fintech in the middle east

Revolutionizing Fintech: back to the layaway model?

The Corona pandemic has surely turned the tables for the Fintech startups in 2021. While businesses around the globe are still struggling to keep up with this new disruption, the fintech industry is booming – inherently striving to improve their ways with the introduction of distinct fintech payment solutions.

According to data by financesonline, the global fintech market is expected to reach US$ 26 trillion by 2022 and is expected to grow at a CAGR of 23.58% from 2021 to 2025 which is a huge number!

The Fintech revolution in the Western world has already set the bar quite high for other countries who wish to join this industry bandwagon. FinTech in Middle East has however been slower for the past decade but things are set to change now. Given the current economic global depression, it is surely now a blessing in disguise!

To promptly maneuver through this technology-driven era, billions of dollars are being invested to integrate the electronic infrastructure required for such transactions in countries like UAE, especially Dubai. Considering how Dubai is a tourist hub for so many millennials across the globe, the adoption of FinTech in Middle East is inevitable.

We see a new frontier in innovation – The famous de-facto ‘Buy now, Pay Later’

While credit cards already provide the luxury of delayed payments, their infrastructure has remained stagnant for the past 30 years and is being disrupted by BNPL players. The BNPL fintech payment solutions are indeed inferior but ignoring this trend can be a deadly mistake because that’s the thing when it comes to trends – you may never know what may hit or lose the bang again!

The adoption of the BNPL solution is constantly on the rise as it provides partial relief from Cash on Delivery (COD) issues. Before the pandemic, 60% of online sales were through COD; however, this model of the transaction has also been one of the major obstacles in the e-commerce growth for Fintech in Middle East.

Here’s a list of some major shifts this industry is set to undergo over the coming years:

BNPL solution – Not everyone’s survival kit

As there is a lot of competition in the market, one’s ability to succeed is dependent upon two things:

  • The growth in GMV and attaining economies of scale.
  • Covering your losses in the early stages.

These practices will filter out smaller players who will not achieve the required scale or raise the required money and will, eventually, exit this competitive landscape. Only a few independent players will stand their ground, survive and grow, each belonging to a specific category and geography.

Winning the customer

The merchants will slowly aim towards keeping their consumers loyal. Hence, we will see more customized and value-added products to attract the target end-user. The BNPL providers will eventually turn their websites into shopping platforms where customers could make entertainment-focused high-value purchases.

Shahry is the pioneer in this respect, providing a seamless user experience and making sure to capture the consumer before they exit at checkout.

High-level inspection

A strict level of regulation will be required for consumers who will make impulsive purchases. With the strong urge to buy something online, also comes the risk of being burdened by debt, hence, regulators will protect such customers and also inspect the BNPL providers that use tactics that fuel such spontaneous purchases

Traditional players joining the boat

When traditional players like Amazon start offering the BNPL solution at checkout, they will, eventually, end up buying the smaller players. Besides, banks might also introduce a credit card working on a similar structure to keep their loyal consumers engaged.

The Layaway model comes to save the day!

Pioneered by struggling retailers during the times of the Great Depression which lasted from 1929 to 1933, is the layaway model.

The model works on a very simple phenomenon: If a person is unable to pay upfront for an item they wish to purchase then they can “lay it away” and pay through a series of installments, either on a weekly or a monthly basis. Once the payment is made in full, they can take the item home.

In the age of social distancing when more and more people are shopping online, the need for technology-driven payment methods has also increased. Amongst the newest forms of payment methods is the ‘buy now, pay later’ option which functions on the above-described model.

Problem prevention – Now or never!

Many merchants are planning on investing in the BNPL solution but the question is, how can we make this technique seamless to avoid future problems? Here is a list of practices that can be carried out to help ensure optimal outcome:

Exhibiting the right solution – split payments

Analyze your consumers and offer the best possible fintech payment solutions. See when and where were your shopping carts abandoned and thus provide the best-suited payment option plan.

Marketing of the BNPL choice at its earliest

The sooner the consumer is informed regarding the BNPL options, the higher the chances are of them using it. The method can be displayed using banner ads on social media websites like Facebook, where products or deals are advertised, in the description box of the product, and at checkout where BNPL is amongst one of the available payment choices.

