With its large cash-based retail economy, coupled with a vast unbanked population, Pakistan offers endless possibilities for investment and growth in the digital banking and payments industry. No wonder a China-backed fintech, OPay, a one-stop mobile-based financial services platform that offers digital payments, digital wallet and financing solutions to its customers, is already here with plans to invest nearly $100 million in digital financial and payment infrastructure in the country.

“We are not just a payment company. We are here to enable the country’s unbanked population to enjoy financial inclusion and help document the economy,” Ali Mubashar Kazmi, the president of OPay Pakistan, says in an interview with Dawn.

Incubated in Nigeria, the fintech plans to bring multiple value-added services through its smart POS (point of sale) terminals to make financial services accessible to most people. “With our POS terminals, a merchant may act as an ATM and become a bank for their neighbourhood as these machines can be used to offer to their customers all branchless banking services ranging from payments to deposits to withdrawal to lending,” explains Mr Kazmi, who has over 25 years of experience in the banking industry.

“We want to be the power that can help Pakistan achieve faster economic development. Our economy needs what we are doing and what we plan to do; we can use our POS machines to not only help document the economy but also provide access to the 80 per cent financially excluded population of the country to small ticket loans,” the president says.

China-backed OPay plans to invest nearly $100 million in digital financial and payment infrastructure

With only around a fifth of the population linked to financial services (mostly limited to the very basic service of opening checking bank accounts) and less than 2pc people having access to capital/credit the sky is the limit for companies like OPay. “The unbanked population can’t even access the most basic financial services to invest in their businesses, limiting their potential. Nobody should be denied access to capital just because of their circumstances and social status. This needs to change now,” he says.

OPay’s entry into Pakistan was facilitated by its ability to raise funding of $400m from international investors led by Japan’s SoftBank. The company was valued at $2 billion.

In Pakistan, OPay has already deployed nearly 10,000 POS machines —about 11pc of the total 92,000 machines deployed across the country — in collaboration with commercial banks and plans to expand the number to up to 200,000.

“We think at least half a million POS machines can be deployed across Pakistan and we are ready to deploy two-fifth of this. With just 0.5pc of the approximately Rs8 trillion retail transactions done on credit/debit cards, the potential for growth in Pakistan is immense,” Mr Kazmi says as he explains the future plans of his company for expanding its footprints in the country’s digital financial sector.

“We intend to soon deliver a poor man’s credit card and small ticket loans for the unbanked and underbanked population. We are also in the process of launching our digital wallet,” he says, adding that his company has obtained regulatory permission for some of its operations while approvals for other products are being awaited. Some products will be launched in collaboration with the existing large banks.

“Our smart POS terminals are a bank branch where all kinds of payments can be made. Several value-added services like bill payments, mobile top up, cash-in, cash-out and money transfer to their customers can be availed by not only bank account holders but also cash-based customers,” he says.

However, most of the value-added services related to banking will be available on these terminals only when and if OPay secures a digital banking license. “OPay sees Pakistan as the most important market in the coming future as there is big space to work in the digitisation of the economy. But I feel things do not move at the speed at which they should in Pakistan. That remains a challenge,” says Mr Kazmi.

OPay has made major contributions to the Nigerian cash-based retail economy’s turnaround into a digital payments retail economy. “Since Pakistan has one of the lowest private sector lending penetration in the world and the highest cash-to-deposit ratio, we are planning our offerings in the digital banking space by targeting underbanked sectors such as small and medium enterprises, agriculture, and consumers from informal sectors whose financial needs are largely uncatered by commercial banks,” elaborates Mr Kazmi.

“If we are able to fix our banking and financial sector to serve our unbanked and underbanked population through the digitalisation of these services, half of our economic problems will soon be gone.”

Published in Dawn, The Business and Finance Weekly, August 8th, 2022