Recently FoodPanda, the market-leader food delivery app, messed up my order. I did not place the order cash on delivery, which is rare. I paid via my debit card, because my bank had a discount on. After 2 days, they refunded me, but they refunded it me in my PandaWallet. No I do not own a wallet that is made of the skin of the useless, albeit cute, animal. It is what FoodPanda call its Not-A-Bank-Account. It has money in it, but you can only spend in it FoodPanda.
I didn’t like it. I felt ripped off. They could have refunded me with one click. I know, because I have a lot of experience in digital payments. Why would they take my fungible currency, and make it non-fungible? Because this is their fintech play. Why does a food delivery app have to do with Financial Technology? Because their goal is to be a Super App; an app for everything from social media to financial services. Except they suck at being a food delivery app.
What is FinTech?
Financial Technology, or fintech, is the name of group of products or services that are Banking, but with IT. So is a bank with a mobile app and website a FinTech business? No, as far as I can tell. These products are created under different regulations regime than banks. Banking regulations are old, dusty, and full of cruft, that makes it inaccessible to vast majority of people, especially in Pakistan. This leads to a lot of unbanked and underbanked people. Why can’t we just make regular banking more accessible through the same regulatory process? Two reasons:
Global and Local Pressures
Pakistani banking has a tumultuous history. From only having a single banking business at the time of Partition, to complete Nationalization in 70s because State Capitalism was a good idea apparently, to widespread corruption in the 80s and 90s where money was redistributed to the elites in the form of ‘loans’ that were never payed back, to seizure of dollar accounts, to widespread circulation of money terrorist groups post-9/11. This has lead to complete break of trust both among the local public and international community.
Branding
Imagine you are the CEO of a seventy-year old Pakistani Banking institution. You want to innovate by creating a tech-focused Banking product. This would require a lot of investments. So you go in front VCs in San Francisco, Singapore and Hong Kong. What do you say to them to make your ideas sound sexy and investment-worthy? You can’t. You are bank, man. You wear suits. You can’t make yourself into a Patagonia-wearing post-hippy. You are a 53 year-old ‘uncle’.
So the best option is to just invest in small startup run by 25 year old ninja genius mavericks with LSE degrees, which will attract foreign institutional investement and will net you eight times the multiple when it is bought by AliBaba or Tencent, or any other Chinese giant.
App & Super App
Unfortunately, Pakistan has no Ninja Genius Mavericks. Most that were here are either got lucrative job offers in their visiting countries after graduating from MIT, LSE, Harvard Business School, or some other megalithic education. The rest got their spirits broken by IBA, LUMS and NED, and are now toiling away in Multi-national middle management or doing maintenance on work on heavy industries, or just freeloading in a government job as a political hire. So who is running these Not-Banks? Mutlinational Telecom Giants like Telenor and curfty 70 year-old banks like HBL.
What does that has to do with Food Panda you ask? FoodPanda, owned by Germany’s Delivery Hero, sees a growth play in FinTech; they want to go beyond delivery. They want to be a SuperApp, like WeChat and AliPay in China. Daraz, the local AliBaba-owned ecommerce marketplace, are doing something similar, by offering cash backs and refunds on ther DarazWallet. Bykea, the Cinderella Story ride sharing company, is also making a huge play by creating services from local savings circle(called comities) and cash-transfers. There are similar plays in ticketing, payment processing, and other basic services.
Why is this wrong?
There are two key assumption that is inherent in all these ventures. Both these are naive at their best, and prejudiced at their worst.
Pakistanis are too stupid to know what a bank is
The reason FoodPanda and Daraz fool us into putting money in their non-bank accounts because they want to show us the joys of being banked. If only we knew what the Bank was and how cool it could be! No worries our betters from Germany and China will show us how great they are!
I am sure you are yelling ‘Check your privilege’ at the screen. I know that Pakistan is behind on many metrics in literacy and chances are many Pakistanis don’t know what a bank even is. But are they ordering from Food Panda and Daraz? Are they taking rides on Bykea, which costs 3-6 times as the local bus? Why the deception then? What did FoodPanda’s trick even do besides forcing me to not ever use a debit card for their services? The people who use these apps are already banked or have easy access to banking services. Which takes us to the second assumption.
Lack of access is the only barrier to banking.
Imagine you are Panwala, with a khoka on one of the busiest corners of Karachi, or Lahore. You have no rent, accept the bribes you pay to local authorities. You don’t collect sales tax, pay income tax, or even have a registered business. You work 15 hours a day, but you earn comfortable amount. Better than many IBA graduates working at multi-nationals. Your only transactions are in Cash. Why would you want to be banked?
I understand that not being part of the formal economy can be devastating to people, especially on the lower rungs of society. It makes you a target for crimes, it blocks your access to credit. It makes creating generational wealth impossible for most, continuing the cycle of poverty. But these people all spend their limited capital at corner-stores like our panwala. Even if they start getting paid into their EasyPaisa account, they will still need to withdraw cash to buy basic necesseties. The lack of banking is a feature, not a bug of this society. It would take decades of governmental measures to make banking more convenient than cash.
Core Incompetencies
What exacerbates this problem is that the core of these businesses is not even close to functional. Daraz is synonymous with bad service to the point of being a punchline in memes, FoodPanda’s delivery maps don’t even have house numbers on them, and Bykea is one moral panic away from having most of their business wiped out.
WeChat was a great chat and social media app before it became China’s cash replacement. Moreover, it grew because of the silo provided by the Great Firewall of China. WeChat would have never survived in the face of competition from WhatsApp or Facebook. Daraz, however, is a terrible experience throughout, despite foreign competition.
Being unbanked is a huge problem. But it is not the only problem that can be resolved through tech. Pakistani tech businesses should first solve the problems with their core products before they try to be AliPay and WeChat. Pakistan needs a functional eCommerce site before that site can become an all-encompassing Super App.