In 2015, the GSMA published a report on the evolution of digital societies in Asia, providing a deeper understanding of e-commerce in Southeast Asia. Our findings from that research compelled us to keep a close watch on the e-commerce industry in Pakistan and its sharp growth trajectory. E-commerce in Pakistan is on track to be worth U$ 1 billion by 2020, and retail mobile money payments (over-the-counter and mobile wallets) are flourishing in the country.
Over the last two years, top domestic e-commerce players in Pakistan have witnessed strong demand, especially during shopping occasions such as Black Friday1. Thanks in part to offers and promotions, customer acceptance of e-commerce has tangibly shifted. While this growth is promising, the potential of Pakistan’s e-commerce industry remains untapped compared to other markets in the region. As of 2016, the e-commerce revenues in India reached $14.5 billion with internet penetration at 32 per cent (432 million internet users) with the average internet user spending $33.56 online. By comparison, Pakistan had an internet penetration rate of 20 per cent with 39 million internet users and an average online spend of $2.56 per internet user.
How can mobile operators help the e-commerce industry in Pakistan realise its potential?
The GSMA recently published a report focusing on the challenges faced by e-commerce players in the Southeast Asian region, while highlighting opportunities for collaboration between e-commerce players and mobile money providers. The findings are of particular relevance in the context of Pakistan given that cash remains a major hurdle in the end-to-end digitisation of the marketplace, with more than 90 per cent of e-commerce purchases still paid for through cash on delivery (COD). Customers derive more trust and comfort in paying cash upon delivery, which creates a challenge for merchants who struggle to manage their cash flow due to delays in the realisation of funds, and costs associated with return orders such as cash-in-transit insurance, theft, or extortion.
In Pakistan, operators are already playing a remarkable role in taking the e-commerce industry forward. Telenor Group’s Telenor Microfinance Bank, for instance, is already serving more than 20 million active customers through over the counter and mobile wallet service Easypaisa, and its online payment gateway. Operators are investing in the infrastructure to make mobile broadband accessible to more than 50 per cent of the population by 2020. Simultaneously, they are enabling customers and merchants to buy and sell online by addressing the key issues that hamper the adoption of e-commerce.
Providing easy-to-integrate solutions for merchants and cashless alternatives for the unbanked
In 2015, Easypaisa launched its online payment gateway, allowing e-commerce platforms to accept digital payments and easily integrate with their systems through a set of APIs and plugins. Additionally, Easypaisa offers online merchants additional value-added services such as advanced analytics and reporting. In 2016, JazzCash also launched its own payment gateway with innovative features like hosted checkout and sandbox environment, which ensure a smooth, secure and expedited on-boarding experience for the merchants. These gateways improve the value proposition for merchants to start accepting online payments, and create a new business line for the providers through providing an entry point to e-commerce transactions for their wallet offerings. On the market level, the gateways help to curb the culture of COD, as providers are providing multiple options to customers to settle their online purchase. Wherever Easypaisa or JazzCash gateways are integrated, buyers can choose one of three options to settle their online purchase (in addition to using credit/debit cards backed by major card schemes):
- Using virtual or physical prepaid companion cards issued against the mobile wallet account balance;
- Directly using the Easypaisa or JazzCash mobile wallet account; or
- Paying by cash at an Easypaisa or JazzCash agent
Enabling SMEs and social entrepreneurs to sell online
Micro, Small & Medium Enterprises (MSMEs) and individual sellers on social platforms such as Facebook and Instagram often struggle to accept online payment, as commercial banks and large acquirers may not support them. Easypaisa identified this gap and launched another payment solution called ‘Request2Pay’, which enables these budding enterprises to receive online payments by simply sending a payment request link to the customer via any messaging application – no website or integration required.
Protecting the customer to ensure safe online transactions
To address the inherent lack of trust in online payments, mobile operators have introduced purchase protection programmes for customers whereby a buyer is guaranteed a refund if their merchant fails to deliver the goods. Easypaisa was the first in the market to provide such escrow account functionality called ‘Buyer Protection’. JazzCash also followed with their escrow services, whereby the customer can raise a dispute just by logging into an online portal. Such steps aim to invoke a sense of safety and trust in the customer, encouraging them to transact online.
The benefits of collaboration to propel e-commerce in Pakistan
While e-commerce in Pakistan is on the right path to reach scale, it needs meaningful collaborations to hit the billion-dollar milestone by 2020. Working together, e-commerce players and mobile money operators can develop an ecosystem to propel the growth of e-commerce while being mutually beneficial. E-commerce can provide mobile operators with a loyal customer base conducting more digital transactions because of this increased utility of mobile money. On the other hand, mobile operators can enable merchants to accept online payments through their website/portal; to provide support to their customers purchasing goods online; and to minimise the delay in the realisation of sales. Additionally, mobile money agents can act as logistical partners for e-commerce players, helping them with last-mile delivery in hard-to-reach areas, in turn gaining an extra source of income by providing such services.
 In 2016, revenue for Daraz surpassed US$ 9.5 million within a week; 55 per cent of all the orders processed were mobile oriented.