TMF 018 - SadaPay No More Sadda Pay - The Fintech Landscape in Pakistan

Fintech has established itself as a permanent fixture in the Pakistani financial landscape, and its continued success relies on our collective efforts. The recent developments surrounding Sadapay being acquired, coupled with other industry advancements, have compelled me to highlight a crucial issue: the role tech enthusiasts play in shaping the future of fintech. In this episode, we'll explore ways to collectively improve the future of technology and ensure its positive impact on our world.
Hosted by Saqib Tahir
Support the show: https://support.sknexus.com/
See full show notes at: https://sknexus.com/ep18

Chapters
0:00 - TMF 018 - SadaPay No More Sadda Pay - The Fintech Landscape in Pakistan
2:28 - Intro to Today's Topic
2:56 - News of SadaPay getting acquired by Papara
5:26 - Banking situation in Pakistan
7:18 - Introduction to EMI - Electronic Money Institution Style banking in Pakistan
9:42 - Why SadaPay and NayaPay succeeded
11:11 - The hypocrisy of us Tech Enthusiasts
14:15 - Why we need to support startups
16:00 - What is TAM? Total Addressable Market
17:08 - Intro to BaaS - Banking as a service
18:28 - Why we need to digitize financially
20:52 - After show: My financial setup and launch of a new podcast

Following are references for you to read
https://www.sbp.org.pk/dfs/Fintech.html
https://www.sbp.org.pk/ps/EMI.htm
https://www.sbp.org.pk/ps/PDF/List-of-EMIs.pdf
https://sadapay.pk/blogs/sadapayxpapara
https://www.neem.io/

Chapters

• 0:00 TMF 018 - SadaPay No More Sadda Pay - The Fintech Landscape in Pakistan
• 2:28 Intro to Today's Topic
• 2:56 News of SadaPay getting acquired by Papara
• 5:26 Banking situation in Pakistan
• 7:18 Introduction to EMI - Electronic Money Institution Style banking in Pakistan
• 9:42 Why SadaPay and NayaPay succeeded
• 11:11 The hypocrisy of us Tech Enthusiasts
• 14:15 Why we need to support startups
• 16:00 What is TAM? Total Addressable Market
• 17:08 Intro to BaaS - Banking as a service
• 18:28 Why we need to digitize financially
• 20:52 After show: My financial setup and launch of a new podcast

Transcript

0:00

(Transcribed by TurboScribe.ai. Go Unlimited to remove this message.) Welcome to another episode of Tech Made Fun. So, I don't know how long this episode has been in the research pile. And recently a couple of things happened because of which I was like okay, I think we have now come to the topical format. So, I think it's a good time to cover this topic now. So basically, story time. It was Eid the day before, Eid Mubarak by the way. So, I left home, went to the petrol pump, I needed water, it was very hot, I bought water. But then I remembered that for the first time probably in my life, I forgot my wallet at home. The good thing was that recently, I got a notification on my phone from my banking app. And they said that now your banking app supports Tap2Pay. You can set it up. So, I did set it up but I never thought that I'll use it. Because you know, it's a Pakistani app, a Pakistani feature. It doesn't work half the time as you may already know. So, I just set it up in the novelty factor. And never thought about it again. But so, when this happened, I was like, Oh, I have my phone, I don't have a wallet. So, Tap2Pay works wherever NFC card works. So, I went to the shopkeeper. Now, I went to the shopkeeper, there was a bottle of water for 100 rupees. And this is a regular shopkeeper, whom I keep going to. Today, there was a new guy sitting there. He started arguing with me. Sir, the phone doesn't work on Tap2Pay. Only the card works on Tap2Pay. You can't give money. We don't even take easy money. There's no card, blah blah blah, long story. So, I said, let me try at least once. And you know, eventually, after a long time of arguing, I was like, okay, what's the harm in trying? I got the machine, put 100 rupees in the middle, tapped it, it asked for a fingerprint from me. I put the fingerprint. Now, there was a little twist here. I had to tap again. And this was like different than the regular tapping process. So, when the transaction got cancelled, I said, okay, I think I have to tap again. After fingerprinting once. So, I tapped again. And it worked. Hurray! I charged 100 rupees. And the phone worked on Tap2Pay. And I was surprised. And I was thinking, man, this is such a fun thing. Like, because YouTubers and these people watch everything on Apple and Google. And here, with difficulty, I think easy money has become common enough. So, when I used this option and it worked, and an old, broken screen, broken machine worked. I was very happy to see that, man, there was a little advancement. It's a little victory, you know. Little victory like this in the world of tech make me really happy. Especially in our ecosystem, where progress is very slow. And, you know, this incident happened. And