Tag: fintech

What it’s like launching a Fintech startup in the UAE

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Ian Dillon

It took us 4 years – but we launched our Fintech startup NOW Money in May this year, and the reception so far has made it all worth it.

We started NOW Money in the summer of 2015. Back then we didn’t yet know how little we knew about what we were trying to do and how to do it, but we did know exactly the problem we wanted to solve.

Bank accounts are often accessible only to those that earn over AED5,000 per month. In the GCC, there are 25 million low-income workers that earn less than this. This means no bank accounts, no online payments, no ability to send money home using cheap online providers that almost everyone from Europe is used to. Our goal was to provide the best account in the GCC, with these excluded workers our customers.

My co-founder, Katharine, and I had seen the success of the new mobile only ‘challenger banks’ that had started in the UK – the likes of Monzo, Startling and Revolut. Customers loved them and had a passion for them that had never been seen for banks and financial services companies before. We wanted to do the same thing first in the UAE and then across the GCC.

These days, ‘startup’ and ‘Fintech’ are the new big buzzwords. Billions are invested into Fintech startups annually; many people have entrepreneurial ambitions to start or work at a startup and a number of corporates have strategies to partner with or support entrepreneurs and startups. However in 2015 mindsets were completely different. Almost no one understood why we’d left well paid jobs and the corporate ladder. We were laughed out of meetings, often told that what we were trying to do was impossible. We couldn’t get legal support, couldn’t get a bank account ourselves and were lightyears away from being able to raise funding. We made life hard for ourselves by being focused on remaining independent, creating our own technology and providing the best customer service possible from day 1, and the delays were demoralising and at times we wondered if we’d ever get to launch.

However with persistence we broke down each of the barriers – and 4 years and a lot more grey hairs later we launched in May this year. We had to overcome so many challenges in those 4 years to launch, the most time consuming being banking (try getting an account, let alone a banking partnership as a Fintech startup in the UAE) and regulatory issues.

These barriers took so long to break down that we had got used to running the company in a cycle of break down a barrier, move to the next problem, raise funding to keep the lights on, repeat. So when we had finally received the last of the approvals required earlier this year and launched, it all felt quite surreal.

For the first time, and after years of planning, we had customers. This meant the problems we had to solve quickly changed from dealing with bankers, regulators and investors, to issues such as customers losing their cards, remittances being delayed, customers not having the right documentation to open an account, etc. We realised that even with the most comprehensive planning, you cannot prepare for and have no idea what will happen until you launch! We’ve learned to be very nimble and adaptable, aided by our incredible in-house team of tech developers that are all with us in Dubai and everyone in the company (and this means everyone!) is on the ground with customers at least once a fortnight. We believe it is this connection with our customers and ability to innovate quickly to optimise ourselves around their needs which sets us apart from the competition.

The satisfaction and validation of our mission that we’ve seen since launching has been immense. Numbers of customers continue to grow strongly – we’ll accept over 2,000 new customers in September alone – but the most pleasing thing has been the reception from customers. 

With an account like NOW Money, it would be easy for our customers to use the MasterCard we provide to take their salary out at an ATM and continue to spend this cash in the same way in which they did before, and at first they did. In our first month in May just 12% of our customers used the account for anything other than cash withdrawal. However since then the engagement has exploded as customers discover the range of services available to them in the app – services which save them significant amounts of time and money, which ultimately ends up in the hands of their families back home. And as word of mouth spreads amongst our customers, the change in behaviour has happened rapidly. Last month almost 60% of our customers made an in-app transaction or significant card spend in-store, and this ratio is continuing to trend strongly upwards. More importantly, the direct feedback we collect daily has been overwhelmingly positive, with customers used to being ignored often surprised that a company would go to such lengths to provide a great solution for them.

Also pleasing is to see the appreciation of their employers. Employers in the UAE often get a bad rap for the way they treat staff – but those we’ve worked with really do care and on a couple of occasions I have even been called directly to thank us for providing a service their employees like so much and that provides them with financial independence they’ve not experienced before. This has led to employers referring us to other corporates in their networks – the very best form of sales lead.

