When Alok Kumar noticed his 15-year-old brother experiencing the same struggles he faced a decade ago when using cash or his parent’s credit card while growing up in Saudi Arabia, he decided to solve the problem by launching a teenager-focused neobank.
He teamed up with Nuha Hashem — whom he met during his university days in Saudi Arabia — last year to launch Zywa, one of the first teenager-focused neobanks in the Middle East and North Africa that offers Generation Z access to digital payments and enables them to go cashless.
“It did not make sense to us that nothing had changed in a decade, so we decided to solve the problem ourselves 14 months ago,” says Ms Hashem, who has a degree in electrical engineering from Ain Shams University in Egypt and a master's from a university in Turkey.
“Teens are digitally smart, have a smartphone and are exposed to TikTok from an early age,” she said.
“These teens will enter the workforce very soon, start earning and have sudden access to many apps, especially ones with the power to impact their credit score, and then they would need to be financially literate to make the right decisions. This is currently lacking in the education curriculum.”
The internet is the go-to source for investing and financial education for young people, an April survey of 4,000 US adults by Investopedia showed. About 45 per cent of Gen Z uses YouTube for financial education, while 30 per cent turn to TikTok, the survey revealed.
Neobanks are increasingly popular among Gen Z, as they serve their needs better than traditional banks.
FinTech start-ups began to surface after the 2008-2009 financial crisis. The ensuing shake-up of banking regulations and the rise of new technologies have enabled neobanks to disrupt the market with consumer-friendly services: shorter account opening times, faster peer-to-peer transfers, credit building and payday loans.
There are at least 333 neobanks worldwide, including start-ups and digital-only operations from legacy players, a tracker by The Financial Brand publication showed.
Zywa offers a gamified community-based banking app and payment card to youths aged 10 to 25.
Through the app, parents can send money to their children and oversee their spending and savings habits, while teenage users can spend and manage their money more efficiently.
In the UAE, Gen Z spends more than Dh5 billion ($1.36bn) every year but many still rely on cash or their parents’ credit or debit cards. This is despite having options such as supplementary cards issued by their parents’ banks, Ms Hashem says.
“While these options give access to digital payments, they are not fundamentally designed for Gen Z and this is where we add value,” the co-founder and chief technology officer says.
“We are a Gen Z team building for Gen Z, and aim to grow our product as they grow, to be the only financial services platform they will ever need. We want them to experience banking in a cool way that sets a high standard for them in the future.”
Zywa focuses not only on payments, but also aims to create a community of young people who can learn, earn and grow with initiatives such as internships, events and meetups, influencer partnerships, gamified financial literacy and more, the founders say.
“If you look at the region, there is no community that is exclusively tailored [let alone provides financial services] for Gen Z, and we aim to fill that gap by starting with a banking platform for them,” Ms Hashem says.
Zywa, which can be downloaded from the App Store and the Google Play store, does not charge users for the service.
Instead, the app makes money on interchange revenue and merchant commissions through affiliate partnerships, says Ms Hashem.
“We believe in financial inclusion and thus a subscription model does not make sense for us, because you should not have to pay to get access to financial services — it is a basic right,” the entrepreneur adds.
The company, which is based in Dubai International Financial Centre and also in Abu Dhabi Global Market, is currently operational in the UAE and has more than 25,000 users.
The team is currently in talks with regulators and partners in Egypt and Saudi Arabia, with aims to launch in those markets in 2023.
It raised $3 million in a new funding round this month, with the company’s valuation now reaching more than Dh110m ($30m). Investors who participated in the latest funding round included Goodwater Capital, Dubai Future District Fund, Rebel Fund, Trampoline VC, Zemu VC, some European family offices and strategic angel investors.
“We are excited to back Zywa as we believe financial education needs to be revolutionised for teens in this changing economy,” says Samantha Ku, chief operating officer of Square Financial Services, one of the strategic angel investors that joined the latest funding round.
The new funds will help the company to focus on product, growth and strategic partnerships to accelerate its expansion in the UAE and Egypt, and support the launch of its services in Saudi Arabia by early next year.