like, I remember that, okay, I read this topic, on which I did so much research. Where did this topic go? Now, it's here today. Basically, in today's episode, I want to talk about the fintech landscape in Pakistan. Fintech is a term that most probably you guys will be familiar with. Or if you're not familiar, you'll hear it somewhere. And it is like, it's the same thing, tech is everything, which we made fun of once in an episode. So, fintech is financial technology. Short, fintech. Okay? And in this, the episode I want to open, first of all, I want to do it with this. As the title suggests, Sada pay, no more Sada pay. So, what happens in Pakistan, any startup comes. First of all, here, the revenue model or business model of every startup basically fails. Everyone's. Very few will probably be profitable. But most startups just come, and they acquire a large market share. And then they try to sell, and exit, put their money in the pocket, and leave, bye bye. So, two companies have already done this before. As you know, Daraaz is our biggest e-commerce marketplace. Alibaba bought it a few years ago. And similarly, Foodpanda, which is our biggest QSR platform, or food aggregator platform, was bought by Fedora, which now owns Delivery Hero. So, these are like two very big, very successful startups, which through their way of exit, became really, really popular. In recent news, we found out that Sada pay, a fintech app, with an EMI license, and I will explain everything in a while, was bought by Papara, which is a Turkish company. And which made me a little sad, because Sada pay was on a very good trajectory when it came to marketing and branding. And their fans were fans, and they were doing something that no one else was doing in the market. And they were doing a lot for freelancers. As you may know, I talk a lot about freelancing in a sister podcast or brother podcast. So, Sada pay was a good product. I am sure it is still a good product. But when Papara bought it, all those things that I often say, it was confirmed again. That basically, all the startups that run here, or all the apps that run here, they don't have a revenue model. What was Sada pay's revenue model? It was making money on transactions. How much would it be? It's a small percentage. It's a PQR transaction. And the PQR transactions of EMI banks are already so small in size that it's not really profitable. Then they opened the whole freelancing venture. And there were a lot of hurdles in this too, compliance-wise and rules and regulation-wise. Because of that, I'm sure they had to face a lot of pain points. And you know, they weren't profitable. I have one good authority to say that there were a lot of issues going in the company. So, their solution was to sell it to a big company. Because when a big company like Papara came, which I think is Turkey's number one, or one of the top fintechs, with billions of dollars or whatever, they can eat the cost, right? Just like when Alibaba was sold, Foodpanda was sold. They can eat the cost. They can eat the initial cost. And then they can make a new business model on which they stand. So, let's see what happens with Sada pay eventually. But this all is part of a larger debate I want to have, which is the banking situation in Pakistan. Because in Pakistan, there is a huge number of unbanked people. I can't remember off the top of my head right now, but it's a very, very big percentage which is considered unbanked right now. And unbanked means that they don't have a bank account or their financial transactions are not being documented or digitized. And typically speaking, historically speaking, this was the biggest issue of banks. And by extension, state bank. It's a painful process. And then there is a huge population of people who are working in companies, private companies. But those companies don't easily give a salary letter. Which I guess it is. But the unbanked population is suffering a little bit because of this. Now, before you say, So, that's a separate discussion to have. Because there is a big, big misconception when it comes to tax. Especially income tax versus sales tax. If you have to have a bank, you have to go to like, you know, normal banking channel. So, to the uninitiated, it was a very confusing situation. To solve that came EMI. What is EMI? EMI is Electronic Money Institution. And in simple words, EMI is basically any kind of bank or bank account, usually branchless, in which you can open an account with your mobile number. Okay? So, in the beginning, EasyPay, JazzCash were the definition of it. Now, they have become proper banks. But, you know, generally speaking, just to keep it simple, EMI banks are those where you have your ID card, you have your mobile number on your ID card. You download the app, enter your mobile number. Through the camera, your fingerprint verification is done. You don't