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Does Pakistan’s digital payments’ landscape finally have the breakthrough it was looking for? China’s Alipay, which has over 800 million users across multiple markets, is about to enter Pakistan. E-commerce watchers would now wish that Alipay’s founder, the Alibaba – which spun off Alipay from its e-commerce setup some years ago but still owns Alipay’s underlying technology – also follows suit soon.

Ant Financial Services, the group that owns Alipay, has made a deal to buy 45 percent of Telenor Group’s stake in the Telenor Microfinance Bank, formerly Tameer Bank, at a value of $184.5 million. This is confirmed by Telenor Group’s public statement on this subject. After building critical mass of Easypaisa users, Telenor Pakistan will do well to further scale the business with a formidable strategic partner.

Mind you, Ant is the world’s largest Fintech co. It has been focused in the past couple of years on growing its scale overseas. Though its acquisition bid for US money-transfer giant MoneyGram failed earlier this year, Ant has struck local partnerships with digital and financial players in strategic markets like Indonesia, Malaysia, the Philippines, Thailand, Singapore and South Korea.

The Telenor-Ant deal, if it goes through the local regulatory checks, is significant for Pakistan, on multiple counts.

One, the deal would bring the local Fintech market into spotlight. The market potential of some 100 million unbanked individuals is a mouth-watering prospect for Fintech players. Alipay, with its robust technology payment platform, stands a better chance to build scale, which is essential to provide low-cost digital payment services in a low-income market.

Two, it may help the online economy’s ecosystem to grow further. The online economy – which includes e-commerce as well as the gig economy – needs acceptance of digital payment solutions at the grassroots level to be able to realize its billion-dollar potential in the near term. While the cash-on-delivery payment settlement is good to build user trust early on, in the long run, digital wallets will be more efficient.

Three, Alipay’s entry in the market might force the big banks as well as branchless banking (BB) providers to wake up and smell the coffee. Local banks seem content raising CASA deposits from a small user base – now they risk losing a big chunk of the potential market to digital. As for the BB operators, they are still stuck at a collective 15-16 million active accounts, drastically lower than the potential. It is time to make serious investments in Fintech and improve the service offering

And four, Alipay’s experience in Pakistan may provide impetus to some major e-commerce FDI coming into Pakistan later. While Alipay could help revolutionize the financial side of e-commerce here, local players like Daraz, TCS and others are slowly becoming efficient at merchandising and marketing. Should Alipay find traction in Pakistan, it may convince Alibaba to make its move and find a local partner, or target.

Copyright Business Recorder, 2018


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