BNPL in the Middle East, with Ziyaad Ahmed

BNPL is usually spoken about in terms of it being a more convenient payment tool for people in option-rich credit markets, but a revenue model that doesn’t require interest resonates with Middle Eastern customers for even more reasons.

So in this episode I speak to Ziyaad Ahmed, co-founder and COO at Spotii, a Dubai-based BNPL now in the ZipPay stable.

You can learn more about Spotii at https://www.spotii.com/

Their social tag is @spotiime

You can learn more about myself, Brendan le Grange, on my LinkedIn page (feel free to connect), my action-adventure novels are on Amazon, some versions even for free, and my work with ConfirmU and our gamified psychometric scores is at https://confirmu.com/ and on episode 24 of this very show https://www.howtolendmoneytostrangers.show/episodes/episode-24

If you have any feedback, questions, or if you would like to participate in the show, please feel free to reach out to me via the contact page on this site.

Regards,

Brendan

The full written transcript, with timestamps, is below:

Ziyaad Ahmed 0:00

I would say that, primarily, we are a data company.

My background has been in alternative data. I think that that's also part of the secret sauce that Spotii has, which allows us to do what others are unable to replicate: which is to come up with this unique customer score.

It's not easy to do, but in order for any Buy Now Pay Later to be sustainable, the biggest thing that you have control over, the largest variable cost, is your losses. Our algorithm right now uses over 200 variables to come up with the customer's propensity to default.

Brendan Le Grange 0:34

Welcome to How to Lend Money to Strangers with Brendan Le Grange. I've been in lending strategy for 21 years. In that time, I've been based out of South Africa, Denmark, Hong Kong, and now England. And I've travelled often, for projects in the broader regions. And yet, I have never been to Dubai.

I was supposed to go 15 years ago, and I'm still a bit bitter about that. Everything had been set up already, even the hotel with indoor ski ramp had been booked. And it was just to help some colleagues pick out a new collection system, so nothing too strenuous. And then something fell over in one of the country portfolios I used to oversee, and I had to reprioritize my time. In other words, I'm a complete outsider.

And as an outsider, when I think of Dubai, I think of an international hub for capital and human resources, but a hub through which those move rather than a hub that is also a market in its own right, which of course the United Arab Emirates are. So in today's episode, I take a closer look at FinTech in Dubai, and how one brother-sister bear is rolling out by now pay later there.

Great, well, Ziaad Ahmed, welcome to the show. For the last two and a half years you've been the co-founder and chief operating officer of Spotii a Dubai based by now pay later. It's a role that you seem to have pivoted towards after a foundation in asset management and hedge funds. So before we get into Spotii and the story there, could you maybe start by talking a little bit about the path that brought you to where you are today?

Ziyaad Ahmed 2:15

Yeah, absolutely. And thank you so much for having me, Brendan. Appreciate it.

In terms of my background, I started off my career on Wall Street in traditional finance, as an investment banker. After graduating from Wharton undergrad, I then moved on into private equity, and then pivoted into the hedge fund realm. When you're dealing with the public markets, and you realise how competitive it was, you're always trying to go out there and try and find the next edge, the next edge that I was able to find, and what was very interesting for me, and what actually set me on a path towards Tech, was that I was investing a lot in consumer stocks, and I was using big data trends to be invested in these consumer stocks.

For example, we'd be looking at it social media scrapes. So one of the big data trends, and this was in 2016, was this hashtag of #BNPL beside a lot of cosmetic names, a lot of apparel names. It was just starting as an industry, but there was a small and very large group of people talking about it in a very passionate way. I got me intrigued because a lot of the names that I was investing in the public markets in the US were being attached to buy now pay later names like Estee Lauder, names like Urban Outfitters.

Upon investigation, I ended up discovering Afterpay. Afterpay was very recently a publicly traded company, it was still a very small company - I got to know them,. I got to know the company, I got to know the business model. And I really fell in love with it. And I thought that this was going to be the next big thing in consumer credit.

When Afterpay started up in the US, I took that as an opportunity to join them during their early stages and helped grow that business out, before leaving and starting Spotii up in the UAE.

