(from 0.43) I want to welcome you to the second season of Couchonomics with Arjun. Join us this season as we go beyond fintech and payments, and embark on the journey into the future of financial services; a future which will be shaped by existing and new developments in technology and innovation including and not limited to the likes of embedded finance, open banking, ESG, various versions of metaverse, decentralized finance, digital currencies, and other trends. On the couch, we’re going to have the most influential and progressive-minded Founders, Executives, Investors, Regulators, Innovators, and industry commentators from across the MENA region and beyond. Join us as we unravel a multitude of layers of the financial services industry and try to learn how technology will continue to impact the world that we live in. Couchonomics with Arjun is proud to collaborate with some of the most respected and innovative names in the world of payments FinTech and Technology.
Arjun: Welcome to today’s episode of Couchonomics, I’m your host Arjun. Joining me on the couch today is Wael Fakharany. Actually I’m a big fan of Wael, so it’s with great pleasure I want to welcome him.
Wael: Thank you so much, it’s a very, very comfortable couch.
Arjun: Oh you didn’t even let me ask you that question, right? I think you’ve seen a few episodes!
Wael: Absolutely, I’m a big fan of the episodes 🙂
Arjun: Thank you, that’s very kind of you. You know, now at least I know there’s one person looking at it.
Wael: No, no, it’s really nice.
Arjun: Thank you. So, Wael, lots of interesting topics we want to dwell into – obviously the company Edenred, we want to talk about a little about yourself, we want to obviously talk about financial inclusion as a topic, But before we get into it, I think it would really help a percentage of my listeners to get to know Edenred a little bit better, both from a global context and the local regional context. So we start with the first question, let’s introduce Edenred.
Wael: Absolutely, I’ve been in Edenred for a year and five months, so I’m relatively new. The company has been there for a long time. We are actually Accor, as the Hotel Accor, and we became Accor services, and then we spun off as Edenred. So Edenred is a global company with about 12,000 employees. We are listed in the Euronext Stock Exchange, in France. We are a publicly traded company. We have about 46 locations around the world. 12,000 employees, as I told you. Our revenue is around 2 billion euros and our profit is about 800 million euros.
Arjun: Okay
Wael: So we’re a profitable technology company, uh fintech company. We work primarily in four areas:
1) an area called Eat, so basically meal vouchers. We are one of the largest meal voucher players in the world,
2) an area called Care which is employee benefits or HR benefits for employees.
3) the third is the Pay,
4) and the fourth is Move – so fuel cards, payment solutions, meal cards, and fuel cards.
These are the four areas, and the company is divided into an Employee Benefit division, where we belong, and the second division is Fleet and Mobility, and the third is Payment Solutions and you know, the New Market division that’s globally.
In the UAE we started actually not as Edenred, we started as a company called C3 in 2008, doing WPS payroll processing. And I think this was the same time where the country introduced the WPS regulations. Then Edenred acquired 50% of the company in 2015 and acquired 100% of the company in 2019. So we are 100% owned by Edenred, hence the name C3 doesn’t exist anymore. We are Edenred UAE. Then, lately we’re also looking at, you know, expanding outside the UAE to explore the wider MENA region, so that’s a very quick introduction about who we are.
Arjun: But tell us some numbers about how big you guys are in the UAE, in terms of stats
Wael: We are relatively a big player in the payroll processing market. We process two and a half million salaries a month.
Arjun: Okay, that’s nearly 20-25% of..
Wael: Some people get paid twice. So it’s about two million people. Two million people process salaries with us. We have about 12,000 corporate clients in the UAE, we have 10 banking partners, we have about 31 exchange house partners. So our business is divided into Direct business and Indirect business: the Direct is where the client is ours, the Indirect is where we actually empower exchange houses, and 31 of them, to basically process salaries.
Arjun: So you provide the infrastructure?
Wael: Absolutely, right, absolutely. And honestly, the sky is the limit.
Arjun: Do you have an ecosystem which is I guess, next or not?
Wael: It’s a very impressive ecosystem for sure, but there is something fundamentally strong about our mission in the country which is empowering the underbanked. So the idea of not only paying them securely and on time, but actually providing them with value-added services so they can be financially free and financially safe. These are the hardest working people in the UAE, they work under very tough conditions, they work six days a week, and they send 80% of their money back home. So we’re super proud of the mission, and I think one of the reasons of our success in the UAE is that we, as a management team, we’re maniacally focused on what we call C3Pay Champions – we actually have pictures of them in our office because we want to remind ourselves that these people pay our salaries. We provide them with the best cybersecurity, GDPR, compliance, graphical user interface, distribution, operations, support in seven languages, applications. We’ve built an ecosystem around ‘blue-collar’ and this is what we want to do. The UAE alone has about 5 million WPS workers out of the 10 million population, and if you look at the larger MENA region, there’s about 28-30 million underbanked people in this part of the world. So we want to serve those guys with the best infrastructure, the best technology, the best support..
Arjun: Okay so let’s take a step back, so you’re giving me a great segue into this whole topic of financial inclusion right. So two questions for you – one is, in your opinion, and we can take the UAE or you can take the region that’s your choice, what is the current state of financial inclusion according to you – part one of the question. Secondly, where are we actually heading, in terms of addressing the challenge of financial inclusion in the foreseeable future?
