The Customer Effect
A digital bank offers financial services to UAE migrant workers
- A large portion of the UAE's 8 million migrant workers can't access checking accounts because of minimum salary requirements.
- A digital bank is offering banking services to the country's migrant workers through partnerships with employers.
Migrant workers make up over 80 percent of the United Arab Emirates population, but for many, a checking account is still out of reach. Minimum salary and balance requirements make getting a bank account nearly impossible for many workers, and a young digital bank is hoping to break into that market. "They live on cash on hand, but obviously, they're excluded from the financial system, and remittances are expensive; the financially excluded are paying a lot of money to exchange houses," said Now Money co-founder Ian Dillon. The digital bank began operations two years ago. On Tuesday, Now Money announced that it secured $700,000 in early-stage investment from two U.S.-based venture capital sources, Accion Venture Lab and Newid Capital -- a year after its initial seed funding. The company said it hopes it will be the first of many U.S. venture capital investments in the Middle East. UAE-based banks aren't set up to serve this population, noted Amee Parbhoo, director of investments at Accion Venture Lab. The UAE's migrant workers are largely from South Asia, a large proportion of which work blue-collar service industry and construction jobs. Many of them send a portion of their income home through remittances. The UAE is the world's sixth top remittance-sending country, sending $19.3 billion in 2014, according to the World Bank. Serving the financial needs of migrant workers is a new area of fintech investment. "It isn't a place where we have seen a tremendous pipeline," she said. "There's probably a lot of reasons for that -- [the banks] are going for a base of customers that are staying there a long period of time, and this upends the model a bit." For UAE banks, minimum salary requirements vary by institution, but Dillon said they can be as high as $1,000 to $3,000 per month. Now Money works with employers to deliver digital payments to employees through its app. The platform offers customers bank accounts to deposit and withdraw wages, debit cards and access to a marketplace of online remittance platforms that offer lower-cost money transfer services. The UAE's Wages Protection System introduced in 2009 required employers to pay salaries electronically. Unbanked employees were a challenge for employers, which were often forced to pay staff with single-use debit cards. "Employers were stuck, and what they did was provide employees with one-time use gift cards that employers would load salary on, and the employees would go to the ATM and withdraw all of it as a cash transaction," he said. "It was a workaround for the employer, but for the employee, it still hasn’t changed anything." The app also makes remittances easier and cheaper, he added, as Now Money is able to negotiate discounts with providers. Since the employees aren't charged fees to use the mobile bank accounts, Now Money's revenue stream is based on exchange fees from debit transactions and a portion of the fees for remittance services. As a fully digital bank with no branch infrastructure, it can save on overhead costs. Like all startups, the challenge is to serve target demographics while generating sufficient revenue to sustain the business. Parbhoo said Accion Venture Lab is encouraging Now Money to think about value-added services to generate additional revenue streams. "Now Money is building a platform and relationship with these customers; they have the potential to offer all kinds of other services that customers will need."