The eCommerce policy framework of Pakistan was passed and approved by the cabinet in October 2019. A lot of hard work has gone into the policy from both the private sector and several public sector bodies, however I believe there is no time like the present to start working on potential improvements. There are three key ways that I believe this can be done.
Rebate on Foreign Transactions
Firstly, the goal of the policy is to help grow the overall eCommerce sector and as a secondary goal it is to help exports. I believe that a monetary reward in the form of a rebate or tax credit should be given to all eCommerce merchants who are focused on selling Pakistani products abroad. A rebate of this nature can be very easily implemented and verified as it will only be applicable if a customer who holds a non-Pakistani credit or debit card, places an order on a Pakistani website using a Pakistani payment gateway. The Pakistani internet payment gateways can easily be used to verify these transactions.
For example, if a US based customer uses their Citibank Visa card to purchase a dress on Khaadi for PKR 5,000 and the payment is processed through HBL’s credit card gateway, then Khaadi would get a rebate/credit of 50 PKR or 1% of the total value. (Values are for illustrative purposes only)
One of the advantages of this method is that it focuses on small orders for as little as $10-$20 but the potential volume of orders that eCommerce retailers such as Khaadi, Gul Ahmed and others may potentially get would be large. Currently some of these fashion retailers prefer to use foreign payment gateways therefore the money never enters into Pakistan.
The reward for the eCommerce merchant should be a few dollars or upto 10-20% of the total sale all of which many eCommerce merchants could use towards subsidising their customer acquisition cost. This policy could also benefit SaaS companies in Pakistan and push them to build world-class product businesses such as Zoho out of India.
Banning COD in Pakistan
The eCommerce policy bans all COD transactions in Pakistan over the next few years.
“To promote financial inclusion and digitization, COD mode of e-Commerce will be gradually discouraged through special incentives for consumers and merchants with an objective to use digital devices for payments. (Within three years of the launch of this policy, maximum COD transaction amount will be PKR 10,000. Efforts will be made to convert all COD payments into e-Payment preferably within 10 years (2029).” Section II, Recommendation I of the eCommerce Policy
While focusing on digitisation is a worthy goal, the potential for this to be a death nail to the eCommerce business is high. My recommendation is to tie the COD limit to the number of active unique mobile wallet/card users in Pakistan.
|COD Limit||Active Mobile Wallet or Online Card Users|
|Rs 50,000||5 Million|
|Rs 40,000||10 Million|
|Rs 30,000||20 Million|
|Rs 20,000||40 Million|
|Rs 10,000||60 Million|
|Rs 5,000||100 Million|
|Numbers are for illustrative purposes only|
So every 6 months we review the total number of active mobile wallets in Pakistan and the active online cards being used in Pakistan and based on that data we set the maximum COD limit for the upcoming 6 month period.
A policy like this encourages banks and fintech’s to work hard to on-board and activate customers, with a reward for the COD market being limited because of their actions. Rather than the eCommerce players finding themselves in a position in 3 years where the move to digital money is still slow, but the COD limit is enacted, which would hurt the overall eCommerce market.
Increase Internet Users in Pakistan
This might seem like a simple one, but it’s critical, and while I don’t have any specific policy recommendations, the entire digital economy is dependent on the growth of the total active internet users in Pakistan. To grow this we need to be more inclusive and affordable both in terms of data cost, but also taxes on smartphones.
In addition to smartphone and data costs, mobile manufacturers and telcos should work together and focus on bringing in products built on KaiOS within the feature phone category as well. KaiOS is the 3rd largest mobile OS in the world after Android and iOS and Reliance Jio has sold over 60 million KaiOS phones which are capable of running whatsapp, google maps and other web features, products such as these can help greatly in introducing web products to the massives who are not interested or do not see the value of smartphones just yet.