We’ve just closed a funding round, led by the UK’s leading Fintech Venture Capital investor. We are working hard on adding additional exchange and other partners to our network to give our customers more choices, preparing for upcoming launches to Saudi and Bahrain, and working on an offering for SMEs in the UAE. But one goal that will remain our number one priority – the same mission that got Katharine and I through the tough times for 4 years – is providing the best account in the GCC for our customers. We don’t believe that income, nationality or any other factor should stop anyone from having the best experience and loving their account, and so far the response we’ve seen from our customers is proving that it isn’t.

We’re changing the way financial services operates in the UAE, and operate in a very transparent and openly collaborative manner. If you’d like to learn more or reach out with any opportunities, please reach out to me on LinkedIn, Twitter or comment on this post.

A technical insight on how to be certified to operate in the Payment Card Industry

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Introduction

The Payment Card Industry Data Security Standard (PCI DSS) is an information security standard for organizations that handle branded credit cards from the major card schemes (Mastercard, Visa etc.)

Being PCI DSS certified verifies that your company infrastructure and business processes are secure enough to process and hold customers card data, allowing the company to process payments, bills, subscriptions etc. PCI DSS certification is a very important certificate to have as a financial institution or fintech company such as NOW Money.

Continue reading…

Why FinTech and Banks need each other

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Since the banking crisis of 2008, the financial services landscape has altered dramatically. Faced with a range of issues such as low interest rates, lack of customer trust and slow, cumbersome legacy systems, it first appeared that traditional banking institutions were ill placed to compete with the wave of new players in town. These start ups were offering a far superior customer experience, attractive products and fast access to services.

Much in the same way as traditional media outlets who didn’t see the signs fast enough, the big banks seemed doomed. A failure to innovate fast enough in today’s fast-moving digital world can sound the death knell for an industry.

However, the banking world has had a sharp wakeup call in recent years and many institutions have now realised that the days of batch processing and monthly updates are over. They know that customers want a personalised, tailored banking experience akin to their favourite online shopping platforms. Customers want to be able to bank when at a time of their choosing and from wherever they like.  They want fast, responsive services and they want simple and easy to use interfaces when they bank, not branch only, face to face banking such as in the past.

Whilst the big banks have strengths, speed is not one of them. Their slow reaction to the growing digital movement allowed nimble start-ups to take advantage of the gaps in the market left by the traditional providers. Some areas tapped into by the FinTech companies have been particularly successful, for example, peer to peer lending and crowd sourcing apps have expanded rapidly, with the likes of Beehive and Eureeca in the UAE.

Another area that traditional banks overlooked due to its previous unprofitability is serving the unbanked. FinTech companies have a lower cost base and so can deliver services much more efficiently, therefore finding whole segments of the market that have largely been ignored. Providing financial services to those shut out of the market can have a significant impact on society as a whole. Companies operating in this space are usually not just in it for the profitability aspect but for the social impact as well.

However, whilst FinTech companies initially appeared to have all the answers, they also experienced several road blocks. A lack of infrastructure and an established customer base were hindrances to expansion. Lack of brand recognition and ready capital also became obstacles to many FinTech companies trying to scale their offerings. Furthermore, regulatory compliance and risk management, things that are old hat to the banks proved to be the undoing of some new startups.

More than a decade after the crisis that lead to these changes, attention has now settled on collaboration between the banks and the FinTech companies. Rather than competing for consumers, working together is now seen as the way forward. Many banks are increasingly open to working with smaller, niche players who can bring services to them rather than building their own. Furthermore, many FinTech players see themselves as complementary to banking services as opposed to replacing them.

The World FinTech Report by Cap Gemini and Linked In noted that, ‘Bringing in the top talent with the relevant skills and creating the right culture, while also making strategic investments in agility, digital, and operational excellence, will maximize firms’ ability to achieve customer focus. Creating an effective partner ecosystem will also be critical for success.’

It’s no longer enough for banks to rely on what they’ve always done, the future will be owned by those who continue to innovate and work with the new players in the market. The fragmentation of services certainly can make things more complex for traditional institutions however, it can also reap rich rewards.

UAE – Home of the expat

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The United Arab Emirates stands as an attractive place to live for many reasons. It’s innovative approach to business, it’s technologically forward outlook, the tolerance and respect for different cultures and religions and the demand for labour from all sectors of industry has meant the country has become a beacon to expats across the world.

So successful has the UAE been in attracting people from elsewhere that the local population has been dwarfed by the huge number of expats flocking to this glittering oasis in the GCC. The Emirati population stands at just over 11% of 9.5million, the total population of the UAE.

