In/On Demand: Inside Short-Term Lending

[Music] hello everyone um we hope the Exodus doesn't continue further I know um welcome to today's session I know it's a time when the hunger pangs might have already started so we're hoping that we're going to feed you some really interesting information um before we start quick show of hands how many of you heard of buy now pay later bnpl let's say 10 no my question is 10 let's say he gave me a five year ago Mark I'm going to go with a 10 year ago Mark 10 years ago how many of you realistically heard of bnpl oh yay I got two hands and yet here we are today um bnpl having completely disrupted the fintech market what has led to this um one of the people who's been a key driver of this disruption regionally is here with us thanks so much ham for joining us um he's LED Tabby started it in 2019 LED it as was mentioned to become a unicorn status company with more than $1.5 billion valuation on the path to an IPO um thanks so much hosam and and as we start off let's go back to understand you know we just saw a very small show of hands what has changed what led to this disruption in bnpl itself first of all thanks uh for having me um very difficult to start a session with a mass Exodus but let's try um so we started the business in 2019 uh based on some learnings from my time in e-commerce uh prior to that um and the fact that consumers in this market just were shying away or or not comfortable with digital payments at all uh especially not online uh and where we are today there's been a massive shift towards digital um one I think driven by just the lack of payment methods and payment options uh in 2019 and before that um what we had historically has been your traditional cash payment methods or credit cards banks in the region um historically have been very averse to opening up to certain sectors of society and and and not willing to uh open them up to and and give them access to credit uh that has changed quite substantially um and I think the you know we we this was an opportunity that we thought we could leverage the fact that there is a sizable portion of the economy that is underserved by traditional uh financiers uh opened up a space for us and allowed us to to get in we uh we looked at credit card penetration in this market being sub 40% in the UAE sub 30% in Saudi um and that presented a clear Gap that we could go after providing consumers with a seamless friendly uh and transparent form of credit uh that could address their needs you know these are customers that have jobs they have uh they have bank accounts um and they have needs um and these needs were underserved and and coming in providing them with that access uh really seem to fill a gap in the market 14 million users roughly is what you have now and so like you mentioned you know the it enabled Financial inclusion in a sense bnpl but also that we've seen concerns about debt accumulation overspending so how do you balance the two and ensure that you know it remains a safe space it largely comes down to incentives um and you know business models and if you look at how banks operate Banks when they are providing credit cons consumers are essentially betting on the failure of that consumer or at least that short-term failure of the consumer in the sense that a credit card business model works when consumers revolve when consumers are paying interest on on their purchases at that point in time that credit card model works and makes sense for us we've turned that business model around and said we will make money from the merchant uh we actually require customers to pay us back on time and therefore we built that uh that behavior into our business model we will lend to Consumers with a clear requirement that that consumer uh has to be able to afford this or has to at least have the willingness to want to pay us back as opposed to again the bank where if you are delayed then I am better off as a bank um so the way the business model works is we integrate and we work with Merchants the merch the merchants pay us a commission and a take rate on every transaction that goes through customers that default or are delinquent are not allowed to continue to transact on the platform until they are made whole or or or they pass back um and that way we just make align the Intensive incentives accordingly we're only really betting on the success of that customer we need to make sure that they have the willingness and the means to pay us back um and and and for that reason that customer is happy right that customer doesn't have excess excessive burdens beyond their means um they don't have additional costs when uh they are in default uh they just have to manage their finances in the short term and come back to us when when they're ready coming to what comes next you know you recently acquired tweak in the Saudi digital wallet also you know plans for the IPO that's coming up can you take us through what next for tabing so what we've done so far I mean over the last four years we've focused uh intensely on building uh building a b Now payad product and providing short-term credit to Consumers that was kind of the Crux of what we focused on across both Saudi and the UAE uh we initially focused online uh then we opened up offline we've we we were the largest issuer of cards in the UAE in the last year um and that is a product that has really taken off in in the UAE Market to provide the same service the buy now pay later feature to Consumers not just online but also offline um but as we've built uh this these products and and built a deeper relationship with that customer more directly through the pro through the card we realize that these customers have much broader needs uh again uh due to kind of a lack of interest from traditional Financial Services providers in the region um and so you know the things that we look at today are um do these customers require other forms of