That’s a great question, and I think WPS played an incredible role. For those who don’t know, WPS is a Wage Protection System where you have to pay your employees – if you own a small coffee shop, a barber shop, or you’re the largest company in the UAE and the GCC for that matter. You have to pay these employees digitally, and you have to pay them through an agent like ours, where the money flows from the Corporate Account to us, us to the Central Bank, Central Bank to us, and basically we distribute the money through our cart processing and CMS systems.
Arjun: And the cap is five thousand in the UAE?
Wael: Five thousand Dirhams. So this helped everyone to have some sort of a digital payment. It helped the country, it’s a source of pride for us, living in this country. It’s a source of pride that the country allows people to be paid securely, safely, being traced, and on time. Once you have a salary card, where there is 2000 or 5000 Dirhams in it, you have actually digitized yourself. You are technically digitized. But what people used to do for a very long time, is they would run to ATM machines.
Arjun: (laughs) I’ve seen that.
Wael: They undigitized themselves. So one of our objectives for the next couple of years is to create this cashless society or cashless community, by empowering people to use products and services both online, at the point of sale, and to actually use our app, which is one of the beautiful things about our product, our crown jewel is our app. A million people use our app in the UAE to basically transfer money, have a salary advance, peer-to-peer, send money to colleagues, top up the mobile, pay your bills, pay insurance, there are so many value-added services in this. Now I think this is like an introduction to your question. The answer is, a lot of people have digital salaries, yet are not financially included, because the way how they work is basically, the country digitizes them because it’s mandatory – if you work in this country, you have to be paid digitally. But they understand that by going to the ATMs, so there is a long 80% of the money that goes out of the ATM. It’s a big percentage.
Arjun: That’s even now right?
Wael: Absolutely. It was 95, now it’s 80%. Now the idea is, what kind of products and services, what incentives, what programs are we going to put in place, to incentivize those very price sensitive people to actually start moving towards a cashless community? That’s on one side. The other side is, financial inclusion is all about financial literacy, it’s all about financial freedom, is about savings, it’s not only about transactional – but it’s about having some financial options for their life – to get a small micro loan, get a salary advance which we call Early Wage Access, pay their bills, have a credit score, have a saving account, be able to actually have access to a little bit of the financial services that the other affluent people use. And this is where I think most of our effort is going through what we call the value-added services, by basically having an app where people use our financial products and services to actually have this financial inclusion that we’re trying to do.
Arjun: Okay so one conversation and we’ll go to save that for the next time you and me have coffee, is that I don’t believe in a cashless society; I believe in a less-cashless society.
Wael: I completely agree, the cash will not completely disappear, but the percentage will decline.
Arjun: You have to understand that cash has a role to play in a number of different ways but as I said we can have a whole different episode, and I’m not the one who should be doing the talking..
Wael: But then again, look at the volumes right – if 20% of the cash stays in the wallet instead of going to the ATM, that’s a huge volume of salaries. Massive.
Arjun: Right, so let’s come to the point which you said about how we’ve gone from 95% of the people, who in your words ‘undigitize’ themselves – it’s down to about 80%, it’s decreasing every day. Now I want to focus on not just on the value-added services. One of the challenges is that you are talking to a community which, although is very familiar with using mobile devices, they’re fairly.. their use of digital tools is fairly basic right, and you mentioned financial literacy. Fnancial literacy comes in different forms and shapes, one of them is getting them comfortable with the whole concept that that your income is digital. So what is it that Edenred is doing differently to drive or accelerate that financial literacy that people get more and more comfortable, and you know that 80 becomes a 70, then a 60, and a 50?
Wael: We are laser-focused on the user, so we have a distribution team that visits the accommodation sites. We have language support, WhatsApp support, call center support in seven languages. We actually have a distribution team that distributes the cards to the accommodation sites, and while we’re distributing the cards, we have brochures, pamphlets, social events, parties on the accommodation sites, where we actually try to educate them about choosing the app in many different languages, where they can actually interact with and use our products and services, and have this financial freedom to do things. It is not as scalable as self-on-boarding, but we’re very committed to this, and we have designed our app, we’ve designed our team, we’ve designed what we call ‘squads’ – our working squads, to basically completely laser focus on the user.
The user – our C3Pay Champions – make 70-80% of our business and they are very important for us because the focus that we’ve done for us from infrastructure point of view, from a development point of view, and marketing – we’ve surrounded them with products and services, that we think that is very unique and we invite all banks in the UAE to actually give us their card holders; which is happening. We have 10 banking relationships, where they say ‘You know what, as a bank, we would like to focus on the corporate relationship, we would like to give to the corporates – whether it’s a very large corporate or a small corporate, an LC, trade finance, cash management, transactional banking, but when it comes to salary processing for the blue-collar, we would like you to actually almost buy our portfolio of cards, so here’s a hundred thousand cards.
We just announced a couple of weeks ago a partnership with United Arab Bank (UAB) where they gave us 30,000 of their blue-collar cards. We think that we serve them better, we think we support them better, and we think that we know the persona of our cardholder – our C3Pay champion – much better, and then we hope we also have some incredible data around the usage of this user – how much is he spending, is he a male or female, in which construction site, in which industry does he work, is he Indian or Pakistani or Egyptian, and all of this data – of course very secure, very GDPR – all of this data is used to actually incentivize him to change some of the behaviour to become more digital and digital, so that’s the ‘less cash’ concept. So this incredible focus differentiates us and makes us have a unique value proposition for both exchange houses and direct clients. There are three hundred and thirty thousand corporations in the UAE, just in the UAE alone, and 76 of them have less than nine employees – small businesses, micro businesses – you can’t imagine the penetration that we have in the small segment, it’s about ninety percent. 90% of the people use their mobile to understand that their money is digital.
