In 2001, in Karachi, he forecast on the cell phone penetration in the country: by 2010 a hundred million people in Pakistan will have feature phones – a prediction deemed as ‘outrageous’ by the audience. Some of them walked out on him while others chose to be more expressive in showing their indignation. He though turned out to be right.
Continuing to speak up his mind without giving a whit about what others may think, presently he is bent on making Pakistan a cash-light economy in the next three to four years.
He is Qasif Shahid – the CEO of Financial Ninja, named Finja which he co-founded with Monis Rehman and Umer Munawar. Another of his initiatives is called Finsurgents, perhaps derived from ‘resurgent’ or ‘insurgent’ – readers may take their pick.
These days he’s working on a product quite aptly titled ‘SimSim’ – again derived from the Abbasid-era ‘Arabian Nights’, his own door to the treasure trove of digital payments.
Dubbing Finja as the David of the industry, he believes it is pitted against the Goliaths. Qasif Shahid also believes he is “the modern-day Robin Hood”. To him, if Hood lived today, he wouldn’t need to rob the rich to give to the poor. “Instead he would make a fintech.”
The objective: Free digital payments
Profit spoke to Qasif about SimSim and Finja. At the Finja office, the environment is quite relaxed, and you find casually-dressed young men and women indulging in light banter while punching on their keyboards. The walls are plastered with motivational, entrepreneurial quotes, and scribbled sticky notes abound. At the conference hall, a birthday party was going-on. About Finja, Qasif speaks eloquently – and with passion. The Finja website, so describes the company: ‘Finja, founded by veterans of tech and banking industry, is a Pakistani fintech with a mission to make payments free, frictionless and real time.’ Free digital payments thus is the objective. “Whether the cost is one rupee or a million rupees, it ought to be free.”
Here is how.
Would Finja be as good a channel for lower income groups?
The first thing to understand is the relation between FINCA and Finja. Finja is the first entity to have become a super-agent of a bank without buying the bank.
The arrangement is: whatever money is made is split equally between the bank and Finja. In this model, the money in this case is made only as float. Lending the money coming into system as current accounts, banks lend it to T-bills and others. It’s about 7 to 8 percent in Pakistan. The payments in the model are free. It is different from everyone else because everything here is free.
The minute you start playing like this, you have a partnership not confined to the bottom of the opportunity pyramid because the products that we create are where consumers are using the product on a mobile phone. So it doesn’t matter if you partner with a commercial bank or a micro finance bank because the consumer is going to download the app and digitally load money in it and then he is going to go out and start spending it digitally. So that doesn’t confine me and means that I can go hunt anywhere.
Our wallets are actually for the banked, so they can digitally load the money into it. And then they give it to others with whom they are exchanging transactions. So our wallets are for the rich and the affluent and they reach out to others and give them this wallet.
My plumbing is with microfinance banks but it doesn’t mean that we are targeting the lower SECs directly.
Behavior change in financial services always happens from top down. It’s the rich man that tells about the feasibility of a bank being a good one or a bad one, not the poor guy.
Most people with money are control obsessed and they only do things that allow them greater control over their money and also the people whom they are giving money too. We know this thing about people with money so we are giving them a product that increases their control over it.
So we are actually going after people who already have a smartphone or already have one. And by the time we will get to those who have it, another 50m will have it too.
Our product is only for smartphones, and not for laptops, because we believe that the future of the world is in smartphones.
What is in it for FINCA?
Microfinance banks over the past 40 years have not been successful. I believe, they failed the world. Professor Yunus launched the Grameen Bank 40 years ago in Bangladesh. Yet only 300m customers in four decades worldwide deal with microfinance banks. The telephone companies gained a clientele of five billion in 20 years. Microfinance banks have failed the world because their business model is analog. This means that they have the customers in real world by filling out forms, then move these forms between cities and open a relationship and then give their customers hard cash. It costs a lot of money and time. It’s all physical analog process. The forms and cash are cost prohibitive.
The loans then make about 40 percent return annually and the cost of processing and collection of those finances is about 30 percent. So, the banks aren’t making much. On top of it they are not scalable. So when a microfinance bank goes out and partners with us, we say that you can become the first microfinance bank to become a five million customer bank, or 10 million, even 20 million. For a microfinance bank on its own, such growth is elusive.
