UAE-based entrepreneur Amal Abdullahev wanted to build a startup to match businesses with social media influencers, but the biggest challenge he faced was cost of all the software as a a service (SaaS) products he was using, denting his company’s overall financial position. This is a struggle that many other startups face if amassing various SaaS tools to operate and grow their business.

Most SaaS solutions offer multiple pricing schemes, but the choice between monthly and annual subscription plans might have a significant impact on the entire cost structure of the business. Abdullahev opted for monthly subscription plans in order to avoid hefty lump sums, but in the long run, ended up paying more. 

“With a very limited runway [that we had back then], it was very hard to not burn the cash too fast. One of the biggest expenses we incurred was those of the SaaS. The problem was that when you opt for the monthly payments, you're overpaying the premium, which sometimes starts from 10 per cent to 50 per cent. And if you had to pay it upfront, you wouldn't be able to save and extend your runway eventually,” he explains.

Realising this issue, Abdullahev, along with Alisher Akbarov, and Alexander Mushta founded COMFI to help businesses mitigate the challenge of managing their SaaS expenses. The startup offers buy now, pay later (BNPL) for businesses looking to bundle their SaaS products, allowing them to split the cost of the annual subscription fees over the course of 12 months.

COMFI spots a “blue-ocean” market opportunity in solving a pain point for small and medium-sized enterprises (SMEs) in the Middle East and North Africa (Mena) region with cash flow challenges that also need software solutions to run their operations. On the other hand, it also works to enable its partner SaaS suppliers to secure revenues in advance so that they can better predict their sales trajectory and growth roadmap.

“In the B2C BNPL space, the value that players offer is to increase the average order value by 45 per cent for their [partner merchants], and they can increase the conversion to purchase by up to 30 percent. The value that we [as B2B players] can bring into the business space is that we enable higher rates of sales velocity, or the velocity of the deal cycle, which means how much time is needed for a merchant to close the deal or get a merchant to sign the contract. That's the primary metric that we try to optimise," says Akbraov.

B2B versus B2C

The Covid-19 pandemic accelerated the digitisation of B2B transactions and since then, B2B startups have mushroomed across different sectors. Over the past couple of years, the B2B BNPL sector has been gaining ground and catching up to its consumer counterpart, hoping to plug the gap in short-term lending solutions for small business owners. The growth of this segment is expected to be driven by the macroeconomic downturn, which will drive the demand for cash perseverance and customised financing schemes. For Akrobav, the business lending activity in BNPL remains subdued owing to the fact that the B2C market has not yet fully matured.

However, there are monetary and non-monetary aspects at play. For one, transactions processed by B2B BNPLs typically involve larger sums of money spread over longer tenures, meaning that payment delays would pose a direct threat to the existence of B2B startups. However, the major challenge faced by COMFI and other B2B players lies in the risk assessment processes. The general lack of transparency and data in the B2B space makes it difficult for COMFI to  assess the creditworthiness of potential clients and so the startup says it keeps getting pushback from merchants because the "culture is not there yet".

“So in the case of B2C, you can leverage the credit bureau data, so you get a sense of his repayment behaviour, which can reduce your risk. So there’s more transparency or background information on the customer at a cheaper cost. With business, it works a bit differently. You need to find reliable sources of data in order to assess the creditworthiness of the business," says Abrokv. “This is the main business we're in, [it] is about trying to identify who is a good customer and who is not, so that our business model can survive and live through the next five or 10 years. Not all of the suppliers of data can give you the data that you need to make a proper judgment and decision.

“It takes some time to actually get through their skeptical barrier. So this is something that we probably struggle with; it's the positioning, the wording that we use, the message that we convey, and how we actually persuade them that this new thing is worth testing out,” he adds.

A high cost of data acquisition as well as stretched-out repayment schemes translate into a lower-margin product, a challenge that is likely the main reason for weakened B2B BNPL activity.

Expansion

Currently, COMFI operates under a SaaS licence in the UAE, with plans to expand to the Saudi market, where it can leverage the country’s growing fintech market.

“In 2023, the investment in fintech increased by 70 per cent, whereas in the UAE it shrank by 20 per cent. So we can assume that the UAE fintech market is getting pretty mature,” says  Akbarov. “We have all the players to cover the local basic needs, whereas, in Saudi Arabia, there's still room to grow and introduce new products.”

Similar to other SaaS startups in Mena, COMFI is also turning its gaze overseas to cater to a larger addressable market.

“B2B expansion is required, depending on the niche you're in; for example, we are in B2B SaaS and if we were only in the Mena region, that probably  wouldn't be enough. We would still need to be worldwide because the cost of operating the B2B BNPL is obviously higher,” he concludes.