In Uzbekistan 22 million individuals use distant banking companies. That equates to greater than half of the nation’s inhabitants. Nevertheless, the Uzbek market has comparatively few startups, and people who do exist deal with customers’ ache factors with out fixing the market’s
elementary issues. Let’s discover why that is taking place, what niches can be found within the nation, and what fintech companies on the vanguard.
Development with a slowdown
Uzbekistan’s know-how sector has been experiencing an actual increase in 2022: in the previous few months alone,
a number of thousand IT specialists arrived within the nation, and main firms have begun to relocate their workers to Tashkent.
On the one hand, it is a response to the disaster in neighboring areas. Alternatively, it’s a pure stage of improvement.
Again in 2019, The Economist journal named Uzbekistan because the world’s most improved nation of the 12 months. And in 2020, within the Doing Enterprise 2020 examine, the World
Financial institution talked about the area as one of many high 20 economies the place enterprise climates improved probably the most, noting the convenience of beginning and operating a enterprise. Different constructive developments embrace
the launch of an IT park in 2019 with incentives for startups, in addition to a number of latest fintech initiatives, such because the connection of recent cost
programs and creation of a digital Uzbek sum.
Fintech companies have gotten extra accessible, though at a slower tempo than in different Central Asian nations. In response to specialists, 22
million individuals use distant cost companies in Uzbekistan. For comparability, the nation has 27.2 million Web customers.
However Uzbekistan’s fintech market stays largely unsaturated. The nation has three or 4 cost companies in addition to a number of dozen banks with various levels of digitalization. And in line with our information, there are a complete of 63 fintech startups based mostly in
Uzbekistan. For comparability, take into account Saudi Arabia, a rustic with roughly the identical variety of individuals, which has
two and a half occasions as many fintech firms.
Why is that this the case in that case many Uzbeks are utilizing cost companies? Uzbeks have financial institution playing cards and know methods to use them, however they typically obtain their wage on a card, withdraw money, after which use money. Or they switch cash to kin. Wanting on the statistics,
all the things is okay: the nation has loads of ATMs, payroll playing cards, and plenty of transfers. However the market is hitting a useless finish. Even though customers are steadily altering their habits due to the Click on, Oson and Payme wallets and the Uzcard and HUMO
cost companies, a small proportion of them purchase items on-line, subscribe to companies, earn cashback, and make investments.
The issue can be associated to the truth that most Uzbek fintech companies nonetheless carry out a restricted highly-specific operate and are sometimes an auxiliary service for big digital firms within the banking sector. For such companies, a fintech add-on is simply
a small cog in an enormous system, simply an extra supply of earnings. Because of this, they incessantly do not attempt to clear up the consumer’s elementary issues and don’t invent one thing new.
An instance is Apelsin, a web-based financial institution created from the native Kapitalbank. Constructing on its expertise and infrastructure, the massive financial institution provided yet one more cost service. However cash transfers are a low-level downside that may be seen on the floor. Fixing
it solely requires giving a device to a mechanic. The elemental issues are how to economize, methods to earn cash from financial savings, and methods to get a mortgage on beneficial phrases. In America, Europe, Asia, Singapore, and China, startups already supply on-line brokerage
companies, cryptocurrency companies, and alternatives for extra earnings.
Many common fintech companies in Uzbekistan are owned by companies and banks with overseas roots. For instance, Payme, a well-liked e-wallet service within the nation, belongs to the Georgian financial institution TBC. For overseas companies, a younger firm in a brand new market
is one other asset in a diversified portfolio. However they aren’t all the time within the improvement of native fintech firms as an business.
In fact, the business is not standing nonetheless. Regulators have gotten considered one of its key drivers. For instance, the federal government not too long ago created a number of sandboxes to check new applied sciences, together with blockchain. Non-profit organizations are additionally showing, for
instance, the FinTech Affiliation of Uzbekistan (FTAU), which develops concepts for brand new companies, bearing in mind market realities and worldwide expertise.
FTAU analysts word that considered one of fintech’s predominant issues in Uzbekistan is the low degree of digitalization. It is not simply in regards to the digital divide and lack of web entry in some areas. The event
of cost companies has been hindered by the shortage of infrastructure, in addition to the shortage of an analytical framework — structured information and well-developed behavioural fashions. The nation’s digital banking companies market is so younger that it’s tough to analyse
habits and predict tendencies. And if there isn’t a information, then creating distinctive merchandise is tougher. Moreover, in line with our observations, Uzbekistan does not have sufficient fintech builders, specialists, and “evangelists”. The regulatory framework can be
continuously altering, and whereas many legal guidelines account for startups’ pursuits, the fixed modifications decelerate progress and restrict alternatives.
Discover the technological key
As a result of the Uzbek fintech market does not have any giant gamers who can declare a monopoly, and there are usually not so many startups, the entry threshold for newcomers is low. The area has many potential niches, however particular native traits matter right here.
The typical age of a resident of Uzbekistan is 29 years. By means of comparability, it’s 44 years in Germany, and 38 years in america. Millennials
and zoomers, who are actually 20-35 years previous, are extra receptive to new digital companies: they adapt quicker and are selecting up new digital habits. This additionally applies to cost strategies: younger customers are extra doubtless to make use of cellular banking and cashless funds. What’s
extra, they’re able to spend money on cryptocurrencies and use different non-standard funding strategies.
