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fintech adoption

Fintech Adoption in Pakistan and Digital Transformation Supported by Local Fintechs Could Improve Tax Collection: PM Imran Khan

The team at Islamabad-based Fintech firm SadaPay has been introducing innovative and appealing financial products and services that are focusing on younger consumers in Pakistan.

SadaPay is offering black, sleek premium spending cards which may be comparable to some of the cards offered by European Fintech challengers such as Monzo or Starling.

SadaPay has also launched a Founder’s Club and allows its clients to get their hands on these premium black cards if they can get 10 of their friends or colleagues to register to use the company’s Fintech services.

SadaPay, which was recently approved by the State Bank of Pakistan to launch pilot operations, points out that Payoneer’s Global Gig Economy Index revealed that Pakistan was among the top freelance markets, even surpassing India, Bangladesh and Russia last year (following the COVID-19 outbreak).

The report from Payoneer confirmed that the United States saw the most growth at 78%, followed by the United Kingdom at 59%, Brazil at 48% and Pakistan following closely at 47%.

In Pakistan, there’s also a young workforce that is increasingly using digital banking and online payments services like EasyPaisa and JazzCash to settle daily transactions. The COVID-19 pandemic has accelerated digital transformation in Pakistan and neighboring countries like India and Bangladesh as well.

Last month, Pakistan’s Prime Minister Imran Khan said that the Digital Pakistan initiative would help move the country away from a cash economy, which has become even more relevant in a post COVID world.

Prime Minister Khan had stated in January 2021 that the Digital Pakistan initiative would help the nation transition to a more modern economy. The premier, whose comments came at the launch ceremony for the ‘Raast‘ payment system in Islamabad, noted that the initiative could potentially play a key role in eradicating poverty in the country with a GDP of nearly $400 billion.

The Prime Minister remarked:

“Cash economy is an obstacle for the people.” 

He added that digital transactions will help Pakistan on its journey to prosperity. He also pointed out that tax collection is extremely low in the country and that out of the 220 million residents, just 2 million are paying their taxes.

He further noted:

“Only 3,000 Pakistanis pay 70% tax.” 

Khan explained that the low tax collection rate has been a significant challenge or obstacle in the country’s ongoing development.

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Fintech Firm Plaid Introduces Deposit Switch to Automate and Streamline Account Funding

Ashley Cornall, Product Manager at Fintech firm Plaid, notes that more financial platforms and services now exist than ever before to assist users with taking control of their financial wellbeing.

But it might still be quite challenging for consumers to direct where their payroll funds go when choosing services that best meet their financial requirements. Cornall explains in a blog post that changing where direct deposits go is “usually a manual and time-consuming process for both financial institutions and end-users.”

For instance, in order to transition income to a new banking service provider, many customers have to fill out a bank-provided form to collect their new account information, and then need to bring that particular form to their employer. She adds that when using a paper-based process, there’s usually “little to no clarity around when their paycheck will start flowing to the new account, which can leave the user feeling anxious and perplexed.”

Cornall points out that for financial services providers or institutions, “high-friction onboarding experiences can lead to user drop-off and inactive accounts—and can ultimately prevent banks from becoming a user’s primary financial institution.” The team at Plaid believes that there’s “significant opportunity” that exists for “expanded innovation that leads to better user outcomes.” Plaid can help by developing the Fintech infrastructure that aims to bridge the gap between financial institutions and payroll information, beginning with direct deposits.

Cornall confirmed:

“[Plaid] is excited to announce … Deposit Switch, a new product, currently in beta, that makes it faster and easier for users to establish or change the destination of their paychecks. By automating direct deposit account funding, banks can optimize their account funding flows, and ultimately increase customer lifetime value.”

As mentioned in the update, Deposit Switch from Plaid has been “optimized for conversion and coverage.” It provides instant and fallback methods for users that are setting up recurring account funding.

The Plaid team added:

“Our proprietary instant switch method connects a user’s payroll or employer account directly through Plaid Link. Instant account funding is available for employees at large and small companies, as well as gig economy workers. For users unable to utilize our instant switch method, we’re building a fallback method. Users will be able to ask Plaid to contact their employer on their behalf to update their direct deposits – no forms required.”

Liran Zelkha, CTO, Lili, which offers banking services for freelancers (like no-fee early access to wages with direct deposit), said that Fintech has “given people more choices to find what works best for their specific money management needs.”

Zelkha also noted that Plaid Deposit Switch is helping his company with streamlining the account funding process, which will “give customers a better experience and should also benefit our customer acquisition and retention.”

