SafePay Cracking the Digital Payments Problem in Pakistan: A Fireside Chat w/ Founders Ziyad Parekh & Raza Naqvi
The digital payments landscape is quickly evolving in Pakistan and one of the names that come up when considering digital payments is SafePay, which is a Y-Combinator Startup School grant recipient and is building tools and APIs for businesses in Pakistan, making it easy for them to accept digital payments online from anywhere in the world. We, at Startup Grind Islamabad, sat down with Ziyad Parekh and Raza Naqvi, the co-founders of SafePay to discuss their journey, the process of building the product, their remote work culture, choosing big problems to solve and the ultimate solution.
The Duo behind SafePay
Ziyad is a software engineer — programming, building things and coming up with solutions is what he’s passionate about. He’s based out of the Bay Area in San Francisco — he has had multiple jobs in the US and they were all fine, but he always knew he would ultimately come back to Pakistan. He also knew that in order to be able to do that he would need to come up with something meaningful that would pull him back. He realized that there are a number of problems and challenges facing Pakistan and perhaps he could contribute towards solving one of those challenges by applying technology to it. He thought of working on resolving the digital payments issue. As we begin our chat, he states, “we’re not the first company to do this and we’re not going to be the last one, but we were in the unique position to try something that had not been worked upon previously. We decided to take a stab at it; we understood the technical aspect of how it would work and we thought we would go ahead and put together an MVP, throw it out there and see what happens. We kind of built it over the course of 6–7 months while I was in San Francisco and launched it in May 2019. It picked up and it was pretty interesting. At that time, it was just me and I knew that this is an interesting solution and people thought they wanted to use it. I knew that I would need help in order to cater to the needs of the customers. That’s when I reached out to Raza who is now my co-founder. I’ve known him for about 25 years now and I knew that he was the right person to work with me on this.”
Raza Naqvi is a lawyer and he went to high school with Ziyad in Karachi. He went to the UK later on to study law and practiced it for close to 5 years in London before he moved back to Karachi in April 2019 — “I should start off by saying that I don’t have the same technical background as Ziyad. Ziyad and I had been in touch about SafePay, discussing how similar companies in the UK were solving the same problem; studying the literature available by the State Bank and seeing how to take all that into account when applying it to SafePay. It wasn’t until May 2019 when we had a discussion when Ziyad had launched SafePay in the current version as we know it, that we decided to take it forward. I was in Karachi, knew I didn’t want to go back to practicing law and wanted to explore the entrepreneurial environment. SafePay was an exciting segway into what excites me, which is entrepreneurship and various aspects of a business in general. It’s been quite an interesting shift of skills that I have acquired over the period of the last 10 months.”
Building a Company Around Remote Work Culture
“It is incredible that we’re a team that works from three different continents and that we can do everything virtually.”, Ziyad expresses. He adds, “I’m not going to pretend and say that this was something that we had intended from the start. Originally, when I moved to the Bay Area, I would move around the Palo Alto area and see all these amazing office buildings of tech companies. I’d always thought that it would be amazing to have a smaller office in that area. Fast forward to 2019, I had the complete opposite. I don’t have an office; I work from my house in San Francisco and I’m working with five other people who are in different places — spread over three continents. In our case specifically, I couldn’t convince Raza or the other people working on this to move to San Francisco for the same reason I couldn’t technically move back to Pakistan just yet because I have commitments and responsibilities here. So, we thought we’ll just play it by ear and see what happens. We have these amazing tools like Zoom and Slack that make us feel like we’re more connected than in a physical setting. It all started with WhatsApp groups. We realized that this wasn’t a bad setup and that it wasn’t difficult to do this. As long as everyone was responsible for the work they needed to do, we could get it done.”
They started out with the mindset of getting things done and it has been going pretty well for them. Discussing SafePay’s remote work culture in light of the COVID-19 crisis, Ziyad elaborates, “fast forward to Coronavirus and these crazy times, we kind of got lucky in the sense that we don’t have an office — if we had one and a bunch of overheads, those costs would just add up exponentially. The fact that we don’t have those costs is allowing us to stay afloat during this time. It’s been super cool to see that because of our remote culture, we’re now able to attract people to work with us that we wouldn’t have been able to do before because of the physical constraint. So, I would highly encourage people to look into it as their working culture and explore the many tools available, to take advantage of the remote working opportunity. It will be easy and as long as you’re disciplined about it, it should be ok.”
Choosing to Solve the Difficult Problem
When thinking about the issues and challenges Pakistan faces and trying to solve them using tech, Ziyad opted for digital payments because it had been sort of personal frustration. “I grew up in Pakistan. In the US, you had these options available to sign up on Netflix, buy from Amazon, do any kind of e-commerce very conveniently and a lot of people took it for granted in the US because it was the norm. When I moved to the US, I got really used to that — getting an Uber or doing other things and the money gets automatically deducted from my phone or card. Being unable to do any of that was frustrating every time I used to come to Pakistan to visit my family. I noticed everyone complaining on social media about the lack of PayPal; why the government doesn’t introduce it in Pakistan; what’s wrong with the government and PayPal. From my time in the US, I realized that companies like Stripe were created even though PayPal existed in the US, but these solutions allowed digital entrepreneurs to come up with payment options for innovative business models. Companies like Airbnb, with new business models, wouldn’t exist if Stripe hadn’t done that for all these companies. That was my motivation to work on something like this. It’s a difficult problem for sure, we realized that. There were a lot of laws and regulations, so I thought I’ll just build it and see if this works and I’ll ask for forgiveness later.”
