- Buy Now, Pay Later, and not just with your bank
- Transfer money to a friend from your phone
- Banked or unbanked, everyone has a solution
- Save some, and then invest some
- Why UAE, and the focus on FinTech?
- COVID-19 impact
Dubai: Sit on your couch, and pay off your bills, save some money, invest those savings, do some interest-free installment shopping, and while you’re at it, don’t forget to pay your friend back for that lunch. The coronavirus pandemic economically crippled many individuals and businesses, but it also gave rise to a number of companies who offered people in the UAE exactly what they needed in that hour – easier, contactless, budget-friendly ways to handle and spend money, right from home.
Financial services integrated with the latest technology for automation, or FinTech, has been around for some time – if one considers everything starting from the world's first ATM in 1967. However, the coined term itself became very popular in only the last couple of decades, with the internet, the smartphone age, and everything that came after that.
How does this affect me?
But the latest generation of FinTech firms and their services are disrupting the playing field even more and in money matters across the board including banking, transfers, savings, investments, and shopping. They are eliminating not only the need for actual exchange of cash, but also the need to be limited to one financial institution’s platform while spending money.
But how does all this affect you today? UAE residents now have access to solutions that are unlike others in the region and interestingly, many of these were launched in the peak of the pandemic year – 2020. We spoke to a couple of firms about how and why they created these payment solutions for UAE residents.
Buy Now, Pay Later, and not just with your bank
UAE residents are no newbies when it comes to installment offers. Many merchants have bank partners who allow customers to pay back the purchase amount in installments. Even if these installments are profit-free, the customer may still be charged a processing fee.
Spotii is a new UAE platform that is placing the onus of customer convenience on the merchant for their free installment plans on purchases. The customers pays no fees and no interest on the four installments, unless the payment is past due date. The merchants pay a platform fee.
We figured merchants will want this as it a new tool to engage with their consumers better, while customers will appreciate it because in this uncertain period they’re being given a very user-friendly way to make the purchases that they need to make.
Founded by sibling duo Anushcha Iqbal and Ziyaad Ahmed, Spotii is a UAE-grown initiative. “My background has always been in financial services,” CEO and co-founder Iqbal said to Gulf News in a Zoom interview. Iqbal left her last role in private equity in 2018 and started looking at FinTech solutions and studying the market. “I was visiting Ziyaad [my brother] in New York and he was describing what he was up to in the US… The idea was simple yet very powerful,” Iqbal said.
Ziyaad Ahmed, COO and co-founder of Spotii, used to work with AfterPay US – a platform that aggregates merchants and allows customers to pay the purchase amount back in interest-free no cost installments every two weeks. Here’s when the ‘Buy Now, Pay Later’ idea took shape. “We spent the latter half of 2019 just developing and building the product in the UAE,” Iqbal added. The company was established in January 2020 while the official launch of the platform was in April the same year.
Launching during a pandemic
When asked about launching a new business amid the coronavirus pandemic, she said, “The reason we decided to push forward was… if there was going to be a disruption, a shift, or enhanced restrictions on movement, digital payments are going to be needed. And we figured merchants will want this as it a new tool to engage with their consumers better, while customers will appreciate it because in this uncertain period they’re being given a very user-friendly way to make the purchases that they need to make.”
Iqbal said was their sole source of income was the merchant’s platform fee. AfterPay reportedly revealed that they make over 24 per cent of their income from late payment fees from customers. However, Iqbal said that Spotii was not looking to make income from late payments, which were capped at Dh40. Dh20 is charged the first time payment is late. A second late payment is charged an additional Dh20 or 25 per cent of the purchase amount – whichever is lower. "We don't want to punish consumers for beng unable to pay," she said.
Platforms similar to Spotii in the UAE include postpay and Tabby, both of which have a similar model where you pay the amounts in three or four interest-free installments. All three platforms launched in 2020, amid the rising need for such solutions given the pandemic and its economic impact.
Transfer money to a friend from your phone
Money solutions such as Venmo in the US, WeChat in China and Paytm in India have been around for some time, enabling people to make peer-to-peer money transfers easily using mobile devices as long as both parties are on the platform. However, such transfer solutions were not common in the UAE, apart from bank transfers – which could take time owing to the authentication processes of each bank.