Within the expat population, the largest nationality group is Indians, making up over 27%, next is Pakistan 13%, Pakistanis – 12.69, Egyptians – 4.23%, Filipinos – 5.56 % and Others – 38.55 (Bangladesh, Uzbekistan, Krygstan, etc.). Western expats account for approximately 8.5% of the total.

As the figures highlight, a significant proportion of the expat population are from South East Asian countries. Many have come here to work in low skilled, manual work in sectors such as security, construction and transport. These roles are often low income, however, the workers are earning more than they would do in their home countries and many are supporting other family members in their native lands.

Whilst the expatriate labour force is a much-needed source of strength to the UAE, providing a considerable amount of spending power between them, inevitably, due to family support needs, there is also a vast outflow of funds back to home countries.

The number of remittances jumped 17% in Q1 of 2018 to AED 43.5 billion and approximately 70% of these transfers were done through money exchanges.

Indian workers led the remittances with Dh16bn, followed by Pakistanis, Filipinos, Omanis, Egyptians, Americans, British and Bangladeshi expatriates.

With the considerable sums involved, remittance payments are a rich source of income for exchange houses, but this way of transferring money comes with its own problems for expats. Problems such as difficulties in accessing the physical exchanges themselves, working out the optimum time to do a transfer and avoiding fees are all faced by expats when they need to send money.

This is where FinTech companies can have a hugely positive impact on people’s daily lives. The replacing of cash transfers with digital ones will reduce costs and save time both for the senders and recipients. Creating a system that allows financial inclusion for the low paid will mean greater benefits for the entire financial system.

Giving the ‘unbanked’ access to proper financial services that suit their requirements will have a significant impact on society. It makes a difference to social mores such as equality, employment and GDP. Furthermore, it also lessens the use of cash in society which reduces costs across the board, from shopkeepers to governments. The less notes and coins in use means less money governments need to spend to produce them. Reducing the use of cash can likewise help to prevent fraud and illegal activities. Digital payments are much easier to track and scrutinise than cash ones are.

Lack of awareness amongst the low paid and low skilled workforce is often cited as a hurdle that needs to be overcome. However, the UAE has one of the worlds highest smartphone penetration rates in the world and therefore, access and use of digital devices is not a stumbling block, even among the migrant workers.

By creating favourable conditions for FinTech companies to develop and grow, the UAE will provide a financial lifeline for those who need it most. The country stands to gain enormously by giving its expat population the opportunity to participate fully in the financial sector and go digital.

A brighter future

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Meet Naveen and Rohan, two childhood friends who rolled the dice. At first glance, they seem like any other blue collar expats, working hard to support family back at home. However, Dubai wasn’t their first port of call when looking for employment outside their home country.

After spending most of his young life in India, Naveen moved to Singapore to finish his degree. Rohan followed suit by travelling to New Zealand for his education. They smile as they recall their experiences as first time expats in these developed, westernised countries. Studying and being away from family for the first time feels a lifetime away from their current position. They now work 12 hours a day and 6 days a week as security guards at a compound.

Whilst there is little time for fun in their current daily routine of work and sleep, both men draw strength from their families back home. They speak to them daily and remind themselves why they are doing the jobs they do.

After being denied a work visa in New Zealand, Rohan needed to find another job. He still had to support his parents but after enjoying the way of life in New Zealand, moving back to India was not an option. “Even though financially things have gotten better, life is too sad back home. All my friends want to leave;” and one of them had his eyes on Dubai. A recommendation from this trusted contact was all it took for Rohan to end his search. He knew little about the city and didn’t care. All he needed was a job and a work visa, something New Zealand refused to offer.

I find out that at the same time Rohan’s life was being uprooted, Naveen decided to spend all his savings on his sister’s wedding. He struggles to contain his joy when he tells me this, so the look of embarrassment that follows is puzzling. His family is his priority but his act of selflessness, though commendable, proved short sighted. Naveen’s father became ill. The expenses of his heart medication began to snowball. The cost of living in Singapore started to skyrocket. Naveen needed more money. And quickly. In desperation he turned to Rohan who offered him a ray of hope in the form of Dubai. Without hesitating, he spent his remaining 14,000 rupees on a one-way trip.

