Saturday, January 23, 2021

Raast Aims to Create Pakistan's Unified Digital Payments Infrastructure

Pakistan's central bankers have taken the plunge into the world of digital payments with their own offering: Raast. It aims to create an instant low-cost payment system that can seamlessly and securely connect government entities, a variety of banks and State Bank authorized private payment processors like 1Link and NIFT which may choose to take advantage of it.  Currency and coins in circulation account for about 43% of Pakistan's total money supply. The introduction of Raast is part of the government's effort to modernize and document the nation's cash-based informal economy. Undocumented economy poses a serious threat to the country because it creates opportunities for criminal activities and tax evasion. It will also promote e-commerce in Pakistan. 

Raast Digital Payment System. Source: State Bank of Pakistan

Raast Digital Payments:

Raast is a system of digital payment infrastructure. It is essentially a pipe that is intended to connect government and financial institutions with consumers and merchants with each other to process payments instantly at very low cost.  

Raast will be boosted by Pakistan government's decision to use it to pay salaries, pensions and pay welfare recipients under Benazir Income Support and Ehsaas Emergency Cash programs. 

It has been developed in-house by the State Bank of Pakistan  in collaboration with Karandaaz, Bill & Melinda Gates Foundation and supported by the World Bank, the British government and the United Nations.

Private Payment Apps:

Several private payment apps, including EasyPaisa and JazzCash, are already operating in Pakistan. These apps lack interoperability with each other. Each operates in its own silo. Neither of these offer links to financial institutions and government entities. 

There are also several EMIs (Electronic Money institutions) in Pakistan. These include NayaPay, SadaPay and Finja.  EMIs are not banks, but can store deposits. These are not tied to any banks or telcos. They could all use back-end plumbing offered by Raast. 

Private Payment Processors:

1Link and NIFT payment and switch networks, supported by different groups of Pakistani financial institutions, currently process the bulk of credit/debit card and ATM transactions as well as e-payments in Pakistan. State Bank's Raast promises to be cheaper and faster than these networks,. Raast also offers processing of e-payments by government entities. 

Raast Future Roadmap:

State Bank of Pakistan  intends to demonstrate Raast's usefulness by first processing government payments to individuals, including government employees and Ehsaas welfare beneficiaries, before expanding it for business applications.  SBP’s plan is to start person-to-person (P2P) payments in Q3/2021 and then bring merchants on board by Q1/2022. 


State Bank of Pakistan's launch of Raast digital payment infrastructure represents a great leap forward for the use of financial technology (FinTech) and financial inclusion in the  country.  It will also promote e-commerce in Pakistan. Undocumented economy poses a serious threat to the country because it creates opportunities for criminal activities and tax evasion.  Raast is part of the government's effort to modernize payment systems and document the nation's cash-based informal economy. 


Riaz Haq said...

China prepares to launch the world’s first official e-currency
Party leaders believe the country’s big tech platforms have too much power

THERE IS A good chance that the digital yuan will enter circulation in 2021. It is a debut that will initially make little difference, but could, over time, change the way central banks conduct monetary policy.

The People’s Bank of China has filed more than 100 patent applications for a digital currency and has overseen a range of trials, putting the e-yuan into use in a few cities and on several apps. So far the experiments have gone smoothly, and soon people will have the option of downloading a government-issued digital wallet. Unlike commercial ones such as WeChat Pay and Alipay, the official version will be equivalent to an account at the central bank with the same solidity as hard cash.

For the millions who already use a smartphone instead of a debit card, it will feel like just another payment app. Yet some talk of digital currency as a revolutionary product that could spell trouble for banks as people withdraw money from savings accounts and put it directly into their ultra-safe official e-wallets. What is more, if digital currency were ever to fully replace cash, central banks would, in theory, gain three new powers: to lower interest rates below zero with little difficulty; to issue cash directly to those most in need; and to see more precisely who has money and how it is spent.

In China the central bank is not trying to reinvent monetary policy—at least not yet. Its motivations derive from more immediate challenges. Given the rise of mobile payments, it worries that the big tech platforms have too much power. The digital yuan will offer an alternative. It will also give China a conduit for moving money across its borders without having to rely on swift, a global payments system that comes under American influence. But China’s first objective is much more basic still: to check whether the technology behind the digital yuan works and whether people actually want to use it. Money has been around for some 3,000 years. This update will take time.

Riaz Haq said...

Karandaaz Chief Digital Officer Rehan Akhtar told The Express Tribune that Raast is not a bank or a mobile wallet, rather it is a backend payment system similar to 1link, which intends to take all banks of the country on board to offer the public an optimal digital payment experience.

“Banks and mobile wallets motivate people to open accounts so that respective service providers can facilitate their customers in conducting transactions through digital applications or internet portals,” he said.

“On the other hand, no mobile application will be launched for Raast and instead, banking applications and portals will offer payment through the Raast mechanism.”

He added that all banks will be taken on board for offering payments through the Raast mode.

Akhtar pointed out that one banking institution alone cannot develop financial infrastructure for all its customers, therefore, banks collaborated with companies offering payment solutions to enhance their services and cover all their customers. Raast is one such system, he said.

He talked about the concept of intra-operability through which payment solutions aid bank customers in withdrawing money from even those ATMs that do not belong to their respective banking institution. However, it comes with a fee.

“Intra-operability exists in the telecom sector as well, which lets consumers make calls from local networks while they are abroad and that too comes with a fee,” he said. “If intra-operability is compromised, it is the customer who suffers.”

He emphasised that Raast is aimed at resolving the issues present in account-to-account intra-operability among banks.

The Inter Bank Fund Transfer system is underutilised in Pakistan because of high fee and complicated procedures.

Detailing about the arduous procedures, he said that to transfer funds, a customer needs the name of banking institution and 10-14 digit account number of the other party. “This information needs to be verified and finally a high fee is charged for the transfer, which discourages micro transactions through this mode altogether.”

According to him, intra-operability should be a seamless experience and that is exactly what Raast plans to achieve.

He added that a directory is planned to be created in the Raast system, which will simplify payment addresses for swift fund transfer.