2020 saw the launch of a lot of solutions for exactly this purpose. Ziina, PayBy and Mamo Pay are all examples of new launches that allow residents to easily transfer money to friends, family or colleagues. All that’s needed is an account for both parties on the chosen platform. Each of these platforms also tout end-to-end security and encryption to ensure security of customer details.
Faizal Toukan, CEO and co-founder of Ziina, told Gulf News in an email interview, “Andrew Gold (Co-Founder and Head of Engineering, at Ziina) and I met at a hackathon called Ethereum San Francisco... After our first encounter, we started brainstorming how to best solve p2p payments in MENA with our Co-Founder Sarah Toukan.
You can send and request money from any of your friends on Ziina by searching for their Ziiname (username) or phone number.
“We realized that cash was becoming an issue in the region, people wanted an easy way to settle a tab, share a cab fare, send an allowance, and split the grocery or the takeaway bill. In January 2020 we started building the app and shortly after launched in June 2020.”
Ziina is currently partnering with 11 banks, but Toukan says soon payments will be possible through any bank’s debit card. The platform requires authentication of first-time transfers. Toukan added, “When you sign up with Ziina you only need your phone number and a bank account. You can then send and request money from any of your friends on Ziina by searching for their Ziiname (username) or phone number - no need for any additional details. The money goes straight from your bank account to your friends.”
When asked if the pandemic had triggered a faster app launch, Toukan said, “While we started working on Ziina prior to COVID-19, the pandemic has made the need for cashless payments all the more urgent.
“This is for two reasons. Firstly, people have fewer opportunities to meet in person, so they will resort to sending remote payments when they need to pay someone back. Secondly, people are hesitant to handle physical cash which can be a carrier of germs. This is in part due to circumstances relating to COVID-19, and in part, because our users have been looking for an alternative to cash for some time now.”
UAE has been moving towards becoming a cashless society for some time, but Abu Dhabi-based FinTech solution PayBy also credits the pandemic for proving a catalyst for the growth of more cashless solutions being adopted. A spokesperson from the firm told Gulf News, ”…the social distancing economy has indeed catalysed the growth of contactless payment solutions such as PayBy and led to increased adoption rates.”
The firm partnered with First Abu Dhabi (FAB) bank in March 2020, and was then integrated into 40,000 FAB Point of Sale (POS) devices within a few weeks. The company added, “PayBy has also partnered with ADCB and Abu Dhabi’s ITC to roll out cashless payments in all Abu Dhabi taxis, which don’t need to have a POS. Other partnerships with the Lulu Group, the Middle East’s largest retail conglomerate, leading retailers such as Al Ain Coop and Jumbo, have helped consolidate and establish PayBy.”
Banked or unbanked, everyone has a solution
This is a common scenario for some UAE residents where the salary drawn may be too low to open a bank account or get a credit/debit card, or if the resident is still in the process of settling in or moving. PayBy has been integrated with uPay systems, so users without a bank account can top up their digital wallets on kiosk machines and use PayBy for shopping, cashless payments, withdrawals and peer-to-peer transfers.
“PayBy opens a virtual FAB account for each user to ensure the fund security. But linking to bank accounts isn’t a must,” the firm said in the email statement to Gulf News. PayBy has an instant credit feature that allows users to take a small amount as credit for no fees as long as it is paid back in 40 days. However, more information on this feature was not immediately available.
Residents may also have seen PayBy on their VoIP platforms such as BOTIM and Totok. PayBy allows direct P2P transfers between contacts using the chatrooms on these platforms. The transfer can also be done through a text message or via QR codes. The amount is received in the PayBy account but it can be easily transferred to one’s bank. Ziina, on the other hand, doesn’t hold any money and facilitates inter-bank transfers only.
Security is key
A word of advice to our readers using apps for financial transactions – make sure that the security settings on any app you use and those on your device are efficient before saving or entering any sensitive financial data.
Toukan from Ziina said, “Our users’ security is our highest priority. All API calls made to Ziina’s servers are encrypted in transit. Three separate encryption keys stored in three separate places are required to initiate a transaction. One of those keys is only ever stored on the user’s device, so Ziina is unable to make a transaction without the user’s consent.”
A PayBy spokesperson said, "Financial transactions on PayBy are well protected by leading and proven technologies, including an AI-based fraud management system to detect unauthorized activities, compliant with PCI-DSS standards, the international gold standard for security. The QR code generated by PayBy is based on tokenization – widely acknowledged as a more secure payment method as it allows the payment to be processed without exposing sensitive payment information."
