A TALK WITH THE CEO OF FINJA

1. Q) Can you tell about FINJA and what is a digital wallet?

FINJA is a Pakistani fintech, with a mission to introduce innovative financial services and free digital commerce in Pakistan. FINJA has partnered with FINCA Microfinance Bank Limited (FMBL), which is headquartered in the US and has a presence in 21 countries. It has branches in 93 cities in Pakistan. Together, FINJA and FMBL have created a digital wallet, SimSim, which allows users zero-cost payments that are real-time and free. All that is required for making these payments, is an internet-enabled smartphone.

We are excited to offer this innovation because we feel it will completely disrupt the way people transact for the better. SimSim is the tool for creating that disruption and bringing the subsequent digital revolution. It offers users a fast, easy and secure way of accessing their money anytime, anywhere. Users can carry out various transactions without complex procedures.

SimSim can hold any amount of money, which users can transfer into it from various sources, including other wallets or bank accounts. All users need to register for SimSim is a valid CNIC and access to the internet. The money in the wallet can be used to make varied payments, e.g., home utility bills, education fees, mobile top ups, payments to several digital merchants and much more just with a few clicks in the application.

As a startup FINJA is mainly focused on scale as opposed to gaining huge profits. Our goal at this time is to deliver value to our users and ensure they can transact seamlessly.

1. Q) What is the value model behind FINJA?

As is the case with all groundbreaking apps, it is the users that create value. For example, in the case of Facebook, every time a user “likes” a post, he or she creates value for Facebook and propels the platform forward. Similarly, for FINJA, users serve as nodes of data. FINJA will accumulate user behavior, gauge the transaction patterns of its users and then meaningfully use that data for targeted marketing to specific user segments, or even generally as marketing analytics. Data analysis is the next step towards gaining insights into user behavior and then designing the product according to users’ requirements. FINJA keeps its users at the forefront of its business or value model.

The world of technology has seen an unprecedented, rapid change in the last 20 years, as a result of which, users now wish for convenience. Anything that is instant and free is instantly adopted. This means that for an idea to go viral, it must be free, and convenient. WhatsApp, Facebook, and YouTube are platforms that don’t charge anything from users for the basic product and neither will FINJA. SimSim is free to download! I don’t want our users to transact two to three times day, I want them to transact over fifty times!

1. Q) A lot of businesses in Pakistan are strictly cash-based, which means that they do not pay taxes and operate informally. How will you convince these businesses to sign up?

The first thing to understand is that the market is completely untapped at this point in time, and there is infinite potential to grow. Therefore, the idea is to on-board 70% of the tax-paying businesses that are willing to work with FINJA. We are not particularly concerned about involving the remaining who are avoiding taxes. Once we get the 70% of tax-paying businesses to engage with FINJA, we will create immense new value for them, it will become essential for the businesses operating on cash to adopt the new model or they will be unable to compete.

As this idea takes off, a merchant or vendor operating outside the tax net would be at a distinct disadvantage, as his competitors would leverage our platform to offer cashless, real-time, digital services that bring efficiency to business and convenience for buyers. It would then be a matter of time before the tax-evading businesses decide to become part of the digital ecosystem.

1. Q) What is the value you will be creating for the merchants that use your platform?

Cashless, digital transactions will change how all members of the supply chain interact with one another. Cash handling costs go down and the entire supply chain will become digitized. When everything is in the digital space, a concept we call Just-In-Time Management of Money will be implemented throughout the business. Supply chain efficiency is an important growth indicator for businesses and we are offering our partners this feasibility. Additionally, merchants can see their business grow exponentially – gain new users who are transacting digitally – and also provide an impetus to existing users to modify their purchase behavior. The value created is not limited to a specific time period but is long-term.

1. Q) What do you think Pakistan’s rate of adoption will be for this technology?

Good question! You see, in the U.S., people used mail orders, credit cards, and finally mobile wallets, in that order. In Pakistan, credit card usage is limited to only the privileged class, so one would expect digital adoption to be slow. However, this is not the case. Pakistan is uniquely positioned for Reverse Innovation or leapfrogging, a phenomenon that developing countries undergo, whereby they skip a few steps of the innovation process and reach the end quickly and directly. For example, the adoption of smartphones in Pakistan happened before many of the households adopted computers. Adoption of wireless technology like 3G and 4G was quicker than the use of traditional landlines.

In Pakistan, the adoption of smartphones was a life-changing event – for most people, it was disruptive technology. Similarly, the adoption of a digital payment system that is free of cost will be indicative of disruptive technology: it will eliminate the need to carry physical cash. At the Lahore Eats event a couple of months ago, we had 6,117 transactions worth PKR 1.5 million. This is evidence of the fact that users are conducive to the adoption of routine digital payments. Currently, we have close to 30,000 beta users and 4,000 merchants. The merchant transactions total PKR 3.2 million in value, and all transactions combined aggregate to PKR 686 million in value.