have to go to the bank. You can open your account anywhere with an internet connection. And obviously, because the nature of this account is so easy to open, there are some limitations on it also. Like, its non-verified limits are very low. But, you know, we live in a country where the average salary is still around 50,000-60,000. That too, like, in the corporate or educated sector. So, that is way more than enough for a lot of people. So, EMI was the answer and still is the answer for unbanked population. So on and so forth. EMI came. EMI became very successful. And especially, the EasyPaisa and JazzCash, because they had telecom brands behind them, they became a major success. your outer regions, or interior Punjab, or interior Sindh, where there is no bank. To send money at home, to people who have come to their villages, or to work in cities. For them, EasyPaisa and JazzCash became the go-to. But, here is the problem. EasyPaisa and JazzCash, they are at the end of the day, partnered with their telecom brands, Telenor and Jazz. And then, now they have become a proper bank. So, they have also started the same practices, which are common in banks. Plus, the customer service, and their app, because their apps were like the first ever apps which exist in this kind of ecosystem. They are particularly not a good user experience. Now, Jazz has refreshed its entire mobile app in the name of Simosa. And, go and search in the package selector. These are such big companies. These are the giant companies of Pakistan. They haven't made a proper app yet. Like, it's very funny. And, basically, they made the app by doing UAT. So, that frustration aside, there was a problem here. The problem is that EasyPaisa and JazzCash are not user-friendly. EasyPaisa is like opening a Chinese lottery app. There are 12 buttons, and there are tring tring tring tring animations everywhere. So, what happened is, that a few years ago, a lot of new ventures started coming into the space. Fintech under the EMI license, which had Sada, Neha, Tag, which didn't work, Finja, which I think pivoted. And now, Huo Bank is running. And, they had a really unique opportunity here. So, what opportunity did they have? They had, look, there are a lot of people that are still unbanked. There are a lot of people who are frustrated by the existing digital solutions or digital wallet solutions. And then, there are people who just don't want to deal with monopolies or their customer service or whatever the situation was. And, on top of this messaging and this problem solving, Sada and Neha, I think, were the two clear standouts which have come a far way and became really, really successful. Right? Now, what's the point? What's the point of telling this whole story? The point of telling this whole story is, that there is a bit of hypocrisy in our culture. Especially, if you're listening to this podcast, you might be part of the problem. I'm sorry to say. And that is, look, like 5-10 years ago, when new credit cards and debit cards started coming, you'd go to every shop and say, no card sir, we'll take cash. The card doesn't work. The card doesn't work. The card started working with difficulty. And even now, there are a lot of places where the card doesn't work. Then, easy peasy, jazz cash came. Like I said, easy peasy, jazz cash. People slowly, slowly became comfortable and people slowly, slowly started using it. And the story I just told you, that now, there's an option of tap to pay. So, that day, when I went, I was literally told, no, it won't be used, this and that. Now, if I wasn't tax heavy and I wasn't adamant, I would have left the water bottle and went back home. I would have driven for 15-20 minutes and got my wallet. I would have been so poor. But because I was adamant, we used that service and it worked, right? But the hypocrisy is that, we, as like people who understand tech, we don't push enough. Yeah, we don't do our part enough. Okay? Go and ask any IT or tech sector person who is working in freelancing or digital services. So, number one, yeah, almost number one issue that they'll tell you is, there's no payment gateway in Pakistan. There's no Stripe here. There's no PayPal here. There's no option to get money or send it. And that is a very valid concern. But look, when these new services come, like NehaPay and SadaPay, have you tried them? Have you supported them? You don't go out of your way and support these new ventures and then problem occurs. So, why don't we support them? Like, on one side, we say that, there's no Stripe or PayPal services here. On the other side, the services that are here, we don't get them lifted. Even now, if you go to SadaPay or NehaPay app store or Playstore Purchase, there will be so many negative reviews, which make no sense because it's not their problem. It's the limitations of EMI license. Like, cash withdrawal limits or