The directory will allot an alias to the accountholder, which will make it easier to trace the person and transfer money between two accounts in different banking institutions.

“There will either be a low fee or no fee at all on the intra-bank fund transfer through Raast, which will act as a massive incentive for consumers,” he said.

The official said that the system’s simplicity coupled with the directory is what has made it unique.

He elaborated that there will be three use cases for the payment system.

In the first case, the government can use Raast to pay stock dividends, government salaries and payments under the Ehsaas programme.

Moving on to the second case, he said person-to-person use of the system will allow the transfer of amounts between two individual accounts. However, this mechanism is yet to be activated. Third case is the use of Raast by a merchant.

He added that if a merchant receives digital payment, then banks take two to five days to settle the amount, which can impact the cash flow for businessmen, particularly those who have to buy merchandise on a daily basis.

Raast will soon launch a merchant scheme similar to Visa with excellent efficiency, he said. Raast has the capacity to operate multiple settlement processes per day and merchants will receive their amounts on the same day.

Finally, he explained, there will be request-to-pay option that will enable merchants to demand payment for products through the service so that they receive the exact amount digitally, which eliminates chances of fraud.

Riaz Haq said...

In the move toward digital payments in cash-centric economies, building trust in bank accounts and payments done in bits and bytes is critical.

In Pakistan, for firms seeking to spur that adoption and to foster financial inclusion, it’s important to have a “cash in, cash out” mindset, as Erwan Gelebart, CEO of digital wallet, mobile payments and digital banking provider JazzCash, told Karen Webster in an interview.

At the time of this writing, JazzCash (owned by VEON, a global telecommunications and digital services firm) has 12 million active users in Pakistan, where 80 percent of the adult population is unbanked. According to the World Bank, that represents a total of 100 million individuals. This, of course, represents a significant opportunity for firms seeking to broaden financial inclusion.

In terms of mechanics, the JazzCash Mobile Account is a bank account that is linked to users’ mobile numbers, allowing users to send and receive funds, pay bills, take out and pay loans, and conduct other everyday financial activities.

The business model is akin to mobile banking services seen in other parts of the world, such as M-PESA, which in a nutshell leverage mobile devices to facilitate the flow of money, rather than relying on banks or wallets that are in turn issued by third parties.

Apps — And Agents, Too

Users can register for and open accounts by downloading the JazzCash mobile app from Google Play or Apple’s App Store. But in a wrinkle — and with a nod to the “cash in, cash out” feature — the users also can visit one of over 60,000 JazzCash agents located in Pakistan, who can help users set up and use their JazzCash accounts (and transact in cash to buy goods).

Call it a way of bridging the divide between digital transactions and those rendered in bills and coins. Individuals and merchants just starting on their journey of getting comfortable with digital payments are happy to have agents that are “a few meters from where they are. That footprint is important,” Gelebart noted.

Cash In, Cash Out

At a high level, said Gelebart, “the customers are digitizing the cash they have with them” as they interact with a network of more than 40,000 merchants across the country and overcome obstacles to accessing the traditional banking system.

One key distinction is that the account itself is free of charge – and at present, there is even a sign-up bonus for new users equivalent to 30 U.S. cents, which helps spur adoption (especially on the merchant side). And fees are not incurred until users actually take advantage of the services on offer and transact.

Drilling down into the use cases, Gelebart noted that face-to-face transactions are not a pain point in daily commerce, as people are very much used to, and comfortable with, using cash. But remittance does have friction, as cross-border transactions involve costs and risks.

Gelebart pointed to a May 2020 announcement with Mastercard, where JazzCash users can apply for physical debit cards, while merchants can accept digital payments from their customers and move toward cashless operations.

With a nod toward the merchants, he said the company is running a pilot program that leverages the data collected through transactions and other business activities to generate risk scores and lend money to those corporate clients.

“We can create a profile, a risk profile, and the merchants can get an instant loan. They can go to their interface, the JazzCash business account,” he told Webster. “And in a few seconds, if they’re eligible, they will get the money directly in their account. It’s about adding more value to the JazzCash business accounts. And as a result, receiving and collecting payments digitally will start making sense for them” – especially as they can log their sales functions directly into the business account (which, in turn, provides richer data to JazzCash as it designs new commercial offerings).

Riaz Haq said...

Pakistan: Digital payments boom under Covid-19 lockdown

Mobile wallet penetration is currently low with the total number of accounts standing at 46mn (34% of the adult population) and active accounts at 25mn (18% of ...

Easypaisa, a leading digital wallet in Pakistan, reported a significant increase in activity during the lockdown
This is an indication, and reinforces our view, that Covid-19 could drive a shift to digital payments in Pakistan
Pakistan represents an ideal environment for digital banking to thrive


The report draws insights from a regional survey, which polled more than 5,000 consumers in the UAE, Saudi Arabia, Egypt, Jordan, Qatar, Kuwait, Bahrain and Pakistan.

Across those countries, 47% of consumers said they expected to shop online more frequently over the next year. Only 15% expected their online shopping frequency to decline, while the remaining 38% expected it to remain the same.

The likely surge in e-commerce and digital payments in 2021 is consistent across the countries surveyed, with 49% of Gulf Cooperation Council (GCC) consumers saying they will shop online more frequently, and 48% in Jordan, 47% in Egypt and 39% in Pakistan saying the same.

Mo Ali Yusuf, regional manager at, said Covid-19 was driving a “significant share” of e-commerce and digital payment transactions in the Middle East, with 40% of online shoppers saying they are buying and paying online because of the pandemic.

“We’ve witnessed this steady shift to digital payments over the past six years, but the pandemic has really served as a catalyst – condensing five years of growth into a matter of months,” Yusuf told Computer Weekly.

“While there has been a sudden surge in e-commerce and digital payments this year due to the impact of Covid-19, what we are seeing today is more than a temporary change in consumer behaviour.”

Yusuf said that despite a big uptake in digital payments across the Middle East in the last few years, cash on delivery still occupies a significant proportion of share of wallet for consumers.

“This presents a market with huge potential for continued growth over the next decade,” he pointed out.

