Uber and AirBnB are just two examples of venture capital-backed technology companies that have successfully disrupted an existing industry.
With these success stories in mind, venture capitalists have looked in every field, and in every geography, to identify yet another industry that is ripe for disruption. The result – a huge tidal wave of money, over USD 10bn per quarter has poured into the Financial Services Industry, focusing (among others) on InsurTech (nimble tech-driven startups in the insurance industry), FinTech (financial industry & banking services), RegTech (solutions to solve regulatory issues), WealthTech (investment solutions) and so on.
In the GCC, we have seen three new companies entering the End-of-Service Benefits/Savings (EoSS) market – FinFlx (no, that’s not a spelling mistake), Aurem and Equevu (no, that’s not a spelling mistake either).
FinFlx
ADGM-based FinFlx has received financing from a number of blue chip backers, including the legendary Y-Combinator and the Dubai Future District Fund. They claim to offer ‘the leading financial well-being programme in the UAE’ and to ‘help your team reach financial independence’. So far so good, but what does that actually mean in plain English, and what do they actually do? Turns out that they offer a very simple savings account. In the paid version they promise a return of 4% at a cost of AED 5 per month per employee. They apparently also offer a free version, with reduced functionality.
FinFlx has two legal entities: FinFlx Workplace Solutions Ltd is registered in Dubai International Financial Center (DIFC) to perform the commercial activities of ‘Software House, Technology Research and Development’ whilst FinFlx Investment Management Ltd is incorporated under the Laws of the Abu Dhabi Global Market (ADGM) regulated by the Financial Services Regulatory Authority (FSRA) as a Category 3C license and authorized to perform the activity of Managing Assets with Retail Clients and Holding and Controlling Client’s Money.
Our view: A very simple solution, however, there is only one investment option, a simple savings account. Investment funds are not on offer.
Aurem
Backed by Further Ventures (itself backed by the UAE Sovereign Wealth fund ADQ), Aurem charges 1% on Assets under Management and in return employees can invest their End-of-Service contributions.
At present the investment options are unclear, and so also are the administration capabilities of Aurem. If investment funds are offered, then the complexity of trading in fund units requires a robust tried-and-tested administration system which is perhaps why FinFlx has stayed away from investment funds.
Aurem recently bagged a Cat-4 license from ADGM where it is allowed to ‘deal in investments’, but is not allowed to hold clients' assets.
Our view: As of yet it is unclear what is actually on offer (watch this space).
Equevu
The third of our three FinTechs is Equevu. Their business model is less clear-cut. Not only do they offer software, but they are also in the consulting business. Similar to the other two, Equevu too aims to ‘empower employees’ financial wellbeing’ through their technology. What that exactly means is not entirely clear, however, it appears they offer to companies a voluntary savings solution (options, terms, costs – not disclosed), and in parallel they offer a white-labelled Software as a Service (SaaS) solution which means that they are licensing their technology to other Financial Service providers. The capabilities of their software are not disclosed, and neither is any information provided about the available investment options.
Equevu has two legal entities - a technology company in Abu Dhabi Global Market, and Equevu Consulting Services FZC, which is registered in Sharjah Publishing City.
Our view: Multi-pronged approach (consulting, software for third parties, direct solution for companies), with little detail available as of now. As before - watch this space!
The bottom line
Will these three companies ‘disrupt’ the financial services market in the UAE? We at Pensions Monitor do not think the big UAE banks and insurers are quaking in their boots just yet. However, will some of these newcomers be able to win some market share in a certain niche, and manage to break even in the long run? That is entirely possible of course. We very much liked the streamlined approach of FinFlx but well noting its severe limitations when it comes to investment choice. Regarding the other two – Aurem and Equevu – it’s too early to tell as we haven’t seen much detail yet.
Also very important to note is that whilst all of these newcomers are set up in ADGM (resp. DIFC), none of them have yet obtained a license by SCA (Securities & Commodities Authority) to offer their solutions in mainland UAE. We have yet to see whether these companies are interested in the new market of End of Service Savings (EoSS), and if so, how they will position themselves against top fund managers such as Daman, Emirates NBD, Abu Dhabi Commercial Bank, and so on.
But let’s bear in mind that these are startups in a fast-moving market. We at Pensions Monitor will certainly keep a watching brief on them and report their progress and more detail on a regular basis. We hope to speak to them directly soon and inform our readers about their offering in more detail. Stay tuned!
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