Brendan Le Grange 3:57

What's interesting to me, as I see that background with awards and degrees, time on Wall Street working in hedge funds, you are with Afterpay - one of the hot names at the time of FinTech - in the Bay Area, so really at the pinnacle of FinTech... and then you decided to move halfway around the world to co-found Spotii. So obviously, you've done a lot of research, but it still is an interesting leap of faith as it were to sort of go out on your own. What was the vision behind that move?

Ziyaad Ahmed 4:24

After my job in hedge funds, I actually went back to school and also got my data science degree. So I'm a data scientist as well. I graduated from Berkeley. For me, I'm a very data driven person, obviously.

Risk management, data analytics at Spotii is very much about figuring out trends, seeing emerging patterns happen in data, and that's kind of how I live my life as well. For me, one of the truisms that I saw being in and around retail for as long as I have, is that there are two major macro trends that were happening around the world: (1) the first is the migration of shopping from offline to online, and (2) the second is the digitization of payments moving away from cash. Cash is, in my opinion, a very antiquated form of technology.

So when I was looking around, I looked at the Middle East, it's kind of this green space, both of these trends were still very much in early days, right. So if you think about it, it's like being in San Francisco 20 years ago. So for me, I saw that opportunity. It also happens to be that my co founder, who happens to be my sister, has been living in the UAE for the past 15 years. So upon discussing things with her and recognising this trend, recognising the need for the product at the time, that was what helped me make the leap from the Bay Area out here to in Dubai.

Brendan Le Grange 5:40

Dubai is a city that I know of, but I've never worked in and I don't know all that well. But as an outsider, I know it as a hub for traditional banks, established capital, but what is the tech scene, the FinTech scene like there? It seems to me to be one of those cities where everything's so expensive, that it's not the easiest place to necessarily bootstrap your way into a business.

Ziyaad Ahmed 6:01

I could also make that same argument for the Bay Area, right? Have you ever seen San Francisco, it isn't exactly the cheapest place in the world to live, but what I would say about the UAE is that what I've found is that this has actually been highly supportive.

I found that the talent here is excellent. I found that the business environment in general has been very supportive, especially as we entered into the pandemic. What I personally found is that I was very grateful for living in the UAE, because they handled it a lot better than most places in the world, including my country, right?

We launched Spotii a month into lockdown. I hired everyone remotely, we were working in our bedrooms, right. And that was a very terrifying thing to do, bootstrapping a business and you're hiring people remotely that you've never met, you're like, okay, cool, like the way the UAE handled and lockdown allowed us to emerge out quicker and stronger. And as a result, I was actually able to focus upon growing and scaling my business.

I think that a lot of Spotii's success happened to be because of the fact that we were based out of the UAE at that time.

Brendan Le Grange 7:01

In terms of the consumer credit market there. A lot of the traditional businesses I think of, in Dubai, are serving a regional hub, say serving neighbouring areas that are maybe bigger in population, but you are focused on the UAE, you serving consumers living in the UAE, what is that market landscape like when we talk about consumer credit?

Ziyaad Ahmed 7:20

Sure, I'd say that the roots that have made BNPL so successful in other geographies very much exist here, it is a market that was very heavily focused upon debit cards, it is a market that culturally shys away from interest because of Sharia reasons, as an example, right? It's got that cultural appeal.

We operate in UAE, Bahrain, and in Saudi, for that reason, some of the traditional forms of credit that had really taken root in the US and Europe didn't necessarily have as much of a presence here, there's been a tremendous amount of survey work done here. I think one of the things that it leads to us unique compared with other regions is that in other regions, it's a good to have, because there's so many alternatives, so many other options to be able to make these purchases. But BNPL came in here and sort of became that next level of innovation for this region in a very short period of time.

BNPL is no longer just a good to have, it's a must to have. Cconsumers demand it, merchants require it as table stakes.

Brendan Le Grange 8:20

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Ziyaad Ahmed 8:33

The thing about BNPL is that the way that we've constructed the product is that it does remain free for the consumer if they pay us back on time, if they don't, there's a single late fee charged to them as opposed to compounding interest. It is meant to be very consumer friendly, but it also fits very well with the cultural nuances and the Sharia requirements that for a lot of our consumers is very important, right?

