You have an offering to SME clients that is unique in the Kingdom. What advantages does it offer, and what has allowed you to innovate in this direction?
We are highly focused on point of sale (POS) financing, or, as it is known in the West, Merchant Cash Advance (MCA). We are the first to launch MCA in Saudi Arabia. This product allows small businesses to use their future POS transactions as collateral to gain access to financing. The repayment is a percentage of their daily sales directly through their POS devices. This system is perfect for the needs of SMEs. We could introduce this product because the Saudi Central Bank (SAMA) opened its regulations to allow 3rd party payment aggregators into the market, who are able to support the operational requirements of such products. In January 2020, we signed with Geidea and Sure Global Technology, which are both payment aggregators. Previously, the only payment aggregators were banks. SAMA's new initiatives allow new products to be introduced to the market while remaining in a sandbox environment allowing both the regulator and Fintech an opportunity to test the market viability of their technology.
How has the pandemic influenced your business, and what have you done to respond to the current situation?
We were impacted significantly, as our core business is SMEs. When the shutdown occurred in Saudi Arabia, nearly all SMEs were shut down. The Saudi government's response was amazing, we deferred payments to support those SMEs based on the mandates of SAMA and Monsha'at. It has also required us to look at the delivery mechanism of our product to our SMEs. It required the Company to move plans forward on the complete digitization of our merchant experience. Our product is well adapted to the crises because if one's business has to temporarily close, and has no revenue they would not have to pay until they were allowed to reopen. This is built into the product and was an immediate relief to customers during this pandemic. We have begun pilot tests and now have about 70 SME merchants on the MCA platform. Our expectation is to grow the platform exponentially going forward with an expectation of having 2,000 merchants on the platform in 2021.
Has the short-term impact for you been curbed by the SAMA interventions?
Many countries did not have a clear stimulus package until after lockdown, while Saudi Arabia to a proactive approach and announced the plan prior to the temporary shutdown, so the sequence of events was done properly. While there was anxiety amongst business owners, they felt relief that they would not have to pay their debtors or go bankrupt from their financing arrangements. That was extremely important.
What does your recent MoU with Mastercard achieve?
Our tie up with Mastercard provides an SME in a box service. We can issue prepaid cards, so that people have access to financing or capital, immediately. Most of merchants are underserved, and we wanted to make sure they had access to capital when they need it the most. We are dealing with micro to very small businesses with a maximum of SAR5 million in revenue. That is why we are looking at the entire SME ecosystem, from payments to cards. Once we have access to data, it will be easy for us to expand digitally. In that sense, open banking is a requirement to expand lending to SMEs, personal finance, and have a thriving fintech industry. Fintech is driven by data. If you cannot get to the data, there are many limitations going forward, and this is a regulatory change we hope to see in the future.
What is on the horizon for you, and where do you see growth coming from in the next year?
Growth will come from expanding our current product, as we have a product that is scalable. Typical SME products are not scalable without large operations, and our expectation is to serve 2,000-3,000 merchants over the next 12-24 months. We will likely be fifth or sixth in terms of the number of payment devices in the market. The goal is to penetrate the market and expand the MCA products reach. In the short term. However, the delivery mechanism of the product and access to data will evolve over time. We have 100 employees currently which is an increase of 100% prior to the pandemic. This is required to keep up with the market demand of our product. We have some very exciting new products to complement our current offering to SMEs in 2021-2022.