Pakistan’s Fintech Market Can Cross $7 Billion Mark by FY26: Middle East Investor

Muhammad Ghazali Aqeeq, a prominent investor and managing director of a leading management consulting firm in the Middle East, has highlighted that the FinTech landscape in Pakistan is rapidly evolving, fueled by technological advancements and an increasing demand for innovative financial solutions. He said various estimates suggest that the fintech market in Pakistan could reach a size of $7-10 billion by FY26, with a strong CAGR as the sector expands to meet the growing demand for digital financial services. This growth not only presents opportunities for fintech companies but also plays a crucial role in enhancing financial inclusion and improving economic stability in the country. However, the growth of fintech companies in the country is not without its challenges; particularly regulatory frameworks established by the State Bank of Pakistan (SBP) and the Securities and Exchange Commission of Pakistan (SECP), Ghazali added. Muhammad Ghazali Aqeeq explained that the potential of the fintech market in Pakistan is substantial on the back of its large and youthful population; which exceeds 240 million. Several factors contribute to this promising outlook. For one, demographic dividend, with a significant portion of the population under the age of 30. There is a growing demand for digital financial services as young consumers are more inclined to adopt technology and digital payment solutions, fueling the fintech sector. Ghazali elaborated on financial inclusion that a large segment of the population in Pakistan remains un-banked or under-banked; with approximately 100 million adults lacking access to formal financial services, highlighting the potential for fintech solutions to bridge this gap by providing accessible and affordable financial products directly to consumers. The investor was of the view that the increasing smartphone penetration is giving rise to smartphone usage and improved internet connectivity, particularly in rural areas, enables more people to access digital financial services, creating a favorable environment for the growth of mobile wallets, online banking and other FinTech applications. Ghazali Aqeeq highlighted the investment opportunities in the FinTech sector in Pakistan may attract significant investment from both local and international investors in coming years, with this influx of capital being critical for scaling operations, developing new technologies and expanding service offerings, while creating thousands of jobs for the local market. Ghazali pointed out that the diverse FinTech solutions have a number of potential sectors; including various segments, such as digital payments, lending platforms, InsurTech, remittances and wealth and fund management services, catering to a wide range of consumer needs. Ghazali expressed his apprehensions vis-a-vis regulatory challenges in the country, which can be converted into opportunities through an accelerated licensing process to promote innovation. The licensing process for FinTech companies should be expedited by a Single-Window Operation and implementing a digital application system, with clear timelines for approvals, can help reduce delays and encourage timely market entry for new offerings. Ghazali Aqeeq maintained that the complex compliance requirements make FinTech companies grapple with extensive compliance requirements set forth by the SBP and the SECP. A simple and clearly articulated joint FinTech Regulation would suffice the opportunity for investors to set up quick and efficient compliance. He added that there is still a lack of clarity in various segments, such as blockchain technology and peer-to-peer lending. This ambiguity can deter investment and innovation as companies are uncertain about the regulatory landscape. Ghazali Aqeeq said that third party engagement for data privacy and security concerns with the increasing reliance on digital solutions, concerns around data privacy and cyber security have come to the forefront. SBP and SECP may consider developing clear guidelines for the FinTech Sector for such concerns which can be supported by third party specialist vendors. A third party managed service provider can also be engaged to establish a minimum baseline for the compliance of data privacy and cyber security environments, ensuring smooth and uniform implementation across FinTech. This will ensure an effective and efficient compliance without formalizing independent departments by all Fintech; reducing ample investment and time on these compliances in Pakistan, Ghazali added. Muhammad Ghazali Aqeeq stressed that the enhanced collaboration with industry stakeholders in establishing regular communication channels between regulatory bodies and FinTech companies can foster a collaborative environment. Single access point for an application programming interface (API) can eliminate a large amount of time for whitelisting with various government agencies. Ghazali concluded that as FinTech companies in Pakistan continue to grow and innovate; addressing the regulatory challenges imposed by SBP and SECP is crucial for their success. By streamlining compliance processes, clarifying guidelines and fostering collaboration, regulators can create a more supportive environment for FinTech innovation. Engaging with industry stakeholders through forums and workshops can help regulators understand the challenges faced by FinTech firms and develop more effective regulations, he added.