The Power And Perils Of Bringing BNPL To Pakistan

Slow to the digital field in general, Pakistan’s eCommerce marketplace has hit a major growth spurt in 2020 and 2021, with revenue growing by over 35 percent in the first quarter of the fiscal year 2021 alone. It is also a younger demographic: 40 percent of the population is under the age of 30. Also, the increased access to digitization – even rural areas have 3G at this point – has served to give commerce a massive shove forward.

However, what Pakistan is lacking, QisstPay Co-founder Jordan Olivas told Karen Webster in a recent conversation, is an easy way to access credit. Credit card penetration is low, and cash remains king when it comes to making payments. The market clearly needs another option, which is what QisstPay aims to offer as it introduces buy now, pay later (BNPL) as a tool to the Pakistani market.

“The problem in Pakistan today is that there aren’t a lot of ways to get formal credit,” noted Olivas. “So this is something very specific. We are not offering lines of credit. We’re not issuing loans. What we are doing is factoring invoices, in a sense. We’re essentially buying the invoice from the merchant and extending a partial net 30 to the consumer.”

As a result, the consumer gets a chance to split up their payments – paying 50 percent at the time of purchase and the other half 30 days later. That payment cycle was chosen to match up with typical Pakistani pay cycles, which are usually 30 days.

The solution is designed to offer what firms like Afterpay and Klarna provide to consumers all over the world: an easy on-ramp for controlled digital spending. To get started, consumers need only provide their phone number, address and debit or credit card numbers (to make the first payment). QisstPay does not collect a photo ID or a customer’s CNIC (the local equivalent of a Social Security number), which greatly streamlines the onboarding process.

“We do this in much the same way that any of the other BNPLs do in the market today: using social underwriting. We collect their email and phone number, so we get a lot of information from there,” Olivas explained. “And in addition to that, we have a three-tiered transactional risk model, a merchant risk model and a consumer risk model, so we can basically create a weighted risk score to either approve the transaction or decline it, based on the likelihood of payment.”

And that weighted risk score is still very much a work in progress, he noted, as QisstPay is introducing an entirely new payment method, the likes of which has never been seen in the market. The company is still starting out, and their artificial intelligence (AI) is still based on a limited data set. Its loss rates are well within what it considers an acceptable range, but would be horrifying to a BNPL player in the U.S. or other parts of the developed world, Olivas noted. Although QisstPay has done a good job of mitigating those losses, he said, there is clearly more work to be done.

But investors in BNPL firms – especially in a market like Jordan, where it currently doesn’t exist – need to see the bigger opportunity as a customer acquisition and merchant growth driver. That wider potential isn’t always easy to explain or characterize to potential investors, said Olivas. What QisstPay has noticed in the early days of building the business is that unless investors come in with a strong BNPL background, it’s hard to get them to see the metrics of success in the segment, even if they’re excited in general about the prospect. BNPL is not about transactional volume – it’s about merchant and consumer acquisition, and about stimulating bigger growth rates.

The power of a service like QisstPay isn’t just about driving higher average order values and better conversions, Olivas noted, but in offering up a service that makes it easier for consumers to get what they want and need, and easier for merchants to grow their businesses by supplying it.

The Challenge of Offering Something New 

While there is much to be said for being the first player out on a greenfield – as QisstPay is in Pakistan – there is the massive challenge of getting both consumers and merchants on board and willing to use something new. While services like Afterpay might see their most avid users tapping into the service five or six times a month, a QisstPay superuser might use the platform once or twice.

But Olivas believes they will see that change over time, particularly as they are able to recruit more merchants onto the platform, and as the new payment form becomes more familiar to customers. This has been the pattern as BNPL platforms have emerged elsewhere in the world, he noted, and one that seems on track to repeat as the payment method emerges in Pakistan.

And Pakistan is the only market QisstPay is taking on – the goal isn’t to plant a flag here and then see how many more places they can take on. Pakistan is an unusual and complicated market, said Olivas, and trying to focus elsewhere is a good way to fail widely. As the fifth-largest country on Earth (following China, India, the U.S. and Indonesia), Pakistan is a plenty big enough challenge all on its own, said Olivas.

But it’s a challenge that he believes promises big rewards for the player that can properly debut BNPL.