ZoodPay, the digital lending platform for E-commerce in the Middle East and Central Asia, has acquired Karachi-based Tez Financial Services (Tez). Tez was granted a Non-Bank Financial Company (NBFC) license in 2018 and has been providing nano-loans to the unbanked and underbanked masses in Pakistan. 

The Pakistani ecosystem has shown exceptional maturity over the past few years. The $143M raised in the first quarter of the year marks a 408% QoQ growth compared to Q1’21, as recorded in our Pakistan Q1 2022 Venture Investment Report. The region has been recording some notable exits since last year after two years of 0 exits, marking the entry of regional players in the market for the first time. The cross-market acquisitions have spanned different geographies with Jordan and UAE entering the market last year. This year, Pakistan has recorded only one exit in Q1’21 with UAE-based TruKKer acquiring Pakistan’s TruckSher, a digital freight booking platform. The cross-market expansion trend isn’t just limited to Pakistan, the MEAPT region overall has seen some notable cross-market acquisitions this year with Swvl expanding to Turkey and UK with the acquisition of UK's Zeelo and Turkey's Volt Lines. MENA-based startups also got acquired by international players including the likes of US-based Astute Imaging and Canada’s Magnet Forensics acquiring Egypt’s DilenyTech and UAE’s Comae Technologies.

In the absence of credit histories and credible data, conventional players have been unable to assess risk, deterring their interest in serving the masses – resultantly less than 5% individuals in Pakistan have access to formal credit. ZoodPay aims to address this problem by leveraging its holistic B2B2C digital-lending ecosystem.

Commenting on the expansion, Michael Khoi, CEO of ZoodPay said, “Pakistan is a market brimming with potential given the number of people seeking access to credit facilities. We’re confident that by combining ZoodPay’s unique ecosystem and experience operating in frontier markets with Tez’s local know-how, strong team and ecosystem partnerships, we’ll be able to positively impact the life of Pakistani people and empower them by giving them access to easy, affordable and reliable digital financial services”

Zoodpay's lending strategy is fortified by three integral elements of digital infrastructure including, (i) Acquisition of consumers and merchants via its diverse distribution channels (ii) Deriving rich transactional data from its internal universe of fintech, e-commerce marketplace and logistics, and (iii) Leveraging its proprietary credit scoring algorithms to assess credit risk and extend credit.

Sharing their views, Naureen Hyat and Humza Hussain, Co-founders of Tez articulated, "We started Tez with an ambition to make access to finance for the masses as easy as access to a mobile phone. We are humbled and thrilled by the confidence shown in our business model by larger regional players and look forward to the next level of development for Tez where our learnings in crafting the digital lending journey and managing risk can serve as a foundation for delivering consumer-centric lending solutions at scale, while creating credit histories for the masses.” 

With a population of over 230M people, half of whom are young and digitally savvy, over 100M smartphones and 90% internet coverage, Pakistan represents a clear high potential market, with a dire need of formal credit.

Sharing his views on this transaction, Nadeem Hussain, Chairman of Tez said, “The Pakistani startup ecosystem has hit its inflection point. In addition to sizable fundraises, acquisitions of local players by international players are starting to take place. This further validates the global value Pakistani startups are creating. Planet N was one of the first in the market to invest in startups. We are now seeing the first mover advantage.”

ZoodPay raised $38M in a Series B round last year and has now launched its Series C round, part of the proceeds of which will be allocated to ZoodPay’s expansion into Pakistan. The acquisition will help the FinTech ecosystem in Pakistan with Tez’s deep insights into digital consumer lending in mitigating default levels and on the other end, will aid ZoodPay in furthering its expansion plans.