Having partnered with a Fintech and Finja is creating that new value. (People using Finja don’t necessarily have to have their accounts in FINCA.)
Our value to the microfinance bank is that through this opportunity the bank has to grow exponentially, which has never happened before for a microfinance bank. While this is only possible by their collaboration with this Fintech, it needs to be commended that FINCA has been able to realize the opportunity here. The leadership of this bank is among the outliers who have been able to crack the fact that the growth is only possible if there is equality in the leadership.
So the brand that has come out of this partnership between FINCA and Finja is SimSim. It is a shared trademark and the partnership is that when the bank gains millions of customers they won’t let go of us, save that they buy our share. But SimSim is co-owned, it’s a shared property, it is as much ours as it is of the bank. SimSim by FINCA bank and powered by Finja, this is the brand – the mobile wallet. The merchants that we are making are Finja’s merchants and Simsim would be accepted there. The brand is free, transactions are free, apart from the government charges and taxes. We aren’t charging any extra money, the app is free, the usage is free, transactions are free, top-ups are free, there is neither any charge for the merchant nor the user.
We wish to digitalize cash. What Whatsapp has done to messaging, we want to do to payments in Pakistan. What Whatsapp has done is to change the way people communicate, it has killed the full stop.
The exciting part is that Finja has a mission: to take Pakistan from a cash-heavy economy to a cash-light one in three to four years. We believe that it is a journey of 10 years. In one decade, the largest country of the world can convert itself to a cash-light economy. We wish to accomplish that in four years for Pakistan.”
The importance of keeping it gratis
When a country becomes a cash-light economy, lots of benefits accrue. It doesn’t stay an emerging economy anymore, its market expedites, its tax net widens, its proceedings get documented, the government to people relationship changes, corruption is eliminated and its discount rate management improves. One upshot is that people bring in their cash into the banking system, and since that is documented, tax collection is improved and corruption is limited.
Moving hard cash is expensive. There is a lot of friction and it can get destroyed or corrupted in the process. If digital commerce remains free, Pakistan would be cash-light in four years but if not then it is a decade-long process. They will save digitally, spend digitally, buy insurance digitally, make payments digitally and all that. But this will happen if the digital commerce is free.This means that there is an opportunity for 100 million people in Pakistan to reinvent their relationship with money within the next three to four years. All the big changes happened in the world when the new thing was free and in real time.
Here are some recent cases in point: emails are free in real time, and so are likes, social photographs and social media. If they were not free, they would not have brought significant change. So if payments are not free, they won’t kill cash and people would continue to use cash.
The catch is: none of the big players is interested in making payments free – they are making hundreds and millions of rupees on these. So, they are hindering progress. Partnering with a small bank, we are saying that everything is free. We are telling people that this is the fastest way to change Pakistan and if you use us there will be enough pressure on the incumbents to free payments as well and when that happens, Pakistan changes as well.
This thinking stems from our being a platform. There are two types of businesses: pipeline and platform. In pipeline businesses, all raw materials go into the process and output comes out and is distributed. In platform business the entire value is created by the users who are outside of the enterprise. Facebook is a platform; all value is created by users, they upload pictures, content and press a like. Like is the smallest unit by which Facebook grows.
And we are exactly like a platform. We have no customers or merchants but we have personal and commercial users, and when they make transactions they transfer value in real time. Transactions are free like a like is free and when that transactions are made, we grow. We want to make transactions exactly like a like; as easy as a like, as free as a like, and as real time as a like. We don’t give a crap if it’s for one rupee or a million rupees. We want it to be free. We are a platform and our transactions are free.
Right now there are 20,000 users and a few hundred merchants on our platform.
When you have a platform business and you have a merchant or commercial user, and he goes and brings new customers for me, then we will put money in those customers that they will spend only here. So we go out and work with my users and at one level we free payments for them and at another we award them with monetary or discount benefits. I won’t need to to have thousands of employees but my users are growing the platform for me; what they are getting is for free and it is improving their lives, their friends’ and families’ lives and they are playing a role in changing Pakistan.