Ben Doyle, Co-Founder, Yotta, remarked:

“Yotta helps customers develop better financial habits by making it easy and fun to build and grow their savings. Working with Plaid, we’ve made it faster and easier for customers to take the first step by establishing and funding their accounts with direct deposit. Yotta also integrates with Plaid Exchange, so customers can securely use their Yotta account with other fintech apps for digital payments, financial planning, investments and more. Fintech is the new normal for most Americans and Plaid helps Yotta meet customers where they are.”

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Buy Now Pay Later or BNPL Fintech Split Handled Over $2.4 Million in Transactions for Malaysian Businesses

Malaysia-based Split, a Buy Now, Pay Later (BNPL) platform, recently revealed that it had handled RM 10 million (appr. $2.47 million) in total transactions for local businesses within months.

Split allows merchants to provide up to 3 interest-free installments to their clients, who are able to use any credit or debit card offered by local banking service providers.

Split’s management noted that more than 250 Malaysian brands such as Dyson, Switch, Lorna Jane and Gamer’s Hideout have now benefited from the significantly more traffic, greater number of sales conversions, and incremental revenue as well.

This development has come at a time when Southeast Asian consumers have increased their usage of BNPL services, with prominent Fintechs such as Grab, Razer, and even Mastercard now becoming actively involved in this nascent market.

The Split platform is reportedly backed by Silicon Valley’s 500 Startups and Entrepreneur First, an international talent investor.

Dylan Tan, Co-Founder at Split, stated:

“We want to disrupt the traditional credit card model by offering consumers an alternative that is accessible, interest-free and does not charge them penalties for having an outstanding balance. Malaysians will find that our model is very consumer-friendly and that’s entirely by design.”

Tan added:

“Split isn’t tied to specific banks. With one connection to us, merchants can immediately offer our BNPL instalments to consumers from all local banks. Ultimately, we aim to broaden the reach of our merchants, connecting them to as many shoppers as possible and vice versa.”

The BNPL market in Southeast Asia is growing rapidly with Fintech firms like Grab and Razer offering flexible purchasing plans.

BNPL lets people make purchases and then pay them off over an extended period of time through weekly, bi-weekly or monthly installment plans. These products may offer 0% interest, pay-in-installments, and other options that can make it more manageable for people to pay for goods and services.

BNPL is a fast-growing global market that’s expected to expand from $7.3 billion in 2019 to approximately $33.6 billion in 2027 at a compound annual growth rate (CAGR) of 21.2%, according to a report from Coherent Market Insights.

The Asia-Pacific or APAC region is expected to become the world’s fastest-growing BNPL market due to the rising number of Internet users. Around 40 million new users joined the booming digital economy in Southeast Asia in 2020, which brings the total Internet users in the region to around 400 million, according to estimates provided by e-Conomy SEA Report 2020.

BNPL services have become popular throughout the world. Europe-based BNPL Twisto recently received a €16 million investment and BNPL Limepay was recently chosen by Property Marketplace Domain (in Australia)

Digital travel platform Agoda recently partnered with BNPL Fintech Atome to offer installment plans to Malaysia and Singapore Consumers.

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By 2022, Most Payments will Migrate to ISO 20022, a Standard for Electronic Data Interchange between Financial Institutions, According to Payment Components

The team at Payment Components, a UK-based firm that’s empowering Open Banking with agile PSD2 and API frameworks (developing solutions for banks, corporates, and developers including BaaS while supporting Fintech payments), notes that with the introduction of new regulations and payment systems, managing a bank’s payment infrastructure is “becoming increasingly complex.”

Bank institutions have to integrate with new acquisitions, localize their proprietary technology stacks to the countries they move to, while also having to keep up with standard payment integrations. If banking platforms don’t complete these tasks, then their payments messaging “becomes siloed and causes system delays, errors, and increased costs,” according to Payment Components.

The Payment Components team asks how smaller banks and e-money institutions can “efficiently keep up with the constant stream of new releases?” The Fintech firm states that it has created a solution that lets banks manage all their payment flows “within the same system.”

The company explains:

“Each country has its own domestic payment service and each bank and group may have its own messaging system. So far, the dominant messaging standard used for the last decades has been SWIFT MT. But this international standard has reached its limits as the industry needed a messaging protocol able to carry more data and requiring fewer manual intervention.”

They added:

“The demand for instant payments is growing. In the UK, the use of Faster Payments has seen an increase with double digits quarter on quarter. And growth is similar all over the world.” 