You know, the first time you used Amazon in your life, you were not 100% sure. Mine was in 1990 something (laughs), you were not 100% sure that this book will arrive on time. And can I put my credit card on the Amazon website? Then when the book arrived, I told my friends that you know what, I bought a book online! This is 1997-96. It was incredible, but now, we use Amazon to actually deliver water for us, we use Amazon to deliver deodorant, toothpaste for us, as a subscription. We don’t have to worry about it, but it took us a while to understand that you can actually buy anything online.
So if you can buy anything online, then you can actually get paid online. Then there is this ‘aha moment’ where I have seen in one of the accommodation sites, a guy with a huge wallet that has a lot of invoices for all of the exchange houses, salaries that he sent his mother. I sat on the floor with him and I told him, can you show me what you’ve done? Basically, he almost had a filing system in his wallet – a huge wallet – about how much has he sent his mother the money – January, February, March, April. I told him, how did he do it? So he said, the minute I got paid, I took a metro, went to the Exchange house, whether it was July or August or September, I stood in line, I transferred the money, they took the commission, they gave me the invoice, I waited for my mom to send me a message saying the money was received after a few days. So I told him, can I show you something differently? I sat on the floor with him and I showed him how to download the app, add your mother’s beneficiary number like this, whether it’s a mobile number or a cash pick up point, or a bank and (puff!) 200 Dirhams gone! He was almost in tears when she called him a few minutes later saying ‘I got the money’. This ‘aha moment’, if we can do it at scale for 2-3 million people, then I think this is a very noble mission, and I think we’re helping the country, we’re helping our card holders, and at the same, I make money.
Arjun: So I’m going to get a lot more into the value-added services and I have a question to ask you but let’s go back in time a little bit. So COVID was actually a trying period for the entire nation, for every part of the world right? And for the underserved, arguably even further right? What is it that you guys did differently or what were the sort of key learnings that emerged out of that period which you have been able to institutionalize in the business today?
Wael: I wasn’t at the company in the COVID, but I knew what my colleagues did. First of all, I think the country i.e. the UAE, treated us very kindly in COVID. I think I use the word ‘kindly’ because I was here in COVID. The way the COVID experience was digitized, the way you would actually get a message to go and get your groceries, the vaccination, the flawless execution of the country, has made the UAE one of the top countries in the world from a vaccination point of view. And this did not differentiate whether you’re a blue-collar, white-collar, millionaire or so on. Everyone was cared for. And when everyone is cared for in this way, you actually developed this sentiment that you know, you want to live here, you want to work here, and so on. Of course, some businesses were affected, and the country, more specifically, the Ministry of Human Resources and Emiritisation were actually very flexible in the WPS rules during the COVID. So the current rule is that you have to pay 80% of the people 80% of the salary. So if you have 10 employees, maybe one is on holiday, maybe you penalize one for not doing a good job, or maybe one did overtime, so you have to pay 8 (employees) out of 10, and you have to pay them 80% of the salary. During COVID, the MOHRE (who are the WPS regulator) actually decreased the amount to 70% and 70%, because they wanted to help companies with working capital. They wanted to create more and more flexibility in the workplace, and to be honest, it was very hard for people to even fly out of the country. My mom and dad were 82 and had COVID, it took me three weeks to actually fly to Egypt, in one of the expatriation flights to Egypt, to make sure that they’re good and well cared for in the hospital in Egypt. So everybody was affected, but the country reacted both at the consumer level, from a kindness point of view, and from a corporate level, by decreasing the regulations of the WPS point of view. Now we’re back, you know I fly a lot, and you look at the airports right now, I can’t believe that COVID is all gone, and the airports are full. I call it revenge travel. People are just consuming airlines and travel, and it’s good for country, it’s good for everyone, but at the same time, we’re back to normal. We’re back to growth. The limits of WPS have grown, and I would love for them to be 100% and 100%. I would like everyone to get paid on time, and to get paid safely and securely, and for the country to tighten the screws of WPS for sure, because it’s an honour to work in a region and in a country where everyone gets paid on time. For me coming from Egypt, most people get paid in cash. There are laws in Egypt, but they’re not 100% implemented. But here, Saudi, and the GCC, it’s pretty difficult when it comes to paying people on time.
Arjun: So it’s pretty good in that sense. So let’s talk about it. You mentioned you work with 10 banks. You work with 31 exchange houses, 12,000 corporates, and you’re working with fintechs. So how is that ecosystem or experience, if I specifically talk about banks and fintechs for a second, how’s that sort of evolving? Are banks as serious about financial inclusion? Or is it a problem that they want to pass on? And I’m sorry, it’s an emotive question. You can choose to answer it in a slightly less emotive manner. And are we actually seeing good quality fintechs with complementary offerings that you can (I guess) bolt on to the to the offering that Edenred wants to offer in this this part of the world? Is that evolving, both from a banking and a fintech perspective?