So I think that it's a great way to help bridge and solve a lot of the needs that maybe credit cards or some of the traditional forms of credit have solved in other markets.

Brendan Le Grange 9:02

Yeah, I think that it wasn't an aspect I've thought of at all until we started speaking. And it really is a way of flipping that interest equation around. I think a lot of the time, people would just say, well, we'll call something a fee, we'll make a monthly fee instead of interest, but it was the same standard products, whereas BNPL is a business that can work without interest being charged without interest being part of the process - you're not just trying to work around it, you've actually replaced it with a separate income source.

So I think it is uniquely qualified to take off. I mean, everybody loves no interest, but it's a more significant feature for you. So let's talk about Spotii in a bit more detail now, what does that product offering look like?

Ziyaad Ahmed 9:45

Absolutely. Our core products remains a split in three, right? So the concept is, is that it's a third down payment, a third one month from now and two months from now. The entire idea was supposed to be that we wanted to create a friendly budgeting tool for consumers.

So consumers get paid on a monthly basis allowing you to split it in truly past three instalments across a several month period allows you to match your cash inflows and outflows, which is actually what our consumers are very grateful for, for our consumers love the concept, right? It's a simple concept, it's very transparent, it's super easy to use, we have an app, we are omni channel, we are both in-store as well as online - we are the largest offline BNPL provider in the region, because of the fact that the fact that in this market, the majority of spending still remains offline. And you have to go where your customer goes, right?

We have very sophisticated data and analytics that allows us to real-time process all of this wealth of information as a customer is going through our journey. And we are then able to prescribe every individual a unique Spotii score, or a unique credit score, based upon your ability to be able to afford. So for us, it is very important not to overburden a consumer with too much credit. Our score is unique to the consumer. And it is very much based upon their financial profile, and they need to match your profile. Again, if you truly want to be a BNPL that is transparent and easy to use and friendly and wants to be a budgeting tool, you have to take into consideration what our consumers profile looks like. That's what our consumers really appreciate about us. It allows them to be able to live within their means and still be able to get what is necessary and important for them.

Brendan Le Grange 11:33

Yeah, and I love that 'no interest, no cost, no catch' tagline which really does sum up that vision as a friendly budgeting tool rather than a credit product in the traditional card sense where the more you spend the more your miles you get - that sort of approach that inherently, if not encourages then certainly rewards, higher spend. And it's always been a tricky balance. When interest is your revenue stream, you make more money by people borrowing more, whereas the BNPL model and it gets a lot of grief in the news that moment, but the actual model, the underlying model of BNPL is actually far better aligned with customer incentives.

Ziyaad Ahmed 12:08

It's a good point that you make because I think that that's a very key differentiation. Alternatives will make money by consumers not paying, we make money by consumers payng us back. It's about using it in the correct fashion -customer defaulting, right, we're not making interest, we're not compounding that interest. So for us, it is ensuring that the customer remains within their spending limit, budgeting properly and using the platform in a responsible manner. In that way, our our vision and what's what's healthy for the consumer is very much in line.

Brendan Le Grange 12:39

Yeah, and it's a message a few of your BNPL founders around the world share, but I think is worth repeating over and over, is that it's just so much easier when you talk about a budgeting tool, and that is a key part of it. Because with a credit card, it's really hard to know what you're paying when because so you spend the money today, it's getting caught up in some cycle that then gets billed at a point. And then there's another 25 days until you actually pay it. And if you want to pay it down over a longer time, then everything gets caught up in that bundle. And you don't know what's interest has been charged from day one for cash, but day 55 for something else.

We come from this world where a consumer would be spending and what they spend today, compared to what they have to pay and when was very vague and putting it together as a budgeting tool as a thing where it's divided by three its pay this now, pay this in the future and pay this in the future.

It should be taking away a lot of the real risk that underlies that relationship between people and their credit. So just for some sort of further context, if we zoom out a little bit - as I said, I don't know, the UAE market or indeed the Middle East market very well at all - you talk about your inhouse score, and I don't want you to share any trade secrets, but in terms of the data that traditionally lenders would have access to what does that look like compared to what you're doing?

