By Hasan Salahuddin

Alibaba Group’s recent entry into Pakistan’s financial services sector through KOKO Tech Pakistan is expected to strengthen digital credit access and create new opportunities for underserved consumers and businesses, as the country’s digital economy continues expanding rapidly.

KOKO Tech Pakistan, a local unit licensed by the Securities and Exchange Commission of Pakistan (SECP) to provide "buy now, pay later" (BNPL) services, marks Alibaba’s formal entry into Pakistan’s emerging digital credit market.

The development comes at a time when Pakistan’s digital payments ecosystem is witnessing substantial growth. The SECP has described KOKO Tech Pakistan’s BNPL licence as a direct foreign investment inflow and expects the Alibaba-backed company’s AI-driven credit assessment systems and globally tested digital infrastructure to support young users, freelancers, and small businesses that remain underserved by traditional banking channels.

The broader market environment appears increasingly supportive of such services. According to the State Bank of Pakistan’s (SBP) Q2-FY26 Payment Systems Quarterly Review, retail payments totalled 3.4 billion transactions worth Rs167 trillion, with digital channels contributing 92% of all transaction volume.

Separately, SBP’s Q1-FY26 review showed e-commerce activity recorded 250 million online payments worth Rs343 billion.

The Ministry of Commerce’s draft e-Commerce Policy 2025-30 projects Pakistan’s e-commerce market at $5.9 billion in 2025, supported by 58.3% mobile broadband penetration and a young, technology-oriented consumer base.

Despite the rapid expansion of digital activity, formal consumer credit remains relatively limited. SBP’s Annual Payment Systems Review FY25 recorded only 2.2 million credit cards by the end of June 2025, representing less than one percent of Pakistan’s estimated population of around 241.5 million, even as financial inclusion increased from 47% in 2018 to 67% by June 2025.

The SBP’s National Financial Inclusion Strategy aims to raise financial inclusion to 75% by 2028, while its CY25 progress report showed that 6.8 million new unique accounts were added during the first year of implementation.

According to the Pakistan Economic Survey 2024-25, freelancers contributed $400 million in foreign exchange earnings, while SBP data showed mobile banking users reached 27.1 million and branchless banking app users rose to 92.2 million by Q2-FY26.

Taken together, these indicators point to a steadily maturing digital economy in Pakistan, even as access to regulated consumer credit remains constrained, creating space for alternative financing models such as BNPL services.

Speaking with Wealth Pakistan, Asad Ullah Jan, Fintech Strategy & Operations Leader at PalmPay, said BNPL could significantly expand access to digital credit in Pakistan, particularly for consumers and small merchants facing barriers in obtaining financing through conventional banking channels due to limited documentation or insufficient credit history.

He said the strongest potential existed in e-commerce, mobile retail and apparel segments where cash-flow flexibility remained an important issue for both consumers and merchants.

Jan said the entry of international fintech companies could accelerate innovation, merchant digitisation and broader financial inclusion efforts in Pakistan.

However, he emphasised that long-term success would depend on maintaining responsible growth.

“In Pakistan’s market, success in BNPL is less about fast disbursement and more about strong risk controls, collections, fraud management and sustainable unit economics,” he said.

He added that while many players are entering the market, companies maintaining disciplined underwriting and operational efficiency are likely to achieve stronger long-term outcomes.

Umer Irfan, Software Business Analyst at IntellixCore, said freelancers, unbanked consumers and small businesses could emerge among the major beneficiaries of digital credit expansion.

He said Pakistan hosts one of the world’s largest freelance populations, where workers often face gaps between project payments and immediate spending requirements. BNPL services could help align repayments with project-based income and ease short-term cash-flow pressures.

He said Pakistan’s large uncarded population could gain access to microcredit through alternative data sources such as mobile usage patterns and utility payment histories.

Small businesses could also benefit by using BNPL and embedded finance products for inventory purchases without traditional collateral requirements, particularly in the informal retail economy, he added.

Irfan said Alibaba’s entry, alongside VONE Group’s recent $20 million investment in Mobilink Bank, could strengthen investor confidence and encourage additional international capital inflows into Pakistan’s technology sector.

He noted that a gradual shift from cash-on-delivery systems toward digital transactions could improve transaction visibility and contribute to broader economic documentation.

At the same time, Irfan highlighted risks requiring regulatory attention, including data sovereignty concerns, possible algorithmic bias in global AI systems and consumer over-borrowing risks.

He said the ongoing move by the SECP and SBP toward real-time regulatory technology monitoring should be supported through stronger financial literacy initiatives and clearer disclosure standards.

As Pakistan’s digital economy continues expanding and financial inclusion efforts progress, industry observers believe the emergence of new digital credit platforms may create fresh opportunities for underserved users while increasing the importance of responsible lending and stronger consumer protection frameworks.

Credit: INP-WealthPk