The difference between these two and other migrants is their perspectives. They had lived in first world countries, been educated at degree level and knew their worth. Sadly, great expectations often end in disappointment. At first glance, this is just another example. Both men are tired, frustrated and worst of all, underpaid. Despite moving across the world their salaries have barely improved. Their families are still struggling.

However, what happens next is unexpected. Rohan tells me that this is all going to change. He explains that they are pursuing new jobs. Rohan has previous management experience and is looking for a managerial role at a hotel, whilst Naveen is pursuing more lucrative security role. They make a point of referring to their future as “bright”, a complete contrast to the dim room we are currently in.  Nevertheless, they remain resolute.  Neither of them has given up on reclaiming the lives they used to lead.

They admit it will not be easy. Meaningful opportunities are scarce, they have little time or energy to pursue them and their Indian passports have proven to be a stumbling block. The odds are stacked against them. However, bad odds didn’t deter them in the past. They are willing to bet on themselves yet again and I hope their luck will change. After all, this is Dubai, the city where dreams are made.

 

 

 

 

The poverty premium: It costs more, to be poor.

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Put simply, the poverty premium is the principle that people on low or zero incomes pay more on the essential costs of living than wealthier people.

Despite working in a business entirely centred around financial inclusion (providing access to the digital economy for those usually unable to afford it) I have only recently begun to investigate the true reach of the poverty premium’s grasp: across almost all areas of our economy.

At a basic level, the poverty premium is predominantly dictated by economies of scale. Purchasing in bulk or from hypermarkets usually affords the buyer some kind of discount.

Why would you buy the rice from the convenience store? Perhaps it saves a trip in the car. If you fall into the middle or upper financial segments, this is likely. But for people on a lower income, around 70% of the UAE population, buying a small amount is all they can afford at one time. But they get less rice, dirham for dirham, than those who can afford to buy in bigger quantities or hypermarkets they can reach in their cars.

According to University of Bristol, the lowest income UK families pay nearly AED 4,000 more per year than their middle income counterparts for basic amenities. Costs are driven up by having to pay to access money (same in the Gulf), increased insurance costs due to living in dangerous areas, and paying for utilities in inefficient ways such as pre-paid meters, kiosks and gas bottles (again, same in the Gulf).

Working in the remittance industry, I am acutely aware of the costs people without access to the digital economy face compared with those who are banked. People from smaller countries such as those in Africa pay up to 30% of their transfers when paying cash at the counter. Those who can send them online would pay less than 5%.

Finance, access to credit, insurance – this is just the obvious stuff. The poverty premium extends way past finance or even groceries.

The UAE’s recent ban on Skype has, as a nation of expats, affected most of us. Free calling home made living away from loved ones that little bit easier. Many have already found VPNs are a way to circumvent this ban. VPNs are not only illegal in the UAE, they are prohibitively expensive (around $100) for those who have a monthly disposable income of around $200 (AED750), and often too complicated for people with an elementary grasp of technology to implement anyway. Middle and higher income people may choose to pay this one-off VPN cost, but those on the lowest incomes must instead pre-pay for what phone credit they can afford and then spend that credit on premium international calls. Much like inheritance tax, the poverty premium is not afraid to tax the same funds repeatedly.

Have you noticed that in the last decade, the cost of “luxury” lifestyle goods – think televisions, Playstations – has depreciated, whilst the cost of life’s basics – food, healthcare, transport – has exploded to ruinous levels? The poverty premium doesn’t apply only to people living in absolute poverty like Somalia. This new type of poverty continues to hit those living in precarity in America, the UK and even here in the UAE.

So how are we addressing the poverty premium? Despite the attempts of universities and charities, it receives little attention from policy makers. Better to look at something you can influence far quicker. Technology. Technology is the ultimate equalizer.

Skype ban excluded, technology is bringing the power of choice to anyone in possession of a smartphone. The UAE has a 98% smartphone penetration level. If you are still in any doubt of lower-income people’s capacity to operate a smartphone (we still hear this a lot), please look at this recent image of the NOW Money team delivering dates during Ramadan.

Looks staged, doesn’t it? It isn’t. These people are ready and waiting with half our economy’s purchasing power. The “new” ideas aren’t really new – after all, they are just selling things, renting things, delivering things. But the way they can be paid for and consumed – online, rather than expensively at the closest shop, brings a whole new dimension to accessibility and pricing.