Integrating BNPL into seasonal promotion material

When you are promoting your product through a sale on social media, increase the visibility of the BNPL payment option by using hashtags like #Quadpay or #CitizensPay.

Providing an omnichannel experience

To provide consumers with a seamless BNPL solution, an omnichannel consumer experience is the most effective course of action. A few solutions also allow the users to use virtual cards which can be inserted in an Apple/Google wallet and users can simply tap pay on the screen to make any purchases.

Considering the implementation requirements

Use a tool that supports simple and easy integration so that if a new solution needs to be added over time, only a few lines of code are required to get the job done.

Interrogating the abandoned carts

According to the Baymard Institute, the average cart abandonment rate is just under 70%. To help drive conversion, most e-commerce websites send an email to notify the customer about installment payment options that they can avail.

Store registration on BNPL directories

Retailers who offer the payment solution in the store are being actively sought by shoppers, as people are becoming more familiarized with the term BNPL. Listing your store in the provider’s shop directory will help drive more traffic.

Fintech in Middle East adopting the layaway model

To help you better understand the significance of the “Buy Now Pay Later” model, let’s imagine a scenario:

You had your eyes set on a flashy new item at a store close by and couldn’t buy it due to financial constraints. You walked past the store every day thinking how you’d enjoy even a slight glimpse of it through those shiny glass windows.

Then came the BNPL solution where you could pay for it without any interest, get it delivered right to your doorstep, how would you like that?

Aplenty, no?

Keeping in mind how swiftly the solution is becoming popular amongst the masses today, here are two companies in the Middle East, that function on the Pay Later model:

Tabby

Founded in 2019 by Hosam Arab, the Tabby startup offering the BNPL option was a cherry on top for so many people who did not have the privilege of ordering online through credit/debit cards. The company is currently only operational in the UAE and Saudi Arabia.

They did not have to make any modifications to adjust to the new business models that were being introduced amidst the pandemic. The most surprising however was the fact that while companies around the globe were laying off employees, the tabby firm was hiring new ones.

The fintech startup has recently also raised US$ 7 million to propel its growth on entry into the Saudi Arabia market. The customers have the freedom of using their mobile number or email address to purchase products online which provides an alternative to COD. Their revenue is generated through the merchants while the customers can make purchases using interest-free delayed payments.

Tamara

A Saudi-based Fintech firm that was founded in February 2020, is one of the fastest-growing BNPL providers in the Middle East. Just after 5 months of its launch in September 2020, the company raised 6 million dollars in seed funding in January 2021.

Some of the most popular brands in the country like SACO and Whites have been successfully secured by Tamara. It is also one of the very first BNPL firms to become part of the Saudi Central Bank (SAMA)’s Sandbox programme.

The future is bright for the BNPL market as it is expected to grow 400%, reaching a value of 680 billion dollars in transaction volume globally by 2025.

Wish to work on this model? Have a unique idea? We can help.

We can see success happening for the Fintech players as the BNPL solution is setting new standards for online shoppers. They can now make purchases without the hassle of tackling cumbersome money-related issues.

If you wish to work on this model, reach out. We will work through this unique idea of yours and pray that may the odds be ever in your favor!

Fintech Disruption in Financial Services

Tech Innovations for Fintech Disruption in Financial Services

Researchers have published extensively on fintech in the opening decade of the current century. Although the amount of theoretical work is sufficiently large, yet no company could attain any significant breakthrough in practice until late 2008 when the businesses were suffering severely from Great Recession. The subsequent period witnessed a remarkable revolution demonstrating fintech disruption in financial services.

This period was the beginning of time when scores of industries started to incorporate advanced fintech. Following are the three most notable emerging trends in financial services which revolutionize data security, data analysis, transaction processing, and operational management in corporate sector.

Blockchain for Innovation in Financial Services

Documented businesses in every industry rely on traditional banking for transactions. As the challenges section indicates, transaction through centralized banking carries many vulnerabilities. Blockchain is an appropriate alternative which is tested for over a decade to addresses transaction problems without leaving side-effects.

Blockchain is an instance of distributed ledger technology which defines a database to store data in distributed and shared schemes. The most notable aspect that distinguishes blockchain from other data management techniques is immutability. The technology is tamperproof unlike relational database management systems which are prone to intrusions.