1. Q) Why would people who distrust credit cards trust digital wallets?

Well, the real task is not to have them trust us, but to have them transact with us, as most people are resistant to change. However, once they do, they become comfortable with the new procedure, because it is so convenient and fast!

Security protocols can be in place, but they are useless if the user isn’t willing to take a leap of faith. Therefore, in order to urge people to transact with us, we will offer spending credits to users who invite their friends to register as well as to those who successfully register. This model is a guaranteed success, and is still being used by Careem to increase daily active users (DAUs). Furthermore, the credit card model is based on principles of lending, whereas our model requires you to use your own money. Think of us like a current account with no interest payments. This idea, being more in line with Islamic tradition, will lend itself to adoption.

1. Q) What is the payment method or technology that FINJA employs for its platform? How is SimSim different from NFC payments via Jazz-cash?

To make payments with SimSim, all you need is a smartphone with a camera and a QR code. The camera scans the QR code and allows you to make payments without any need of additional infrastructure such as a POS machine or an NFC scanner.

Incumbents, or traditional banks, are making a fortune by charging transaction costs to users. We, on the other hand, are not charging our users for transactions, allowing them to set up accounts easily. We have created an ecosystem where the cost of making a payment is nonexistent and we wish to pass on this benefit to the users.

1. Q) Coming to competition, MasterPass was initially operating in Karachi and has now expanded its operations to Lahore as well. Is SimSim planning on doing something similar?

Firstly, we don’t think of MasterPass as competition. Our business model differs from them in terms of design. If you strip a payment event down to its lowest denominator, there are only two actors, the merchant and the customer. Everyone else is an enabler or intermediary.

In olden days, merchants transported money from the payer to the receiver, and charged a fee in return for services. In the new world order these intermediaries become unnecessary because both the payer and the receiver have access to technology, i.e., smartphones with internet. Clearly, there is no need for an intermediary and the subsequent pricing of that behavior. MasterPass works with merchants and banks, both of whom wish to earn money for their services, and therefore, MasterPass must charge for its transactions. Our fundamental design is different. We want to give the money back to the users, as they are the evangelists who help us grow forward. This change in user behavior will assert pressures on incumbents to free payments as well.

1. Q) FINJA is affiliated with FINCA Microfinance Bank. How is the role of FINJA different from that of FINCA, and who stores the data for SimSim?

Speaking of affiliations, the industry norm has been to buy out a bank. Telenor bought Tameer, Ufone bought Rozgar and changed its name to ‘U Microfinance Bank’, Mobilink bought Waseela and changed its name to ‘Mobilink Microfinance Bank’. We are only partnering with a bank and sharing gross revenue.

As a “super-agent” of the bank, we cannot take deposits. The users’ money is always with the bank. FINJA creates the front-end applications and interfaces through which people can access their money. We maintain records of all the activities that users carry out in the app, e.g. the number of transactions, how many times you log into the app etc. The customer relationship and money handling is the bank’s domain. The goodwill attached to SimSim is shared between FINCA and FINJA.

1. Q) Since you aren’t charging for transactions, how do you generate revenue, and can we expect to see many discounts on your platform to encourage spending?

In the payment business you don’t generate revenues by pricing the payment event. You give people unconditional and limitless access to their money so they create their own cashless ecosystem by keeping all their money in SimSim. This means that we will have a lot more money in current accounts and that 7-8% of the float will be shared between FINCA and FINJA. We predict that SimSim will have 20-30 times more money than other wallets because we don’t deduct transaction charges.

As for the second part of your question, we do not offer any discounts, the discounts you see are strictly being offered by our partner merchants because it allows them to cater to a bigger market. However, we do conduct marketing promotions like shop mobs and at events such as the Lahore Eats, we subsidize the discounts being provided by our partners.

1. Q) What’s the future of Fintech in Pakistan? What’s the role you expect the Government to play for this sector?

As I mentioned earlier, the market is ripe for cashless payments. The right mix of technology in the form of smartphones and wireless internet is available in Pakistan, and I believe people will be ready for such a technology in the near future. Fintechs are essentially technology innovators and any fintech startup with a great idea will have potential to succeed.

The Regulator, State Bank of Pakistan, has already defined the Branchless Banking Regulation framework. A conducive regulatory environment lays the groundwork for the players in the industry. We expect and hope the Government will provide incentives such as tax holidays, to industry participants, for a limited amount of time. This will remove some of the considerable barriers to entry for smaller players entering the market, increase competition and will help document the economy. Players attempting to make a place for themselves in the market will soon weed out any inefficiency in the technology, leading to a mass payment solution that is better than any we have seen today.