bank account limits, so on and so forth. But like, we say that, we don't want to put any effort. We don't want to support either. They say, vote with your wallet. We don't want to do that either. And we want all the services to come to Pakistan for our convenience. Let's solve our problem case. So, I think that is an issue because we say, beggars can't be choosers. So, what we can choose at least is to support people who are trying to bring change in the country or support companies who are trying to bring change in the country, right? If there are companies like NehaPay and SadaPay, then their track record is fine. Like, go at least give those apps a try. Like, try to use them daily in your life. Try to make use of them. Try to advocate for them. So, if you are using it, you are bringing all your stuff and saying, yes, yes, I use it. I like it a lot. Why don't your family use it? Why don't your family use it? You can understand, when more people will use these apps, more awareness will become for these apps and more companies will come in the future and there will be more competition. Otherwise, you will be left with easy money, jazz cash, monopoly options and on the other side, you have banks. And because those are giant companies compared to these smaller new startups, they will always, almost always, abuse their power. They will try to sell you 10 products. They will try to put you in a lottery. It was so funny on EasyPay. I made an account. The next day, a marketing call came. You want to buy our insurance? I said, why are you calling me? I opened a bank account. I don't want your marketing. The next day, I started calling. Like, it was so outrageous, right? So, my whole thing is that, look, as a fellow tech enthusiast, as someone who takes interest into tech and understands the pain points and problems of the ecosystem, let's be a bit more involved in supporting new ventures. Now, I am not saying to take part in a scam or start using your due diligence app. No, don't be the first person. Go wait it out. There is no new company. Like I said, Hugo Bank app is coming, right? I have nothing to do with them. I don't know what kind of service it will be. Their app hasn't come yet. But let's say it comes tomorrow. It has good reviews. People are using it in the market. You have a phone number. You have an ID card. This is an EMI bank account. It's not like it won't cause a problem in your filing. It won't cause a problem in your tax. Try it out, right? Support it. And if you like it, use it. And if you love it, share it with others. Tell other people to use it. Because I think in our country, especially after the corona time, when investment startups have become so dry that all the startup gurus are sitting quietly. Not even a rupee of investment is coming. This is not a good outlook for us. Like, what do you want? Do you want people to just make startups here and big companies come out and buy them and then keep monopolizing? Now see, Foodpanda has such a strong monopoly. How many people have tried to compete with Foodpanda in Corona? Foodrunner came. So Cheetah came. So Jovi came. And they got destroyed because there is so much revenue behind Foodpanda. There is so much money. They can't win. Like new startups can't win against them. And then obviously, their service was not as good as Foodpanda's. Because Foodpanda is a very operational business and operational businesses are very hard to run, right? For a small business to run operationally at the same level as a large business is impossible. But that's not the case with Fintech. In Fintech, because it's digital, it's software, it's an app, no one is coming and giving food. It is very possible that a small focused Fintech startup offers something unique and valuable, which the bigger guys are not. Just like SadaPay was doing. Like SadaPay's mission was making payments very easy, very simple, which it does. Like SadaPay's interface by far is the best. It has the fastest app, the simplest to use. Same thing with NeaPay. NeaPay wanted to make very transparent transactions, online transactions, spending controls and limits and so on and so forth. That was their unique proposition. And I think Hugo Bank's savings or something like that. So on and so forth. But what I mean to say is, that look, as a fellow tech enthusiast, if tomorrow you say that there is no PayPal here, there is no Stripe here, then maybe you're the problem and maybe you should try adopting new things and supporting new things so that tomorrow the companies will see that there is one here. So the product, I'll explain a concept to you because product management is a bit different. One thing is that in product management, it's called TAM. Total Addressable Market. So basically, whenever we launch a product or make it, you see in the initial stages what TAM is. How many people will use this product? How