Wael: I’ll answer your question, but I think something magical happened over the last couple of years in the UAE, where there’s more and more tech players setting up shops here. Not commercial organizations, setting up CTOs here and Chief Product Officers, and you know, back-end and front-end developers here, and Senior Architects here, and Engineering Managers here. Of course, it’s expensive to live here, but there’s definitely a lot of talent being acquired from all over the world, in here. Our CTO is from Argentina. He was in Mercado Libre which is like the Amazon of Latin America. He worked in Brazil, in Chile and he ended up with us. Our Chief Product Officer is from the UK. So we have a lot of talent being acquired here, and one of the sources of pride that we have is that we’re not a commercial organization. We have product development in country. We have data science in country. We have data analysts in country, who basically understand the pulse of our C3Pay Champions. I think we’re not alone, I think there’s a lot of fintechs that work with banks and work with each other that actually complement the picture when it comes to development and tech and so on. Are banks fast enough? I don’t think so, but I think we complement what banks do but they’re very serious about financial inclusion. I’m an avid follower of the podcast and I think one of your guests was talking about how Bill Gates said that everybody doesn’t like banks but they want banking. So, regardless of the word bank – because it comes with a lot of baggage – we need those services. Those services, together with fintechs, actually create (I would say) a perfect, virtuous circle for speed technology, daily stand-up squads, the rhythm of fintechs and compliance-regulations-rules of banks. So the combination exists for sure.
Arjun: Do you think there are good viable fintech companies in the market today who you can work with?
Wael: Absolutely!
Arjun: And you have a choice among them? So it’s not as if there is one player who’s doing only..
Wael: Of course, but we also we would like to develop our own capabilities, but at the same time, we use other fintechs to actually expand the value and the scope of our products and services, to reach all the financial needs of our C3Pay Champions.
Arjun: Yes I get that. So you’re working with both, the infrastructure providers, where you could take your own product to market, and in some cases, you work with someone who’s a third party who you can work with.
Wael: Absolutely, that’s right.
Arjun: Let’s come to the banks. What should the banks do differently?
Wael: I think in general as a consumer, if I decide right now that I want to send money to my nephew in Mexico, I will have a problem. There’s a setup that I have to do. There’s a KYC that I have to do. There’s some compliance work that I have to do. From an experience point of view, I love the infrastructure. I love the compliance, I love the regulations. It keeps everyone safe. But at the same time, I think the speed of banks should be better. By the way, it’s not only banks. There’s a lot of old oil and gas companies that are using old technology, that are “tested and proven” but the world of technology is moving so fast, so they need to sort of experiment with newer technology faster than this. So I think speed is definitely something. We’re working with RAKBANK by the way. We’re internally working with RAKBANK and I think in the couple of the last few quarters, RAKBANK has developed a very good working relationship with us. We need them to be faster than this, but we’re very proud of our working relationship with them. Super proud. And I think we’re going to expand this relationship into multiple areas.
Arjun: Awesome! We talked a lot about the consumers but there’s 30,000 or 10,000 corporates, you said?
Wael: 12,000
Arjun: The vast majority of them are small businesses?
Wael: Correct
Arjun: What are you doing on that side of the fence?
Wael: So as we move up the value chain of the B2C side, we want the consumer or the C3Pay Champion to love our products and services, download the app, use mobile top-up, lately we just launched ILOE – the Involuntary Loss of Employment, it’s the insurance against being fired.. All these products and services – mobile top-up, money transfer, salary advance, Early Wage Access, we would like the small and medium businesses to actually..we would like to go up the value chain and offer more than just a payroll portal. We would like to offer a semi-HR system for announcements, for HR, for Learning and Development, for so many things.
So we actually have a team working on the B2B value chain and the B2C value chain. Therefore, in the future you’ll see some products and services launched..we don’t yet have HR systems, and I think most of the small and medium businesses have Excel spreadsheets and basically, use pen and paper for employee attendance, employee administration, employee hiring and firing. We can automate this for small and medium business at scale with the press of a button and a subscription fee. So I think this is a value that we can bring to SMEs in a big way. It’s a majority of our business but we have the big guys. We have companies with 55,000 employees, 40,000 employees, and 25,000 employees. I just want you to imagine if you’re the HR manager or the Employee Benefits Manager of a company with 50,000 people, a construction company, an industrial company, the hiring and firing and the attendance and the deductions and the bonuses for 50,000 employees, and the movement.. You know, ‘oh I resigned’, ‘Oh I’m on holiday’, ‘I want to move from one side to the other.’ We’ve automated all of this in our payroll portal. We’ve automated it for the 50,000 and we can scale it down for the for the mom-and-pop shops around the corner.
Arjun: So why stop at HR? Because these guys don’t have any financial direction..
Wael: We’re just starting (smiles). We can go up the value chain and do some amazing things, like working capital finance.
Arjun: I was going to say, are you guys going to get into the financial game?
Wael: We’re experimenting yet, but at the same time once the HR Manager becomes your primary client, the CFO should also be your primary client – of the smaller medium business. Once this happens, you can actually go up the value chain and offer at scale, a small and medium business company, so many value-added services in any field of business they are.
Arjun: So again, there’s obviously a lot of commentary out there which basically says if you start solving the problems for the micro and small businesses, then indirectly, you start solving the problem of financial inclusion for their employees.
