Ministry of IT & Telecom Government of Pakistan Yusuf Hussain December 14, 2017 www.ignite.org.pk 1
Digital Finance Definitions are Still Evolving Financial services delivered over digital infrastructure including mobile and internet with low use of cash and traditional bank branches. Payments, savings, credit, insurance, mortgage, investments, remittances, committees. Store of value that people can access using a mobile phone or a computer and that provides an easy way to make payments. Mechanism allowing people to make payments using their mobile phones without having a traditional bank account. www.ignite.org.pk 2
Pakistan digital finance transactions are growing Total BB Transactions Volume: 167.2 million Value: 746.6 billion Agents transactions for liquidity management Volume: 5.4 million (3.2%) Value: 272.7 billion (36.5%) Customer oriented transactions Volume: 161.8 million (96.8%) Value: 473.9 billion (63.5%) SBP: Quarterly BB Newsletter Apr-Jun 17 Over the counter Volume: 67.3 million (41.6%) Value: 245.1 billion (51.7%) M-Wallets Volume: 94.5 million (58.4%) Value: 228.8 billion (48.3%) www.ignite.org.pk 3
Potential GDP Impact for countries Depends on Baselines and Readiness Pakistan currently has a less developed financial system requiring greater upfront investment, and thus would not have as large an increase in productivity as some of its lower-income peers www.ignite.org.pk Source: McKinsey Global Institute Analysis 4
Digital Finance is Transforming the Way People Transact Bank Payments provider RECEIVING PAYMENTS Fintech company Manage digital wallet Receive investment advice MAKING PAYMENTS Telecoms company Retailer www.ignite.org.pk 5
Individuals: Reduce poverty & hunger, improve gender equality, education & health Two poorest quartiles and women would be added: women with financial accounts tend to spend more on food, education, and health care. In rural Niger, payments made via digital means saved an average of one hour travel time and more than three hours of waiting time per transfer. Improve management of income and expenses, save for big-ticket items, invest in their farms and businesses, and put money aside for unexpected economic shocks. In Malawi, farmers whose income from crop sales was deposited directly into accounts spent 13% more on inputs for their future crops and achieved a 21% increase in yields. www.ignite.org.pk 6
Businesses: Credit, Efficiencies, New Business Models Electronic record of sales and expenses, enables businesses to analyse cash flow and enhance their understanding of operations and customers. A payment processor operating in Brazil, Mexico, and 11 other countries enables businesses to process digital payments demonstrates their credit worthiness. An additional USD 25 billion credit will be available to Pakistani individuals, startups & MSME by 2025. www.ignite.org.pk 7
Financial Service Providers: Lower Costs, More Deposits, More Credit, More Instruments By improving efficiencies Pakistan will add new deposits of USD 263 billion by 2025. By improving efficiency, the shift to digital payments from cash could save $400 billion across the 7 countries analyzed. A much wider variety of players than banks will likely be involved. These may include telecoms companies, payment providers, financial technology startups, microfinance institutions (MFIs), retailers and other companies. www.ignite.org.pk 8
Governments in Emerging Economies Could Collectively Save at least $110 Billion Annually This effectively would increase public investment in critical areas such as education, infrastructure, and health care. Digital payments could further enhance revenue by reducing the size of the informal economy. Digital operations within government can create large efficiency improvements and therefore cost savings. www.ignite.org.pk 9
Pakistan s Digital Finance Growth Drivers have a Mixed Trajectory 1. Widespread digital infrastructure. 2. Dynamic and sustainable financial-services markets, with agile regulation. 3. Products that people prefer to existing, often informal, alternatives. www.ignite.org.pk 10
SBP Aims to Add 50 Million People to the Financial Net by 2020 3 RD Party Service Provider Operation Bank A Bank B Mobile Wallet Platform Any Customer Any Telco Unified USSD Platform Other PSO/PSPs Interoperable Financial Switch Mobile Wallet PSO/PSP Operations Mobile Wallet www.ignite.org.pk 11
Digital Finance can Boost Pakistan s GDP up to 7% by 2025 Increased labour Increased investment in Increased Productivity physical capital www.ignite.org.pk 12
The Economic Gains from Digital Finance are Likely to be Far Larger Raising the quality of human capital. Regularly paying wages of teachers and health-care workers digitally reduces absenteeism. In India, for example, one study found that attendance rate of teachers is 90% in states with reliable digital salary payments, but only 60% to 80%in other states. Digital payments have already shown their potential to unlock a wide range of new business models in finance and beyond, including e-commerce and on-demand services. www.ignite.org.pk 13
Digital Financial Services Enable the Creation of New Business Models. Digital payments platforms and wallets Individuals Online p2p lending New Financial Services Products New Insurance models Personal financial planning Supply chain financing Nil Nil MSMEs Cash management Digital salary payments www.ignite.org.pk 14
Contd.Digital Financial Services Enable the Creation of New Business Models Mobile micro-payments Digital installment payments for health & education Pay-as-you-go investment model Layaway plans E-commerce Nil Nil Digitized businesses On-demand services Online labour platforms Investors www.ignite.org.pk 15
4 th Industrial Wave Tech Will Put FinTech on Steriods www.ignite.org.pk 16
Suggestions for ICAP GRCS of firms trying to keep pace with technological advance and regulation to support it Innovation profiling and advisory for corporates Due Diligence on corporate VC Investments, acquisitions of Startups, IPO. Budgetary recommendations to the government should include suggestions for new business models www.ignite.org.pk 17
Thank you! (formerly National ICT R&D Fund Company) Name: Yusuf Hussain Designation: CEO 6 th Floor, HBL Tower, Jinnah Avenue Blue Area, Islamabad www.ignite.org.pk (+92 51) 921 5360 64 +92 300 500 1708 ceo@ignite.org.pk Follow us on: IgniteNTF IgniteNTF /company/ignitentf IgniteNTF www.ignite.org.pk 18