Payments to lead the tech wave

Published January 4, 2021
Any attempt to write about 2020 is an overwhelming exercise given that so many once-a-decade events took place in a span of a few months.
Any attempt to write about 2020 is an overwhelming exercise given that so many once-a-decade events took place in a span of a few months.

Any attempt to write about 2020 is an overwhelming exercise given that so many once-a-decade events took place in a span of a few months.

Perhaps nowhere else was that noticeable more than in technology, which came to be the defining feature of our lives. Whether it was little kids waking up to attend a Zoom lecture or coordinating work meetings over Meets, tech’s adoption saw a major spike.

Pakistan was no exception to this phenomenon as people increasingly turned towards technology, be it by choice or necessity, during lockdowns and self-imposed distancing. People from the industry were quick to point out how Covid-19 will usher in a new age of digitisation and with it, a truly behavioural shift.

Take Trax, a tech-enabled fulfilment service, which saw its headcount increase by some 800 people during the course of one year, thanks to a spike in e-commerce orders after the pandemic struck. The number of deliveries being done almost doubled during the few weeks of strict lockdown across the country. Similar was the story of players in edtech, who noticed more demand for their offerings in a matter of a few months compared with years of operations before.

Big rounds of financing are expected in 2021 as fintechs look to blitzscale by buying growth

But going forward, the question is how sticky these changes will be. More importantly, how will they translate into the economy? Perhaps the most notable one will be in the sphere of financial services where the State Bank of Pakistan (SBP) has given its nod to a handful of electronic money institutions, paving the way for what could be an exciting space in the near future. As those players will be commencing commercial operations soon, we can expect some big rounds to be announced since fintechs will look to blitzscale by buying growth in what’s generally an expensive business the world over. Finja’s $9 million Series A round a few days ago could be a telling sign of what’s to come in the year ahead.

Meanwhile, by far the leader in the ecosystem — transport and logistics — may not be as big a darling in terms of fundraising since major names, such as Bykea, closed deals not too long ago while Airlift’s bus operations remain suspended. Similarly, Careem and Uber have been trying to move towards the path of profitability and would be reluctant to burn cash the same way.

Their major focus will instead be on pushing the super app, which Careem unveiled in mid-2020 and Bykea will be further pivoting towards soon. At the heart of that concept are digital payments, which could be the biggest winner in 2021. This could be through whatever form, be it EMIs, checkout platforms such as Foree, switches like 1LINK or the traditional ride-hailing players.

Another area where 2021 will build on the progress of the preceding year is going to be the B2B e-commerce, where a handful of startups closed sizeable funding rounds and would now be trying for that hyper growth. Online grocery upstarts too will be picking up pace on the back of a few million dollars in the kitty. Since it’s a low-margin business, they might find it hard to compete on price with the likes of Imtiaz.

Now that was all tech for the local economy. What about positioning the country as a major hub for exports and earning some greenbacks? Honestly, prospects don’t look too bright. Sure, IT exports are expected to surpass $1.2 billion in 2020-21, thanks to double-digit growth, but that figure in itself is too small to consider this development meaningful and be proud of.

As far as governance is concerned, there will also be a move towards digital channels with tax collection likely to be the biggest beneficiary of this change. However, in terms of service delivery to the citizens, it’d be safe to not expect much, especially outside Punjab.

But these are more or less the predictable trends. One realm that’s difficult to guess is, unsurprisingly, the regulatory front. Despite numerous progressive policies to ensure the ease of doing business for locals and foreigners, we’re the king of mixed signals. So while amendments were made to the Companies Act in May 2020, the same were allowed to lapse because the lawmakers failed to ratify them. Then obviously a singular focus on the monitoring and censoring of content, through social media rules and whatnot, will continue to be a party pooper. Such blatant state intervention will loom large on the minds of existing and upcoming players.

The market is all about signals and investments. One wrong message can undo lots of progressive steps. Here’s to the hope, against all odds, that the government will be smarter this time.

Published in Dawn, The Business and Finance Weekly, January 4th, 2021

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