Wael: Absolutely right
Arjun: Because let’s be honest, these businesses, as you said very correctly, are the heartbeat [or if you didn’t say it, I’ll say it] the heartbeat of any economy right, because they constitute 90% of anyone. They actually contribute as much as 50% to 60% of the GDP and they employ nearly 99% of the workforce in some parts of the world. I unfortunately feel that not enough is done to address the issues of the SMEs or the MSMEs. You start addressing that issue, and I think financial inclusion to a large extent, starts addressing itself.
Wael: It’s a hard problem to solve. But once you crack it.. I think if you look at the CFO – I call him a CFO, but he’s basically the Finance Manager, the owner of a laundry that has five people. He wants control, insights, a little bit of data, and peace of mind. These are the four simple things that this small owner / Account Manager / Finance Manager CFO wants to do. If you can create the least common denominator of a system for this person, and you give him a little bit of inclusion as well, like some SME lending, some working capital finance, some revenue-based finance, you can do so many things to the economy of a country for sure.
Arjun: Ya because even when you talked about Early Wage Access right, one of the most efficient way to de-risk EWA is to is to link the employer into the chain. I’m sure you guys have all thought this through, you’re gonna land up in a situation where you will have no choice but to get involved in some form or the other. And salary financing itself is a huge opportunity, because it’s sort of the other side of the coin.
Wael: Yes, you know what is very interesting also, is that we’re, honestly speaking, I think our business can 5x and 10x in the next couple of years if we open the Pandora’s box of the SME-up-the-value-chain. The second thing is basically, the End-of-Service Benefits who are not WPS yet, like the End-of-Service Benefits right now is a cheque. So if you work for me for five years, at the end of the five years, and if I’m an honest businessman, I’ll give you your End-of-Service Benefits in a cheque. So technically speaking, this is a bit outside the system. If we can get this End-of-Service Benefits in a WPS form that can be actually four times the volume, maybe five times, that we’re doing and it’s actually a very good thing for both the employer and the employee. Some free zones have actually started the practice of carving out – not provisioning – taking the cash from the company and putting it somewhere outside because this actually belongs to you as an employee.
Arjun: There are all kinds of innovation which can happen around it.
Wael: Absolutely, you want to invest, you want to play, you want to have high risks, you want to..whatever you want.
Arjun: So should I just call it that your strategy is to actually become the ‘neobank’ for the underbanked?
Wael: I think the word ‘bank’ comes with a lot of, you know..
Arjun: That’s why I use the word ‘neobank’ (laughs)
Wael: Yeah but then again, I think we want to be the platform of choice for the underbanked, to empower them in this part of the world. And then again, think of the region. 28 million underbanked people and our strategy is B2B2C. Our strategy is not to go to the consumer directly. We want to go to the HR Manager, to the Finance Manager of the corporations, and to those corporations, we can actually offer them value-added services, for them and for their employees as well.
Arjun: Yeah but well, I’d hazard a guess. Once you build all these products, which are B2B2C, nothing stops the B2C to play.
Wael: Correct, once the ‘C’ is with you, then with data science and segmentation, you’d actually understand to be able to segment and micro-segment who’s doing what, so that you can send them a personalized offer. I think the holy grail of marketing is micro-segmentation. Marketeers have always assumed that because you and me are the same age, work in the same company, live in the same neighborhood, we are the ‘same’.
In Egypt, Vodafone Plus or Vodafone Red, or Etisalat this or that, or so on, but the reality is that you like tennis and I like watching movies. We can crack this, because at the transactional level, we understand what are cardholders, these C3Pay Champions, have been doing with their card – how much money have they transferred abroad, at what rate, how many pieces of cheese have they bought from which supermarket, did they use cash or not, which ATM. All of this data can be used to segment and micro-segment them, and then all of a sudden, try to give them offers. And they’re very smart people. They’re smart and they’re price sensitive, so if you have a rate in one exchange house or a rate with us that is cheaper, they automatically go to the right rate. And they’re digitally savvy, and I’m telling you, the penetration that we have is 90% which is phenomenal. We’re even experimenting with ‘buy now pay later’ because we believe that the phone is their source of communication, entertainment, income, and so on. It’s a companion, and when they work very hard, they go back home to their accommodation site, or wherever they live, they want to eat, they want to rest, and they want to call their loved ones. So they have to have a state-of-the-art or semi-state-of-the-art phone. So we’re experimenting with a ‘buy now pay later’ proposition with the phone, and the early results of this experimentation are actually pretty good.
Arjun: So let me let me switch the gears a little bit and take you into the world of regulation, so open banking and open finance is also perceived to be a bit of a game changer for financial inclusion, because in effect, greater amount of data is available, there’s more opportunities to collaborate, it makes the system more efficient, therefore inexpensive arguably. Are you as gung-ho about open banking/open finance from a financial inclusion perspective? Do you think it’s going to have a profound impact on your business model? If so, why?