Preference for digital payments over cash on delivery or bank transfers rises significantly as consumers shop online more frequently, according to the report. Among those who shop online at least once a month, 62% usually pay by card or digital wallet, compared with 44% among the less frequent online shoppers.

“Robust digital payment options have become an integral part of what consumers expect from merchants, especially as e-commerce is more widely embraced in the region,” said Yusuf.

According to Khalid Dannish, CEO of Bahrain Fintech Bay, the island’s fintech accelerator hub, the region is seeing a flood of new digital payments activity in the wake of Covid-19.

“The infrastructure and accessibility is now there for merchants and consumers,” he said. “The pandemic has changed consumer behaviour in a lasting way.

“Given the young nature of regional demographics, the preference is to move towards digital payment strategies not just for convenience but also for user experience. We are seeing digital payments being used for everything from meals to clothing to groceries and utilities.”

Riaz Haq said...

Citi has named Shahmir Khaliq as its new head of Treasury and Trade Solutions (TTS), according to an internal memo from Paco Ybarra, global head of Citi’s Institutional Clients Group (ICG), which noted that the appointment is effective immediately.

During his career at Citi, Khaliq has served in management positions in banking, markets and securities services, country management (CCO) and treasury services. Prior to his appointment as global head of TTS, Khaliq served as head of operations and technology for TTS. Before taking that role, Khaliq had served as global head of Direct Custody & Clearing inside of Markets and Securities Services since 2017.

Khaliq joined Citibank in 1991 in Pakistan as a management associate in the institutional bank before leaving in 1993 for his post-graduate education. He rejoined Citi Pakistan (Banking) in 1995.

Khaliq holds degrees in finance and economics from the London Business School and London School of Economics. He also has a master’s of business administration from the University of Karachi.

“[Khaliq’s] experience gives him a unique ability to understand our clients’ needs and to drive investment in our infrastructure and our network to ensure that we can continue to help them sustain their operations, manage their supply and distribution chains and optimize their working capital and liquidity. He will help improve our core product capabilities and rethink how we interact with clients from a coverage, sales and service perspective to deliver a continuously improving client experience,” Ybarra said in the memo.

TTS, which had been led by Naveed Sultan, offers cash management and trade finance services to multinational firms, public sector organizations and financial institutions throughout the world.

Sultan will head up the firm’s efforts to advise governments and other clients on digitization in a new position as ICG chairman, according to an October internal memo. He will be in charge of developing a new "digital policy, strategy and advisory practice" that will consult with governments aiming to digitize their economies and financial systems, among other tasks.

Riaz Haq said...

Naveed Sultan is Global Head of Treasury and Trade Solutions in Citi’s Institutional Clients Group. With over 25 years of institutional banking experience, Mr Sultan has been at Citi for over 20 years in a range of increasingly senior roles, and currently, is responsible for the business management of Treasury and Trade Solutions globally. This

multi-billion business is one of the largest global businesses encompassing multiple integrated solutions within Citi’s Institutional Clients Group including: Trade and Supply Chain, Export Agency Finance, Liquidity and Investment Management, Wholesale Cards Services, Information Services, Receivables, consulting and digital services serving public sector clients, corporates and financial institutions, a client base that includes 94% of the top 500 global companies, 700 public sector clients and 600 banks, asset managers and insurance companies in over 120 countries, Prior to his appointment to his current role in June 2011, Mr Sultan was the Transaction Services Region Head for Europe, Middle East and Africa (EMEA), the largest region for this business line with a presence in over 50 markets and a multi-billion dollar revenue base. Mr Sultan has served as a director on the board of LCH Clearnet, Citibank A.S (Turkey) and Citibank Europe Plc. He is also a member of the Operating and Management Committees of the Institutional Clients Group. He is a member of Citi’s Innovation Council and chairs the Global Innovation Council for Treasury and Trade Solutions. He is also a member of the Smart London Board; advisory board to Mayor of London. He joined Citi with Saudi American Bank (SAMBA), an affiliate of Citibank, in 1993 where he held several senior positions including Global Transaction Banking Group Head and Senior Country Operations Officer. In 1999, he became the business head for Citi's Transaction Bank for Western Europe, based in London. Before joining Saudi American Bank, Naveed was the Country Corporate Banking Head for Standard Chartered Bank in Pakistan. Mr Sultan has wide-ranging experience covering Corporate Banking, Corporate Finance, Transaction Banking, Operations & Technology and is a regular speaker and author on such topics. He has also taught Business to Masters graduates at the University of Punjab in Pakistan. He is also engaged with Imperial College and Oxford University in an advisory and lecturing capacity. Mr Sultan holds an M.S. in Management from M.I.T’s Sloan School of Management as well as an M.B.A. from the Institute of Business Administration, Lahore.


Citi's ICG appoints insider Naveed Sultan as chairman

Citigroup’s Institutional Clients Group on Thursday named insider Naveed Sultan as chairman, according to an internal memo seen by Reuters.

Sultan, who has been serving as the global head of Citi’s Treasury and Trade Solutions (TTS) since 2011, would build a new “Digital Policy, Strategy and Advisory practice” across all client segments, Citi ICG Chief Executive Officer Paco Ybarra said in the memo.

Riaz Haq said...

In Pakistan, and elsewhere, the stars are aligning for greater use of digital banking and payments to improve financial inclusion. To that end, Amir Wain, CEO of i2c Inc., told PYMNTS CEO Karen Webster in an interview that the pandemic and the rise of mobile infrastructure have set the stage to bring people living in developing and emerging economies into the digital realm.

In commerce and in the great pivot away from cash, challenges remain — tied to acceptance. As eCommerce has become more firmly entrenched in countries such as Pakistan, buying and selling goods by digital means (moving away from the cash-on-delivery model) has generated at least a “reasonable acceptance level,” according to Wain, that gets some critical mass through a few large anchor eCommerce merchants in each market.

“You have these ‘local Amazons’ that are cropping up,” he told Webster, “and if you integrate with them, then you have merchants in meaningful numbers driving digital currency activity. Once you have some activity going, you have to think about, how to continue to expand the acceptance network.’ ”

Mobile plays a big part in increasing acceptance, said Wain, as it provides an alternative to point of sale (POS) terminals, land lines that’s easy to deploy and maintain.