Ziyaad Ahmed 14:03

I think that there's a wealth of information out here. It's alternative data, primarily, for us at this point, we have not yet formed our own partnerships with any of the bureaus out here.

And that was also my background, my background has been in alternative data and being able to look at alternative data in a way to be able to create these kinds of profiles. I think that that's also part of the secret sauce that Spotii has which allows us to do what others are unable to replicate, which is come up with this unique customer score based upon the customers what we can guesstimate the customer's financial profile.

It's not easy to do. But our algorithm right now is sophisticated enough and uses over 200 variables as the customers are going through the pipe and it's putting all of that in together to come up with it with the customer's propensity to default.

Primarily we are a data company.

In order for any BNPL to be sustainable. The biggest thing that you have control over right, the largest variable cost is your losses if you don't have a good handle around that. If you don't have a good handle of how to be able to manage that deal on just sort of the basic, well, you know, this merchant is less risky than this other merchant, if you don't really have that ability, it's gonna be very hard for you to be able to build that long term sustainable business.

Brendan Le Grange 15:15

And when I first heard of the BNPL model, I said well, it's not really any different to what we've been doing, maybe it's just a little bit more customer friendly. But as soon as you start thinking about it, if I was to issue a credit card, you apply today, I get your credit bureau score, and maybe a few documents from you, and then you use that card for five years. And every month we might update your in house score, but it's very, very summarised data points, whereas BNPL, you not only have access to a whole range of fresh alternative data fields, but you can see it essentially, per transaction, you're getting more data, you're getting a chance to update.

And I think that is an interesting mindset change and an interesting different challenge, where we can use machine learning and AI and this sort of modern analytical tools, you're obviously sort of very ambitious on that side. And you've travelled around the world to start a business and you've got investments, and you've got people behind you that believe in you in a very short period of time. So what's next for you? Are you still in the stage of settling down Spotii, or where are you putting your energies?

Ziyaad Ahmed 16:21

So we were fortunate enough to get acquired last year by our parent company Zip to become part of this global BNPL conglomerate. Zip likes to call itself a consortium of founders. And that was the thought process behind it.

Through zip, I've had the fortunate opportunity to meet with founders of other businesses that they've acquired from around the world, to learn from other people, incredibly intelligent, incredibly talented people - it's great, because Spotii's now nearly two and a half years old, and every day seems like it's day one, right? Because every day you're learning and every day, you have this opportunity to solve new problems. And it's just, it just doesn't get routine.

So for me, I'm privileged to still very much be running things at Spotii, I'm privileged to be working with an excellent team, I'm privileged to be part of the extended family which gives me access to a whole host of resources and incredibly talented people that I learned from everyday, this is exactly where I want to be, this is where I'm going to be for the next year. So it continues to grow and thrive. And I'll continue to be there pushing that.

Brendan Le Grange 17:26

And if people are listening, and they want to, well, either if they are in the region and they want to get Spotii get the app or if they just want to have a little closer look at what you're doing in the region. Where should they go to follow Spotii or to find out more about it?

Ziyaad Ahmed 17:40

Yeah, they can do that all over our social media channels, our Instagram handle is @Spotiime, you can download our app available on the App Store as well as Google Play store, you can come to our website www.spotii.com It gives you direct access to all kinds of channels where you'll be basically able to talk to real people at the company.

Brendan Le Grange 18:01

Great that is Spotii with double ii and I will also drop all those links in the show notes. Ziaad Ahmed, thank you so much for the time today, it's been really interesting for me to hear a little bit more about the region, but also another use case of the BNPL that isn't necessarily caught up in some of the excesses we've seen in the market, but really has genuine cultural fit, I think is a great story to hear.

So yeah, thank you very much for your time.

Thank you for having me.

Ziyaad Ahmed 18:28

Appreciate it, Brendan

Brendan Le Grange 18:29

And thank you all for listening. If you enjoyed that, please do rate and review on your preferred podcast platform and share widely including on LinkedIn. And while you're there send me a connection request. The show is written and recorded by myself Brendan le Grange in Brighton, England and edited with assistance by Kane Hunter. Show music is by Iam_Wake and you can find full written transcripts, show notes and more content at www.HowtoLendMoneytoStrangers.show

And I'll see you again next Thursday.