The reason for financial inclusion isn’t just providing people with a safe place to keep money (albeit, that’s a good one). We have bigger plans for NOW Money and its ability to bridge the gap to other platforms: ecommerce, apps, even drones. These are just at the start of the journey to financial freedom for society’s most challenged. And for the creators of these platforms, your market just got a lot bigger.

 

 

A long way from home…

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Meet Dennis. He works as a concierge but his purpose to his family is far more important.

After moving to Dubai in 2016, Dennis is in the final year of his contract and is counting the days until his return to his native Uganda. His positivity is infectious, and it is a rare occasion to see him without a smile, but I quickly learn that he often feels low whilst working in this towering building. His joyful demeaner dampens as he explains his mother’s illness and the medical expenses that have accumulated. Despite being the youngest of his three brothers, he bears the sole responsibility of providing for his mother back home because they face their own financial troubles.

I asked him what he misses the most about home and his reply was simple, “freedom.” He explains the laidback lifestyle he used to enjoy where he had no formal working hours, or even a job title for that matter, but was still able to live comfortably. Some days he would sell clothes and on others he would work on a farm if he so desired. He used to wake up with no boss, no stress and a level of independence someone with my background can only begin to imagine. He recalls how on the weekends he could afford to buy a new set of apparel by selling the clothes off his back, an unconventional trade by our standards but commonplace for him.

One thing he loathes is the inherent “laziness” of his life here. He shows me a picture of himself when he was in Uganda and the difference is staggering. He now cuts a slim figure but just a few years ago his physique was that of a bodybuilder despite never setting foot in a gym. “In Uganda life is the gym, work is the gym. I never had to pay someone to let me exercise!” He goes on to joke that being a doctor in Uganda is a difficult business because few people are sick.

Unfortunately, one of those people happens to be his mother, hence why he sacrificed his content life to move to Dubai. He now works from 7am-7pm, a stark contrast to the carefree life he used to live. His weekends consist of napping and very little else. He jibes that it takes him 3 days to watch a single movie because he inevitably falls asleep, recovering from his long working hours. His anxiety over his mother’s health is exacerbated by the fact he gets paid at the end of the month. “If an emergency happens in the middle of the month and I can’t send money…” he trails off dreading the worst before his beaming smile re-appears.

The discrimination he faces is deeply saddening. He tells me of the tension between himself and his Asian co-workers. The perception is that he and other African’s have come to steal jobs and there is no way for him to challenge this hostility.

Dennis, who has a degree in management, tells me something profound; “workers like me are not just the first face you see in a company, we are the face of this country. Without us nothing here would work so we should be respected like regular people.”

These tribulations have often caused him to think of quitting. Nevertheless, he dismisses these thoughts as weakness. He would consider himself a failure if he quit and abandoned his duties so remains hopeful, determined and patient. “Part of being a man is surviving these struggles”, he proclaims.

Although he must spend another year away from home, he continues to smile whilst toiling, knowing he is doing this for his family.

Missing 10 years of your child’s life; is it worth it?

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Nasir emigrated to Dubai from Khyber Pakhtunkhwa, a scenic area of northern Pakistan which is surrounded by snow tipped mountains and greenery. He made the decision to come to Dubai after his older brother told him that there are many opportunities for employment, and also many other Pakistanis.

After arriving in Dubai, he found a job as a gardener for a landscaping company which caters to one of the many gated communities in Dubai. This was in 2008, and since then he has been back to see his family four times. Nasir talks fondly about his three sons who are back in Pakistan, and is always amazed by much they grow in between his visits. His eldest son is now eighteen years old and is also looking to come to Dubai soon.

Nasir works nine hours a day, six days a week and moves from house-to-house using his bicycle. He lives in company-owned accommodation where he shares a room with one other gardener of similar background.  At the beginning and end of each day the company bus transports Nasir and the other gardeners to and from their accommodation in Al Quoz.

In general Nasir enjoys working in Dubai, especially in the winter. During the summer his hours are decreased and he longs for Friday – his day off. He spends his day off at the Mosque, followed by the cafeteria near his accommodation.

Almost all of his monthly salary is sent back to his family and he survives on as little as he can in Dubai. Like many migrants in the UAE, he does not have a bank account. Nasir’s dream is to start a modest car sales business and bring his whole family to Dubai. One day, he hopes to save enough money to move back and live comfortably in Pakistan – although with his current banking situation, or lack thereof, he has scepticism as to whether he will achieve this.