This technology is revolutionizing financial services by bringing transparency and security. Transparency reflects in the fact that each stakeholder can view history of records as well as the timestamp which indicates time when a block or record was added to the chain.

Blockchain ensures data security with its architecture based on consensus algorithms. Such algorithms require consensus of more than 50% of nodes to make a new block with same transaction record. The probability of generating such a consensus is negligible.

Big Data for Financial Analysis and Projections

The growth rate of data is incredible – to say the least. With the current rate, the total amount of digital data would be as big as 44 zettabytes by the end of 2020 – Raconteur reports. Besides, the data created every single day by 2025 is projected at 463 exabytes. For reference, single zettabyte is equivalent to one billion terabytes.

The creation of such a humungous amount of data is rather beneficial than alarming. As the volume of data grows, the business or the underlying industry has greater opportunities to make correct future projections.

“79% of enterprise executives agree that companies that do not embrace Big Data will lose their competitive position and could face extinction.” (Accenture)

Big Data enables financial institutions to identify patterns in market and forecast future trends. The utilization of Big Data for over a decade is proving this claim as companies are attaining meaningful insight from vast sets of data.

Bank of America introduced a virtual assistant called Erica to help clients with finding billing information and transaction records in seconds. It eliminates the need for manual input of information and search of records. Instead, it runs a predictive analytics to provide precise information. This intelligent assistant is capable of training itself. The bank expects that Erica will get as much smarter in a matter of months that it will provide recommendations as well to clients.

AI and RPA Fintech Technology Solutions

Artificial intelligence resonates in the corporate world more often than any other set of technologies. Financial services have the potential to take the leverage of AI far more than any industry. The degree of repetitive and non-technical tasks is way too high as workers have to speak and type more or less similar set of information to clients.

Robotic process automation addresses this challenge by automating most of the repeated tasks. Two most impressive innovations in this regard are voice assistants and chatbots. A voice assistant answers the queries of clients by replicating human speech while chatbot does the same through online real-time chats and emails.

Also Read: Robotic process automation in healthcare

Earlier, the chatbots could only answer a few questions. They would respond with limited set of answers picked from a pool. However, the use of machine learning and natural language processing (NLP) is now enabling bots to self-train themselves and respond to complicated questions as well. Self-trained bots are now frequently used in industry and ensure a significant drop in operational costs.

Impact of Technology on Financial Services

  1. Data security is one of the chief challenges in financial services sector. The Financial Conduct Authority in UK reports an increase of five times the number of data breaches in 2018 as compared to previous year. A total of 145 banks and financial institutions reported the breach. The figures in North America and rest of the Europe are also alarming. Fortunately, the companies that use Blockchain and AI have significantly low record of violation.
  2. Transparency is crucial when dealing with large-scale transaction processing. Blockchain is ensuring the transparency through its distributed ledger policy. Every stakeholder has more visibility and control over transaction history. Thus, Blockchain elevates the level of trust.
  3. Pace of operations in businesses is growing with the adoption of these technologies. Robotic process automation (RPA) for fintech industry is at the forefront in reducing the time consumption by automating repetitive tasks. Blockchain is enabling financial services providers to perform days-long transactions to complete in seconds.
  4. Cost of operations is also depicting drastic drop in the companies which are adopting Blockchain, AI, and Big Data solutions. For instance, chatbots and virtual assistants eliminate the need to keep 24 hour attendants. Blockchain is replacing the need to keep verification officers. Instead, of someone verifying the transaction records for you, Blockchain enables you to comfortably verify it yourself.
  5. Operational efficiency is the most notable impact of adopting effective fintech products and services. They provide excessively better customer relationship management (CRM) as well as enterprise resource planning (ERP). Besides intelligent information systems provide insights for informed decision making.

Join the Innovators

Fintech industry is leading a revolution in financial services sector which is barely feted like revolutions in other industries. The reason is the fact that most people are unaware of the technical intricacies involved in this revolution. The corporate sector has leapfrogged into an era where acquisition of fintech technology solutions is not a choice – rather a compulsion.

Mob Inspire can assist you in becoming a part of this evolution and in avoiding the extinction. Contact us today so that our experts will take you further.