Not long ago, there were news stories everywhere of PayPal refusing to enter the Pakistani market and how it will impact the massive local freelancing community, which has always struggled with payments due to lack of reliable and cheap channels. And that’s the problem a Pakistan-focused startup has decided to take head on.
PaySay is a fintech, headquartered in UK with an offshore office in Lahore, that aims to enable local freelancers and education academies receive payments from Europe by offering them a UK-based bank account.
The process is very simple: open the website, enter the freelancers page, sign up using an email address and the system will generate UK account details for you in a matter of seconds with details like sort code, account number among others. You can then use these with your foreign clients who then wouldn’t have to pay you through an international bank transfer, saving both parties from the inconvenience. Once you have money in your account, you can either cash it out or transfer it to your local bank.
Does this mean you will have a fully functioning UK-based account with bank card or an app to do your transactions? No. “It can only be accessed through the PaySay platform. Technically, these are sub-accounts distributed and managed through us as one can’t sign up with a British bank if they are not based in UK. This is why it’s not possible to directly use the bank’s portal,” says CEO Farrukh Mian.
At the moment, they have three digital banks (similar to SimSim in Pakistan) - Tide, Viva Wallet and Starling — on board and customers are given accounts from one of these institutions.
The startup was founded by Farrukh Mian, Zahid Khan and Dr Philip Mendrzyk — veterans in payments, software and financial services — and was commercially launched early 2017.
“At my previous job, I was working specifically within the remittance side and saw the initial days of the likes of TransferWise, WorldRemit and Azimo, which is where I got the inspiration from and realised the need for some innovation in the industry,” Mian recalls.
PaySay started out as a hybrid remittance service: bringing together the Western Union model of high street vendor network and the relatively new digital service as offered by TransferWise and others. But since then, they have entered new lines of business, including payment solutions for freelancers and online education academies that have clientèle in UK.
Currently, the local freelancing community mostly depends on PayPal accounts of friends and family abroad; Payoneer (which does operate in Pakistan) — two global brands with wide recognition in the industry. So how does a much smaller player hope to take them on in their own backyard? “The former has the unnecessary hassle of getting multiple layers involved, and the latter charges exorbitant fees, making it a highly expensive alternative solution,” says the CEO, adding that “ours, on the other hand, is relatively faster and slicker due to the smaller size.”
While PaySay has two revenue streams — 0.25 per cent and 0.50pc charges on both the transaction and foreign exchange rates on standard and express payments, respectively. However, for Pakistan-bound payments, they have forgone the former and just restricted themselves to the forex margins. “For all other countries we have both the income sources but for Pakistan, we don’t have the first one to keep ourselves more competitive. Plus, the State Bank doesn’t allow any charges on the principal either if one wants to be eligible for their rebates,” says Mian.
The startup has raised some half a million pounds in two angel investment rounds in 2016 and 2018. But why would a fintech startup with access to venture capital (VC) firms in the UK and Europe would go for such small rounds when the sector is ripe with funding there? “The ecosystem here is a hotbed for fintech, particularly in the remittances space which is why we wanted to diversify our product range a bit more before we approached a VC to make our offering more lucrative,” explains Mian.
Since the launching of this freelancing payment service three months ago, they have floated around $2 million whereas in the remittance business, over a billion dollars have been transacted through PaySay. A back of the envelope calculation, based on their margins, gives roughly an income close to 500,000 pounds.
The problem, however, goes beyond a lack of payment solutions for freelancers. “It’s not that there aren’t other options but more that PayPal is a such a big name and has so much trust that many clients are reluctant to do business if you don’t have a PayPal account because all others are much more time-consuming in comparison,” says Muhammad Hamza, a freelance writer from Karachi. Whether PaySay will be able to fill in that trust deficit or would it become one of the many companies operating in the industry other than PayPal? Stay tuned to find out.
The writer is member of staff:
Published in Dawn, June 23rd, 2019