Written by Emaad Alvi.

Working 7am-7pm, what a way to make a living

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In the second blog post of the Real Life Stories series, we hear Third’s story.

Why is he in Dubai? How does he spend a typical day? What does he do with his money?

Life isn’t always easy, but with an end goal to focus on, there’s light at the end of the tunnel.

Third’s story

Danilo III, or “Third” as he likes to be known, has lived in Dubai for four months, where he moved to from the Philippines. He works as a concierge for a building management company.

Just like most migrant workers in the UAE, Third works six days a week for 12 hours a day, 7am until 7pm. A typical day starts with an instant coffee before the bus ride into work. He lives in Al Quoz, and his accommodation is a long distance from the metro, so he has to share a bus with the colleagues he lives with (he shares a room with several other men). Work is 10km away so walking isn’t an option, especially in the summer when the temperature is known to reach 50 degrees Celsius.

After the bus journey, Third gets to work where he spends the day dealing with the visitors, tradesmen, and office workers in the building. He enjoys his job, there’s lots to do so he’s always busy and especially enjoys getting to know the residents of the building and hearing their stories every morning. He greets everyone with a warm smile, which is bound to brighten up even the dustiest of days!

In the evenings, Third generally does some grocery shopping or his laundry or other household tasks. When possible, he meets up with his wife, which is usually around three times a week. He met her in the Philippines, and they moved over to Dubai together, however they have to live in separate accommodation because they work for separate companies. She works and lives at the airport, which is 25km away from where Third lives in Al Quoz. As you can imagine, being newly weds and living such a distance away from each other with minimal public transport isn’t ideal. They both have the same day off each week, which they spend wandering around Deira City Centre Mall (but not buying anything…).

Third and his wife moved to Dubai to save money and make a better life for themselves, as well as to send money to their friends and family back home. Their first goal is to save enough for a proper Church wedding, as they only had a small affair at home. Then they would like to rent a flat together, so they can settle down and end the current separation. Third is also putting away a little bit of money each month for when they decide to have a baby.

Access to an online account means they could manage their finances and keep their money securely in an account (rather than in cash format stored in shared accommodation). The life Third and his wife wish for is within reach. The money to be made in Dubai is far more than they can earn back in the Philippines, which will in turn open up more opportunities for their future family. Giving Third and his wife access to banking and cheaper remittance could bring their dream wedding and life as a family one step closer.

UAE VAT for FinTech companies explained

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Everyone who lives in the UAE knows that on January 1, 2018 value-added tax (VAT) will come into effect. There is a lot of talk, and furthermore, uncertainty, with the date just around the corner. When it comes to the impact that this will have on the world of FinTech – the uncertainty just goes over the top!

As a result of my experience with both VAT and FinTech, I thought I’d write a post about the issue, and address the main points of uncertainty.

Most people will be familiar with VAT in general, but if not, you can email us to view the presentation from my last ‘VAT in the UAE training’ here that was organized by Astrolabs on the 29th of October, 2017.

So what is a FinTech and what attributes does it have which make VAT treatment so vague?

According to Patrick Schueffel, in his paper, Taming the Beast: A Scientific Definition of Fintech in the Journal of Innovation Management; “FinTech is a new financial industry that applies technology to improve financial activities. FinTech is the new applications, processes, products, or business models in the financial services industry, composed of one or more complementary financial services and provided as an end-to-end process via the Internet.”

Based on the definition above, I have come up with some unique features of FinTech companies, and what VAT complications they may face:

1. Provision of financial services

Financial services in relation to VAT is still a grey area in current VAT legislation. However, as draft cabinet decision on the Executive Regulations of UAE VAT law says, if the financial services are performed NOT in return for an explicit fee, discount, commission, rebate or similar, then they are exempt for VAT purposes. However, if the services above are performed for a fee, discount and commission, etc., then they should be taxed at 5 per cent to the extent of the amount of that separately identifiable charge. For example, the remittance operation itself is exempt from VAT however the fee that is charged by the financial institution is not. Therefore, there will be 5 per cent VAT added to the amount of the fee, but not to the amount being remitted. The last point – agreeing to do, or arranging financial services as per current UAE legislation also counts as the provision of financial services.