many people will make money from this product? So on and so forth. So we have to increase that TAM. And in the case of FinTech, what is that TAM? The unbanked people have to be banked. Right? That's why every FinTech app unbanked, unbanked, unbanked, up, down, left, right, keep unbanking. So yeah, like, just support these things. Keep an eye out for them. And you know, do a little test. Nothing happens. Like, don't commit too much. Delete it. It's fine. Which can be a good outlook for the future of Pakistan. That would be nice. That being said, to end it, just because of our research and all that, I have to mention it, is Bass. So, like, companies, put tech on everything, FinTech, PropTech, Martech. Similarly, in another software world, there is a common thing, as a service. So, software as a service. Right? This thing as a service. Platform as a service. So what is Bass? Banking as a service. So recently, a company named Neem, it got its first license, or one of the first, for Bass. What that means is that Neem now, banking services, can outsource other companies. So for example, I am running a company, I have 100-200 employees, I have to payroll them. So, traditionally, I will go to a bank and contract, that brother, every month, first of all, you have to open my account, send them money, and so on and so forth. Now what will happen with Bass? I can have my own, kind of like a mini bank, within my company, and I can use Bass services, banking as a service services, to make my life easier. So, if you are on the corporate side, or on the commercial side, go look into Neem. Right? Because we want these options to come through. If companies like Neem come, in the future, these will also work. Again, all the companies that I am naming, I don't know if they are good or bad. Try it at your own will. But do try them. Right? Because if they turn out to be good in the future, that opens up the market for new players to come in, and that, overall, is a net benefit for people who are unbanked, people who are not digitalized, and people like, who are already crying in IT Tech, that brother, there is no payment provider here, no payment service, so on and so forth. Right? Because, understand this, that the digitalization of finance, right? It's not just to the extent that, now you were dealing in cash, so now you are dealing in digital cash. No. It opens up room for a lot of things. Like, you can put in digital committees. There was a company, I don't remember its name. Digital people were putting in committees. You can do digital savings. In the future, there will be options for asset or investment, which make it more feasible for people to invest into stocks or whatever. Until we come to a platform, a digital platform that is going on in the world, that seamless integration won't happen, that ecosystem won't be formed. The word ecosystem, I will throw it on in a lot of episodes. We have to push an entire ecosystem, so that we can go to the next level. There needs to be buying power. There needs to be supplying power, right? Once everything becomes digitalized, or gets a little more digitalized financially, that opens up room for a lot of opportunities. Not just that, the government has new ways of making taxes, if you want a negative outlook. But there are new kinds of businesses that can open up, right? Your cash cheques can increase. Your documented history can come. E-commerce can become easier in Pakistan, right? A lot of people can't do e-commerce right now, because there are issues with, you know, transparency and trust, right? Like in the last episode, in the scam episode, we covered what often happens. On Facebook marketplace, they don't order cash on delivery. They give an advance payment, then we will do it. Think of a solution that can fix that. That could be digital, right? There could be some kind of check and balance, that the payment is only released when it is on the side of escrow. When your parcel is received, everything is fine. Escrow has sent the payment to the buyer. And because it's in an escrow, it's in a third party. It's a third party, right? It will serve both merchants and buyers. So all these options, and all these things that are going on in the world, will only come to Pakistan, when at least we consumers are a little more experimental, and we give them a longer lifeline than we currently are, right? That's just my message. A little weird episode, I think. Maybe you learned something, you know, about fintech. You didn't know about it. Yeah, about Bass. Bass. Let me know your feedback. As always, send it at podcast.sknextest.com or anywhere on social. But at the end of it, let me know, do you use any fintech apps right now? Do you like any of them? If you want my personal setup, then there is a new segment in this episode. Let's call it after show for now, where I will go over some of my personal