Telenor Bank-backed EasyPaisa has decided to shutter card payments on its online payment gateway which it offers through various banks. As the competition grows stronger and the rupee devalues against the dollar, keeping the card payments going was an expensive proposition and felt to be unsustainable by Easypaisa.
In an email sent to its partners today, EasyPaisa said that it was shutting down the payment gateway because of a ‘critical change’ in their business process. “As part of the company strategy, we will be discontinuing card payments on the Easypaisa payment gateway from 30th June 2022 onwards,” the company said.
An official from EasyPaisa confirmed the news of the shutdown of its gateway and said that the company was going to focus on its core business of mobile wallets which had now touched 10 million accounts.
Omar Moeen Malik, Head of EasyPaisa Branchless Banking Business, said that their card transactions on the payment gateway were significantly less than wallet transactions. The company has seen a decline in merchants using EasyPaisa payment gateway, which have moved on to other inexpensive card processing options.
Merchants such as online sellers on Instagram or Facebook use payment gateways like EasyPaisa to accept card payments against an order.
EasyPaisa offers payment gateway through different banks and therefore charges a higher rate than gateways from acquirers such as HBL or UBL, making EasyPaisa gateway expensive for merchants. On the other hand, devaluation of the rupee against the dollar means payments to Visa and Mastercard on card payments have also become expensive, making it a costly affair for EasyPaisa to keep its online card processing service running through the gateway.
“When the gateway was introduced, we made the card options available then have a consolidated gateway with payment options. It was never a focus. The space now has evolved to the point that there are new payment processors in the market such as NIFT and PayFast. There are multiple players so for a merchant now, getting a Visa and Mastercard processing is not difficult,” Omar told Profit.
“The rates offered are also better than EasyPaisa because EasyPaisa gets the gateway from acquiring banks and then offers it to the merchants. Therefore, it was a strategic decision to discontinue card service,” he adds.
Bankers and online payment gateway operators also say that operating an online gateway in Pakistan is difficult because of issues such as payment recoveries for instance in case of a chargeback, and lack of user trust. “On the merchant side, you have to take a lot of pain because the merchant is not technologically ready,” another expert in digital payments said.
They also say that the industry is dominated by large acquiring banks such as HBL and UBL, who resort to undercutting of prices to acquire a merchant. “There is also no concept of escrow services in Pakistan. So if EasyPaisa wants to go to escrow, a large bank would offer the gateway without escrow, leaning the merchant towards that bank,” he adds.
Escrow services are offered by third party intermediaries that hold money for the transacting parties, and disburse them if the conditions between the transacting parties are met. For instance, an escrow service will disburse payment to an online seller on Instagram when the buyer receives the product and is satisfied with the condition of the product.
“A small player, in this case, can only lose money, making it a difficult business that hits the bottom line,” he says.
EasyPaisa has been a small player in online payments and the space has been dominated by HBL, UBL, Bank Alfalah and MCB, with multiple new PSO/PSPs making entry into the foray. On the other hand, EasyPaisa’s bank, Telenor Bank, has been struggling to keep a healthy bottom line.
According to the financial statements, Telenor Bank posted a net loss of Rs2.5 billion in 2018, Rs16.2 billion in 2019 and Rs10.7 billion in 2020. In 2021 as well, Telenor Bank was unable to curb its losses reeling from the effects of the Covid-19 pandemic and posted a net loss of Rs10.7 billion.
The new fintech players are technologically ahead of traditional banks and can onboard merchants and equip them with an online payment gateway in a matter of days. On the other hand, banks can take weeks or months to provide a payment gateway because of their old tech, depending on the requirements and readiness of the merchants.