This Y Combinator-backed fintech startup aims to be the Amazon Pay of the Middle East

In the Middle East, there are two ways to transact financially—cash or online bank transfer. Needless to say, cash has the upper hand, especially since it eliminates IBAN and swift code issues. 

It was to change this status quo that Faisal Toukan, his sister Sarah Toukan, and his friend Andrew Gold in 2021 started Dubai-based fintech startup Ziina. Ziina is a digital wallet, similar to Paytm and Amazon Pay, and has made sending cash as easy as sending a text. 

“Today, sending and receiving money in the Middle East isn’t easy. We don’t have a UPI (united payments interface) system like in India. Our modes of digital and online payments are tougher. We want to be the Amazon Pay for the Middle East,” says Faisal, in a conversation with YourStory Gulf Edition. 

The app, which follows the P2P model, allows users to send and receive payments in a few taps. Not only does it remove the process of IBAN and swift codes, it also makes the payment experience social by allowing users to send texts, emojis, photos, and GIFs. The team is also working on a social debit card model. 

Faisal realises that people will not be willing to pay to use the app, which is why the team has launched a business product that allows companies to send money to other businesses via the wallet. 

“Businesses are willing to pay a fee to be included in the application. We charge them a flat fee of 2.6 percent per transaction. We are looking at monetising the businesses in the short term, and working to ensure that consumers look at the social cards as a mode of payment in the long term,” he says. 

The amalgamation of the US and the Gulf 

The fintech startup, which was part of Y Combinator Winter 2021, has already raised $9.4 million from the likes of Class 5 Global, the Oman Tech Fund, Avenir Growth, Goodwater Capital, Graph Ventures, Long Journey Ventures, Jabbar Internet Group, ANIM, Wamda, FJ Labs, and Graph Ventures to name a few.

Speaking of their investment in Ziina, Zachary ‘Zach’ Finklestein, Co-founder and Managing Partner, Class 5 Global, says, “Typically when we invest in a company, we try to get to know the founder in a course of a year, I have known Faisal for seven years. He was interning with me at Lumia Capital.” 

Ziina isn’t the trio’s first startup rodeo. The three have built and grown companies earlier. 

Faisal, however, was uniquely positioned to start up since he spent his time equally between the UAE and the US as a child. 

“During the summer vacations I was in the US, and I would return to the Middle East later. I kept seeing parallels. I took my first Uber at Boston College in the US and then Careem in the Middle East. I saw the growth of Amazon in the US and of Souk here,” he says. 

He went on to do internships at the likes of EY, Deloitte, and San Francisco-based VC Lumia Capital. 

Faisal started his career at Oracle in Boston in sales. Things changed in 2015 when a college friend mentioned Ethereum. Faisal ignored him initially, but the friend decided to give him a demo by transferring money to another acquaintance without any bank involvement. 

“That caught my eye. While at Oracle, I attended several meet-ups in cryptocurrency and blockchain. In 2017, I thought it would be my chance to start up. I decided to do so in Bengaluru, a tech hub,” he recalls.

While his startup was in stealth mode, Faisal would shuttle between San Francisco and Bengaluru, and he met Andrew Gold who had built a solution that could send and receive NFTs through text in 2019. 

Andrew had interned and worked for Apple for two years, where he worked on different engineering projects for the iOS and Safari webkit. He was building a distributed wallet system when Crypto firm Coinbase took notice and acquired his product (he worked on their wallet). 

Faisal met Andrew at a hackathon in the US, and the duo bonded over the idea of building wallets. 

Sarah, on the other hand, has always been a part of the fintech world. A Stanford graduate in mechanical engineering, she was named in the Forbes List of 10 women behind Middle Eastern Tech Brands of 2021. 

Sarah suggested that the team start with fintech and then transition to crypto.  

Challenges of building a fintech startup in the Middle East

Starting with a beta launch, the team had started with the process of getting regulating and onboarded one of the largest banks in the UAE as a banking partner. 

However, building a fintech startup is significantly different in the middle east. “While most startups have to launch and start and fail fast, when it comes to working with people’s money, you cannot launch and break things. In fintech startups, trust is earned in drops and lost in buckets, one incident you lose trust of the consumer and even the regulators,” explains Faisal. 

Faisal adds it took Ziina 13 months to get regulated “But this gets you consumer protection, security protection needed. But the standards are high,” says Faisal. He adds there are four things that one has to get right to startup in the middle east. 

The first one is getting the right banking partner, and most of these banks haven’t worked with fintechs, so you need a strategic investor to help you, second is you need to get regulated so that you need to have a balance of $3.6 million in the capital on the bank balance sheet. 

“Even with all of this in place, it is also important that you work towards building a product that is ubiquitous that people are willing to break the habit of transacting with cash and using a wallet,” adds Faisal. 

Adding to this Zach says fintech in the Middle East has historically lagged behind other regions. Speaking of the landscape in the region, Faisal says the US and India are hyper-competitive. So if you capture a thin slice of a big stack of the market size you can create a significantly profitable business.

In the Middle East, it works differently as companies own more layers of stack as it is a smaller ecosystem. This means that startups like Ziina have the opportunity to build a complete financial services product. 

Zach says regulators in the middle east too are beginning to catch up. “There are multiple banks in the UAE alone worth over $10 billion, and that itself makes the total addressable market massive,” he says. And few of these have been explored.

A burgeoning startup ecosystem 

Faisal feels the Middle East is “underrated” and that there are “a series of changes in the ecosystem”. 

“One is the big exit of Careem, which has created a strong Careem mafia. This has also inspired optimism in the ecosystem. Regulations are opening up. In the next two years, more startups will be born in the Middle East,” he says. 

Elaborating on this, Zach says companies like Careem, the ride-hailing giant acquired by Uber for $3.2 billion, have acted as a catalyst for building newer startups. 

“There are now a bunch of people who understand scale, have built for it, and know what it takes to do so,” Zach says.

According to CB Insights, the past few years have seen a significant push for the fintech sector in the Middle East. The report says new funding in the segment was at $2.1 billion across 175 deals.  Till May 2022, there were 41 deals amounting to $503 million. 

A Finextra report says the region currently has a vast variety of fintechs, and the UAE is the leader with 24 percent of the fintechs in the region. 

Some of the top startups include Dubai Based BNPL startup Tabby, credit scoring startup Finllect, and others. Ziina is among the first wallets in the region. 

The Finextra report states that the sectors that need the most attention include banking penetration, remittances, security of transactions, and compliance. 

Several analysts have pointed out in reports that the banks of UAE, Bahrain, Egypt, and Jordan among others have started using special initiatives to regulate and encourage digital payments. The Dubai International Financial Centre, Abu Dhabi Global Market, and Bahrain have also introduced crowdfunding regulations. 

“It is very early days, but it will be interesting to see the segment grow,” Faisal says. 

The team is raising its Series A funding soon. “Our key focus is also bringing in social elements. We want to change payments from being a number to a more holistic experience. We are experimenting with likes and profile pictures. We want to take this element of social and string it across all products, like a social debit card that can be shared. We are getting initial validation, and are working on this growth,” Faisal says.