‘No matter how obstructive the present be, ecommerce is the future’

KARACHI: Pakistan is edging towards the digital transformation as e-commerce ecosystem is growing steadily in the country, despite a myriad of challenges that are constantly impeding it from reaching its true potential. It was stated by Adnan Ali, CEO Avanza Premier Payment Services Private Limited (APPS), in an exclusive interview with The News. The following are the highlights of that insightful talk.

Q: How important micropayment gateways are and when do you think the State Bank of Pakistan (SBP) is going to launch them?

A: Micropayment gateways will be a huge digital platform, which will help not only help companies like us but also allow us to have a single integration. We’ve witnessed similar platforms being implemented in our neighboring countries, such as Unified Payment Interface (UPI) in India, which has proven to be quite disruptive as it has already accumulated over 100 million users and has processed over 1 billion transactions. The SBP is working very diligently on this. It is expected that it will go live in October of the current year, for Phase 1. In this phase they have selected a few banks with which they will conduct pilot operations. Phase 2 is expected to complete in the coming year.

In turn this will develop an amazing ecosystem in the future, which will also be quite fruitful for fintechs like us.

Q: Is Pakistan’s e-commerce a COVID-fired market of risk and reward?

A: The pandemic has created an environment in the country for many people to go digital and use online services. As a result, the e-commerce market has gained momentum and will continue to grow manifold in Pakistan as well as various other countries.

Post COVID, we’ve seen major growth in the digital space for example the use of e-wallets increased 8.2 times, on Daraz, digital payments contributed 32 percent of the total consumer spending in March, internet traffic increased by 15 percent, according to Pakistan Telecommunication Authority (PTA), utilisation of cloud-based computing is now 10 times higher than three years ago, so it is quite evident that COVID played a catalytic role. With increasing online deliveries, and innovations such as contactless deliveries becoming the new norm, companies have actually started changing the way they operate and picking issues in their pre-existing business models to migrate to the digital payment side.

We’ve also seen a surge on our own requests, we receive over 100 queries, request and potential partnership emails in a month where previously it wasn’t even half the number and the growth is still in effect even with COVID starting to subside.

As a risk for smaller businesses, larger ones will attempt to acquire a rising e-commerce business to easily be able to capitalise on the digital payments wave. Survival will be imperative; those businesses which can adapt to ecommerce and stay afloat will see long-term benefits.

It is still speculative, but the current case scenario suggests the same growth trend will continue as businesses enter the digital payment landscape.

Q: Are fintechs and digital payment providers operating in a tough economic and regulatory environment? What are the challenges facing the e-commerce sector in Pakistan?

A: Yes, fintechs are working under very tough circumstances and it is not easy to establish one for some reasons.

Raising investment in our country especially for startups is not an easy task; most of our business tycoons are not involved directly in investment areas. Though there are some entities which tend to invest, like in our case Premier Systems was the investors, but this is still very rare overall.

Unlike other startups, fintechs, which are working in the banking sector, need to get applicable licences such as for payment system operator/provider (PSO/PSP) or electronic money institutions (EMI).

In both cases there is also a capital requirement of Rs200 million which is quite justified as it takes 1.5-2 years for the fintech to develop. Hence funds are in reality consumed in capex and opex such as staff salary office expenses, etc.

Building relationships with banks is never easy for new finetchs, establishing their trust and being able to develop a sustainable ecosystem and to penetrate the market where existing players dominate like easypaisa, Jazzcash and banks, which provide gateways, is a herculean task. The ecommerce sector in Pakistan also faces many challenges overall such as cash on delivery (COD) still dominates the market as approximately 90 percent online payments are COD.

E-commerce companies want their websites to have lush graphics, styling, easy navigation, etc, but the majority of the products delivered are not what they look like in the marketing campaigns. One of the frequent complaints businesses get is that the product is entirely different from what they saw on the website hence chances for products being returned back are quite high at 35 percent on average orders placed.

Q: APPS received a pilot approval of launching e-commerce payment gateway from the SBP last month. What progress has your company made so far?

A: APPS is very passionate about digitising the payment landscape of Pakistan. We are on our way to becoming the indigenous payment gateway of Pakistan which will address both merchant and customer pain points.

Merchants have faced many issues in adoption of e-commerce as there are open applications programming interfaces (APIs), ecommerce plugins and digital signups for easy onboarding. There are also very extensive onboarding and recurring charges which new entrants usually can’t bear. There are also a lot of markets untapped for online payments such as schools, freelancers, facebook merchants, and other segments where ecommerce checkout stores are not applicable.

APPS aims to target all of these pain points by providing open APIs to all available on the website, provide a diverse range of ecommerce plugins, a digital signup platform, and the best part is that we only charge a small fee per transaction and nothing else. We have also introduced payment links, our digital invoicing solution, which allows merchants to generate and send their clients a link to make payments. This service is ideal for the untapped merchant segment.

To better diversify the instruments accepted by merchants and to empower customers for online payments we are providing a one stop checkout solution. PayFast accepts card schemes such as UnionPay, mobile wallets like easypaisa and is also introducing the acceptance of bank account numbers as a new instrument.

Q: Card payments are underdeveloped in Pakistan. What’s your take on it?

A: While cards seem like the go to instrument for banking transactions, the penetration is rather low. There are 1.6 million credit cards and 26.5 million debit cards out of a population of 200 million plus.

There’s also a low acceptance count as the total number of point of sale machines are only 48.7 thousand. Other neighboring countries like India have 829.4 million debit cards and 57.4 million credit cards. China is a great example too where on average every person has roughly 5 cards, they had even crossed the 7 billion mark back in 2018.