QR codes and even peer-t0-peer (P2P) options are gaining favor, especially for smaller retailers.

Regulators are also getting on board with letting NFIs offer financial products in emerging economies, broadening the financial services ecosystem, said Wain. The greenfield opportunities are also attracting significant numbers of entrepreneurs and capital 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 plays a critical role too — as Webster stated, users need secure credentials in place to transact.

“This is where you will find weaknesses and hence will see a lot of improvement over the next few years,” predicted Wain, “People who do not have experience with the issuing business underestimate its complexities. To them, transferring $10 from one account to another appears fairly simple. But there is a lot more to having a secure and stable issuer processing system. System integrity, handling of leading-edge cases and compliance are some of the areas often overlooked. And let’s not forget there are plenty of fraudsters who are looking for system weaknesses that they can exploit.”

Bad actors may be lured by the relatively immature infrastructure. In other cases, apps are too slow, or user interfaces are clunky. In the end, though, evolution is inexorable — and we are evolving toward super apps. With a nod toward Pakistan as a specific market, Wain noted that there is no dominant super app yet — but the conditions now exist for such an offering to take root.

In terms of numbers, he said, the population of 220 million represents a significant market and there are 100 million mobile users (with approximately 70 million smartphones in the market), and counting.

Among the many features tied to the super app, due to launch in the first quarter, P2P proves to be especially useful for people sending money to rural areas — and which will help bring them toward using more services as time goes on. That functionality helps fill a vacuum left by larger, traditional financial institutions (FIs), said Wain, which tend to be slow in responding to consumers’ needs, and where it’s proven difficult to serve individuals’ “small ticket needs” through expensive branches.

Riaz Haq said...

It takes a certain kind of person to move in next door to their boss. Today the biggest question in Swiss banking is just what kind of person Iqbal Khan is.

Three months ago, Mr Khan, whose rapid ascent at Credit Suisse had marked him out to many as the heir apparent to chief executive Tidjane Thiam, quit his senior position at the bank. This week, details emerged of a bitter row between Mr Khan, 43, and Mr Thiam, 57, triggered by a confrontation in central Zurich between the private banking prodigy and detectives Credit Suisse had hired to monitor him after he resigned.

It was a lurid end to a spectacular dispute between two of the most powerful men in finance — one from which Mr Khan may yet emerge triumphant. On Tuesday, he is due to take up a senior position at UBS, which would make him a likely successor to Sergio Ermotti as the bank’s chief executive. Mr Ermotti is known to admire Mr Khan’s relentless ambition, prizing it over the qualities of other more rounded contemporaries. Meanwhile, UBS’s chairman, Axel Weber, has taken a dimmer view of the spectacle, according to a person who knows him.

Bruising rows between big egos are not new in the world of finance. But the suburban dimension to Mr Khan’s collision with his boss has given it a distinctive flavour. After he boldly moved into the house next door to Mr Thiam’s two years ago, the pair channelled a simmering generational workplace conflict into bickering over house improvements and blocked views. The dispute climaxed in a row at a neighbourhood cocktail party in January.

“To me, moving in next door like that, there are two signals you might be wanting to send,” says one Credit Suisse executive. “Either: ‘We get along so well I’d like to spend more time near you,’ or else: ‘I’m coming for you.’”

Yet the image of an overweening princeling is only part of the picture. Many of those who have worked with Mr Khan recognise different sides to his personality.

Riaz Haq said...

A top adviser to UBS private bank co-head Iqbal Khan won a major promotion as part of a shake-up of the Swiss bank's strategy and corporate development team, can reveal.

Zurich-based UBS is tasking Christian Zeinler with group strategy, from February 1, according to a memorandum seen by Zeinler is head of strategy and business development at UBS' flagship $2.6 trillion wealth management arm – a job he will retain – as well as chief of staff to Iqbal Khan, who co-runs the unit.

The change was set into motion by the departure of Michael Bonacker, who had held the top strategy job since 2017, and will leave by mid-year. Bonacker, an ex-McKinsey partner who held top roles at Deutsche Bank, Lehman Brothers, and Commerzbank before joining UBS, was instrumental in the Swiss bank's strategy reviews since 2017.

Riaz Haq said...

Digitalisation landscape in Pakistan – a tech view

Reposition and optimise branch network while providing more self-services to customers as intimidating branch environment keeps the customers off from the branches, hence to provide them with more self-service digital channels and secure banking at their fingertips.

Not to be surprised as Russia’s largest bank, Sberbank, is embarking on what it calls the biggest transformation in its history, as it unveils a suite of new technology products in an aggressive drive to enter the lucrative Big Tech sector and has dropped the word “bank” from its corporate building and is now called “Sber” while replacing its tellers with super ATMs and offering online taxi and food services.

Build platforms, not just products and services
Let go of “legacy” technology and gradually move towards secure green banking adoption while providing financial services to customers anytime, anywhere and on any device. The banks are still clinging to their legacies and need a two-pronged strategy to rip-and-replace the legacy and adopt new technology and tools to thrive.

Open banking with fintech firms is the sustainable model for banks as today quite a few banks are also divesting some of their capital into other businesses. Digital platforms are the answer to such experiments while initiating new services or collaborating with other businesses.

Data as a value generator tool
Create and promote “data driven” financial services based on artificial intelligence (AI) algorithms defined with the regulatory guidelines working with structured and unstructured data to provide clear and in-depth insight of your customer from both behavioural and compliance perspective. This domain is still untapped in almost all the local banks, while only a few have embarked this journey.

Data works as fuel to the business and financial services that take the banks to the next level. This is the differentiating factor that is inhibiting the local banks from innovation as compared to peer countries who have worked hard on their data strategies and programmes and are reaping the fruit today.

Enter the cloud and managed services evolution
Using on-demand cloud computing to reduce operating costs while increase the availability to 99.XX% as many banks already have steered their staff collaboration over the cloud during COVID-19 work from home (WFH) safety measure. Investments in cloud infrastructure and Software-as-a-Service (SaaS) are visible in the past few years, however, more conducive regulatory guidelines are to be formulated for such ventures.