Ziyad adds, “What’s interesting is that difficult problems are intimidating for sure, but in a paradoxical way, they’re more fun to solve than easy problems. If you go after solving an easy problem, you’ll probably feel embarrassed about picking such an easy problem. If you’re going after a meaningful difficult problem that you care deeply about and it’s affecting you and other people, you can easily convince people to help you solve that problem. Don’t be intimidated by difficult problems. If you break down a difficult problem into a set of easy problems, you stack them and day by day you chip away at it, you’ll come up with some kind of solution — maybe it won’t be the ideal solution, but it will be your solution and it’s something that you’ve accomplished on your own or with a group of trusted friends. That’s how we approached this problem.”
Addressing the difficulty of the digital payments landscape in Pakistan, Raza states, “What I love about working with Ziyad is that he deconstructs a problem and payment is a huge problem. Digital payments, in general, need to be regarded as a utility, the way we think and conceptualize about gas, electricity, water, etc. It really resonated with me back in 2018 that fixing this aspect of the problem can really benefit the country’s entrepreneurial sphere in terms of increasing exports, domestic transactions, etc. Anyone would admit that reliance on cash is a big problem in Pakistan. Above everything else, we want to leave our mark while solving this problem. We’ve done our analysis of the market and its players and they’ve all done some amazing work. Our job is not that difficult as compared to perhaps the first mover. We’ve kind of ride on their coattails and similarly, someone will ride on our coattails. That being said, there’s a lot of noise around the payment space — there are a lot of players who are using the same word ‘pay’, which has diluted our brand equity to some extent and caused some confusion amongst our merchants and their customers as well. This is actually a good problem to have because ultimately, there’s enough of a problem to solve for various players to co-exist profitably in the same space. I’m looking forward to this — if there’s one silver lining to this, it’s that people are now realizing that digital commerce is the future, not necessarily a distant one and that online payments don’t need to be that difficult — it should be easy to do, as easy as getting a sim card or getting electricity to their house or any other kind of normal activity people do.”
Cracking the Digital Payments Problem in Pakistan
Is there such a thing as an ultimate solution to any problem? What is it that would crack the digital payments problem in Pakistan? Ziyad shares his point of view. “I’m not going to pretend that we know the holy grail solution to this problem, but what we can do and what we’re trying to do is to build the payment system that we would want. Luckily, Raza and I have very high standards in terms of what we build and we make sure that we achieve those standards. A large part of our product development cycle is feedback from the merchants we interact with. While we’re not merchants, retailers or e-commerce store owners, we can build the tools that they need to run their businesses as efficiently as possible, without worrying about the payment part and focusing on keeping their customers satisfied.”
SafePay’s aim is to encourage people to buy online, increasing the volume of digital payments in comparison to cash payments. For e-commerce store owners, cash dealing presents a big problem in the form of delayed payments, rejected orders, etc. Ziyad adds, “We want to help merchants get away from that and help them improve their payment cycles. We thought about what would be the ideal solution for Pakistan. We started with a very simple and easily integrated payment solution with an API. For merchants who are not technical, we used plugins for all the popular e-commerce platforms. We thought at the very least we can start a process — it might not be the ideal solution in terms of all the different payment methods that exist in Pakistan. We thought we would start with debit and credit cards and see how it goes. In the year that we’ve been operational, we’ve had a very wide range of merchants — someone who is doing one order a day or even one order a week as opposed to someone who is doing up to 10 orders a day. We have been able to realize their pain points through their feedback. A lot of it has been about the things we were doing well and the things we weren’t doing well. We took that feedback to heart and thought that if we’re charging premium prices for the service, we would want to make sure that the product is so good that people don’t feel reservations about paying that premium. This is how we plan on evolving our product to make it the best in the market — based on merchant feedback and developing things that they want and need for their businesses.”
Ziyad continues, “Given the fact that both Raza and I grew up in Pakistan and I have worked in Silicon Valley while Raza has worked in London, these unique factors allow us to create a unique product that is tailored for the local market while thinking globally. So, I don’t know if it’s the ultimate ideal solution, but what we can do is try our best to make sure that a) it’s up to our standards and b) the merchants we service are happier than happy.”
