With a population teetering around nearly 200 million people (depending on which census is to be taken on authority), Pakistan is amongst one of the largest consumer markets in the world. A world that has for some time now been enjoying a groundswell of fresh talent, “Wapistanis” (people returning to the country after having lived or studied abroad, ‘Wapis’ is the Urdu word for ‘return’) and interested investors. Startups are springing up like fresh spring growth across the country and mostly in Karachi and Lahore (the two main business cities). Earlier today a tweet from the co-founder of Stripe, Patrick Collison, led to a flurry of excitement across the country’s digital, business, and governmental communities.

Stripe has invested an undisclosed amount into a Pakistani startup, by the name of SafePay. The company founded in 2019, emerged on the global stage after participating in Y-Combinator’s 2020 batch was co-founded by two Wapistani’s, Raza Naqvi and Ziyad Parekh. Naqvi is a London-trained solicitor turned Fintech entrepreneur (he co-founded Intelligent Financial Technologies), teamed up with Parekh a Cornell trained engineer, the technical half of the duo to launch what the team referred to as the “Stripe of Pakistan”. With e-commerce on a rip across the country and incumbents not having innovated there is an enormous market opportunity for the team. Quite notably earlier this year others in the Payment space like Checkout.com had also made a first front-office hire in the country, signalling the early warning shots for a payment race that is likely to heat up in the coming days.

Speaking to Ali Farid Khwaja, a leading Fintech analyst from his equity research days in London and today heading K-trade (a Fintech aiming to become the Robinhood of Pakistan), Erly Stage was told:

“Pakistan has a lot of white space in technology in general and in fintech in particular. This seems an anomaly given it’s a country of 200m people. So naturally, it screens well as the next India, Mexico, or Indonesia. The payments space will develop very quickly since already there are sufficient volumes in e-commerce and in freelance payments.

Checkout.com probably has a first-mover advantage but there will be space for many others such as SafePay. Payments businesses typically have many payment providers who specialize in different merchant verticals. I think the fintech space will develop very quickly”.

Ali Farid Khwaja, Co-founder KTrade

The arrival of Venture Capital funds coupled with improving regulatory conditions and easing of foreign direct investment capital rules is heating up the local market in Pakistan. The Tier 1 cities of Karachi, Lahore and Islamabad have technology talent aplenty, thanks to outstanding engineering colleges such as NED and FAST. Long known as a bastion of freelance talent the country is now quickly surfacing as a regional hotspot for technology and startup talent too. PaySafe has managed to also bring in investors such as Global Founders Capital (of Rocket Internet Fame) and HOF Capital (Created by a scion of the Egyptian Billionaire, Sawiris) who are no strangers to Pakistan to co-invest alongside local investors Gobi Ventures.

On a recent Clubhouse room started by Ray Dargham (Founder of the MENA conference STEP) focused on Technology in the country, Pakistan market observers and investors such as Misbah Naqvi (GP, i2i ventures) alike recognised that to date the country has long been a tale of two cities. With those from lower-middle-class backgrounds struggling to secure funding due to lack of networks. PaySafe is yet another example of the “other side” of the bridge, where those with foreign degrees, large international networks. and economic safety nets are able to take the plunge, access capital, and build great businesses. The real potential for the country lies in enabling greater access to early-stage capital and moving investor mindsets from being “rent” focused to enabling greater risk-taking earlier in the economic cycle of a business. The government also has a long way to go in order to incentivise investors with tax breaks to make those investments in the first place (akin to the SEIS and EIS schemes in the United Kingdom). The country stands at the doorsteps of another one of the largest markets in the world India, which remains closed for economic opportunity to those in Pakistan, thanks in part to a bitter rivalry that has seen two wars and enormous distrust, and continuing escalations between the countries. This may well be one of the reasons, other than the perennial discussion of whether Pakistan truly stands at the edges of MENA (the Middle East and North Africa) or is part of the wider South Asian sphere of influence with (India, Sri Lanka, and Bangladesh), that middle-east investors are eyeing the market a potential source of returns for their fledgling funds. The frontier market has clearly shown that its diaspora can create Western ideas with a local flavour. It is yet to be seen if there will be a large global startup emerging from a Nation that is not a clone of a western concept and has global application. Until then the payments scene, merchants, freelancers, and Fintechs alike in Pakistan will certainly benefit from the work undertaken by Naqvi and Parekh.