Wael: First of all, I think it’s our early days for sure. This literally reminds me of the internet. Like how people were saying, oh the Internet is just an entertainment tool. I remember in 1995, I saw mosaic for the first time and when I when I typed something, it was in the Information and Decision Support Center in Egypt, and I got the results. I almost cried because I was a very curious kid, I wanted to know more about information, I was good with math and science and so on. Then all of a sudden, I found a device that basically gives me all the information in the world. What has this got to do with open banking? I think open banking will change the game over time, by availing data that is not available, meaning the onboarding, the cost of acquisition, the cost of maintenance, the lifecycle management of our client will be different because the client will land on my website, on my platform and already vetted, meaning I know exactly who is this client, who are his suppliers, who are his customers, from the data that open banking can avail. We are scratching the surface when it comes to the future of all of this, but the whole idea is that if you want water and you’re thirsty, you will actually knock on the doors of the water suppliers. So when the client lands on my website or my platform, he would be almost 80% vetted for either a loan or for an HR system or for payroll processing, because my system has already excluded the clients that are not. All of this will happen because the open banking systems will talk to each other. I keep on saying that if the world was API-d, the Mexican example that I gave you would be really cool. Right now, if you have a nephew in Mexico, and you want to give him a Starbucks treat, I want to press a button and do this, and the world doesn’t allow it yet.
Arjun: And open banking will?
Wael: I think it’s definitely going to be a game changer, but over time.
Arjun: I buy into it. I think we’ve been seeing what’s been happening in the UK and Europe. I think it’s taken a lot longer than I anticipated. I still think the use cases are fairly simplistic right. Now I don’t know what role will be played here. I think, in my humble opinion, it’ll primarily come down to the role that the regulator plays in terms of pushing the regulation through, and how the banks are going to respond. I think companies like yours, or any other fintechs – I don’t want to say ‘will be held hostage’ – but I think there is an element that you’ll only be able to move if that data or that customer’s data is made available. But maybe in a financial inclusion perspective, it’s different because I think these guys treat you more as their banks, than they treat the banks as their banks. 🙂
Wael: I think a lot of our cardholders sometimes show up at our reception and they think that we are the bank that is processing their salaries, but we’re not. But you talked about use cases right, the beauty about this Pandora’s box of data being open is that we don’t know what we don’t know. Right now, you and me are sitting on this couch thinking of five use cases. The future will actually reveal 10 more use cases that can be more viable and more scalable than we know, because of access to data.
Arjun: I agree with you. So last question in this section, from a 100,000 feet view, what more can the UAE do to help improve financial inclusion?
Wael: Oh so many so many things. First of all, the UAE is definitely one of the top countries in the world when it comes to financial inclusion. Just the word ‘WPS’ has changed the game big time. I think the screws of WPS should be tightened more. I think there should be more. I think there should be should be more experimentation on the user, when it comes to you know Early Wage Access, credit scoring.. There is so much money at the bottom of the pyramid. There’s so much value at the bottom of the pyramid. The third thing is, the end-of-service. If I were to ask the UAE government to do one thing, it would be to look into the use case for us and others, of ‘WPS-ing’ the end-of-service of employees. This becomes good for the employee, thereby good for the country. ‘WPS-ing’ means digitally paying it, mandatorily paying it. I understand that not all companies are created equal. Some companies have a crunch in cashflows, this is why it’s a cohort-by-cohort basis. So construction companies are different from services companies, different from manufacturing companies, but the reality is that we want people to come here, earn their salaries, and when they move from one company to the other, get their end-of-service in a digitized way. We have (us and our competitors) a lot of models regarding this.
Arjun: To be honest with you, I think this End-of-Service Benefits conversation is quite interesting. It’s not one which we’ve had that often in my interactions. One more question I had, and please clarify this, your salary through the WPS system can only be received on your prepaid card? It cannot be transferred into a e-wallet?
Wael: No, the regulations allow a certain number of IBANs for which salary cards.. virtual IBANs for the salary to actually hit your salary card. Once it hits your salary card, you can do two things with it: a peer-to-peer to another salary card or transfer it outside.
Arjun: Okay, wouldn’t it be better if people could transfer this into their e-wallets?
Wael: Of course, but I think the regulations right now, only allow the salary for AML purposes to actually hit your salary card first, and then from the salary card you can use it online, transfer money outside, or peer-to-peer.
Arjun: Okay so you confirm mine, because you see, my working hypothesis – and I can understand the regulatory angle – is one way to reduce the friction, because you add multiple steps. Currently they’re not even allowed to do that. I think one way to actually reduce the withdrawal of money which is happening at the ATM cards, which is sitting at sort of 70-80% is, if money was to come straight into a person’s e-wallet, and if that e-wallet had a number of these services available, then I think people will naturally be inclined to use these services, whether they’re bill payments, and so on so forth, because to receive something on a card feels a little bit like it’s a card.
Wael: Right but mind you, our app is connected.. The minute the money is received in the card, the money is updated in the app. So the app, which a million people use right now and it’s growing incredibly well, those million people have actually a carousel of services.
Arjun: But that’s just information on the card.
Wael: No no, they can actually transfer money outside, they can pay their bills, they can do Early Wage Access, they can do ILOE, and they can top up their mobile, for the time being. But eventually, I would like them to have seven, eight, ten services and so on. They can buy now pay later, they can buy a mobile through their app..
Arjun: Because I think that’s kind of where we should go, eventually the money should directly go into the e-wallet right. We should get rid of the card, with all due respect – or if the card has to exist, it can exist as a companion, but not necessarily as the primary source where the money is actually saved.