payment would they like to uh be able to save and would they like to be able to to invest their their fin their funds and so on and so there's a lot more that we can build out on the financial needs of the customer there are also financial needs for those uh retailers and the businesses that are also largely underserved by by the Banks the banks in this region have traditionally really served of you know the government sector the large private sector but on the side largely been underserved as well and and and and these guys have needs equally as much um and so we are looking at forms of of financing to Merchants uh forms of additional uh uh payment methods for these Merchants you know uh transfers globally transfers regionally Etc um and so what essentially what we're what we will be moving from is a single product by now pay later business to a multi-product money app uh that serves the needs of those customers both the consumers and the merchants alike across the region like one of the things that also is missing in this part of the world is a uh a regional Financial servic provider we have a lot of exceptionally uh solid banks in the UAE very solid banks in Saudi uh but nobody's really serving the region as a whole and I think that's an opportunity that we see uh we can go after and and are well within our rights to uh uh to Target you have seen a lot of you know financial apps come up similar to what maybe not exactly the same but we're offering a lot more than just one service so do you see fintech just to understand lastly where is fintech headed are we going to see more such apps how does the equation with traditional large financial institutions work out and and where is it all headed I think one of the key challenges that a lot of fintech players uh face in this market I mean globally is how to attract customers and and and drive customer acquisition in an efficient manner fintech by definition is a very low margin business um it does require volume and going out with traditional customer acquisition uh methods just doesn't scale uh we've seen many wallet apps in the market uh fizzle out we've seen a number of remittance only players in the market not do too well and it really just does go down to the fact that customer acquisition Digital customer acquisition is extremely expensive the banks can afford it because they have uh the the the balance sheets uh they have the margins to be able to afford $100 $200 $300 uh CS whereas in fintech when you're going out and trying to acquire a customer for a wallet product it's not it just simply does not scale um know we've been able to thankfully crack that through a credit model um credit be in in in the sense that we're providing credit to Consumers that otherwise would not have access to it and acquire that customer indirectly through that form um and built and trying to build an ecosystem through that and so you know to answer your question I feel it's going to be very important for fch players to just think about customer acquisition at at at at uh at the Forefront of what they're trying to build is there a real need and is there a real use case for that product or are you only going to go out and try to acquire customers through uh through incentives and other forms of digital marketing that simply don't scale um and and hit a brick wall at some point uh in in you know not in the not so distant future so will there be more consolidation in the market will you know more AC Acquisitions that we'll see happening you think absolutely I think I think consolidation is is definitely on the cards uh we we made an acquisition recently in Saudi uh for precisely a wallet business that found difficulty scaling um we do see uh that there are other similar business models in the market that are right for for consolidation we've seen a number of investment apps uh pop up uh a number of additional wallets in the UAE uh and so on so I I do believe that the the there will be uh significant opportunities for consolidation as as well investors understand the Dynamics of fintech and the and the requirement for scale in this in this space um we haven't seen much of it yet but uh but I would say over the next coming years we do expect quite a lot to happen and and um for Tabby itself you already mentioned what you have planned ahead but do you see it changing significantly in terms of how you operate in terms of how you scale the business just very briefly what are your thoughts on that I mean briefly it is very very different to uh to move from being a single Product Company where the entirety of the business is focused on one and only one product to start to really change our DNA and and think about how do we address the various needs of various types of customers right uh so far customers is largely been a homogeneous view on on on what the customer looks like uh really trying to understand the needs of a credit seeking consumer going forward those needs uh become a lot more broad um and and us as a business need to think about how we operate differently um we also need to think about you know how do we how do we cross- sell to those customers it is U you know by by by Design we're not going to change the way that we acquire customers considerably we're not going to go out and start to invest in customer acquisition more aggressively it really will be you know understanding our customer base knowing them in in depth and understanding where the various needs are and and being able to serve those those customers in in uh in differing ways um I think we've almost run out of time but thanks so much Assam and all the best I think it's going to be exciting times ahead for you for tabi and for the fintech space in the UAE in Saudi across the region lots to come up uh we hope you enjoyed the session give we gave you something interesting in terms of food for thought and um have a lovely rest of the day thanks thank you [Music]