Disruption comes in all shapes and sizes. Often, from all levels of the pyramid. There is a Rs. 150 billion market waiting to be tapped. It consists of 2 million merchants, a figure that is just waiting to be capitalized. Nearly two-thirds of Pakistan’s 207.8 million people are younger than 30 years old. The disruption of payments has been around for a long time – legacy technology and regulation has just not been able to enable it as quickly as it was needed.
Telenor Pakistan’s first foray into digital payments was back in 2009. That was the time when they worked with Tameer Microfinance Bank to provide a mobile banking solution to Telenor customers under the banner of EasyPaisa. The new offering would allow customers to pay their bills and transfer money both locally and internationally.
The value proposition for digital payments resides in volume transactions. The low-value-high-volume transactions, which is the description of the unbanked population, had a major pain point: they needed to send domestic remittances to their families. EasyPaisa was providing them with a simple solution. The company quickly recorded 420,000 remittances just a few months into its launch making more than a few sets of eyes blink in wonderment.
If you want to bring around real change, its going to happen when the number of low-end smartphones enter the market. When the bottom of the pyramid spends less than 10% of its income on a smart phone, disruption will happen. Back then, the innovations in smartphone technology and cheaper iterations of newer models meant that a large population of Pakistanis was able to access powerful, miniature hand-held computers that could provide service to the internet.
In the early days, internet data only meant that users could only perform lighter tasks such as sending and checking emails on an intermittent basis. However the boom in 3G/4G communications opened up new opportunities for mobile networks to offer digital payment solutions. The catalyst to payments in any market has been low-cost devices and mobile data.. Well, those two coupled with the fact that telecoms made it simple for users to move money from one phone to another, as it was for them to move messages from one to the other. Telenor led the charge and the other players eventually followed suit.
As the regulator came into action and softened the KYC requirements for internet banking, all the pieces were beginning aligned into place. After all, the assumption that your telecom company knows you because you registered your SIM through them, should be enough to make a transaction across the internet. KYC regulations for the merchants is a slightly more complex problem to solve.