When it comes to the recovery of input VAT, tax incurred on costs wholly attributable to the standard rated supply of financial services can be fully recovered; and VAT incurred on costs in relation to exempt supplies – cannot be recovered. Therefore, companies should accurately distinguish which costs are attributable to the financial services that are exempt, and which are taxable supplies. If the company has both, then the following ratio should be applied:

Taxable supplies/Taxable + Exempt supplies

For more guidance on this, please have a look at the guidance published by the federal Tax Authority here.

2. Provision of services digitally

Another feature of a FinTech company, is the digital provision of its services. For this we have to be familiar with the place of supply concept, because if the services are provided to someone outside of the UAE, VAT is not applicable, and vice versa.

The place of supply for the goods, for instance, is where the goods are. When it comes to digital services, the provider has to know who is the recipient – whether it’s a company (B2B) or an individual (B2C).

In a B2B scenario, the purchaser is responsible for accounting for the invoice in accordance with a rule known as the reverse-charge mechanism. The purchaser accounts for the VAT of that invoice as an Output VAT (sounds strange but that is the way) and Input VAT at the same time, meaning there is no VAT liability, only reporting of the transaction.

With B2C, the scenarios are as follows:

3. Fintech companies registered in Dubai International Financial Centre and other free zones

There is a lot of talk around free-zones and how they are going to be treated for VAT purposes. The latest draft regulation says that if the company is registered in a designated zone which is a fenced free-zone, then it is considered as outside of the UAE VAT scope. If the free-zone is not fenced – like DIFC – then general UAE VAT rules apply.

I hope the above helps shed some light on VAT treatment for FinTech companies who, just like us are trying their best to navigate in this complex business world.

Please feel free to leave comments if you have more insight on the VAT situation described in this post, or any questions.

4 reasons to meet us at RegTech MENA

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We have a confession: we love to scan.

Any kind of ID document; you have it, we want to scan it.

The NOW Money team have been geeking out over customer onboarding over the past few months, and the conversation in the office rarely steers from what’s come to be known as “scan chat”.

Ben Walton, NOW’s Technical lead, has been working tirelessly, testing different techniques to find the crème de la crème of compliance and biometric security. He’s scanned Co-founder, Ian Dillon’s passport so many times we think he’s now been put on a warning list. There’s been hours of fun testing comparisons such as a female’s ID photograph against a male selfie.

“Do I REALLY look 12% like a man?”

All in the name of onboarding security.

When we were invited to the RegTech conference in Bahrain on 22nd and 23rd November we jumped at the chance to get involved in the conversation in the region. Ben even moved his flights forward for Bahrain 70.3 triathlon, which he’s taking part in the following weekend. He’s that dedicated to RegTech.

If you’re going too, here’s 4 reason’s you should come and find us for some “scan chat”

  1. See a demo of the most advanced onboarding service in the Middle East

As one of the region’s first and most prominent FinTech companies, we’re ahead of the curve when it comes to digital onboarding. But you’ll have to see it to believe us – and we want to show you! Get in touch to arrange a meeting.

  1. Hear about cyber security from NOW Money’s Co-founder

Don’t miss Ian Dillon speaking on the subject “Cyber Security and Cyber Risk in the Age of RegTech” which is on Tuesday 21st November 21st at 11:35 AM. Put a reminder in your calendar and bring your best questions.

  1. Learn how to save time

With many companies in the region, onboarding and KYC processes can take days, weeks and even months. If any information is missing at sign-up, then the application is not progressed or refused. Our onboarding solution can verify documentation on the spot, using the latest scanning, biometric and KYC technology, saving you time making multiple trips to a branch.

  1. Discuss blockchain with people who know what blockchain is

So often you go to a conference where the speakers are throwing buzzwords around in an attempt to show they’re keeping up-to-date with industry trends. But we really do know our stuff. We are using blockchain in our onboarding solution to solve real life problems in the Middle East. We live and breathe FinTech and RegTech, so if you want to have a proper chat about the latest fashionable buzzwords, we’re your guys.

Have we convinced you? Get in touch now to arrange a meeting.

8 misconceptions about the UAE and its residents

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I often get asked about my thoughts about the United Arab Emirates (UAE). Before I moved here, I probably would have described a land of sand, oil, mosques, wealth, and magic carpets amongst other things.

In all honesty, looking back, that wouldn’t have been a terrible guess, but now that I’ve lived here for a while, I think maybe it was a bit one dimensional!