Yet another all-in-one payment solution that launched in 2020 was Empay by Emirates Payment Services. Empay is a platform that allows a wide variety of payments and lifestyle services such as Dubai Economic Department License Renewal, all types of bill payments, food ordering from restaurants, education fee payments, international remittance, P2P (peer-to-peer) micro-payments etc.
Save some, invest some
For decades, banks have been the preferred choice for savings, and for risk-free nominal growth of those savings through fixed deposits or re-investment schemes. However, most moderate gain wealth-growing plans are usually unavailable for residents earning average salaries, or who don’t have a pot of money saved away, or those of us who don’t have the time or knowledge for day trading.
Globally, the past five years have seen many new investment platforms that allow micro-investments, buying fractions of a share or shares of an index, which allow people to put away a small amount of money to invest.
UAE also now has a couple of licensed platforms such as Sarwa, Wealthface or Stashaway, where you can start saving or investing at low amounts, paying a fraction of the cost you would pay an investment manager.
A spokesperson from investment platform Stashaway told Gulf News, “In the region, around 45% of the total wealth is held in cash, a very high percentage by any standard. This goes to show that there is a huge amount of money sitting idly and not generating any returns for investors.” Given the residents’ needs in the region, products also need to be modified.
If a person does not want to invest, but just save and make something extra, some platforms offer that as well. For example, Stashaway has a Sharia compliant cash management solution (StashAway Simple) that yields 1.2 per cent per annum without any restrictions or associated fees.
Sarwa, on the other hand, has no savings product but allows small regular investments tied to a goal and the risk appetite of the customer. The growth of such robo-advisors in the region is all the more important given the nuances of trading in global stocks or global index funds which include possible taxes, exchange rate loss, high management fees, and liquidity issues.
As Raja Al Mazrouei, Executive Vice President of the FinTech Hive at the Dubai International Financial Centre (DIFC), put it - the UAE has successfully created a complete ecosystem for companies to grow and thrive.
We started the first and the largest FinTech accelerator in the region and the main idea was to accelerate start-ups.
Mazrouei said “If you go anywhere and say I want to launch this idea, or I want to start this business, there are so many factors to consider like the region where you’re starting, the legal and regulatory infrastructure, access to funding, access to timely business opportunities and so forth.
“If you look at the DIFC itself, we are the biggest financial centre in the region, we are home to more than 2,400 companies, out of which 300-400 are core financial regulated entities. We also have an independent regulator of the centre [Dubai Financial Services Authority or DFSA]. We have access to the court system [DIFC courts] which is based on the UK common law…”
The focus on FinTech
About the Hive’s inception, Mazrouei said, “Back in 2014, His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Prime Minister and Vice President of the UAE and Ruler of Dubai, launched the National Innovation Strategy for the UAE… As a result of this announcement a lot of the government entities and departments started to look at how they could engage with innovation.
“We realised at that time that if we do not look at technology, our whole business model will be disrupted, and that all of our businesses would move to technology companies that were tapping into financial services.”
That’s how the DIFC FinTech Hive (known as the Hive) came into existence in 2017. Mazrouei explained, “We started the first and the largest FinTech accelerator in the region and the main idea was to accelerate start-ups. We said let’s look at the technologies that are evolving everywhere in the world, bring them to Dubai, and engage them with financial institutions and see how receptive these institutions were to these technology companies…”
The end of these tests was a positive growth of startups who chose to accelerate their business with the Hive and they benefited from the partnerships with the financial institutions, DFSA’s regulatory assistance and access to investors and funds. Soon, when realising the need for a ‘home’ for these start-ups, Mazrouei said DIFC decided to expand its start-up friendly features to include subsidized licensing, co-working spaces and a community for these start-ups to grow further.
For example, the centre launched a new DIFC Innovation License in August 2020 that comes with subsidised commercial licensing options, starting at just USD1,500 (Dh5,505) per year. Businesses will also gain access to DIFC co-working space at attractive rates. Innovation firms can secure up to four visas when renting desk space as well as a 50 per cent subsidy on additional visas.
When it comes to regulatory support for businesses based in DIFC, DFSA comes in with their own product – the Innovation Testing Licence (ITL). Bryan Stirewalt, Chief Executive at DFSA said, “Over 100 firms have applied to the ITL since its inception. The majority of these firms are providing money services, alternative lending, and wealth management.
In May 2017, the Innovation Testing Licence (ITL) programme was established. Over 100 firms have applied to the ITL since its inception.
