Business Model for Digital Payments

Over the past few years, the payment landscape in Pakistan has mirrored developments occurring in the global payments arena, albeit with a time lag. Although the digitization of payments in Pakistan is a recent phenomenon, the trend has displayed an exponential growth in the sub-continent, with rapid growth being witnessed in digital payment transactions. Pakistan now represents one of the largest market opportunities for payments. With a population of over 200 million eager to partake in rapidly evolving advancements in technology, Pakistan, is poised to make the most of digital developments transforming the payments space. The growth of the local digital payments space is expected to be driven by a change in the existing business model that are also likely to impact how this industry looks in the future.

Pakistan has witnessed significant payments activity in the last 3-4 years. The competitive digital payment landscape in Pakistan now spans telcos, banks, wallet companies, e-commerce / tech firms and, in the near future, payment banks.

• Bank-led model: In the past, banks have largely offered mobile banking apps with integrated bill payment solutions. However, customer experiences with mobile wallets have proved to be far more seamless and quick, leading to customers preferring wallets for mobile recharge and bill payments. Thus, banks have now started offering their own mobile wallets in addition to the mobile banking apps. While most of these apps do not require a bank account for their use, some of these do allow existing bank customers to log in using their internet / mobile banking credentials. Given that banks already have an existing captive base of consumers, they can monetize faster as compared to independent digital wallet firms that will need to spend on customer acquisition.

• Telco-led Model: Large telcos Telenor, Moblink and Ufone launched mobile payments solutions, targeted at their own customer base. The solutions were initially USSD based to ensure even non digital-savvy customers find it easy to use. The primary use cases for these solutions were largely mobile recharges and remittances.