Digital Dollars: On Pakistan’s FinTech Evolution

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The Pakistani venture capital ecosystem gathered new accomplishments across the board by the end of September 2021. These included an all-time high quarterly funding value and deal volume in Q3 2021, and yearly investor participation in 2021 YTD.

In fact, Q3 2021 represented the third consecutive quarter of growth in venture funding in Pakistan, having grown by 179% over Q2 2021. So far in the year, the number of deals in 2021 have already crossed those registered in FY 2020, drawing attention to an upward-moving trajectory of deal flow.

Combined, these growth figures are trademark of a rapidly digitalizing society. As innovative digital solutions sprout up across various domains of life, new ventures continue to explore a plethora of business ideas. Pakistan’s Fintech sector has been one particular beneficiary of the subsequent rise in venture funding. Startups within the sector accounted for 28% of all VC deals closed in Pakistan in Q3 YTD 2021 and a fifth of the dollar amount poured into the country’s startups during this period.

This translated to a tripling of deals and a 17x increase in funding when compared to Fintech transactions in Pakistan by the end of Q3 in 2020. The surge in deal volume over the two time periods was the largest recorded in the country across all industries.

In 2021, by the end of the third quarter, $50M were invested in startups within Fintech. This figure was almost 13 times higher than all previous yearly Fintech VC investments combined. The number of registered Fintech transactions in Pakistan in Q3 YTD 2021, 13, was also seven more than the previous record of five deals closed in 2020. 

In a strong statement on investor attraction, 45% of all investors that supported Pakistani startups in Q3 YTD 2021 (84) financed startups within the Fintech sector. Of these investors, 87% were based outside of the country. Such interest in the industry further pointed to a shift towards digital financial solutions in the country, and the growing appetite for them. UK-based Zayn Capital and Pakistan's own i2i Ventures led the way with most registered Fintech transactions in 2021 by end of Q3.

A closer look into these solutions paints a better picture of the ongoing digital adoption in Pakistan. For example, Tag, the Pakistani startup to raise the largest Fintech round in Q3 YTD 2021 ($12M), is focused on building a complete digital bank in the emerging venture market. Finja, another leading Fintech startup in the country that raised a $10M round in May 2021, brings e-banking services to SMEs, merchants and their employees. The market success of such innovation meant that four of the largest 10 funding rounds closed in Pakistan by Q3 YTD 2021 involved Fintech startups.

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