Big Four auditing firm Deloitte reveals that real-time payments have helped with increasing and providing easier access to working capital. They’ve also improved the efficiency of the financial system by enhancing financial inclusion, while lowering the overall cost of payment systems. According to Payment Components, it should be clear that the trend is “moving towards instant payments and ISO 20022 is the messaging standard that can be used for all types of financial communication.”

The payments firm further noted:

“There are a huge number of benefits to managing payments with a new protocol such as the ISO20022. Firstly, it can transfer a lot more data and therefore enable banks to build informational structures and make data-driven decisions. Secondly, it offers long term benefits for the economy as it allows for more flexibility and innovation in the financial sector.”

Payment Components explains that it’s a protocol that serves as an “enabler” since it provides a more organized way to take care of payments messaging. Two of the primary features are that messaging components are reused instead of having to be created “from scratch” for each message, and the format (syntax) is separate or distinct from the semantics. This reportedly makes it a lot easier to understand messages wherever they might be coming from, the Payment Components team noted.

They also mentioned:

“ISO20022 is there to help improve communication, understand messages from other institutions, and enhance cooperation. The vast majority of the payments around the world will have migrated to the ISO20022 by 2022.”

The Fintech firm continued:

“SEPA, the EURO area payment integration initiative, also utilizes ISO20022 to offer low-value transfers at minimal cost and real-time payments throughout the SCT Inst scheme. That’s why the best strategy is to implement a system that can manage all types of payment protocols.” 

They further noted that it’s one that manages to stay up to date with new releases, and can also integrate with ISO20022, SWIFT MT, SEPA and proprietary payment protocols. With an Internet-based end-to-end solution, banks and financial institutions may add digital payments to their core system in “a simple plug-in application.” They also mentioned that the upfront time and investment required to install it is “minimal,” and the system is “specifically built to integrate seamlessly with different banking core systems.”

Payment Components claims that being able to stay up-to-date with the latest releases and payment infrastructures does not have to be costly and time-consuming. We also don’t have to work with fragmented legacy systems, because with payment systems such as aplonHub, your bank may use the same technology that Fintech firms use and take advantage of the latest payment standards “without creating more siloes,” according to Payment Components.

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Open Banking: UK Fintechs have Asked FCA to Adopt a More Market-led Approach to Open Finance Services

Fintech companies are reportedly urging the UK’s Financial Conduct Authority (FCA) to “break” banks during 2021.

A group of London-based startups is asking the FCA to look into ending the control and dominance of traditional banking institutions, specifically their use of consumer data. The companies have stated that this move should increase healthy competition in key financial services such as savings, credit, mortgages and pensions.

The Coalition for a Digital Economy (Coadec), which serves as the policy voice of Fintech startups and other tech scaleups and reportedly includes former UK Prime Minister Tony Blair’s son Euan as one its board members, is recommending a more market-led approach to providing open finance services (somewhat like in Australia).

Coadec is calling on the FCA to put an end to what they consider to be an “overly-standardized” approach to offering these types of financial services.

The Coadec consortium notably includes Fintech Unicorn TransferWise and Seedrs. In statements shared with City A.M., the group suggested that the FCA needs to “break banks” and offer a more transparent open banking system. Specifically, the FCA should allow other providers (not just banks) to engage in platforms through which consumer data, user accounts and customer transactions are shared among various parties, the consortium recommended.

Joel Gladwin, Head of Policy at Coadec, noted that if Fintechs are provided more access to data this year, then it should increase competition in key services like savings, credit, mortgages and pensions.

Gladwin added:

“Banks were able to send armies of slick lobbyists and magic circle lawyers to Brussels to build extra barriers to Fintechs and maintain their gatekeeper roles.”

But if consumers are able to have greater control of their banking details and related information, then it could help increase trust, promote more engagement and empower activity, Gladwin claims.

He further noted:

“By granting consumers a new data sharing right, and encouraging a market of specialists to compete, banks will have very little room for maneuver this time. Ultimately, this will allow consumers to access better, and more tailored, financial services than they do currently.”

The Fintech companies stated that there has to be an end to bank charges on third-party firms for accessing their financial data. They also recommended removing the 90-day re-authentication requirements, which asks customers to re-authorize their banking provider to release their financial data for use by other parties.

According to Gladwin:

“It is an unnecessary barrier that is preventing consumers from accessing better financial services. As the Brexit transition nears, the Government will have greater flexibility to find a better solution.”

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