Not long ago, when next door neighbour came up with a new data policy introducing strict requirements for big tech to host all Indian data in the country, there were yet again talks in Pakistan about data security and future risks. Beyond drawing room discussions, nothing moved forward, except for one company which took it a bit more seriously.

Meet PayPak - the country’s very own payment scheme. What is that? It’s the company that issues bank cards and processes your transactions. So when you go to your bank for a debit card, they have a number of payment schemes to choose from, such as Mastercard or Visa who then issue the card and process the transactions. With PayPak, now there’s a local player doing the same job.

As of now, 20 banks have already issued some 1.5 million PayPak cards and have switched to EMV standard (chip). These work like your usual debit cards and can be used locally for cash withdrawal at ATMs, interbank funds transfer, transactions at point-of-sale machines and bill payments.

These cards are still not enabled for online payments on e-commerce platforms but that’s meant to change soon. “We are currently working on it and should have it up and running by end of year,” says CEO Najeeb Agrawalla.

The question is why do we need a domestic payment scheme in the first place? After all, the multinationals are doing a fairly good job and as just another consumer, it doesn’t matter too much which company is issuing cards and processing transactions at the back-end. Right? Kind of, but not entirely. “A local scheme would firstly ensure that all data stay within the country, which lately has come under attack. Then it would also save some foreign exchange outflows we inevitably have whenever we pay electronically,” clarifies the chief.

Operating in a predatory environment manned by goliaths, how does the local guy plan to make it through? “Yes, Mastercard/Visa have often exclusive contracts with banks and pay them considerable sums even, which makes my entry more difficult but to make our offer more lucrative, we are trying to keep our charges so low that even the customers would prefer us over the rest,” the CEO says.

In the B2B world, things are not as black and white though. “We have a very collaborative model where we try to work together with other players, like we are doing with UnionPay and Japan Credit Bureau. Even with Mastercard and Visa - who are much more aggressive in their approach, 1Link manages their card issuance for 18 local banks so actually we are the ones getting them a chunk of their business here.

PayPak is the brainchild of 1Link - a local switch system owned by a consortium of 11 major banks that manages payments from multiple interface, including interbank ATM transactions and bank transfers. “It was part of the State Bank Vision 2020 to have a domestic payment scheme and 1Link was cajoled into launching it in 2016,” Agrawalla says.

As for the revenue streams, PayPak has three: it charges a one-time issuance amount, then a fixed per annum card fee, and finally the commission earned through transactions. But due to the penetrative pricing and still being fairly new, PayPak is still running losses with its parent company 1Link pouring in money.

What about the market the company is eyeing? “There are around 40 million card users in Pakistan of which half are welfare and closed loop (such as Benazir Income Support Programme) with no scheme backing it up. The proliferation of cards here is pathetic in terms of population ratio. So we are first trying to bring into net that local customer who isn’t being catered by anyone else,” says Agrawalla.

Does this mean they plan to leave aside that burger boy from Karachi who goes to Dubai every year for his shopping? Not at all. “We are working on a co-badge model, which means there will be two payment schemes on a single card: international transactions and PayPak for all things local. In fact, JCB and UnionPay are already on board and our joint card with the latter would be out by June,” he shares.

While Pakistan hasn’t even yet progressed from cash to cards, the world is fast moving towards mobile banking and digital wallets. In that backdrop, does it make sense for a company to put its stakes on cards instead? “The jury’s still out on whether cards will go obsolete here or not. I personally feel they to stay, at least at the high end. This is why we haven’t limited ourselves to just cards and are already working on PayPak’s tokenisation and tap-and-pay schemes,” says Agrawalla.

“Leapfrogging from cash to digital requires a complete shift in customer behaviour, which I don’t see happening outright. We have to first transition from cash to cards, then move one notch up and go digital,” adds Chief Disruption Officer Syed Ahsan Aslam.

The writer is member of staff:

m.mutaherkhan@gmail.com

Twitter: @MutaherKhan

Published in Dawn, April 21st, 2019