An untried and untested model
The way we have conceived, it has not happened anywhere in the world but elements of this are happening in different industries, in different geographies. There is a little bit of Uber in it, there is a little bit of Airbnb in it, there is Facebook here and there but in one place like a financial services base, something like that has never happened before.
FINCA says Aye…
When I quit banking, the last thing I wanted to do was getting into partnership with banks. Having spent 18 years in banking, I knew that banks waste time, for their time scale is very different.
My first job was ABN with digital and marketing head at Singapore with ABN AMRO, followed by digital head for Standard Chartered and then in similar position with MCB for six years – the last two in Pakistan. Then I did consultancy for banks in the UAE and Africa, but at a much smaller scale.
We are already developing products for FINCA, afterwards looking at branchless banking strategy and advising them on how to approach it. Subsequently we realized that being a super-agent for them instead of selling them the product. FINCA could also see what we could do for them. Yet I’d say, FINCA indeed surprised us with their ability to create such a partnership.
Vostok’s venture capital
Vostok is a venture capital firm; it came on board with Finja, investing $1 million in seed money.
We and the bank both have separate marketing budgets; combined this is quite sizable. Various promotions come from various pools. We are happy to put large parts of money back into users. No marketing is better than this type of marketing because if we don’t get users, our money doesn’t get spent.
Finja existed before SimSim
Most of Finja’s activity right now is either related to SimSim or FINCA. For instance, if we are creating merchants for SimSim, they are our merchants, so most of the work that we are doing right now is going into launching this consumer financing brand.
When we started Finja we were making products for two to three banks, FINCA was one of them. These were process engineering products, like how to digitalize a loan on board, or open a bank account and book a loan as and how would you use tablets to do that. We were a profitable company and then we came up with this.
Untested product, but not lacking in research
For 18 years, I did digital banking and marketing and advised the State Bank on policy. Since 2005 I am in Pakistan – chasing this dream. All my work is in free payments and mobile commerce marketing. So while there is no real research on the back of these [assertions] but if you browse on internet, you’d find me speaking extensively on it since the last seven years or so.
The 10-years time-frame is a very considered one. Having looked at Australia, Belgium, France, Denmark and Austria and also at India and China, I can assess how long it takes for a certain country size to move from a cash-heavy to a cash-light economy, and also the required policies, demographics and institutions. On the research side, after quitting MCB two years ago, I found another company called Finsurgents.
One year-long Finsurgents study project with Karandaaz was on Fintechs, what these could accomplish and what sort of Fintechs should Karandaaz invest in. It was called, “Seeding innovation.” This study is being used across the country, but without crediting Finsurgents. Five people worked at it full time, with advisory body consisting of economists, financial analysts and others. So, my statements may sound sweeping, but actually these are well grounded.
I recall predicting in 2001 that by 2010, 100 million Pakistanis will possess feature phones. I was laughed at. In 2008-9, I forecast by 2015, 50 million would have smartphones; it was surpassed. In 2009, I was called crazy when I launched MCB Mobile – Internet-based and smartphones only. Now I predict, if we make it free, it is possible to have 100 million people on mobile wallet in four years. If it’s not free, it would take 10 years but happen it shall. That remains my objective, along the way educating people on how to make it free.
All these 100 million customers would not be ours. We just want the genie to be out of the bottle. My rationale is: all the incumbents would not let go of the charges because it’s a huge pie. When a customer charges his card at a merchant’s, the latter pays 2.5% to the bank – all combined it makes the bankers Rs400 to 500 million every year. Nobody would be willing to let go of such stash.
Progress so far
I have a smartphone, the merchant has a smartphone, the customer pays. The merchant is doing all the transactions by himself, his cost is zero. And because there is no card, no other process is needed, and therefore no need to charge that merchant.