Security by design
Cybersecurity comes a part and parcel of all processes based and data driven technology. Essentially, customer do desire fast and secure financial services. Security spends will remain on the rise with the increase in the ransomware attacks. While WFH and online transactions will keep rising as per experts, the dark side of the digital and online banking will remain to be active more than ever.

The combat against phishing scams and schemes, security breaches, illegitimate transactions, has taken a paradigm shift in the banking sector as treasure trove of data is readily available to the hackers to activate their goals. Effective implementation of DDoS, intrusion, threat and malware detection tools, multi-factor authentication (MFA), restricted WiFi usage would somewhat secure.

To B or not to B
The controversies of blockchain technology and cryptocurrency have blemished the true essence and value of blockchain, hence still being subject to skepticism, carries a huge potential for non-financial transactions between the financial institutions and other stakeholders. As per Statista, the blockchain market value share of banks is 29.7% in 2020.

Riaz Haq said...

Fintech Adoption in Pakistan and Digital Transformation Supported by Local Fintechs Could Improve Tax Collection: PM Imran Khan

The team at Islamabad-based Fintech firm SadaPay has been introducing innovative and appealing financial products and services that are focusing on younger consumers in Pakistan.

SadaPay is offering black, sleek premium spending cards which may be comparable to some of the cards offered by European Fintech challengers such as Monzo or Starling.

SadaPay has also launched a Founder’s Club and allows its clients to get their hands on these premium black cards if they can get 10 of their friends or colleagues to register to use the company’s Fintech services.

SadaPay, which was recently approved by the State Bank of Pakistan to launch pilot operations, points out that Payoneer’s Global Gig Economy Index revealed that Pakistan was among the top freelance markets, even surpassing India, Bangladesh and Russia last year (following the COVID-19 outbreak).

The report from Payoneer confirmed that the United States saw the most growth at 78%, followed by the United Kingdom at 59%, Brazil at 48% and Pakistan following closely at 47%.

In Pakistan, there’s also a young workforce that is increasingly using digital banking and online payments services like EasyPaisa and JazzCash to settle daily transactions. The COVID-19 pandemic has accelerated digital transformation in Pakistan and neighboring countries like India and Bangladesh as well.

Last month, Pakistan’s Prime Minister Imran Khan said that the Digital Pakistan initiative would help move the country away from a cash economy, which has become even more relevant in a post COVID world.

Prime Minister Khan had stated in January 2021 that the Digital Pakistan initiative would help the nation transition to a more modern economy. The premier, whose comments came at the launch ceremony for the ‘Raast‘ payment system in Islamabad, noted that the initiative could potentially play a key role in eradicating poverty in the country with a GDP of nearly $400 billion.

The Prime Minister remarked:

“Cash economy is an obstacle for the people.”

He added that digital transactions will help Pakistan on its journey to prosperity. He also pointed out that tax collection is extremely low in the country and that out of the 220 million residents, just 2 million are paying their taxes.

He further noted:

“Only 3,000 Pakistanis pay 70% tax.”

Khan explained that the low tax collection rate has been a significant challenge or obstacle in the country’s ongoing development.

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Riaz Haq said...

Pakistan govt planning to launch country’s first-ever IPG (International Payment Gateway)

The government is planning to launch Pakistan’s first-ever “International Payment Gateway (IPG)” to advance the nation’s digital infrastructure in order to provide ease of doing business to the digital users globally.

The Ministry of Information Technology and Telecommunication and the National IT Board (NITB) under the auspices of the government of Pakistan will launch Pakistan’s first-ever IPG.

“We are aiming for User’s Digital payments with ease, convenience, and enhanced safety. In this regard, we are adopting user sensitive inclusive approach and request our users to provide a detailed feedback regarding the features for enhanced usability of IPG,” the ministry added.

As a freelancer, an e-commerce retailer and as a small trader one has to define his or her needs for international payments.

The ministry has also asked the concerned people to share difficulties they are facing in receiving international payments. Further, the ministry has sought details of security-related aspects in receiving international payments, concerns related to fraud-related aspects in international and cross-border payments, and what they would like to have the government of Pakistan provide to meet their special and particular needs international and cross-border payments.

Riaz Haq said...

SBP, after approval of the Federal Government, has introduced three new categories of investment abroad under its revised policy governing equity investment abroad and banks have been authorized to allow remittances under newly introduced categories.

1. Establishment of Holding Company abroad by residents for raising capital from abroad: Pakistan’s investment regime is quite liberal that allows full freedom to repatriate profit, dividend, and capital. However, some international investors prefer to invest indirectly through a holding company established abroad specially in the Fintech and Startup firms. SBP’s revised policy will enable the Pakistani Fintech and startup companies to channelize foreign direct investment in the country by establishing a holding company abroad against remittance of up to USD 10,000 and subsequent swapping of shares to mirror the shareholding of a local company in the holding company.

2. Establishment of subsidiary/branch office abroad by export-oriented companies/firms for promoting exports: The policy will enable the export-oriented companies to establish subsidiary/branch office abroad against remittance of 10 percent of their average annual export earnings of last three calendar years, or USD 100,000 whichever is higher. This will facilitate exploring new and non-traditional markets and capturing more export orders, as international buyers prefer dealing with subsidiaries/representative offices of foreign companies present in their country. Accordingly, the proposed policy would help in the growth of export-oriented companies and boost the exports of the country.

3. Investment abroad by Resident Individuals: The policy will allow the Resident Individuals of Pakistan to acquire an equity stake in international firms through share option plans or investment in listed securities subject to observance of the annual ceiling of foreign exchange defined in the policy. In the case of sweat equity, a person can acquire up to twenty percent shareholding in a foreign company. These policy provisions will provide opportunities to individuals to earn foreign exchange for the country in the form of repatriation of dividend/ capital gains to Pakistan.

Riaz Haq said...