However younger customers lack the product publicity and expertise accrued by a number of generations. Within the US, the mannequin for credit score and loans has existed for greater than a decade. All startups must do is adapt it to new realities, for instance, by providing
a brand new consumer interface or enterprise mannequin. However credit score and banking companies appeared not so way back in Uzbekistan, and monetary habits are nonetheless being shaped.
Though the share of Web customers within the area is rising
by 25–30% per 12 months, 10 million of the nation’s residents don’t have everlasting community entry, and solely half of Uzbeks personal smartphones.
The impediment is the excessive price: in Uzbekistan, each telecom companies and cellphones are dearer than in neighbouring nations. On common, a Uzbek citizen spends
83% of his or her wage when shopping for a brand new smartphone. The typical wage within the nation is $278, and a funds smartphone prices a median of $230.
Accordingly, residents of the areas are much less doubtless to make use of digital companies, together with on-line banking. Our statistics point out that there are 3 times extra financial institution playing cards per buyer in Tashkent than within the areas. That signifies that companies within the capital
are already competing for purchasers’ consideration, whereas in distant cities, quite the opposite, demand exceeds provide.
One possibility for fixing the issue of digital inequality is BNPL (Purchase Now, Pay Later) companies, which let prospects purchase items on an instalment plan with out curiosity. Demand for these companies is
rising in all places, and Central Asian nations are not any exception. The BNPL mannequin will make smartphones, along with digital companies, extra accessible. This idea is already being explored
by Uzbek startup Iman, which gives halal funding companies, however the mechanism can be attracting giant banks. Some rising companies additionally enable workers to obtain wages not a few times a month, however in small instalments on demand. This mannequin is known as
earned wage entry (EWA). For instance, the Bukhta platform in Kazakhstan and Uzbekistan gives this service.
To discover a area of interest, attempt to establish an unsolved downside for which you could find a “technological key”. For instance, suppose you recognize that there’s a digital divide in a area and, what’s extra, infrastructure is missing, e.g. insufficient know-how, databases,
and improvements. And that is the supply of an apparent downside: fintech companies are buggy, and prospects are having bother adapting to them. One potential answer is distant companies, resembling immediate messaging apps, which assist firms keep fixed contact
with customers and shorten the trail to the buyer. For instance, banks inside messaging apps (Zelf, for instance) are already in demand in lots of nations. These banks can carry out each operation — from opening an account to transferring cash — in Telegram or
WhatsApp.
Startups also can create companies that bridge the hole between on-line and offline, an issue that’s nonetheless related in Uzbekistan. For instance, a cellular pockets that permits you to switch cash to buddies who haven’t got a smartphone or cellular app. That is how
the Kenya-based M-Pesa service works: you possibly can obtain and money out funds even utilizing a push-button telephone — a telecoms operator executes all of the transactions. Uzbekistan has comparable instances. For instance, the Upay cost service, which
we not too long ago bought. This servicel even permits offline funds to be made when no Web connection is accessible.
Providers that change consumer habits and improve monetary literacy may even take pleasure in reputation: funding apps that make it potential to take a position even small quantities of cash, budgeting purposes, cashback companies — something that helps individuals spend and save
properly will likely be in demand.
Tremendous apps are the long run
Launching a targeted service in a selected area of interest has a big downside: the product will likely be tough to scale up and produce to different markets, particularly whether it is tailor-made to particular native traits. Fintech startups ought to take into consideration this from
the outset: if an concept can’t be scaled up and freely transferred from one context to a different, then it is going to be tough to construct it into a extremely giant enterprise.
Fashions involving ecosystems and tremendous apps are gaining reputation in rising economies. Entrepreneurs discover an unmet want, which leads a second and a 3rd alongside a sequence, and later they provide a complete answer. If desired, a product will be prolonged
and tailored to the realities of any market by including a few further add-ons. That is precisely the trail taken by Kazakhstan’s Kaspi, which steadily penetrated most areas of the consumer’s life. At current, Uzbekistan does not have any large-scale ecosystems and
tremendous apps (multi-purpose apps with fintech companies) similar to Kaspi, however such fashions are exactly the way forward for the nation’s fintech scene.
Tremendous-app companies should coexist organically and permeate the consumer’s life. So, in case you go to a area with a younger inhabitants, a cellular connection is an effective approach to begin an ecosystem. By connecting prospects to the cellular community, you can provide them entry
to an unlimited digital ecosystem. On this case, banking will be an add-on, considered one of many.
At People, that is precisely the trail we took: we first entered the Uzbek market as a cellular operator, after which we began to supply add-ons, e.g. fintech and a market. Now when prospects register in our ecosystem they
get a limiteless cellular connection and Web companies, in addition to a unified account linked to a People VISA card. We’re steadily including new modules. For instance, in April 2022, we observed the circulate of migrants and opened entry to our telecom companies
to CIS residents within the nation.
We perceive that even though there are at present no large-scale ecosystem merchandise in Uzbekistan and there’s little competitors, giant banks and telecom firms are already trying on this course. Tremendous apps are a possibility for them to
scale up. That signifies that in the end we (in addition to anybody else who decides to construct a fintech ecosystem within the nation) must compete with them — not solely when it comes to concepts, but additionally on the degree of budgets. That stated, new tasks have the benefit
of larger mobility in comparison with companies in addition to the flexibility to extra rapidly take a look at new merchandise in native realities.