The stars are aligning in Pakistan and worldwide for increased usage of digital banking and payments to boost financial inclusion. In an interview with PYMNTS CEO Karen Webster, Amir Wain, CEO of i2c Inc., stated that the pandemic and the rise of mobile infrastructure have set the ground for bringing people in developing and emerging economies into the digital arena.
The discussion took place after i2c announced a partnership with TAG to launch a super app that will allow Pakistan’s unbanked adult population, which now numbers over 100 million people, to make quick payments. Wain observed that “some form of huge event takes place” in general.

Even before the coronavirus drove us all home and online, the introduction of mobile cellphones — which have become increasingly cheaper and more accessible to vast swaths of the public — and the widespread availability of mobile networks in emerging nations signified such an event. “New participants in that ecosystem were able to construct and deliver services on top of the mobile telecom infrastructure” because of the broad use of mobile devices, according to Wain. It has benefited telecom providers as well, because the infrastructure is being used for a variety of different purposes.”

Challenges remain — connected to acceptability — in commerce and in the huge shift away from cash. Buying and selling items via digital methods (moving away from the cash-on-delivery approach) has generated at least a “decent acceptance level” in nations like Pakistan, according to Wain, which acquires some critical mass through a few significant anchor eCommerce merchants in each area.

“You have these ‘local Amazons’ that are popping up,” he told Webster, “and if you integrate with them, then you have merchants driving digital currency activity in meaningful numbers.” Once you’ve established some activity, you’ll need to consider how to extend it.

According to Wain, mobile plays a key role in boosting adoption because it gives an easy-to-deploy and-maintain alternative to POS terminals and land lines.
QR codes and even peer-to-peer (P2P) solutions are becoming more popular, particularly among small businesses.

According to Wain, regulators are warming to the idea of allowing non-bank financial institutions (NBFIs) to sell financial products in emerging markets, widening the financial services ecosystem. Greenfield prospects are luring a large number of entrepreneurs and investors to countries like Pakistan.

All of these factors create a “perfect combination for digital payments to take off in these markets,” he said.

Issuance Matters, Too 

Issuing is also important because, as Webster noted, users must have secure credentials in order to transact.

“You will uncover flaws here, and as a result, you will see a lot of improvement over the next five years,” Wain said. “Those who are unfamiliar with the issuing industry misunderstand its intricacies. Transferring $10 from one account to another appears to them to be a straightforward task. However, having a safe and stable issuer processing system entails much more. Integrity of the system, handling of cutting-edge instances, and compliance are just a few of the areas that are frequently disregarded. And don’t forget that there are many of fraudsters out there seeking for system flaws to exploit.”

The infrastructure is still in its infancy, which may attract bad actors. In other circumstances, apps are overly slow or have clumsy user interfaces. But, in the end, evolution is unstoppable — and we’re on our way to becoming super applications. With a nod to Pakistan as a specific market, Wain highlighted that while there isn’t currently a dominant super app, the conditions are now in place for one to emerge.

In terms of figures, he claims that the population of 220 million people is a sizable market, and that there are now 100 million mobile users (with roughly 70 million smartphones on the market) and counting.

P2P is one of the many features related to the super app, which is set to launch in the first quarter and will be especially handy for those moving money to rural areas — and will eventually lead to them using other services. According to Wain, this feature fills a void created by larger, traditional financial institutions (FIs), which are sluggish to respond to customers’ requests and find it difficult to satisfy individuals’ “small ticket needs” through costly branches.
The typical bank model appeals to those from a higher socioeconomic class. However, younger, more digitally knowledgeable Pakistani consumers, according to Wain, place a higher importance on the user experience and convenience of the product.

Wain anticipated that as applications evolve, credit will have to become a component of consumer-facing offerings and experiences. However, because there is no underlying credit bureau in Pakistan, the credit granted will have to be “small-ticket credit” at first. While some laws have been in place for some time, they will need to be strengthened with clearer avenues to collection and recovery in order for FIs and other lenders to feel more confident in making larger loans. He believes that microlending, with the use of artificial intelligence (AI) for risk grading and other innovative technologies, can assist to solidify that level of comfort.

For the time being, he said, companies like TAG, which is powered by i2c, and others are doing well.