The UAE has a number of financial websites that help consumers compare banking and insurance products.
Set to go live in the first quarter of next year, a new FinTech initiative called MoneyMall plans to take the concept one step further by offering consumers looking for loans, credit cards or mortgages personalised options based on their credit score.
MoneyMall is the brainchild of Briton Kashyap Shah, who is a former banker and product officer for a UK consumer finance platform, and Nikunj Soni, a former retail banker from India. The platform is among the 22 finalists for the 2018 FinTech Hive initiative by the Dubai International Financial Centre – the largest FinTech accelerator in the Middle East, Africa and South Asia region.
The 12-week programme, in partnership with New York-listed technology company Accenture, offers fledgling ventures access to financial institutions and other stakeholders to create innovative solutions that address the evolving needs of the region’s financial services industry.
One growing issue the MoneyMall founders are looking to address is UAE consumers taking on debt they cannot afford to repay.
"There's a big problem in the way people buy financial products in the Middle East," says Mr Shah. "There was no credit bureau before so banks were lending money with a lot of due diligence and underwriting but they were not being very stringent. Then the bureau came along."
The emergence of the Al Etihad Credit Bureau, which launched in the UAE in 2014, changed the lending landscape in the country. Like other credit bureaus around the world, it harvests credit data including loan, mortgage, credit card and phone bill payments, assembling a credit record of the nation's financially active residents.
While chiefly helping lenders assess a customer’s credit worthiness, personal access to its records helps residents keep an eye on their rating - almost like a credit health check.
Central to that health check is an individual’s credit score – a three-digit number that factors in about 2,000 attributes to determine a borrower’s risk of default over the next 12 months. Attributes include nationality, age, outstanding balances and the number of loans.
It is this concept the founders of MoneyMall want to tap into, effectively stepping in as the middle man between the banks and consumers to help residents filter through the myriad products on offer to find those most relevant to their unique financial situation. Mr Shah says the platform will offer users the score for free – bearing the cost itself.
While the MoneyMall founders have met the credit bureau, they do not have an official agreement in place yet. The credit bureau declined to comment.
Liv., the digital bank launched by Emirates NBD three years ago, has already tied up with the bureau to offer its customers their credit scores for Dh10.
While customers still need to visit the bureau for their full score, they can simply click on the CreditCheck feature on their Liv. app to access their basic score and debt burden ratio (monthly loan and card repayments as a percentage of their salary) as well das access tips on how to maintain a healthy credit score by ensuring regular repayments, borrowing wisely and following other positive financial practices.
“As credit scoring gains relevance in the UAE, we want to educate and guide customers to help them better manage their finances today for a healthier financial future,” said Jayash Patel, Liv. head, when the service was first rolled out in August.
The credit bureau's scoring system was introduced in April last year with the bureau saying at the time that it hoped individual credit scores would result in borrowers with good payment histories receiving better rates when applying for a credit card or loan.
Ambareen Musa, the founder and chief executive of Souqalmal.com, told The National last month that as interest rates rise retail lending in the UAE may now move towards "credit score-linked loans and credit cards in the future" – something already seen in other parts of the world.
“For instance, there are specific ‘sub-prime’ credit cards for individuals with low credit scores in the US that come with higher interest rates, while applicants with a high credit score have access to lower-interest options,” Ms Musa said.
Daniele Lavalle, the bureau’s head of product development and data operations, told a panel discussion on millennial attitudes towards money hosted by Emirates NBD earlier this year that how individuals build their credit history “is the most important credit facility of your life”.
“It’s part of your business card whenever you approach a bank for a credit facility; these will be reviewed when you ask for a personal loan or mortgage.”
Mr Kashyap says at the moment many customers apply for products not suited to them, which indicates to the market that they are credit hungry.
“People generally apply for products based on branding,” he says. “They want a certain card and then they get rejected. If they keep applying they will then damage their credit profile.”
Checking which products are suitable on behalf of the customer before they apply, Mr Shah says, will allow several lenders to assess that person’s data without their credit record being compromised.
MoneyMall can then flag up products to users based on a person’s likelihood of actually being approved.
To access the service, customers will register with the platform, which then carries out fraud checks. The platform will then contact the AECB to access the customers’s score, displaying it on the customer’s dashboard.
“If your score is low, then you may need help in how to manage your finances in an effective way, so I will show you a personalised coaching plan,” says Mr Shah.
This, he says, will help customers learn how to improve their scores or how to adopt healthy personal finance habits.
From there customers will be shown a range of financial products, specific to them.
Depending on how the company builds its relationships with its partners, MoneyMall hopes to incorporate pre-approval where lenders guarantee they will lend to certain individuals. The company also hopes to introduce a culture of switching – where customers switch between products to make savings either on lower rates of interest or fees – a common practice in more developed banking sectors.
“Each product will be displayed in a simply way, telling you how much money you could save if you switched to that credit card, for example,” he says, adding that they will also offer customers products based on their individual profiles - such as an air miles credit card for a regular traveller or a cash-back card for shoppers.
In the long run Mr Shah hopes his concept will reduce default rates in the UAE, in turn boosting the economy, as borrowers will only take on products suited to their needs. It is only at the point that the bank approves the credit that MoneyMall will be paid.
Interestingly, the company’s aim is to first roll the service out to low-income residents – those earning less than Dh5,000 a month - a segment of the community typically unbanked as many financial institutions do not lend to low earners in the UAE.
While MoneyMall has been self-funded by Mr Shah to date – a figure he does not want to disclose - the company is looking to raise $1 million.
He has experience in the field, having previously built the consumer finance platform for Credit Score – a company offering a similar concept in the UK.
Mr Shah then teamed up with Mr Soni, who had already built MoneyMall – a basic financial comparison website – as a sideline project to his regular banking job. While they never actively marketed the website, they say it has already attracted 50,000 product enquiries, showing the demand for this kind of information. The duo now plan to evolve the current site into the credit-score linked product.
Mr Soni says the concept will succeed because “nobody is educating the consumer” at present.
“Consumers don’t know how to improve their score if they get told ‘no’ by bankers. There is no platform giving them products suited to them. Everybody wants to improve their credit profile."