Now Money aims to bridge financial inclusion gap for low-income UAE workers, co-founder says

“Anybody who earns less than AED 5,000 a month, or $1,000, is going to really struggle to get access to a traditional bank account,” said NOW Money’s co-founder Katharine Budd.

“Some GCC countries do mandate that the banks allow them, but the banks still make it quite difficult. They still require that they hold a significant amount of money, a minimum balance, or make a certain amount of transactions a month.”

Around the time NOW Money was launched, low income earners’ salaries were mostly paid via a payroll card provider. This means that people would get paid onto a card which they could not do much with except for withdrawing money from a cash machine.

“For the end-user, it’s no different really than being paid in cash,” Budd said. “Certainly not in terms of being able to use it online or have any access to the digital economy.”

This lack of access to banking services hinders people from enjoying the many benefits that come with having a bank account, such as a secure place to store their money, online transactions, and the ability to easily send money home using mobile devices.

It is not only a problem for individuals but also for their employers, as paying a large number of employees in cash is no longer legal in the UAE for companies with more than five people.

Financial inclusion

The needs of low income earners have long been overlooked as they faced multiple barriers to access financial services. But NOW Money is playing a crucial role in enabling financial inclusion by developing a digital bank specifically tailored to the needs of this underserved population.

“I still think we’re one of the only companies that actually focuses on the problem of getting low income peoples; salaries into a product that they can use, to the point that they can remit it,” Budd said.

“I think we are one of the first digital companies in this space. Financial inclusion didn’t really exist before us here.”

Regulatory hurdles

When co-founders Budd and Ian Dillon set out to launch the business eight years ago, they did not realise that braving new territory would be this challenging.

“Luckily, we were naïve enough not to realise how challenging it would be to start a payment business which is essentially a digital bank in the Middle East. I think had we known about a lot of those trials and tribulations, we obviously wouldn’t have done it but we did,” Budd said.

“It took a very long time to get through the regulatory environment, especially when you are the first one to be braving new territory, or going somewhere that no one else has.”

The founders eventually met an angel investor who had been involved in the region’s construction business for around 50 years.

“He’d always experienced this problem of there being no good way to pay the workers. They would work with local dinosaur-type providers that would always be late with payments and have no visibility on when that was going to happen.

“The staff would be unhappy and disappointed in the way they were being paid and so he got the problem and invested in our seed round – that was the start and really, that was how NOW Money was born,” she said.

However, NOW Money has faced a great deal of regulatory challenges along the way.

“A lot of it [regulation] is fair. I don’t think that spending money should be as straightforward as sending an email,” she said.

“The transfer of large sums of money without making sure that it’s legitimate and there’s adequate KYC (Know Your Customer) done on both the beneficiary and the sender – that’s how really bad things have been funded.”

With rigorous compliance measures in place, the UAE’s strict regulatory system has proven to be an effective deterrent against the transfer of illicit funds, ensuring the safety and integrity of financial transactions.

NOW Money has had to “jump through a lot of hoops” to demonstrate that it is a trustworthy digital bank, with proper compliance processes in place.

Many banks at the time had not even introduced digital banking so when Budd mentioned her plans to develop a digital bank specifically for low-income individuals, she was met with scepticism and labelled as “crazy” by some.

People assumed that low income earners were not tech savvy, didn’t own or know how to use smartphones, and couldn’t read.

“It’s just so pompous to have those kinds of beliefs about low income people, especially when it was like seven or eight years ago, Apple [at the time] was telling parents not to let their two-year-olds have too much screen time because they become obsessed with it,” she said.

“When a two-year-old can use an iPhone, I’m pretty sure a worker can do so because they’re built to be intuitive.”

However, these assumptions are gradually fading away.

Overcrowded market

Although several fintechs have launched in Dubai over the past few years, Budd does not consider them to be NOW Money’s competitors.

“When you think of the segment of people we focus on, it’s lower income people and they make up about 70 percent of the population here. There’s basically us and one or two other payroll card providers that service that 70 percent. So if you’ve got nearly 50 banks servicing the 30 percent, but maybe two or three of them serving the 70 percent from a digital point of view, so it’s not exactly like there isn’t a lot to go around,” she said.

“There’s plenty to go around and only two or three of us really focusing on that market and customer segment.”

But what she considers to be the real “competitor” is the “status quo.” This includes people doing things the “old fashioned way” like making transactions offline or taking their cash to exchange houses.

Budd explained that the UAE has an overpopulated market for banks and exchange houses. Despite having a population of around 10 million, there are about 50 banks and 80 exchange houses in the UAE, which she believes is excessive.

“We have reduced the number of exchange houses from 150 to 80, but it’s still too many for a population like this.”

Comparing the situation to the 2017 FAB merger which saw the National Bank of Abu Dhabi merge with First Gulf Bank, she suggested that instead of opening more banks, it would be more beneficial for existing ones to join forces.

Because having too many small banks and exchange houses with skeleton crews can often come at the cost of good customer service and safety of transaction monitoring.

In Saudi Arabia however, where NOW Money plans to launch its services sometime this year, there are around 12 banks that cater to a population of 20 million.

“It’s still probably a few too many,” she said, adding that because exchange brands are controlled by the banks, it is a more “logical number” for a population of that size.