When Welshman Jon Richards started his price comparison site in the UAE in 2011, he quickly found a gap in the market.
Finding that just 20 and 30 percent of banks were supplying much-needed financial package information for customers on their websites, Richards and his coworker and friend Samer Chehab decided to dedicating themselves to addressing this problem.
Their founders all had similar experiences in banking and marketing, all had the same intention of bridging the gap between banks and customers, and the startups all had similar potential for big rewards and failure. MENA’s price comparison sector for finance was born.
A market to be in
“I believe this is a very attractive market,” says Souqalmal founder and CEO Ambareen Musa. “In comparison with the UK, with 65 million people, where they have four big comparison sites, the leader, moneysupermarket.com is valued at £1.2 billion [around $1.9 billion] on the stock exchange.”
They aren’t such big consumer numbers, but are certainly big money numbers. In the Middle East you’re looking at a region with five times the population of the UK - it’s a huge market of increasingly money-savvy consumers looking out for the best deal.
A small sector, but there is potential
Each of the four sites mentioned above looks at different financial products currently available from car loans, to health insurance, to credit cards. All operating out of the UAE, they’re all relatively similar, but all a little bit different.
Covering the most ground at the moment is Compareit4me. Created while its founders were still in full time employment, it’s now comparing prices in Kuwait, Qatar, Lebanon, Bahrain and UAE, with expansion plans this year to KSA and Egypt, and with more of Africa in their sights.
Now working with 40 banks across these markets, the founders told Wamda that their initial reaching out, in 2011 and 2012, banks were keen. Aware of the model they were open to the concept.
“They were aware of the success of comparison,” said Richards. “In UK, India and Asia there are strong comparison markets, but like any new product the challenge is convincing them that we can be a good channel for them.”
In contrast, Moneycamel’s founder and managing director Preeti Bhambri found that early on it was difficult to convince banks to test a new product but again, the lack of information out there for consumers forced the financial institutions’ hands.
And the seekers of information are out there.
The numbers vary for how many visits these sites get. Two of these companies get between 30,000 and 40,000, while souqalmal gets an average of 350,000. These numbers may seem high, then you compare them to outside of the region, where, gocompare.com for example, gets up to 40,000 visits a day. So, there is room for growth.
A market that needs tending
According to Musa, only three percent of all content on the web is in Arabic, and of that even less focuses on financial education.
As a result part of Souqalmal’s model is to work as an education platform as well. Working in both English and Arabic (Compareit4me provides in Arabic also), they now have a weekly spot on a Dubai radio station discussing consumer affairs, as well as partnering with government bodies to raise awareness about personal finance.
“We get banks asking us all the time for info about how they might be able to develop their product,” says Richards. “We can feed back to them the kinds that are attractive to certain members of the population.”
According to the cofounder, for them to be able to see what others are offering, in an increasingly competitive market, that ability to share information will become more important. “In the UK, if you’re not on a comparison site, then you’re not in the market.”
What of one credit card provider getting precedence over another? As Richards puts it they are an advertising channel. “Banks will pay for exposure, to be featured at the top of the list,” he says. “But once the consumer refines the search this doesn’t matter.”
Investors see the plus side
While all the founders in the market have put their own money towards their ventures, they have all received outside funding as well.
In January 2014 Souqalmal raised their second round of funding of $1.5 million, led by Belgians Hummingbird Ventures; and moneycamel received angel investment of an undisclosed amount in 2014.
Having seen the results and scale of financial product comparison sites in the UK, Mulverhill Associates, an investment firm based in Dubai, sees the growing sector in MENA as a potentially successful model.
“We believe there is enormous potential for growth,” says the firm’s managing director Jonathan Hall. Noting that over 60 percent of financial products in the UK are sourced via comparison sites, he believes the figure for the MENA “must be less that five percent, and this is the scale of the opportunity”.
Be wary though
“[It’s] capitalism at its best” said a recent Economist article on price comparison sites. However, the crux of the article is to warn of the potentially high costs to both consumers and banks from price comparison sites.
Bayzat is possibly an example of that wariness. Raising a round of $1 million led by regional VC Beco Capital, in June of this year. “We’re not longer a price comparison site in the traditional sense,” says Bayzat’s chief commercial officer Tarek Bayaa, “but rather a technology company that helps customers compare, buy and use their medical insurance.” Urged on by encouraging interest in health insurance compared to their other products, they are also seizing the opportunity that comes with Dubai’s mandatory health insurance program, which requires all employers to give health insurance to staff.
“You look at price comparison sites like moneysupermarket and they’re profitable, but then also look at their marketing budgets,” says Beco Capital’s Amir Farha. They are huge and this is something The Economist article warns of. “Banking is an infrequent transaction, so you need to work out how to be profitable,” continues Farha.
In the meantime though it’s a financial democracy hard at work and it’s something the MENA region is just getting a taste of.