#Unilever’s #Pakistan #Delivery Service Partner blueEX Plans #IPO on #KSE to Expand Network. #Karachi-based courier service plans to sell new shares equal to 25% of the company within the next two months. #ecommerce #economy #tech

Universal Network System Ltd., a Pakistan courier service that counts the local units of Unilever Plc and Nestle SA as clients, is planning an initial public offering to expand its network and bolster its technology backbone.

The Karachi-based company, which operates the blueEX courier service, plans to sell new shares equal to 25% of the company within the next two months, said Chief Executive Officer Imran Baxamoosa. He didn’t disclose financial details.

The initial share sale will make it the first logistics company to list in Pakistan and lure investors to a business that’s crucial for the nation’s booming e-commerce industry, according to Topline Securities Pakistan Ltd., financial adviser for the IPO.

“There is some crazy exponential growth that is being foreseen right now,” Baxamoosa said in a phone interview. “We have grown organically so far but now it’s about time that we get aggressive.”

The courier company that started by handling cargo in 2005 entered the e-commerce business six years later by going door-to-door and convincing companies to start online sales. It even made websites, back-end software and set up a call center for its clients.

It now has about 1,000 employees and over 350 vehicles. The company will use the proceeds to boost its network fourfold. It will also add servers and other IT equipment.

The nation’s e-commerce industry is in its infancy but is growing rapidly as internet and smartphone penetration jump, according to Ruchir Desai, fund manager at Hong Kong-based Asia Frontier Capital Ltd. The pandemic could be a big trigger for the market, he said.

The company handled 2.1 million shipments and 4.5 billion rupees in cash deliveries in the year ended June. It has grown annually by about 70% on average since 2012. The company forecasts revenue will rise more than three times to 4.3 billion rupees in fiscal 2023, according to Baxamoosa.

Riaz Haq said...

China’s new digital yuan: Lessons for Pakistan

Muhammad Zubair Mumtaz

FEBRUARY 3, 2021

As more and more nation contributes to and depend on the global economy, the process associated with routing payments smoothly so that they can be monitored by the central banks becomes important. Over time, various types of digital payments were introduced to facilitate business and household transactions. However, a lot more is required to be done by Central Banks to help build trust in digital payments.

China, being the leader, has launched a Central Bank Digital Currency (CBDC). An initiative was taken in September of 2020 to allow Digital Currency Electronic Payments (DC/EP). In simple words, the DC/EP is a digital version of the Chinese yuan backed by deposits held by the central bank. To take advantage of this form of digital payments, banks must replace a portion of yuan holdings with assets that are in digital form and then allocate it to businesses and the public using mobile technology.

In contrast, payments are also made using cryptocurrencies; what is different in DC/EP? The answer is the legal status that differentiates between DC/EP and cryptocurrencies. In terms of making payments through cryptocurrencies, the laws are vague in regards to whether it is legal to pay for goods and services in China using this form of payment; however, DC/EP is recognized as a legal tender to make transactions. The government will also control the digital yuan while cryptocurrencies are decentralized and do not have a single entity to manage their supply. Anonymity is another significant difference between the digital yuan and cryptocurrencies. Cryptocurrencies are anonymous whereas the digital yuan will be monitored, tracked, and backed by the government.


On January 11, 2021, Prime Minister, Imran Khan, launched the first digital payment system, ‘Raast,’ to promote financial inclusion and government revenue. This system will be implemented in three phases ending in early 2022. This timely initiative by the government is highly commendable as it will serve its purpose in many ways. Several private-sector digital cash transfer systems already exist that do not require a bank account like JazzCash, Easypaisa, Telenor Pakistan; however, Raast would be the first to connect government organizations and financial institutions. Businesses, fintechs, merchants, individuals, and government entities will utilize this system to receive and send real-time payments via the internet, mobiles, and agents. Using the Raast, the government will pay salaries, pensions, and financial support programs (e.g., the Benazir Income Support Program, the Ehsaas Emergency Cash program, etc.). This initiative is vital to restrict illegal financial transactions perpetuated by militant and extremist organizations. An essential requirement of the Financial Action Task Force (FATF) is fulfilled through digital payments which will help Pakistan come off of the grey list. Furthermore, Raast will automate the collection of taxes on transactions and tighten rules on banking.

Though Raast is not an alternative to digital currency it will be useful to align the transaction channels as the government will have full information about receipts and payments. Based on this information, the informal economy will be brought into the tax net and corruption can be reduced significantly. The government may also control the money supply and take fiscal and monetary measures accordingly.

Riaz Haq said...

Digital transactions boom in Pakistan

According to the (State Bank of Pakistan) report, during the Oct-Dec 2020 quarter, 296.7 million e-banking transactions, valuing at Rs21.4 trillion, were carried out, registering a growth of 24% in volumes and 22% in value compared to the same quarter of last year.

Most of the rise in e-banking transactions was seen in internet and mobile banking.

“Owing to Covid-19, it is no surprise that the country has seen a boom in digital financial transactions,” he said, adding that for most of the people before 2020, e-banking was a difficult process to handle, which carried with it significant security risks as well.

“Coronavirus lockdown was a forceful phenomenon, but it is now turning into a normal thing,” remarked DH Corporation Research Lead Karim Punjani.

The volume of mobile banking transactions stood at 44 million, up 147%, valuing at Rs1.12 trillion, up 192% in the quarter under review compared to 17.8 million transactions valuing at Rs382.5 billion in the same quarter of last year.

The number of registered mobile phone banking users reached 9.4 million, an increase of 5%. Similarly, 22 million internet banking transactions valuing at Rs1.3 trillion were recorded during the Oct-Dec 2020 quarter compared to transactions worth Rs1.1 trillion in the previous quarter.

“The decision taken by the central bank to waive inter-bank fund transfer (IBFT) charges is a good move and we hope this continues,” said Nouman Younas, who recently conducted online transactions.

“Decisions such as waiving the IBFT fee will lead to a reduction in the workforce in commercial banks,” said another digital transaction user Adeel Nazir.

In response to SBP’s measures to incentivise the installation of Point-of-Sale (POS) machines to facilitate digital payments through debit or credit cards, the number of POS machines grew 18% during the quarter under review, reaching 62,480 throughout the country, the report said.

