“The COVID-19 has accelerated the demise of brick and mortar financial services and the regulator is eyeing this as an opportunity”, expressed Arsalan Asif H. Soomro, Managing Director, KASB Securities, during an exclusive Q&A session with our Editor in Chief and had more to say on the overall economic landscape of Pakistan amidst COVID-19.
1. How do you see the overall landscape of economy in Pakistan post COVID-19?
It is obvious that COVID-19 has put a colossal damage on the Pakistan’s fragile recovery. The reams of unemployment, permanent business losses, higher bankruptcies, loss of export revenues, influx of expats in GCC countries and falling tax revenues have created huge challenges for the economy, government, businesses and citizens. Although, the falling oil prices is a blessing in disguise that solves nearly half of our medium term issues but the economy needs to get back on track to be able to benefit from this silver lining.
New normal oil prices $40-45 are structural great impetus for our economy once it resumes optimum capacity after a year or so. We were hardly reliant on tourism that has been hit the hardest globally. Thus far, the governments focus is rightly on reinvigorating the demand through extra spending, cheap financing and tax cuts. The budget would be all-shots fired simultaneously.
2. What impact do you see of this pandemic on digital financial services?
The pandemic has fast forwarded the adaptation of digitization of the financial services. There has been a marked increase in changes in the consumer behavior who have started using online platforms for purchases, investments, fund transfers, business operations and e-commerce. The COVID-19 has accelerated the demise of brick and mortar financial services and the regulator is eyeing this as an opportunity to enhance transaction limits, loan applications, lower fees and further incentives for the sector. This is great for the documentation of the economy and for clusters of data to be used for new business ideas.
For example, our online application for trading in stocks have received tremendous response in the lock-down when people want to engage into financial services staying at home as the market fell to attractive levels. Several documentation requirements have been relaxed requiring lesser paper-work from the regulator thereby easing the access for the consumers. This needs to get better and better.
3. How do you see consumer behaviour shifting towards digital during this crisis time and what is your take in terms of understanding and responding to their needs?
There has been an encompassing impact of the shifts in the consumers’ response amid COVID-19. Retail outlets have started offering e-commerce facilities. Households are getting familiarized with online grocery shopping. Entertainment business is thriving on home-screen. Educational platforms are trying to keep up the learning curve through home-based learning. Businesses are trying to adapt to the Zoom-based meetings and despite lesser efficiencies, are able to execute tasks modestly.
The unnecessary foreign work trips are being curtailed towards more video-conferencing based decision. Interestingly, many dine-in restaurants have started offering home-delivery services to keep the kitchen running. This is a tectonic change and a leap forward into the next decade of data-led digitisation of the world.
4. In your opinion, what significant impact can mergers and partnerships create in nourishment of eco-system?
A lot of business ideas would mushroom in these times and even after COVID-19. The giants having the necessary dry-powder, skill-set, regulatory reach, experience and network would eye for opportunities to acquire the ideas and the generators. We could see new partnerships forged by/between financial institutions, telecoms, retail and hospitality players to create an eco-system where everyone is a winner from one-end of the spectrum to another.
Innovation in Pakistan is under nourished, lacks financial muscle and regulatory support and thus, unfortunately, small scale entrepreneurs would be happy to take seed funds from established venture capital funds in return of expertise, money and endorsement. The nascent industry requires much attention from the government bodies to facilitate the climate of entrepreneurship, innovation and capital formation.
5. What role can education and awareness campaigns play for business community in order to leverage and maintain business continuity?
Year 2020 and 2021 would all be about surviving the tough economic environment, cut the fat, digitize the operations and ensure business operates to the optimum capacity. Since people have more face-time in wake of lesser commute time and work-from-home, spending on digital marketing would continue to increase and target the consumers.
The inefficient business models would die only to be replaced by more data-driven pockets of ideas capitalizing on evolving needs for home-based audience. The business community should nonetheless be wary of excessive marketing in times when the purchasing power is collapsing in the near term. Save every buck.
