YAP CEO Says Collaboration, Not Competition, Creates More Wins for MENA Neobanks

Unconstrained by legacy systems, decades-long financial commitments and the obligations of a full banking license, digital banking apps are shaking things up and introducing a seamless, cost-effective, and flexible way of accessing financial services that continues to threaten the once dominant incumbent model.

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It’s a space that Marwan Hachem, Founder and Group CEO at YAP, has recently entered into in the Middle East and North Africa (MENA), launching the United Arab Emirates’s first independent digital banking app.

He says YAP’s value proposition is textbook neobank: novel features, a slick, user-friendly interface, quick and easy onboarding and zero monthly fees or commitments that present an attractive alternative to a non-digital bank account.

But all in all, Hachem said that they are in competition with traditional banks, mainly because the user group they are targeting — the huge unbanked population in the MENA region who are sometimes denied banking services due to low income — are not necessarily being poached from incumbents.

He also pointed to the way the “booming” European neobank space hasn’t toppled any of the continent’s legacy financial institutions to show that digital banks can complement, rather than replace their traditional counterparts.

Read more: EU Neobanks Lean on Innovation, Consolidation to Bolster Growth

Simply put, both can coexist while serving different purposes for the same customers. “My savings or [main income] can be kept in my traditional bank to cover my mortgage or car payments. [However], if I want to have a BNPL product or a multicurrency product, I will use digital banking apps,” he explained.

With space for both types of institutions to provide different services, Hachem said, “it’s a win-win situation to work together” — a strategy YAP has adopted since it officially launched earlier this year.

In each market it enters, YAP partners with a sponsor bank to issue the IBANs and provide the underlying deposit guarantee, essentially launching a new type of account on top of the bank’s existing services that can be accessed and managed through the YAP app.

With this approach, the FinTech firm has been able to focus on product development and building new features, such as the in-app financial marketplace that Hachem said will allow users to trade digital assets and act as a hub for different banking services.

Starting Where Banks Stop

Besides consumer banking, YAP is also vying for a slice of the small- to medium-sized business (SMB) banking piece, a core part of their business strategy which per Hachem represents a “massive market” for YAP, particularly in countries such as Saudi Arabia and Pakistan.

Read more: UAE-Based Digital Bank YAP Raises $41M to Expand to Saudi Arabia, Pakistan, Egypt

But he reiterated that YAP will not be competing with traditional banks in those markets but offering something simply different.

For example, when it comes to SMB lending, the neobank is seeking to fill a gap in the existing credit market, operating at the level of invoice lending and salary advances, rather than offering larger loans like larger financial institutions. As Hachem put it, “we start where banks stop.”

See more: FinTech Banks Fill SME Funding Gap Created by Russia-Ukraine Conflict

And because the neobank space is increasingly crowded in developed markets across Europe and the U.S., he added that YAP is choosing to focus on markets with huge potential across Africa, the Middle East and South Asia, where there is less competition and the company can benefit from a first-mover advantage.

In Africa, for example, YAP has been granted a Payment Service Provider license by the Bank of Ghana and plans to launch the first digital bank app in the West African nation next year through a partnership with Asian Development Bank (ADB) Bank.

Securing these licenses has not been smooth sailing though. For instance, it took two years to secure the necessary central bank license and sign deals with a sponsor bank before YAP went live in the UAE.

But as they prepare to launch in four new markets, Hachem is confident that experience will continue to be the best teacher. “It’s becoming easier for us. We’re becoming more scalable to go to market [and launch] in new countries,” he said.

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