With the help of these POS machines, 23 million transactions amounting to Rs115 billion were processed during the second quarter of FY21, which shows the positive impact of conducive policies adopted by the central bank, particularly targeted at increasing the payment acceptance infrastructure in the country.

Authorities should encourage banks to establish CDM (cheque/cash deposit machine) like ATMs as they eliminate human interaction and increase online banking efficiency, said a Karachi-based user of digital transactions Mubashir Mahmood.

Card-based transactions on e-commerce portals also increased substantially, with e-commerce merchants processing 5.6 million transactions through payment cards amounting to Rs15 billion in the second quarter of FY21 compared to 3.9 million valuing at Rs11.9 billion in the first quarter.

This marks a shift in the behaviour of Pakistan’s population and also complements government’s efforts to develop a more market-friendly landscape for acceptance of payments by e-commerce merchants.

Riaz Haq said...

#Pakistan #fintech SadaPay raises $7.2 million in country's largest seed round. #Islamabad-based fintech startup has raised $7.2 million in a seed round led by New York-based Recharge Capital. #technology #investment via @MENAbytes

It includes participation of returning investor Kingsway Capital, Raptor Group, and notable fintech angels, including Ualá’s founder Pierpaolo Barbieri, Ribbit Capital’s Brian McGrath, former General Catalyst partner Ilan Stern, and Valon Technologies’ founder Andrew Wang.

Starting with a digital wallet and a debit card, SadaPay aims to build a “neobank” for Pakistan. Currently available in private beta, its mobile wallet is one of the most anticipated fintech products in the country, with over 200,000 people on the waitlist. It launched the private beta a few months ago after receiving in-principle approval from the country’s central bank. In this pilot phase, SadaPay is allowed to operate with a maximum of 1,000 customers.

The startup will start its public rollout after receiving a full Electronic Money Institution license from the State Bank of Pakistan. SadaPay did not share a timeline, but its founder Brandon Timinsky has told MENAbytes that they would receive the license after successfully completing the audit and inspection from the regulator.

Brandon had started SadaPay in 2019 after selling his previous startup in the United States. He was visiting Pakistan on the invitation of a friend and was amazed by the opportunity that the country of over 220 million offered, “My first visit to Pakistan really opened my eyes to the amount of opportunity that has been hidden from the rest of the world due to the country’s difficult history from over a decade ago,” he stated in a conversation with MENAbytes.

As the statement by the company points out, Pakistan is the fifth most populous country in the world but has the third largest unbanked population after China and India. Brandon believes that the country is at an inflection point for digitization, “Pakistan has a refreshingly progressive regulator, a burgeoning unbanked middle class, widespread smartphone adoption, and over 70% of the population is under the age of 35. We believe that a combination of factors makes Pakistan one of the best places for emerging fintech in the world, and we are excited to be a leader in that ecosystem.”

SadaPay’s mobile app enables users to sign up for a mobile wallet account with a few taps in less than two minutes and start using it right away to make free transfers to any bank account in Pakistan. The signup process is seamless mainly because the company is connected to Pakistan’s National Database & Registration Authority (NADRA) – which means it can instantly verify any Pakistani’s identity from anywhere in the world, including the 15 million Pakistani expatriates living abroad.

The account comes with a virtual debit card powered by Mastercard that can be used for online transactions all around the world. SadaPay also offers a physical numberless debit card that the users can request from its app and receive at their doorstep in two business days (across Pakistan). The physical card allows users to make up to three free cash withdrawals (every month) from any ATM in Pakistan. The company also supports remittances from services like Transferwise, Remitly, and WorldRemit.

When launched, any overseas Pakistani will be able to sign up for a SadaPay account using their NADRA-issued ID card, the company’s CEO told MENAbytes, adding that will become the easiest way to send money to Pakistan, for free, at the best exchange rates in the world.

“Since SadaPay does not bear the high costs of managing the physical infrastructure of traditional banks, it passes those savings to its customers in the form of free financial services. The company will generate revenues from premium product offerings such as merchant services and remittances,” noted the statement.

Riaz Haq said...

India has the highest percentage of smartphone users, at 69 percent, followed by Sri Lanka with 60 percent, Nepal 53 percent and Pakistan 51 percent.

The report was unveiled at a virtual roundtable organised jointly by GSMA (Groupe Spécial Mobile Association) and the Association of Mobile Telecom Operators of Bangladesh (AMTOB).

The report, titled "Achieving mobile-enabled digital inclusion in Bangladesh", said 4G network now covered 95 per cent of the population. Yet, there was still a significant usage gap of 67 per cent as only 28 per cent of the population had 4G connections.

"This suggests a lag between 4G coverage rollout and usage of 4G services. This lag in usage is largely explained by issues related to the affordability of devices, low levels of knowledge and digital skills, a perceived lack of relevance, as well as safety and security concerns."

High sector-specific taxes, a fragmented licensing regime, as well as issues with the pricing and usage restrictions on spectrum have been identified as barriers to expanding coverage.

Bangladesh, however, fares better compared to Nepal and Sri Lanka in terms of 4G connections. Only 17 per cent of the population has 4G connections in Nepal, and 18 per cent in Sri Lanka, according to the report.

India has the highest 4G connections at 63 percent of the population followed by Pakistan.

Bangladesh has 17 crore mobile connections. Of them, nine crore are unique subscribers, giving a penetration rate of 54 percent as of December 2020.

Some 47 percent of subscribers use 2G connections and 25 per cent 3G connections.

The report said internet and digital technology played a key role in helping drive economic growth and societal development in Bangladesh.

Digital technologies, mobile in particular, will be crucial to implementing the government's 2041 Perspective Plan, achieving the Sustainable Development Goals, and recovering economically in the aftermath of the Covid-19 pandemic, the report said.

Riaz Haq said...

Pakistan ready to adopt digital financial solutions on large scale, says Easypaisa CEO

“Pakistan is rapidly progressing when it comes to mobile broadband. Our country has enormous potential with respect to widening financial inclusion through digital solutions. Currently, 95 million people across the country use mobile broadband, a number which has grown by 50 million in the past 5 years. A majority of adults have broadband connections in Pakistan serving as a backbone to developing a digital payments ecosystem in the country.” said M. Mudassar Aqil, CEO Easypaisa/Telenor Microfinance Bank, while talking about Pakistan’s financial services landscape.