The Indian government is opting for free payments, albeit at a slow pace. Mine is a new, radical model, the rationale being that in Pakistan digital commerce, digital credit is need of the time. Why this will happen: because when people go and digitize their payments, they can go out and get a loan. In Pakistan at the moment the brightest entrepreneurs are at the bottom or middle tier of the opportunity pyramid. Rehriwala, rikshawala, taxi wala, shopkeeper. They are the brightest because they have opted to, no matter what happens, they were not going to work for someone else. Instead they opted to work for themselves, and be self-employed. If somebody is doing one’s own business without any real means, he must be a bright entrepreneur – with the requisite skill, resilience and endeavour.
In this country, they would never be rich. I have worked with rehriwalas. Each buys stock worth Rs1500 and sells it for Rs3000-4000 – making a profit of Rs2000 per day. All this is in cash. Everyone wants to have a house of his own, and even a modest one costs around Rs1 to 2 million. By the time they’ve saved enough to cough it up, it gets more expensive. They need digital credit, and they’d be able to get it.
For instance, if a cab driver with SimSim wallet has custom with us for six months, he would become eligible for a loan worth Rs1.5 million.
That loan doesn’t have to come from a bank. It could come from person to person (P2P) lending. Regular people like me will take a view on the cab driver and we’ll decide that he deserved a loan, because we have his performance record. Such regular people can say, if we give him the loan, he would buy four more cabs and quadruple his income. And that loan does not even have to come from a single entity, as more than one person can put together money to offer it to somebody with a proven record for hard work and ability to pay back. Those who do not payback, their rating would go down.
The P2P lending can, mixed with free digital commerce, has the capacity to enable entrepreneurs to grow rapidly. Friction needs to be taken out of the digital commerce. To make it share-worthy, both parties to the transaction need to be incentivised by instant discount and also by opening up the venue for loan availability.
There are two ways to handle the loan part, with interest or fee. Since many in Pakistan are not comfortable with interest, the alternate is a fee structure. The essence here is people reaching out to others. In Pakistan, people do a lot of charity. If they are handed a loan to invest in extra rehris or more cabs, they would never run away with your money, because you care for them enough to offer them an opportunity and also because you have a face.
The minds and the muscles
A not tech savvy, business graduate, my value stems from my financial services background, and the strategy and the vision – the very raison d’etre. Monis buys into it, and his contribution is very special – having worked in the Silicon Valley, he is online, e-commerce, new age entrepreneur. For somebody like me, he is the best partner.
The Finja workforce consists of 75, some of whom have been there since the inception. We do not work by ordering people around, but letting them do their own thing, so that everyone is emotionally involved, takes ownership and make mistakes, but learn from them. When we want something which they do not buy into, they fight back. That makes it imperative to explain it to them, so that eventually they buy into idea before setting out to do it. That is how we get the best out of everybody.
Dollars and cents
In terms of dollars and cents it doesn’t cost that much. But it’s an ongoing process, we are continuously adding value to the app, and it’s changing for the better every week. The biggest expense is on the workforce.
Hiring them young
We prefer younger people, just out of school and college, because when we come across those around 30, their worldview seems to be very hardened. But we have few senior people, and, the company also subscribes to my view that ‘anything of value cannot be created without women’. They bring diversity so essential to the product you are developing.
For me the attitude, however, remains the most important attribute, and also the values one is raised with. Interviewing process involves a group, and we don’t hire after a single sitting – inviting the candidate over and over again to see if we like them and vice versa.
Win-win for all
Since the method is to win on their own, all banks and big businesses are badly designed. Our design is a win-win for all: the customer is winning, the merchant is winning, the partner bank is winning, and the regulators are winning.
We are only interested in bringing people who understand and agree with the fundamentals of this design, because otherwise they wouldn’t put their heart and soul into it. Our fundamental thought process is different from others – Mobicash etc. So when we think of the shop mobs, for instance a Biryani seller, we tell him that we will sell his Biryani for one rupee, lots of customers come and download SimSim. So people can come and copy me but for them it’ll be a marketing ploy, for me it’s the design.
For example, all the Easypaisa and others’ contracts are not free payments. This is how we are different and whatever we do will be fresh. And if people copy it, we will be happier.
We have this realisation that we’re the David in this struggle and everyone else is a Goliath. But people love the underdog.
We would never proclaim that our battle is with big banks – our fight is with cash, the non-free system, and the paper-based instruments.