“The ITL gives the DFSA the opportunity to observe firms in a controlled environment while deepening our understanding of the risks and benefits that arise from these innovative business models.”
A firm with the ITL receives, from the DFSA, a restricted financial services licence which will allow it to test its product or service for a period of usually 6 to 12 months. At the end of the Testing Period, the DFSA does a final analysis of the firm, and its regulatory preparedness to transition to an unrestricted licence. The ITL application fee is US$5,000 (Dh67,344) apart from other DIFC related fees.
Regional hub for start-ups
WAM reported that more than 50 per cent of all FinTech businesses in the GCC now operate from DIFC. The first half of 2020 witnessed DIFC FinTech Hive triple in size with the opening of a larger space in Gate Avenue supporting start-ups, scale-ups and entrepreneurs.
This focus on encouraging startups in the FinTech industry was soon reiterated across UAE. In Abu Dhabi, under the patronage of Sheikh Khaled bin Mohamed bin Zayed Al Nahyan, Member of the Abu Dhabi Executive Council, and Chairman of the Executive Committee, Hub71 was launched in 2019 as a flagship initiative of Ghadan 21, Abu Dhabi's accelerator programme driving the emirate's development through investing in business, innovation and people. The tech-focused ecosystem is based in Abu Dhabi Global Market (ADGM).
At the centre of this initiative in Abu Dhabi is the FinTech Abu Dhabi festival – a 3-day digital event hosted by ADGM and the Central Bank of UAE in November 2020 while registrations for the event are now open for the 2021 edition. ADGM’s Financial Services Regulatory Authority (FSRA) offers the regulatory framework for companies in the industry.
WAM recently reported a 119 per cent growth in the Hub71 community of startups, despite the challenging economic environment caused by the global pandemic, expanding from 35 startups in January 2020 to 102 startups a year later, surpassing the ‘100’ milestone. The international community of 209 tech founders at Hub71 originate from 43 countries, with 18 per cent women and 15 Emirati founders.
Sheraa, Sharjah’s Entrepreneurship Centre, is yet another ecosystem in the UAE helping entrepreneurs get their ideas off the ground. Sheraa, which means ‘sail’ in Arabic, is centred at the American University of Sharjah. A not-for-profit centre, Sheraa focuses on mentorship and growth of entrepreneurial ventures from the idea-stage to funding stage.
Sheraa has been organising an annual festival called Sharjah Entrepreneurship Festival (SEF) since 2017 to cultivate the entrepreneurial mindset and inspire the next generation of ‘change makers’. Over the years, SEF has seen 200+ showcasing startups, 240+ local and international speakers, and 8,000+ attendees.
The UAE’s global standing in innovation, especially in this sector, is a purposeful impact of long-term strategies and initiatives. Sheikh Mohammed Bin Rashid launched the National Innovation Strategy for the UAE in 2014 with the aim of making the UAE one of the most innovative nations in the world within seven years.
The importance of becoming a cashless and paperless society, however, is not just to be technologically advanced. According to a MasterCard study, countries that prioritize digitized payment economies are better placed to mitigate the associated adverse impact of unemployment, financial exclusion, fraud, theft, cost of cash, and corruption.
Did COVID-19 trigger the rise of more money solutions?
Every stakeholder we spoke to agrees that, while going cashless was already the need of the hour globally and in the UAE, the pandemic may have accelerated that need even further.
Bryan Stirewalt, Chief Executive at DFSA said, “In early 2020, the DFSA expanded its permitted financial services activities, by introducing the region’s most comprehensive Money Services Regime. The introduction of this new regime coincided with the declaration of the COVID-19 pandemic by the WHO.
“We have since had considerable interest from firms wanting to establish a presence in the DIFC and offer innovative payment applications to consumers in the UAE and across the MEASA region. The majority of the firms applying for the ITL, and in the ITL, are money services firms.
“So, it can be hard to tell if this was driven by the pandemic, the overall trend of digitisation of finance, the creation of the regulation itself, or just an increase in demand from consumers wanting access to innovative payment solutions. We believe it is a combination of each of these factors.”
Disclaimer: The companies mentioned and their services are based on interviews and based on publically available information and being featured is not an endorsement. Gulf News is not responsible for any change in situation, or misinformation by or about these firms, or any loss or damage resulting from such change or error. The use of financial apps and platforms come with risks that users should be aware of during such use.