“96% individuals have a biometrically verifiable ID issued by the government, indicating that a robust regulatory framework is in place which is supported by credit bureaus. Despite these fundamental factors, 70% of Pakistanis don’t have access to financial services when the rails to address these challenges are in place,” he added. During COVID-19, digital payments witnessed a boom. According to the SBP’s quarterly report, 296.7 million e-banking transactions, valuing at PKR21.4 trillion, were carried out during Oct – Dec 2020, growing by 24% in volume and 22% in value compared to the same quarter last year.

“During COVID-19 industry numbers of digital transactions grew at an exponential rate. At Easypaisa, our annual throughput increased by 64% as compared to the previous year reaching PKR 1.5 trillion in 2020. Similarly, the number of active Easypaisa App users reached 3.44 million, registering a 54% increase in comparison to previous year.” he commented. Pakistan is predominantly a cash-based economy. However, things are changing as the use of digital payments is taking center-stage.

Mudassar opined: “The Pakistani economy is ready to adopt digital financial solutions on a large scale as opening a mobile wallet account on a smartphone or feature phone takes less than a minute. Roughly PKR 6 trillion or about one-third of the country’s deposits are in circulation. This is one of the highest percentages anywhere in the world and the only way to reduce this is for every adult in the country to have a mobile wallet. Furthermore, all retail outlets in Pakistan should be mandated by law to accept digital payments from mobile wallets. Tax incentives should also be introduced making digital payments cheaper than cash.”

Riaz Haq said...

Pakistan: Central Depository Company (CDC) and National Institutional Facilitation Technologies (NIFT) signed an agreement to enable digital payments through NIFT ePay.

CDC is recognised as the infrastructure backbone of Pakistan’s capital market and it is the sole securities depository in the country, while NIFT is one of the largest payment processors in Pakistan.

This collaboration will enable the investors to use NIFT ePay services for investing into Mutual Funds using CDC’s digital platform” “Emlaak Financials.” Furthermore, the solution will also be facilitating CDC’s IAS account holders to make IAS payments through CDC Access portal.

The agreement was signed by NIFT’s CEO Haider Wahab, and CDC’s CEO Badiuddin Akber at the CDC’s head office.

NIFT’s CEO stated, “We are delighted to be a part of CDC’s newly launched initiative for the Mutual Fund Industry. We understand that the “Emlaak Financials” platform has an aspiring roadmap, and we look forward to playing our role in enabling the platform and in making this service a success. NIFT will always focus to partner for unique and innovative ideas which will uplift the digital transformation in Pakistan.”

At the signing ceremony, CDC’s CEO Badiuddin Akber said, “As we embark on this collaboration with NIFT, it gives us immense pride that we are engaging NIFT’s payment gateway for the first of its kind mutual fund aggregator platform , being launched in the financial landscape of Pakistan. The launch of this platform and its integration with NIFT’s services to enable secure and swift payments for mutual fund investors is in-line with CDC’s vision of enhancing efficiency and ease of doing business.”

Riaz Haq said...

#Pakistani-#American founder's #SiliconValley payment processing company i2c vows to hire 500 employees in Pakistan as it continues to grow at exponential rate. The #fintech has 65% of its workforce based in #Lahore, #Pakistan. #technology

i2c has recently hired Jon-Paul Ales-Barnicoat to lead its human resources development as the organization plans to massively scale and hire 500 resources in the next 12 months majorly from Pakistan making the total organizational headcount to over 2500.

Jon Paul is an industry veteran with experience of working at Silicon Valley tech companies including Fandom, Pixar, GE. Joining i2c is a new experience because the company is majorly driven by the workforce in Pakistan and most of the human capital too is based here. With the ongoing conversation about the future of remote work, we felt it would be interesting to understand Jon Paul, the new Chief Human Resource Officer’s perspective and how he visualizes that for i2c, given the organization has been working remotely before the rise of the term ‘future of work’ and ‘remote working’.

So, we sat with Jon Paul during his recent visit to Pakistan to discuss the tech ecosystem, i2c, and how the organization plans on scaling effectively right from the heart of Pakistan, Lahore.

Founded in 2001, and headquartered in Silicon Valley, i2c’s next-generation technology supports millions of users in more than 200 countries and territories. It is a common name in the tech circles of Pakistan. Specially fresh graduates in Computer Sciences, Software Engineering and other IT related fields are aware of the organization because of its large scale hiring drives in the north and center of Pakistan.

Jon tells me how he is excited to be visiting Pakistan for the first time and working from i2c’s Lahore office. I ask about how his experience has been so far. Jon tells me, “Pakistani people in particular have been very welcoming and sincere in their intention. The value system is very precious. The sense of community, and the family values are permeated into professional relationships as well. And there’s a tremendous amount of loyalty and respect for one another.” I was curious how i2c is unlocking that value system in the workplace.

Jon tells me,

“You see i2c is built on the shoulders of Pakistani employees. We understand their contributions and provide benefits which are very nurturing for our employees.

We give our employees cars. We have a daycare center. We feed our employees twice a day. Our medical benefits are amazing. And we have education benefits for our employees’ children. And now we have created a real cash plan where our employees are going to get a share in the success of the company. We contribute to the retirement fund as well. Very few companies of our size do that.”

i2c has been quietly setting its foot in different regions of the world. Right now the Pakistani offices have almost 1000 employees in total whereas outside the country, there are over 600 employees based in US, Canada, Europe, Latin America. The organization will be expanding across all regions with specific plans to hire over 500 employees in Pakistan in the next 12 months. I was curious if there is a process for rotational assignments, and internal transfer of employees between different countries. Jon told me that Amir, the founder, and he have been working on it and believe that this is a great differentiator and advantage for their employee base in Pakistan. Due to COVID situations, this program is on halt but there have been several examples of employees moving from Pakistan to the US and later to Canada.