Before joining Y-Combinator in 2021, the startup raised $5.5 million in pre-seed funding. This was one of the largest pre-seed transactions in the Middle East, Africa, and Pakistan.
Last year, TAG Fintech concentrated on a single market. It was possible to open an account for those who previously had no access to banking services in Pakistan thanks to the ideas of founder Talal Gondal and the experience of TAG Fintech’s CTO.
“Pakistan has its own quirks. It is one of the largest countries, but its banking infrastructure is severely outdated. The majority of people do not have access to banking services. At the same time, the market here offers limitless opportunities for expansion; Pakistan’s population is over 225 million and growing every year”, says Alexander Lukianchuk of TAG Fintech.
Mobile communication is changing, with high penetration of 4G mobile networks and rapid growth in smartphone ownership. “This market clearly requires quality financial services, and I anticipate rapid growth of companies that can successfully enter this
Before joining Y-Combinator in 2021, the startup raised $5.5 million in pre-seed funding. This was one of the largest pre-seed transactions in the Middle East, Africa, and Pakistan.
TAG Fintech, according to Alexander Lukianchuk, could become one of the most valuable startups. The total investment was more than $12 million, and the company was valued at $100 million by the most recent investors. Although there are existing financial service providers in emerging markets, the quality of the user experience and customer service in general remain weak points for many of them.
Another significant challenge is delivering the breadth of functionality.Obtaining a high-quality product with a wide range of functionalities is costly and time-consuming. It is difficult for each startup to obtain such resources, making it difficult to compete. It is inconvenient to use a service that only performs a subset of the required functions.
“In the coming years, we will see consolidation in Western markets; smaller players will be absorbed by market leaders, and models will be copied and become better.” “As a result, consumers and regulators will benefit from a more integrated infrastructure,” explained Alexander Lukianchuk.
Integration is another driving force in the West. Different companies’ services successfully interact with one another. Open Banking solutions are a good example in this area; this trend is being updated, and a number of successful solutions have already emerged.
In emerging markets, the situation is quite different. Traditional banking tools are primarily used to provide financial services, and the established banking sector is finding it difficult to transition through the stages of transformation. If the goal is to provide access to services with minimal procedural barriers, it is necessary to consider neobanking.
“The market in the West is undeniably more competitive.” Asia is unique. China and Singapore, for example, already have a well-developed financial infrastructure. However, many other Asian countries continue to be “green fields for payment services and other banking services,” as specified by Alexander Lukianchuk.
As everyone is aware, the startup ran into EMI licencing issues shortly after its launch. We are currently working to restore the right to carry out activities. Regulatory issues proved to be more serious. It’s one thing to create a product; it’s quite another to launch it in an unfamiliar market.
In response to the licence issues, TAG Fintech’s CTO stated that the key mistake made at the time of entry into the market was underestimating the political aspect of doing business in the country.
Pakistan is a relatively closed system, making it difficult to enter and establish a business. Working in western markets, more time is spent on technology and product development, but in Pakistan, the team has spent a lot of resources and energy on politics and bureaucracy.
“It is a huge mistake to enter a market without understanding the rules. But I believe we’ve learned our lesson and are ready to move on,” said Alexander Lukianchuk.
Currently, the company intends to broaden its geographic scope of operations. particularly the options for expanding into other regional markets where there is a potential for innovative financial services. During the first half of 2023, it will most likely be possible to attract new investments and expand outside of Pakistan.