Wael: Absolutely right
Arjun: I’m gonna go into Wael, the Angel Investor. So we’ve had a number of conversations, you’ve obviously been angel investing for a while and you’ve been angel investing primarily or quite actively, in Egypt. Couple of questions for you – what’s your take on the fintech ecosystem or the startup ecosystem if I were to refer to it in Egypt?
Wael: Since I work for Edenred, I don’t invest in fintechs in Egypt because there’s a conflict of interest. So most of my investments happened before the Edenred days. Let me rewind. The minute I had some dispensable money, I went to my father and I told him, what do you think I should do? Should I buy real estate, or should I do expensive holidays or buy expensive cars? He told me a very good advice, he said, ‘pick up smarter friends and give them the money, whether they own a coffee shop or whatever’. So I’ve started doing this since I was 16-17. Every time I had money – and I was always had money, I’m really blessed that I always had money – I worked, I hustled, I did a lot of great ethical things in Egypt. I worked everywhere in Egypt from Harish to Luxor to Aswan. When I was a student, it was very uncommon during my growing up to work, so I worked in used T-shirts and I had money. I never put this money in the bank. I put the money with smarter friends, friends who are dedicated to a single cause. I say, ‘Hey listen, you have a coffee shop. You want a hundred thousand Egyptian pounds, why don’t you make me a partner at ten percent?’ In the beginning it was just verbal, then it became written somewhere, and then we had a structure. I think the turning point for me was when I worked for Google for 10 years in this part of the world, I started learning about this world. Coincidentally my son was graduating from college and he wanted to do a sports analytics company, so he was my first (sort of) serious investor. He was my son, I had like a bias to him, I took X percent of his company, I gave him a little bit of money, and his company is flying so far. So good.
Arjun: Congratulations!
Wael: 1000 employees, doing really well in Egypt. I started learning that 9 out of 10 companies will lose but one company will make outside returns. Then I started this journey of spending a little bit of money. Me and a couple of friends, we have this..it’s a WhatsApp group (laughs) where you say, ‘I’ve seen this kid who’s smart in Egypt, why don’t you give him X thousand dollars and so on’, we’ve been doing it. But back to your question, Egypt is full of problems and Egypt is full of opportunities. It’s one of the greatest countries in the world, I’m very biased. But at the same time, it has 112 people, 7 million people live outside, 105 million live in Egypt. Every service in Egypt is sub-optimal. I don’t want to get in trouble but a lot of services are sub-optimal. Startups are solving local problems with local solutions, with smart kids that can scale not just across Egypt but across the world. I am so bullish in Egypt despite the doom and gloom that is happening globally, and you know, the devaluation and the ‘poor ratings’ and all of this. 105 million people have serious problems to be solved and tech can play an incredible part in it.
Arjun: Yes I get that, but do you see these Egyptian fintechs actually become regional superpowers?
Wael: 1000% but then again, the Egyptian Market is so big that they have enough to solve.
Arjun: But is there enough money to be made in Egypt then?
Wael: Good question. There are a couple of startups that I’m not invested in at all but I’m watching, and they have either broken even, or broken even at the unit economics level that are going to fly. Now the currency is another issue, because the currency is losing a lot of its value and so on. The best setup is that you try to use the labour arbitrage that is happening in Egypt – is to have a client outside, that pays you in hard currency and use the Egyptian skills, you know, 52 universities, millions of people, it’s a semi-India. Egypt is like very close to India from a cultural point of view.
Arjun: You don’t have to convince me that. I used to go to Egypt quite often.
Wael: The idea is, if you can use Egypt as a hub for development, as a hub for operations, and try to get some clients outside, either in the GCC or globally, that’s a killer formula. If not, there is enough money in Egypt but the currency is a different issue.
Arjun: Yeah it’s a challenge, I’ve been very bullish on Egypt since I started working with Egypt about 10 -11 years ago when I first arrived here. I used to go to Cairo quite regularly I was even there when some of the challenges were happening. I actually got stuck at Tahiri square one day when a few firecrackers went off, and I walked from there to a completely different part of Cairo. I think it was about an eight kilometre trek which I had to do, and I do see the similarities between India and Egypt in terms of lots of challenges, big enough country, obviously India’s a billion and a half. But 110 million is not small. I do see the fact that there is abject poverty, but I do see the youth, I do see that determination. My only concern with Egypt was always been that, will it achieve that level of economic stability that’s required, because the other fear I have for Egypt is that are you going to get a brain drain happening very quickly, because if all these young talented people are not going to find the opportunity to thrive?
Wael: Yeah there are two very interesting phenomenon because I’m watching the ecosystem very closely. There’s a lot of brain drain for sure. There are a lot of smart people that want out. But there are a lot of smart people who also want to live in Egypt, get paid in dollars, and want in. They want to stay in, meaning, if you get paid in dollars in Egypt then then you’re fine. Like today, it was 35 or 36, I’m not watching what’s happening, but one dollar is 36 or 35 Egyptian pounds, or a little bit more. So if you can sell your products and services, sell your skills, then there is value that you can bring. I have a lot of friends who basically are software developers for large multinational companies, engineering managers, technical architects, squad leaders for large corporates, in Berlin, in Denver, in Colorado, and all of a sudden, they’re big, getting paid in Egyptian pounds. So the two phenomena are happening. Egyptians are very adaptable. They’ve been around for seven thousand years (laughs) so they’re very adaptable. So they’re going to find a way out for sure.
