Mobile Payments Bridge Cash And Digital Divide In Pakistan


In the move toward digital payments in cash-centric economies, building trust in bank accounts and payments done in bits and bytes is critical.

In Pakistan, for firms seeking to spur that adoption and to foster financial inclusion, it’s important to have a “cash in, cash out” mindset, as Erwan Gelebart, CEO of digital wallet, mobile payments and digital banking provider JazzCash, told Karen Webster in an interview.

At the time of this writing, JazzCash (owned by VEON, a global telecommunications and digital services firm) has 12 million active users in Pakistan, where 80 percent of the adult population is unbanked. According to the World Bank, that represents a total of 100 million individuals. This, of course, represents a significant opportunity for firms seeking to broaden financial inclusion.

In terms of mechanics, the JazzCash Mobile Account is a bank account that is linked to users’ mobile numbers, allowing users to send and receive funds, pay bills, take out and pay loans, and conduct other everyday financial activities.

The business model is akin to mobile banking services seen in other parts of the world, such as M-PESA, which in a nutshell leverage mobile devices to facilitate the flow of money, rather than relying on banks or wallets that are in turn issued by third parties.

Apps — And Agents, Too 

Users can register for and open accounts by downloading the JazzCash mobile app from Google Play or Apple’s App Store. But in a wrinkle — and with a nod to the “cash in, cash out” feature — the users also can visit one of over 60,000 JazzCash agents located in Pakistan, who can help users set up and use their JazzCash accounts (and transact in cash to buy goods).

Call it a way of bridging the divide between digital transactions and those rendered in bills and coins. Individuals and merchants just starting on their journey of getting comfortable with digital payments are happy to have agents that are “a few meters from where they are. That footprint is important,” Gelebart noted.

Cash In, Cash Out  

At a high level, said Gelebart, “the customers are digitizing the cash they have with them” as they interact with a network of more than 40,000 merchants across the country and overcome obstacles to accessing the traditional banking system.

One key distinction is that the account itself is free of charge – and at present, there is even a sign-up bonus for new users equivalent to 30 U.S. cents, which helps spur adoption (especially on the merchant side). And fees are not incurred until users actually take advantage of the services on offer and transact.

Drilling down into the use cases, Gelebart noted that face-to-face transactions are not a pain point in daily commerce, as people are very much used to, and comfortable with, using cash. But remittance does have friction, as cross-border transactions involve costs and risks.

Gelebart pointed to a May 2020 announcement with Mastercard, where JazzCash users can apply for physical debit cards, while merchants can accept digital payments from their customers and move toward cashless operations.

With a nod toward the merchants, he said the company is running a pilot program that leverages the data collected through transactions and other business activities to generate risk scores and lend money to those corporate clients.

“We can create a profile, a risk profile, and the merchants can get an instant loan. They can go to their interface, the JazzCash business account,” he told Webster. “And in a few seconds, if they’re eligible, they will get the money directly in their account. It’s about adding more value to the JazzCash business accounts. And as a result, receiving and collecting payments digitally will start making sense for them” – especially as they can log their sales functions directly into the business account (which, in turn, provides richer data to JazzCash as it designs new commercial offerings).

In other words, acceptance increases as merchants themselves build a history with the app.

Gathering The Consumers And Building Scale (And Partnerships)

The pandemic, and the fact that lockdowns rendered face-to-face transactions more difficult (if not impossible), has helped shift consumer interest in Pakistan toward digital payments.

In an illustration of how apps and mobile banking can increase financial inclusion, a significant number of the app users are women, as Gelebart told Webster. There are cultural and religious considerations in Pakistan that may make banking through traditional channels (or even visiting agents) more challenging for women. Most agents and bankers are male, he said, and physical proximity between women and men can be problematic. “What happens is that the women stick to using cash,” he noted.

JazzCash is working with the country’s financial services regulator to design a full self-service registration option (onsite at agents) that is slated to go live within a matter of weeks, utilizing biometrics to match against national databases and verify identities.

“We are removing bottlenecks for each segment of our customer base,” Gelebart said.

Asked how JazzCash generates revenue, he estimated that about 60 percent of registered customers are generating at least some revenue on a monthly basis. That, of course, implies that 40 percent of the installed customer base is not currently generating any revenue — and rather than transact, they may be using the app to build savings.

As Gelebart told Webster, within the past 12 months, “we’ve registered the equivalent of about 10 percent of the adult population,” with a cumulative tally of 12 million users. While the core use cases are tied to moving money (and generating savings within these mobile accounts), the second most prevalent use case is tied to bill payments. ReadyCash offers short-term installment loans of small denominations (through a microfinance bank that is also owned by VEON).

The same transaction and data flows that cross the JazzCash platform also enable the company to generate credit scores for individuals. “Suddenly they become eligible for a loan with us in the future, or with other banks,” said Gelebart.

Looking ahead, he said, “we do want to partner to open up and act as a platform connecting these customers and financial services firms, so that all these banks can come up with their own innovation and value proposition for their customers.”