One can’t be blamed for basing assumptions on what most people would consider to be the native Arabic speaking Emiratis; how they live and what jobs they do. But the Emiratis only make up 13 per cent of the population. The rest? 17 per cent Western expats and 70 per cent low-income migrant workers from countries such as Pakistan, India, the Philippines, Bangladesh, Nepal and Sri Lanka.

Are you shocked that not everyone drives a sports car? Well, it’s true. And there are a few common misconceptions about the UAE and the underprivileged 70 per cent of its population that I can help clear up for you.

  1. The streets are paved with gold
    More golden sand, than actual gold. The UAE is celebrating its 46th National Day in December 2017, so understandably, it’s very much still under construction. Yes, there is a lot of wealth, and the Burj Al Arab is partially plated with gold leaf, but there’s also 70 per cent of the population who earn under AED 5,000 a month (around $1,360) and cannot afford luxuries.

 

  1. You can live here comfortably on $1,360 a month
    Most of the low-income migrant workers in the UAE are here to send money back to their families, because they can earn more here than in their home countries. Typically, they send around 60-70 per cent of their wages home, meaning that they will only get a remaining 20-30 per cent to live on. So, monthly income suddenly drops from $1,360 to about $400. And given that Dubai is one of the most expensive cities in the world, this isn’t much to survive on, let alone afford a comfortable lifestyle.

 

  1. Most people in the UAE have a bank account
    This is a common misconception and far from the truth. Most banks in the UAE have a minimum salary requirement of AED 5,000, meaning that the low-income migrant workers can’t have a bank account and get paid via a prepaid card with limited functionality. They use this card to withdraw their salary in cash, excluding them from many in-store card purchases or online benefits such as cheap remittance options.

 

  1. It is more developed than emerging economies
    Considering that world’s tallest building and the only seven-star hotel in the world are in the UAE, you might expect the most high-tech payments systems too. Pakistan and India are leading the way here though, having launched instant mobile payments years ago. Easypaisa, a money transfer service accessed through a mobile phone, was launched in Pakistan in 2009 and PayTM is India’s version, which was launched in 2010 and has amassed over 230 million users. NOW Money is the first accounts and remittance service for low-income people in the UAE, but most of them have used similar services in their home countries.

 

  1. Migrant workers can’t afford smartphones
    The first question I get asked when speaking to people about NOW Money: “but can they afford smartphones?”Yes, 98 per cent of low-income migrant workers own a smartphone. It’s their only way of communicating with their families back home, and probably their most prized possession. A perfectly good smartphone is now available at Carrefour for AED 120.

 

  1. They can’t read English – can they even use a smartphone?
    The standard of literacy in emerging economies ranges between 50 and 60 per cent compared to 99 per cent in many Western countries (UNESCO 2015). Therefore, you could argue that migrant workers won’t be able to read their native language, let alone another one? Wrong! When carrying out market research at the end of 2016 I discovered the majority of users wanted the NOW Money app to be in English, as they’re using it every day.  As go-getters who have moved abroad, UAE migrants hold an education advantage on their relatives at home.

 

  1. Their families don’t have access to the internet
    Some won’t, some will. But, in reference to point four, mobile payments are sophisticated in some of the workers’ native countries, so the chances are beneficiaries will be able to receive money using a mobile device. NOW Money delivers remittance to mobile wallets, bank accounts and local pick-up, so there isn’t actually a need for their families to have access to the internet.

 

  1. It’s all about Dubai
    Dubai’s population only makes up 2.8 million of the 9.27 million people in the UAE. That means there’s still 6.48 million people living outside the metropolitan hub.  Although Dubai and Abu Dhabi are the best-known Emirate states, there’s actually five more: Sharjah, Ajman, Fujairah, Ras Al Khaima, and Umm Al Quwain, all of which have low-income migrants working in their hotels, shops, taxis, and building new structures.

 

So, as you can see, NOW Money’s target audience are vast in quantity and in need of safer, cheaper and more efficient access to payments and money transfer services. The emergence of FinTech and RegTech in recent years has opened up a gateway to enable cost-efficient solutions to be created for this population, who are currently excluded from the current financial system.

To find out more about how NOW Money can help your employees on less than AED 5,000 please get in touch at info@nowmoney.me or tweet us @NOWMoneyME