The Regulatory Framework
There are extensive, stringent regulations in place when it comes to digital payments in Pakistan. We ask Ziyad and Raza about their experience while operating in this domain. Ziyad mentions, “It’s been an extremely pleasant experience. I was in Karachi earlier in 2020 and we met with the payment systems department of the State Bank and the rest of their team. We explained our situation to them. We told them that we’re trying to build tools that allow businesses to easily accept payments online. At our core, we’re not a payments processing company, we’re a technology company. Payment processing is just a problem that we’re solving right now. For better or worse, that’s what we told the State Bank. We’ve walked through all the different regulations that they have. We realized that majority of those laws don’t actually apply to us — we’re not a bank; we’re not an acquirer, we work with an acquirer. All we do is allow them to funnel all the processes through that acquirer. We just built a very nice easy to use, convenient interface around a big problem. So, what Stripe does and what we do is take the responsibility of extensive compliance off the merchants’ shoulders and take it upon ourselves to ensure that we’re secure. State Bank kind of understood all of that and their response was extremely encouraging. I do believe that at some point we will get regulated and we’re actively working towards that with the State Bank, as they’re coming up with a framework that closely fits our business model or trying to adapt our business model to the existing frameworks.”
Raza adds, “I’m quite a nerd when it comes to this kind of stuff. While I was in the UK, other than reading literature, I was also researching the regulatory framework, which is much denser in the case of the UK. In Pakistan, we have seen the right kind of movement and facilitation from the government and State Bank and bodies like SECP. Unfortunately, there’s a slight disconnect between the SECP and State Bank because whenever something comes up regarding payments, the SECP says it’s State Bank’s responsibility. So, I know that the SECP is coming up with a regulatory sandbox kind of environment, which allows startups like us to operate in an isolated environment where they can launch their product and see the performance in a closed environment. The only reason SafePay can’t be a part of that sandbox is that we’re in the payment space, so it’s a strange situation where SECP and SBP are kinds of sorting it out amongst themselves. I’m happy that State Bank is super-efficient about updates, things like volume processed, etc. They were very accommodating for us when we met in January. They want us to succeed actually, they also see that we’re solving a problem. We want to be regulated because when you think of regulation you think of money, customer obligations, anti-money laundering. Pakistan has been in hot waters with the FATF situation currently. The idea is that what we’ve identified the regulation alongside the State Bank — the kind of regulation we think we need to comply with and we have kind of abided by that and actually gone over and above, as we want to be absolutely transparent.”
The SafePay User Experience
SafePay caters to a variety of merchants from diverse industries. They started off by promoting their solution on Facebook, to see who would come initially, the majority of them were small e-commerce stores. It started off with just people who were open to taking a risk on a new kind of payment service that they were willing to try. “Luckily, the support and feedback loop we kept with them and the way we kept them engaged helped us in getting our message across to their friends. We then had merchants working in electronics, gadgets, and now we have companies that are selling insurance and credit card products, doing some very cool things in Pakistan in the startup world, we have merchants who offer travel packages and tourism, short-term home rentals, online education. This kind of strategy, especially in these times has highlighted the importance of diversification — the entire world was hit hard and businesses had to stop. For us, there was a time when a lot of the e-commerce stores in Pakistan had to stop selling. So, our haphazard strategy of letting anyone come in and incorporate the payment system kind of paid off because while one segment of the industry went down, the other one, like online books and online education picked up. It was very interesting to see that there were all these different types of merchants. Luckily for us, we now have information about e-commerce in Pakistan and how it’s growing and with all that data, we’re able to do some pretty cool analysis on how COVID has affected the Safe pay economy.”, states Ziyad.
Raza continues, “Ziyad and I are like two ends of a spectrum, he is super technical and I’m not. So, when we develop a new product, we follow it up with a blog post — Ziyad does the development. He explains it to me in a way that I can create content around it, explaining it in a fun and engaging way for a layperson. We get a wide array of people who apply to join SafePay. When we launched SafePay, we got a lot of messages on Facebook and Instagram — the response rate was pretty amazing. As Ziyad had correctly identified before launching, there was enough need in the market for a solution like this.”
In terms of the merchants that use SafePay, there are certainly some who are more sophisticated than the others. Raza explains, “the way we have created SafePay is to cater to all. In the summer of 2019, Ziyad had developed a product of ours called Quick Links. That was our response to people who wanted to use SafePay but didn’t have a website. The idea behind that was to be able to generate a URL that can be sent either through WhatsApp, Instagram, or email. Whoever has to pay you goes to the link and is able to get to the SafePay checkout experience. There’s a broad range of solutions that we have developed and we intend to continue with them because people who hadn’t thought of online commerce before are now getting into the fold. I can give an example of my mother who is a doctor. Her hospital is closed. While I’ve tried to get her to use online payments in the past without success, now due to the COVID19 crisis when telemedicine has become a hot topic in Pakistan suddenly, she’s actually receptive to using SafePay. I can imagine millions of people in that situation.”
SafePay has a super helpful knowledge center on the website for any questions new or existing merchants may have. Raza highlights the features of the knowledge center, “We have broken down the process of signing up with SafePay and the entire onboarding process, we also have a newsletter that we send to our active merchants with tips on what we have learned from the digital payments space and other content we find interesting. We’re lucky that to this point, we’ve created a close-knit SafePay ecosystem and we’re now at a size where we can manage that. We hope to stay true to that culture, as the network grows.”
This article is derived from the virtual fireside chat hosted and transcribed by Shehab Farrukh Niazi, Editor in Chief Startup Guide Pakistan with the Founders of Safepay on April 9, 2020. You can view the original video on youtube.
