Starting a business was not a novel concept for Uday Rathod.
His family has a manufacturing business in India, a commodity trading company in the UAE and a 20-year-old IT services firm.
But an “itch” to do something on his own led to him setting up financial technology start-up Znap in 2017.
“I came from there [the family business] but I thought that was a bit too easy and comfortable. A guy could just fit in and take off and it wouldn’t have made any difference,” the chief executive of the platform says.
“Personally, I had the itch to do something different at least, create something of my own and not just copy a model. That push had been there for a while.”
When it was launched in 2017, his app focused on cashback, based on the model of giving incentives in the form of refunds after a purchase. Business was picking up pace in late 2019 — but in early 2020 the Covid-19 pandemic hit and the start-up faced headwinds.
“Thoughts passed by, because you start looking at the numbers and money, then you start thinking what would happen if we don’t function for three or six months, can we afford to run the business or not,” Mr Rathod, 38, says.
However, the entrepreneur managed to quell the doubts and persist with his venture by adjusting his strategy.
“[We decided] let’s just move [ahead] and then figure out as we progress — and we never looked back.”
The pivot came in the form of transforming from a cashback-centred model to an all-inclusive service, which has proved to be successful so far despite growing competition in the crowded FinTech market.
“Covid-19 did force us to change the app and the way we look at things. Before, we looked at trying to benefit users, thinking that if you please them, you will be successful,” he says.
The pandemic's onslaught showed them the other side of the market: businesses, particularly retailers and food and beverage establishments, were thrust into an unprecedented situation, as consumers distanced themselves from physical shops.
That's when the Znap team saw an opportunity.
“We changed the business model to addressing the pain points, which we realised at that time was that a lot of brick-and-mortar establishments weren’t getting business because of so many restrictions,” the Melbourne-educated Mr Rathod says.
“We thought we could help local businesses who have invested in establishments and properties by getting people to walk into stores instead of depending online and earn cashback for spending in-store. We wanted to benefit businesses, which, in turn, benefits users, ultimately benefiting us, too.”
The global health crisis led businesses to rethink their strategies, with many forced to either halt operations or completely shut down.
Customer retention is key for any business, and Znap tried to ensure that its services revolved around that philosophy. The app offers, among others, cashback of up to 50 per cent, bill payments, sending e-gifts and takeaway food orders.
While none of these are new, Znap aims to distinguish itself by allowing the cashback earned to be spent at multiple stores, which means there's no need to carry a card or QR code for each merchant.
“Normally, programmes give cashback in a generic sense: with a loyalty card and you can only spend that cashback [with] that retailer again and within a time frame,” Mr Rathod says.
“We want to eliminate the need for multiple cards or apps for cashback.”
While Znap managed to identify the opportunities in the market, it still had to deal with trust issues.
Merchants were sceptical at first, so the start-up had to prove that it was helping them with a secure platform.
“It comes with the game and it takes some time to explain. You can’t just come up with an app and say, 'hey, pay through us, spend through us'. Trust is a big factor,” he says.
The efforts of the Znap team paid off, with more than 350 merchants on board and thousands of products now listed on the platform.
Znap has so far attracted more than $1 million in investment. Mr Rathod — himself an angel investor in the US and India — plans to “very actively” woo investors for a funding round worth between $5m and $7m within the next couple of months.
“We're in talks now with investors from the FinTech and retail space. It’s time for us to get some funding to streamline our product, make it more seamless and grow — we're looking at a big round,” he says.
The global FinTech market is projected to hit $332.5 billion by 2028, from an estimated $112.5bn in 2021, an almost threefold growth, according to a report from Washington-based Vantage Market Research.
While the market is huge, finance apps are among the less numerous categories in the Apple App Store and Google Play. Of the millions of apps available on these platforms, finance comprises only about 2.5 per cent and 3 per cent, respectively, according to Business of Apps, a market data provider.
Globally, FinTech funding surged 68 per cent year-on-year to $210bn in 2021, with the payments segment enjoying the lion's share of funding among subsectors, accounting for $51.7bn, consultancy KPMG said in March.
Mr Rathod stresses that the FinTech space holds potential for strong growth regionally and globally. There are several investors willing to help budding entrepreneurs tap into growing demand and unserved verticals, he says.
“Saudi Arabia is the bigger target because of its population size, and we're also looking beyond the Middle East and North Africa region. These are opportunities we shouldn't miss.”
Q&A with Uday Rathod, chief executive and founder of Znap
How has the Middle East start-up scene evolved in recent years?
[Many of the] start-ups in 2015 to 2017 were at an amateur state, but today they're all over the news, especially with governments supporting FinTech and the cashless economy.
Even after Covid-19, the spike in the cashless economy is amazing. In terms of e-commerce, digital platforms and payments, consumer apps, it’s great — and it’s quite seamless in the region.
What was one strategy that worked effectively for your start-up?
We tried everything we could, but the only thing that actually worked for us, that I’m so happy about, is referrals. A Dh25 ($6.8) referral reward has really worked for us, and helps us get transactions and trust, a little bit of connection — and it doesn't make us look shady.
Each platform has its own charm at different levels. Some download our app and see us, some talk to us on social media, but referrals have been the best.
What are some of the responses you've received when pitching Znap to merchants?
Something like, "We don’t know you. You’re a start-up, we’re scared.” Merchants try to compare us to bigger companies lots of times, but obviously we’re quite new and not that big.
They tend to lose trust because “you’re not someone big”. So, we have to convince them we’re working towards that [by saying]: “Help us out so we can help you out and that’s a give-and-take business relationship.”
For the bigger brands already established in the market, they understand the language of marketing. They may be convinced with the concept but it doesn’t really go well because they view it from a marketing perspective — how much reach you can provide them.
What is your advice to aspiring entrepreneurs?
Do not be afraid. I think a lot of people have fear factored into them because of finance or being sceptical of how to do things.
You will fail; we did. If you fail, you get up, you learn, you move and you can get past it.
What was the biggest fear you faced?
Mostly, it was paying salaries and having to keep [all] our employees. But even though Covid-19 was a problem, we still ended up paying everyone’s salary in full.
It’s not their fault, it’s not our fault; you can’t blame it on anyone. That was the fear factor: can we afford the salaries in the long run? But I think our pivot was a great move and I hoped everyone agreed with me. Guess what? They’re still here — and we're still here.