welcome this move, but it would have been nicer if we would have propped up our own entities for Chinese to partner with.
BRR: Coming to SimSim wallet, what's going on right now? What's the plan for the next 5 years?
QS: SimSim and Finca are doing many things together. We want to play in multiple segments at the same time. In personal user segment we have SimSim. Then we have a commercial segment where we go out and make merchants. Our third area of concern is the SME segment, and there we have a product called "payroll plus" which is free as well. We help SMEs transform their businesses by allowing them to transform their employee relationship, their vendor partner relationship, and their front-end customer relationships.
It's our deep conviction that if any business model has to scale and conquer the world, it should have to mimic the design of nature. In nature's design, everything that is in equilibrium is a net giver and not a net taker. When we engage with a partner, we want to become net giver and the brilliance of our design should be that we only win as a consequence.
I would also like to announce that we have launched a market place. Previously we were telling people to download the wallet, but no matter what we did the wallet had friction. Now we are telling them to download the app, attach credit card or debit card to it, or use a digital voucher and start buying about 50,000 things. One way of buying things and doing transactions on SimSim is through the wallet, but there are many other ways. We have become the first digital wallet integrated market place.
BRR: How does SimSim make money?
QS: I always say that in the payments business, the dumbest way to make money is to price the payment event. In the payment business, the money is always around the payment event. It's not in pricing the payment event. So we make money through float; we make money through lending; and when we process payments, we charge the businesses. And now we will also make money through our market place.