Fintech Disrupt Challenge 2016
Karandaaz Pakistan recently held a Fintech Disrupt Challenge (FDC 2016) in collaboration with the Lahore University of Management Sciences Center for Entrepreneurship (LCE) with the aim of fostering fintechs in the country. Three fintech start-ups emerged as winners of FDC 2016, including Ricult Pakistan Pvt. Ltd., Paysys Labs Pvt. Ltd., and PublishEx Solutions Pvt. Ltd.
According to the State Bank of Pakistan financial inclusion in the country is currently at 23 percent.1 As is common knowledge, increasing the rate of financial inclusion provides multi-faceted advantages to an economy, including positive economic growth and more empowered individuals.2 Financial technology organisations—commonly referred to as fintechs—are being touted as an especially effective catalyst for financial inclusion. These organisations apply existing and new technologies to provide financial services to a wider population.
Exhibit 1: Opportunities Offered by Digital Technologies
Source: FinTech and Financial Inclusion World Bank, 2016. This exhibit has been altered slightly for editorial purposes.
As technology is leveraged to provide more efficient, cheaper and faster services, conventional business models used by banks and other financial institutions are seeing significant disruption.3 Fintechs, through digital means, are increasingly allowing access to services at lower costs, and to populations that are relatively scattered and unserved by conventional financial institutions. As a result the fintech industry has been able to attract exceeding amounts of investments. In 2015 global investment in the fintech industry was over USD 22 billion, seeing a growth of 75 percent from the previous year.4 Similarly, in the first quarter of 2016, investments in the fintech industry were reported at USD 5.3 billon, showing an increase of 67 percent over the same period in the previous year.5
Exhibit 2: Global Fintech Financing Activity (2010-2015)
Source: This image is reproduced from Fintech Evolving Landscape Report 2016
Corresponding to global trends within the fintech industry, Karandaaz Pakistan, with its objective of advancing financial inclusion in the country, recently held a national Fintech Disrupt Challenge in collaboration with the Lahore University of Management Sciences Center for Entrepreneurship (LCE) with an aim to promote start-up fintechs. FDC 2016 brought together more than 28 start-ups, selected from a pool of over 60 applicants, to present their ideas to a multi-discipline panel of judges from the banking, venture capital, technology, donor and education industries in Pakistan. The ideas presented ranged from initiatives on savings, investments, real-estate, credit, insurance, and finance to name a few. The three winners of FDC 2016—Ricult Pakistan, Paysys Labs Ltd. and Publishex Solutions—won awards approximating USD 100,000. For a brief introduction to the winners of FDC 2016, see below.
- Ricult Pakistan Pvt. Ltd., are using an innovative credit scoring model to provide crop inputs to farmers, currently on an in-kind basis. Ricult is in the process of developing a mobile application and is partnering with financial institutions and mobile network operators (MNO’s) to eventually disburse credit, instead of in-kind input, to farmers on soft payment terms. This application will eventually include an online market place for agriculture inputs such as seeds, fertilizers, and pesticides and will also provide weather and soil related insights to farmers. A pilot programme with 150 farmers in Central Punjab is currently underway.
- Paysys Labs Pvt. Ltd., have developed a touchless mobile-based biometric fingerprint authentication solution. The solution offers automated customer identification where a user can take a picture of him/herself, fill in the required information and provide biometrically verified fingerprints through the application, using only the phone camera. This potentially breakthrough technology, eliminating the need for a touch point sensor, can result in substantial savings in cost of procuring Biometric Verification Systems (BVS). If successful, this initiative can greatly add to the pace of implementing biometric verification in accordance with the recent regulations issued by the State Bank of Pakistan.6
- PublishEx Solutions Pvt. Ltd., aims to develop a payment portal through which a consumer will be able to pay directly from their sim balance to purchase any digital content through mobile application stores (e.g. Google Playstore and Apple Store) and websites. This will be a first-of-its-kind payment channel in Pakistan not dependent on a mobile wallet or any type of online card.
In addition to the three winners, the following applicants were also in the top 10 category:
- Gallaa: An upcoming online marketplace and information management portal where verified members of the Galla community can save by participating in saving groups based on the principles of Rotating Saving and Credit Associations (ROSCAs). The virtual ROSCA overcomes a variety of challenges faced by actual ROSCAs such as fraud, theft, geographic challenges, resulting in increased and more efficient savings options for participants.
- CheckIn Solutions: An analytical tool facilitating financial institutions in lending primarily to the unbanked and low income population, via credit scores derived from telecom data and conventional data sources such as, credit history data with the financial institutions.
- TiliziM: The TillizM system consists of interconnected components that will familiarize mobile phone users with the ease and convenience of digital transactions. Through distributing discounted coupons and nano loans, after disruptive credit scoring techniques, TillizM intends to pave the way for easier digital purchases. This will be done in engagement with MNO’s.
- Mint 10x: A remittance service model, allowing individuals to remit money, locally and internationally, through a mobile app using a e-saving certificates and prizebonds issued by the government (on E-ledger), on blockchain. Through this, users from one end will be able to download an application and purchase e-savings certificates, send these certificates to users on the other end via blockchain, who can then redeem these certificates with a physical dealer of currency notes, at 3 percent minus the total value of the remittance, compared to 10 percent of traditional channels.
- Arazi: A crowd funding platform that offers the opportunity to invest in real estate in Pakistan.
- Assan LainDain: A many-to-many lending platform for micro and small businesses, diversifying the lender risk across multiple businesses.
- Payments Fusion: Providing Personal Accident Insurance (PAI) to lower and middle income consumers via a mobile app and USSD platform.
The nascent fintech industry in Pakistan requires significant impetus to flourish. Major stakeholders effecting the development of national fintech industries include governments, regulators, investors, technology vendors, financial institutions, incubators, accelerators and innovation labs to name a few.7 Karandaaz Pakistan, through initiatives such as FDC 2016 and some of its other projects with public and private sector incumbents, is working to impact the fintech ecosystem from a variety of angles, including funding support, policy support, cross-learning and knowledge creation. The largest impetus however, will be provided by the collaborative efforts of all relevant stakeholders in fostering and promoting fintechs in the country.