An aspiring entrepreneur and seasoned finance professional, Ummair Butt, was just days away from leaving the UAE following the failure of his first Dubai business in 2010. Advance almost 14 years, and Butt is now Founder and CEO of Direct Debit System, a successful start-up born out of the challenges he faced with budgeting as a monthly salaried parent in the UAE.
Recounting his journey, Butt explained, “After the failure of my first Dubai-based insurance aggregator business, I had to move to full-time employment. Two school-going kids meant I was paying three cheques for school and four for a rented apartment. These bulk post-dated payments never made any sense to me, so I decided to investigate why the system existed in this way. I found that organizations were treating cheques as a hedge to protect future cash flow, a cheque was merely a security instrument to guarantee future payments. However, no one knew that bounced payments could be reduced by 41% if people pay monthly, and there was actually a perfect digital legal alternative to cheques – Direct Debit.”
Butt continued, “September used to be a challenging month as school cheques would be large due to books and uniforms, plus the rent cheque going out within just a few days. It would clear out the account and we would then go on to live off the credit card. This vicious cycle of dipping in and out of debt continued until 2012, when a press release announced that the Central Bank of the UAE was launching Direct Debits in the country.”
Butt had previously spent several years in the UK finance sector, where he played a part in the introduction of the Bacstel-IP platform. It was a standardized platform that has resulted in 97% of the UK population using Direct Debits today. As a junior accountant he became fascinated by the country’s transition from cheques and Giro payments to the Direct Debit system. Butt volunteered to be part of consultative committees of BACS UK Ltd, the regulator of Direct Debits on behalf of the Bank of England, aiming to create a system that was more business friendly. Because of this, cheques became a thing of the past and it ultimately inspired Butt to attempt a similar approach in the UAE.
Following the 2012 announcement of Direct Debits in the UAE, Butt’s fascination soon turned into frustration when he found that UAE banks were doing exactly what UK banks had done in the early 2000s, working across different portals rather than a single centralized platform. Recognizing the same challenges that he had seen previously in the UK system, he realized that his dream of everyone moving to monthly payments in the UAE would not be achieved if left to the banks alone, and he decided to take action.
Butt explained, “Whilst employed, I moved to Ajman to save on rent and dedicated over half of my monthly salary towards the development of a new Direct Debit system for the UAE. In September 2017, I resigned from my job and started Direct Debit System FZ LLC and we soon landed two large real estate clients. However, there were still flaws with this system. If a business had “assignments of receivables” with more than one bank, it could not use a single bank to sponsor Direct Debits, as the other bank(s) would not let receivables go through any other bank’s system. This, along with the fact that it remained a paper-based latent process, left me frustrated.”
Against this backdrop, Butt approached the UAE Central Bank to explore whether he could instigate the same change that BACS UK Ltd brought about in the UK, with the aim of creating a platform that is bank agnostic, paperless, standardized, and supports the interoperability of the Nation’s Direct Debit system with financial and CRM systems.
“It took us three more years to develop our system to act as an aggregator of Direct Debit for the UAE Central Bank and to get the necessary approvals to become a licensed entity with CBUAE through a local bank”, explained Butt. “We were finally granted a NOC in Sept 2022 to access the CB systems”.
In September 2023, after rigorous testing of the system for a year, Direct Debit System FZ LLC onboarded its first client and the current rate of enlisting so far suggests it will cross 150 clients in 2024, with some notable names getting onboard. The start-up is also looking into other regions and territories with a UK subsidiary already established and KSA, Pakistan, India, Malaysia, Indonesia, US, and Central Asian countries next.
Butt concluded, “I know from experience that Direct Debits can help monthly salaried people to budget better and stay out of debt. People should stay away from X% credit card offers and simply budget monthly outgoings. It equally helps business to lower the cost of collection through a safe legal system. After years in development, I hope that both merchants and customers in the UAE can benefit from Direct Debit and its safety and ease of use will make regular payments more streamline and cost-effective.”