Flash Report /

Pakistan digital payments: New entrant enhances customer choice

  • The State Bank of Pakistan has granted in-principle approval to SadaPay, a start-up offering digital wallets

  • SadaPay aims to compete by pricing aggressively and focusing on a unique customer segment

  • Potential challenges would be a highly concentrated market, financial muscle and building a vast agents network

Pakistan digital payments: New entrant enhances customer choice
Rohit Kumar
Rohit Kumar

Global Financials/Thematics

Tellimer Research
29 April 2020
Published byTellimer Research

With a high unbanked population, strong mobile penetration along with a high cash-to-GDP ratio, Pakistan represents an ideal environment for cashless payment platforms to thrive. A new start-up, SadaPay, is aiming to disrupt the country’s digital payments industry with competitive pricing and a focus on the freelance customer segment.

The State Bank of Pakistan has granted in-principle approval to SadaPay, a digital payments start-up offering digital wallets along with a debit card, and with a special focus on freelancers. We think this new entrant could help accelerate the digital payments space in Pakistan given its innovative product offering, competitive pricing structure and focus on an important but underserved niche customer segment. However, the company will face challenges, including push-back from some well-entrenched incumbents.

Pakistan’s digital payments industry is underdeveloped but growing fast. Mobile wallet penetration is still low with the total number of accounts standing at 46mn (34% of the adult population) and active accounts at 25mn (18% of adults). Also, these are not unique accounts per customer so the actual penetration is likely to be even lower. By way of comparison, in Bangladesh total mobile wallet accounts are equivalent to 70% of the adult population and in Kenya this number is well over 100%. However, growth is strong in Pakistan, with total accounts growing by a CAGR of 32% in 2016-19. The central bank is also keen to see this market grow, as indicated by its National Payments System Strategy (launched in 2019), which was largely focused on digital payments. The industry is currently dominated by telecom companies, with Easypaisa (owned by Telenor and Ant Financial) and JazzCash (owned by Mobilink) having a combined market share of 87%.

SadaPay aims to compete by pricing aggressively. Most of the services offered by SadaPay are free or at a minimal cost. For example, there are no charges for getting a debit card, cashing out via ATMs is free (up to three transactions per month) compared to 0.8-3.0% charged by competitors (Easypaisa and JazzCash), fund transfer to any bank account is also free (up to PKR10k, and PKR8 per transaction thereafter) compared to 1.0-3.5% charged by competitors. Foreign currency transaction charges are only 1.5% (compared to c3% charged by banks).

The company attributes its cheap fees to its low operating costs (in contrast to banks it does not have any physical branches). It aims to earn revenues from premium payment processing services and payroll solutions for employers, along with a small transaction fee that it receives from Visa for payments made through their channels.

Table 1: Pakistan digital payment platforms competitive positioning

Number of accounts (mn)-24.916.1
Market share-52%34%
Total agents (000)3079130


Issuance of debit card (PKR)Free500500
Cash-out via ATMsFree (up to 3 transactions)0.8-3.0%0.8-3.0%
Transfer to any bank accountFree (up to PKR10k)1.0-3.5%1.4-3.0%
Source: State Bank of Pakistan, company websites

SadaPay is focusing on a unique customer segment. The company is targeting freelancers in Pakistan. It aims to help them receive their funds from abroad directly into their digital wallets with minimal costs. Given the absence of services like PayPal, freelancers in Pakistan often face difficulties in receiving their funds. Pakistan has a big freelance market, and it ranks 4th in the list of fastest-growing freelancing markets in the world with 47% growth in freelance earnings in 2019 (as per Payoneer’s Global Gig Economy Index, published in Forbes). Based on the above data points, we think freelancers could prove to be a viable niche to enable SadaPay to rapidly gain scale before targeting the broader market.

Potential challenges for SadaPay (and other new entrants)

1) Concentrated industry. Although Pakistan's digital payments industry is underdeveloped, it is already very concentrated with the top two players (Easypaisa and JazzCash) controlling 87% market share, with around ten other players (such as UBL Omni, HBL Konnect) competing for the remaining 13%. It will be difficult for new players to compete with these well-known brands. As a network industry, payments incumbents have significant advantages.

2) Financial muscle. We think for a new player to succeed, significant marketing and promotional activities would need to be carried out. We have seen incumbents like Easypaisa spending heavily on marketing (marketing expense up 4x in 2018 to PKR2.5bn) despite having weak profitability – a key benefit of their telco ownership. New entrants like SadaPay, whose owners’ pockets are likely less deep, will find it hard to match this level of investment.

3) Agents network. We think agents are key to success in the cashless payments industry in Pakistan. This is because banking penetration is low (21%) and there should be sufficient cash points available for customers to encash and withdraw funds. New entrants may find it difficult to build large agents networks quickly. SadaPay claims to have 30k agents; although this is a good number for a start-up, it is much lower than the 130k agents Easypaisa customers can access and the 79k agents available to JazzCash customers.

SadaPay profile 

SadaPay was setup in 2018 by an American entrepreneur, Brandon Timinsky, who has extensive experience of setting-up technology businesses such as GasNinjas, CancelledListings and MetricFitness. Dr Waqar Masood Khan, former Finance Secretary, serves as a Chairman of the Board.

(the image at the top of this article is from the SadaPay website)