By Muskan Naveed ISLAMABAD, Oct. 29 (INP-WealthPK)- Financial Technology (FinTech) firms are playing a major role in the digital financial landscape of Pakistan. With a huge gap existing between supply and demand, startups are jumping at the opportunity to bridge the gap in the market with innovations that are easing the use of financial services. Startup ecosystem of Pakistan While the Covid-19 pandemic has brought unprecedented challenges to the world, it is human nature to find a silver lining in the face of adversity. Startups are a testament to the ability of humankind to adapt to changing scenarios. The Covid-19 pandemic has caused a shift in consumer preferences and an increased focus towards the digital space. This provides a lot of opportunities for innovators to harness the shifting attitudes towards disruptive transformations. The Pakistani ecosystem has been growing at a phenomenal pace. Fundraising by Pakistani startups has increased by 89% in the yearly timeframe, with the funding hitting $125 million in 2021. Need for FinTech startups The rising popularity of FinTech startups can be attributed to the gap that exists between the demand and the supply in the sector. While there are abundant traditional banks in the country, the service delivery needs a lot of improvement. Recently, consumers have taken to social media platforms to voice their concerns about the services being provided by the banking sector. Complaints related to unnecessary complexities and uncooperative customer service representatives are rampant. Digital or mobile banking is not an easy feat in Pakistan as traditional banks are still navigating through the tricky waters of the digital realm. Mobile banking applications are experiencing prolonged downtime. The applications are not built for scale and network congestion, which results in rendering them useless. There has also been an uproar on the new interbank fund transfer charges. This is seen as another roadblock hampering the growth of the digital financial ecosystem. All the challenges that the present banking sector faces pave the way for startups to explore the niche by bringing in innovations. Rise of FinTech Despite the opportunities that exist in the FinTech sphere, the market has stayed largely untapped. However, the trend may be shifting soon. Currently, there are over 45 startups, of which the majority is operating in the payment segment. EasyPaisa and JazzCash are two common names that dominate the market as of now but startups like Tez, SadaPay and Finja are quickly garnering users’ interest. Pakistani startups raised $212 million funds in 2021, according to Invest2Innovate, and out of this figure, $28.37 million was raised by FinTech startups alone. Moreover, the funding in the FinTech sector has increased by 29% since 2020. The State Bank of Pakistan (SBP) and the Securities Exchange Commission Pakistan (SECP) have pledged their support for FinTech startups. Various initiatives have been taken to foster a conducive environment for startups. SBP has set up a FinTech Facilitation Desk for startups to work in collaboration with the central bank. SECP is also working on a comprehensive industry policy for FinTech and startups in general. As FinTech startups may face regulatory challenges, the SECP’s Regulatory Sandbox is designed to help them prosper in the purview of the law. With nearly 21% of the adult population not involved in the formal financial sector in Pakistan and low levels of financial literacy, FinTech startups are working towards lifting these figures to facilitate economic development. Research indicates that the financial inclusion of the population can cause an increase of $36 billion in Pakistan’s Gross Domestic Product by 2025. This shows the importance of the FinTech sector in Pakistan and startups are going full force to tap the potential of the market.