Arjun: Switching again, let’s talk a little bit about technology. I’ll pick on a couple of technologies and in no particular order, let’s talk about blockchain, for example. Blockchain is coming, I think there are enough use cases that people are talking about in the financial services space. What is Edenred’s view on this?
Wael: It’s super early days for us to be honest, it’s a use case-by-use case basis. Are we going to use this technology? I still don’t know because we are looking for a use case that fits our particular vertical. If you’re a hammer, you think that everything is a nail. You know what I mean? But we’re not a hammer, we’re trying to actually think user-first. What is the C3Pay Champion? What the user wants to do? I think blockchain is like any technology in the world, it will actually get early adopters, a lot of people to use it, and all of a sudden, it will be embedded in everything that we do if it fulfils the promise, which is the speed, the security, and so on. Have we started experimenting with it? Not yet. Is it on our radar, screen, and map? It’s like everything, it’s like ChatGPT, it’s like large language models, it’s like everything on our reader screen because we’ve tripled our tech investment over the last couple of years globally. The largest growing number of people, I’m so proud that we’re still hiring while the large companies are either freezing headcounts or laying off people. I’m also very proud that we’re a profitable fintech. Again, the words ‘profitable’ and ‘fintech’ are a bit of an oxymoron in this day and age. So we are a very profitable fintech, we have a saying that Revenue is vanity, Profit is sanity and Cash is king.
Arjun: Is there any particular technology, out of this plethora of new technologies, that you guys are actively experimenting with?
Wael: We’re working on all of them. We’re working a lot of technologies, and I think some countries are more advanced than the other. But from a WPS / salary processing point of view, we’re experimenting with a few technologies that will very soon see the light.
Arjun: So last couple of questions. Next two years – without spilling the secret sauce – what are your top five priorities as a business?
Wael: Very clear in my head. Number one, I think we have a chance to dominate the payroll market in this part of the world from it from a B2B2C..
Arjun: And that takes you beyond even the 5000 income or you want to stay at that..
Wael: WPS. The blue-collar underbanked and it’s B-2-B-2-C, whether it’s WPS or non-WPS, anybody who basically processes payroll because payroll is an incredible use case where it happens 12 times a year and you can basically grow this big time, on both the B2B side and the B2C side. The potential in the UAE is 5x to 10x and the potential globally is 100x. Globally, as in the Middle East – look Saudi, look Kuwait.
Second is basically, we want to drive a cashless community. We want to do less cash and get more and more people to be digital, to keep being digital.
Arjun: People should not be withdrawing as much money?
Wael: Absolutely. The third is that we want to act for the Exchange Houses, as their tech arm: We want them to outsource some of the tech part because we do it at scale, we do it with a lot of focus, we are super good at this, this is what we do for a living every day, we wake up in the morning and look through this every day.
The fourth is that we want to do some good. Our slogan globally is Enrich Connections For Good. In this, ‘for good’ is for good purposes, so we’re looking at plastic-less, we’re looking at food distribution, we’re looking at CSR, we want to be involved in the community we serve, and the fourth objective is to also do this with compliance in mind. We lead with compliance, we lead with KYC and KYB, with transaction monitoring, we win clients, we win good-practice clients, because we have a strong compliance practice. We hired a very strong Compliance Director, who comes from the banking background. We want to take what the banks are strong in, which is the compliance. So we actually want to lead with compliance and data protection, and stuff like that.
Arjun: Okay so you mentioned about expanding in the MENA region, so which is your next country that you guys are focused on?
Wael: I think very soon we’ll announce it but it’s very obvious. We’ve gotten the semi-go-ahead to explore Saudi. I think between Saudi Arabia and Egypt, we will probably go to either one of those.
Arjun: Interesting you mentioned the five things, but none of those five things mentioned bringing any other of the Edenred verticals into this part of the world. Any reason why not?
Wael: I think the meal voucher model is a tax incentives model. So if you’re a Peugeot or you’re EDF, you have 10,000 employees, if you give them meal vouchers, you actually get some tax benefits. The tax situation here is different, so there is no incentive for employers to actually give a meal voucher for employees yet. Are we excited about expanding beyond payroll? Of course but the easiest nut to crack for us, is payroll for the underbanked people, which are 15x the number of people that we have right now. Like, before expanding to other than payroll, the payroll part alone is 15x.
Arjun: Wael, it was great to have you on the couch. Thank you for actually being the champion for the underserved and I think it’s my sort of first episode where we’ve actually gone into so much depth. But you’re not getting away that easily, I have one last question: Your audience is 10-12 year olds, you have anywhere between 30 to 60 seconds, explain financial inclusion to them.
Wael: I only need 10 seconds (smiles)
Arjun: Okay go ahead.
Wael: We make people get paid on their mobile so that they can use their mobile to spend their money anywhere in the world.
Arjun: And that means anyone?
Wael: Anyone!
Arjun: All right, excellent. Well thanks a lot for your time, I know you’re a busy person, and I’ll let you now go back to solving the problems.
Wael: Thank you so much.
Arjun: Thank you so everybody, that was Wael, he is the CEO of Edenred for the MENA region that you heard firsthand. You can see the passion that he carries about the business that he’s only been running for, I guess, 18 months right. With that, goodbye till the next episode.