Zywa raised $1m in a pre-seed round in February that was led by start-up accelerator Y Combinator. Executives from Google, Amazon, Netflix, McKinsey and Morgan Stanley as well as regional bankers and entrepreneurs also participated in the round.
The FinTech recently joined Abu Dhabi’s global tech ecosystem Hub71.
“Hub71 has invested Dh500,000 into Zywa through their start-up incentive programme. We are currently going through the programme and Hub71 has been extremely helpful in terms of connecting us with key partners,” Ms Hashem says.
Meanwhile, Y Combinator has been “pivotal in Zywa’s start-up journey”. The company is part of Y Combinator’s winter 2022 batch that kicked off early this year.
“From day one, we had access to real-time advice from the founders of unicorn giants globally, such as Airbnb, Stripe, Coinbase, Gmail, and many others. The network and community is very supportive,” she says.
“One of our mentors was Tom Blomfield, who is the founder of Monzo, one of the largest neobanks globally. His advice was very valuable and helped us improve our product and strategy — the change was almost 180 degrees.”
After starting out as a two-member team, Zywa currently has a team of 10 full-time employees and a few interns.
“We are building the first ever community tailored for Gen Z in Mena, and we have a young and seasoned team, which is close to the age group we are targeting,” Ms Hashem says.
“Furthermore, we bring a diverse mix of seasoned professionals, who have built and scaled similar products in other markets.”
Zywa has a referral programme that incentivises users to refer their friends. The FinTech is also joining up with universities and high schools to widen its reach among its target audience and build the community from the ground up.
When the start-up was launched during the pandemic, it was initially challenging to hold meetings with banks and partners online, the co-founders say.
Once the pandemic rules were relaxed, Ms Hashem dropped out of her doctoral programme in the US. Mr Kumar — who graduated as an engineer from King Fahd University of Petroleum and Minerals in Saudi Arabia and later worked as a management consultant on several initiatives under Vision 2030 as well as co-founding a food technology start-up — quit his full-time job.
They both moved to Dubai to work full time on Zywa.
“Things got better once we were able to interact personally with all stakeholders,” Ms Hashem says.
“Being pioneers in the space, we are doing a lot of ground work with banks as well as regulators about educating them regarding the proposition, KYC and fund flows. This process is heavily time-consuming and has several dependencies, which affect growth and expansion plans.”
Q&A with Nuha Hashem, co-founder and chief technology officer of Zywa
What successful start-up do you wish you had started?
Sometimes, when you see a start-up idea, you think: “This is so smart, why haven’t I thought of it?” This is exactly how I feel when I think about Uber — it is such a simple idea which solves a big problem and also adds tremendous value to the economy.
What is your next big dream to make happen?
My next big dream is for Zywa to become the number one financial services platform for Gen Z, to contribute to increasing financial literacy in Mena and to make the world a better place for Gen Z.
What new skills have you learnt in the process of launching your start-up?
I always say that the things I have learnt from the one year I worked on Zywa are far more than I have learnt in my bachelor’s, master’s and PhD combined.
As a start-up founder, you push yourself into the deep end and learn how to swim along the way. You work in engineering, product, marketing, legal, operations and juggle many things at the same time.
So, I would say the most valuable skill I have learnt in the process of building Zywa is being a generalist, which was a complete 180-degree change in mindset from when I was a PhD student and a specialist.
If you could start all over again, what would you do differently?
Started even earlier. The tagline of our brand is #StartEarly. We are telling Gen Z to do that in terms of financial literacy and in terms of building and networking with their own community. If I had to start all over again, I would change nothing except start early!
Who is your role model?
Jessica Livingston, one of the founders of Y Combinator, is my role model, because she was a female founder back when it was rare and controversial. She also had no prior experience with start-ups and hustled her way against the wave — despite popular opinions regarding seed funding — and created the most powerful accelerator in the world that actually walks the talk and puts founders first.
Where do you see yourself after 10 years?
I see myself working with other Arab female founders to help them break the cultural bias by pursuing things that matter to them, which inspire them and could make the world a better place.