As the world emerged from the initial waves of the COVID-19 pandemic, 2021 proved to be a transformative year for Pakistan’s fintech sector. Building on the digital momentum gained in 2020, Pakistan saw record-breaking investment in financial technology startups, strong regulatory support from the State Bank of Pakistan (SBP), and increased adoption of digital payment solutions across consumer and merchant segments.

Pandemic as a Catalyst

The pandemic had highlighted the vulnerabilities of cash-dependent economies. With lockdowns disrupting physical transactions, Pakistani consumers and businesses turned increasingly to digital alternatives. This trend continued into 2021, with mobile wallets, internet banking, and branchless banking seeing exponential growth.

According to the SBP’s “Payment Systems Review 2020-21,” there was a 30% increase in mobile banking users, totaling over 11 million by mid-2021. Internet banking transactions crossed 80 million with a value of PKR 5.3 trillion.

Rise of Fintech Startups

2021 witnessed an unprecedented boom in fintech startups in Pakistan. Notably:

SadaPay, which offers digital wallets and prepaid cards, was granted a full Electronic Money Institution (EMI) license by SBP in August 2021.

TAG and NayaPay both secured significant seed funding rounds, with TAG raising $12 million in September—one of the largest rounds in the region.

Finja, a digital SME lending platform, raised $9 million to expand its reach to underserved micro-businesses.

These startups targeted pain points in banking access, digital payments, credit scoring, and expense management. Their customer-first approach and mobile-centric platforms resonated with Pakistan’s young, tech-savvy population.

Regulatory Push

Much of the sector’s momentum can be attributed to progressive regulation. The SBP continued to champion financial inclusion through its “Digital Pakistan” strategy. It launched:

Raast, Pakistan’s first instant payment system, in collaboration with Karandaaz and the Bill & Melinda Gates Foundation.

A revised EMI Licensing Framework, encouraging fintechs to formalize their operations.

Measures to reduce onboarding friction for digital accounts via biometric verification and simplified KYC.

The Securities and Exchange Commission of Pakistan (SECP) also launched a Regulatory Sandbox, offering fintechs a testbed to trial innovative solutions under regulatory oversight.

Financial Inclusion Gains

Pakistan’s financial inclusion rate, long stagnant, started to improve. By mid-2021, over 50 million mobile wallet accounts were active, with notable increases in female account holders. Initiatives such as the Ehsaas Emergency Cash Program further normalized digital disbursements.

SMEs, often ignored by traditional banks, found new credit avenues through digital lenders like Finja and CreditBook. Freelancers and gig workers also benefited, with SadaPay and JazzCash enabling quick international remittances through partnerships with Stripe and Payoneer.

Challenges Ahead

Despite the optimism, significant challenges remained:

Trust in digital finance, especially among low-income and rural users, needed strengthening.

Cybersecurity threats loomed large as digital penetration increased.

Many fintechs faced scalability issues due to limited digital infrastructure and complex compliance requirements.

Nonetheless, the sector’s trajectory remained upward.

Looking Ahead

By the end of 2021, Pakistan’s fintech ecosystem had become a central pillar of its digital economy. With a supportive central bank, investor confidence, and a large unbanked population eager for solutions, fintech in Pakistan appeared poised for explosive growth in the years to come.

References:

State Bank of Pakistan – Payment Systems Review 2020-21

https://www.sbp.org.pk

TechCrunch – Pakistan’s TAG raises $12 million to offer digital banking

https://techcrunch.com

Dawn News – SBP grants EMI license to SadaPay

https://www.dawn.com

Karandaaz Pakistan – Raast Instant Payment System

https://www.karandaaz.com.pk

SECP – Regulatory Sandbox Guidelines

https://www.secp.gov.pk