experiences or random thoughts in every episode. Okay, so welcome to the after show for Tech Made Fun. I haven't thought of its name yet. There are two things I want to discuss. Number one is this, that this episode was more for people like, obviously those who have money, income, those who are managing their money or are in the financial system. If you are not, then we have launched a sister podcast called The Wandering Pro, which is all about career and business, because I have a lot to say about that. And I didn't want to muddy up this series of episodes. So now Tech Made Fun will be a tech podcast and The Wandering Pro will be a career and business podcast. If you go to the website, sknextest.com, you will get both side by side. You can listen to both, enjoy both. And you know, hopefully we can make this a better thing for everyone. And I'm very peculiar about it, because to me, and it teaches you a lot. It makes you disciplined and it makes you safe also. And these are one of those best practices also. So what I recommend to everyone is, so you should have at least three accounts, ideally four. What do I mean by that? Because as I said, regular bank account is still the way to go. And then similarly, a savings account should be there. This should also be a regular bank account, where you open a savings account. Islamic is also an option. Non-Islamic is also an option. Whatever floats your boat, open a savings account. So these are your two base accounts. An income account, a savings account. Then the third account you have to open, is the expenditure account. I recommend you open the EMI one. The benefit of that is, let's say I open on Sada. So in that you get two accounts by default. You get a virtual card, and you get a physical card. And then what happens is, all your online things, you can use the virtual card for that. And all the offline things, you can use the physical card for that. And because the card numbers of both are different, you can also freeze both individually. If you don't have an accidental charge, or a card hack, or so on and so forth. And you can just manage your finances better. What I personally do, I do this, that I have an income account, in which all the income comes. I have a savings account, in which I save at the end of every month. And then, what I have to withdraw cash, I do it from my income account, round amount from the ATM. Because you know, if there is no round amount, then withdrawing cash is very difficult. And then for expenditure, I have kept both. On Sada and on Neha. I use both on full disclosure. Why do I use two? So on Sada, as I said, the interface is very easy to use, very fast. So I have to go to the tea shop, order food, take care of the shop. Standing there, in two seconds, put the number, how much money, yes, this much, send, send. It happens in five seconds. Literally, I have become so fast, that instead of withdrawing money from the wallet, I can withdraw money from Sada Pay. So this is the main purpose of Sada Pay. And on Neha, I have kept it exclusively only for online things. Because it has no spending control option. I have put a limit, that in this month, more than Rs 10,000-15,000 can not be charged online. So in that, that keeps me safe. Tomorrow, if my number goes to someone, someone sees it, someone sees it, I will have more and more loss. So it will be up to Rs 15,000. That too, if Rs 15,000 is in the account. In that account, often very little money is in it. And I am just paying for subscriptions. One last tidbit I want to give is, that I have seen a lot of people, that the freelancers especially, they are after the US dollar account. That we want to open a US dollar account. So why do you want to open a US dollar account? When you, and by US dollar account, I mean, you want a US dollar debit card. I say, look man, in most services, if you use a Pakistani debit card, you get pricing parity. What that means is that, just like I take Netflix, which I don't use, but just as an example, you take Netflix from a Pakistani card, so you get it quite discounted. Same thing with Spotify, same thing with YouTube music, and same thing with Steam, or a lot of services, where they know that, okay, this is a Pakistani card, so for Pakistan, we have a special pricing. That is really nice. So use your Pakistani card, wherever you can. Here, it works everywhere, for example. But if you want a dollar card, then we will cover it in another episode. So hopefully, this episode was a nice intro into Fintech, Baas, and the current landscape in Pakistan. And you know, tomorrow, maybe I will do another episode on this, because this is a very close to heart issue. When it comes to progression in Pakistan, in Pakistan, the tech, any industry's progression, I feel like, we, as the people who are closer to tech, can play a big role in improving it down the road. Thank you very much.