The entrepreneur Talal Bayaa found success after his insurance and human resources fintech Bayzat set out to solve one problem and found an even bigger one causing it.
Mr Bayaa wanted to create an online service to help UAE residents find health insurance but found in the process that there was a bigger issue, and larger opportunity in helping companies get health insurance for their employees. He then realised insurance was the tip of the iceberg for HR departments at companies in the UAE.
Many of them still use outdated procedures to keep their books in order and everything from payments to keeping tabs on employee holidays are often done manually. In many cases, companies are still using basic HR software.
“It started with my co-founder talking about a specific problem, which was a lack of transparency when trying to acquire insurance products,” Mr Bayaa said.
“That turned out not to be the problem but the effect of a problem so, as you seemingly try to solve what is a high-level problem, it starts to cascade into almost an infinite number of [other] problems and opportunities, and then you start working them one by one, you find yourself building a company that keeps solving problems for your customers.”
Bayzat started in April 2013, getting into the fintech, or financial technology, space at a time when it had yet to become the buzzword it is today. Financial services companies have been investing in technology for years but it is only in the past two or three years, especially in this part of the world, that spending on the technology has increased dramatically.
Banks have been at the forefront of digital investment but increasingly insurance firm are starting to spend more on technology. It is a win-win situation for the firms, who save money because they need fewer human resources, and for customers who get more efficiency.
Sage, a HR software provider, claims the right automation tools can halve time spent on HR admin and save up to 40 per cent in costs. Oxford Strategic Consulting found that effective HR could add US$14 billion per year to the Arabian Gulf’s GDP.
Still, while the UAE has one of the most tech savvy populations and one of the highest smartphone penetrations in the world, companies in the region are still lagging behind on digital technology spending to make their businesses more efficient, a recent report by the Economist Intelligence Unit (EIU) concluded.
ADP, an American HR management software provider, says that even in the United States, nearly a third of HR teams still track employee data and benefits manually.
The main challenges to growth in the digital economy in the UAE include the fact that there is a lack of skilled IT workers needed to help companies go digital and that companies are not spending enough on technology. This means there is a lot of potential and it is expected the digital economy in coming years will grow at a faster pace than the real economy. While difficult to accurately gauge, the digital economy represents about 4 per cent of GDP in the UAE compared with 8 per cent of GDP in the US, the EIU said.
“The Middle East’s technology market is undeveloped,” Mr Bayaa said. “Companies are restricted to paper-driven, archaic processes because they are not aware of any alternatives. Inefficient procedures like manual employee-record management and payroll are a drain on businesses and their employees and yet it continues to flourish here, one of the most forward-thinking countries on the planet. It’s a pain point we see across the region that desperately needs resolving.”
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Mr Bayaa, who trained as a bio-engineer at the University of California in Los Angeles, says he was not motivated primarily by making money but rather by solving a problem. An entrepreneur who obsesses too much with making money will find he may not solve the problems at hand efficiently, he says. He admits, however, that he was fortunate with the timing of launching his company when there was not many tackling the problem.
“I think we got quite lucky with the timing, quite honestly,” he says. “Our timing was very good. There was a lot of chance with that. I think globally there wasn’t a lot of start-ups in the insurance space at the time. We had a head start in terms of our understanding of the industry.”
Bayzat began shortly before Dubai Government made health insurance mandatory for everyone, providing an avenue of growth for the nascent company. The Dubai Health Insurance Law that came into effect in January 2014 introduced a legal liability for every sponsor to provide an essential benefits package, which costs between Dh550 and Dh750 a year. The deadline for businesses to have their employees insured was March 31, creating demand for experts such as Bayzat to grow their businesses.
Analysts, including those at the consultancy firm PwC, are upbeat about long-term growth for the insurance in all parts of the industry. They say the insurance market in the Middle East has significant growth potential, with an average insurance take-up of just 0.3 per cent in life insurance and 1.1 per cent in non-life insurance.
Bayzat’s technology not only allows companies to manage insurance requirements but also lets them automate a lot of mundane administrative work using OCR technology, which enables users to scan information from documents such as passports and Emirates ID cards. The system also allows employees to figure out what is covered by their insurance and what is not, and request time off work.
Like most start-ups, Bayzat began humbly with personal funds. As the operation became successful, it attracted US$350,000 from angel investors and from then raised $1 million from investors including Beco, a venture capital firm in Dubai.
“Bayzat understood their customer pain points and have developed solutions, specifically for HR and employee benefits that will transform the way SMEs manage and engage with their staff,” says Amir Farha, a managing partner at Beco Capital.
“The HR platform has become an integral part of the Bayzat overall suite of services as the company looks to launch several new features over the next 12 months that will continue to create enormous efficiencies for their customers.”
For the past two years, Bayzat has had more than 300 per cent growth, going from having three employees to over 100 today. It counts as its clients 650 companies and insures 18,000 employees.
Mr Bayaa says the firm’s revenues are in the millions of dollars, without being specific.
The success of the company has increased the number of investors who would like to participate in its growth.
In December, Bayzat raised an additional $5m in funding from Silicon Badia, Beco Capital and others, taking the total raised so far to $13m.
“Bayzat’s dual strategy and core focus on building unique technology for this market is what attracted us to this business initially,” says Namek Zu’bi, a managing partner at Silicon Badia.
“Add a stellar management team and you have a recipe for success in a highly fragmented and inefficient industry.”
Mr Bayaa says in the next two years he is aiming to increase the number of lives insured through Bayzat to 100,000.
He is also looking to expand with more services and spread outside the UAE, he says.
Company profile:
Founder and CEO: Talal Bayaa
Based: Dubai
Sector: HR benefits
Revenue: Millions of dollars
Funding stage: Finished series A
Main investors: Beco Capital, Silicon Badia, Hameed Kanoo, Precinct Partners