Dubai’s FinTech platform helps consumers achieve financial stability by shielding from bulk payments
Direct Debit supports people and businesses in handling recurring bills, reports Sarmad Khan
Ummair Butt is an entrepreneur who is willing to challenge the norm and he is not afraid to fail. Conviction and persistence have defined the entrepreneurial journey of Mr Butt, who was only days away from leaving the UAE after his first business venture failed almost a decade and a half ago.
Fast-forward to today, Mr Butt is the founder and chief executive of Direct Debit System, a start-up pushing to ease the burden of bulk payments on consumers in the UAE.
The venture is a paper-free UAE Pass identity-verified system made available to merchants, landlords, schools and other businesses that need to collect recurring payments.
The start-up provides an all-in-one monthly solution and it is a direct result of challenges Mr Butt faced when he had to budget as a salaried parent in the UAE.
After the failure of his insurance aggregator business back in 2010, he took a full-time job and with two school-age children, he had to write three cheques for the school and four for the rented apartment.
The post-dated payments took the biggest toll on his finances, especially in September, as large amounts were drained from his account to cover school fees, books and other expenses.
This was followed by the rent payment, which forced to rely on his credit cards to meet household expenses.
“I thought if me being an accountant can’t control this sort of upheaval, it must be a problem for everybody else as well,” the finance executive says.
The 48-year-old Briton, originally from Pakistan, found himself trapped in this vicious cycle of post-dated cheques and credit card payments. However, in 2012, the UAE Central Bank introduced a direct debit system, offering him a glimmer of hope.
“I was very happy because at that time, I was a monthly salaried person. Had a little bit of debt from the failed business and I had two school-going kids,” Mr Butt says.
The direct debit option was the answer to the “huge imbalance” he faced, driven by the bulk payments he had to make.
Direct Debit is a simple, secure and automated payment system, which allows merchants, be it a business or an organisation, to directly pull recurring payments from a customer’s bank account with authorisation.
Utility bills, monthly subscriptions, rent and school fees are among the common expenses that can be channelled through the direct debit system, which also eliminates the risk of missed payments.
The paperless process not only reduces the burden of bulk payments for payers, it also helps in improving cash flow for business and cuts administrative costs.
Mr Butt, who studied accounting in the UK, had seen the transition of the British financial system, which has resulted in 97 per cent of the
UK population using direct debit today.
In the early 2000s, he volunteered to become a part of consultative committees of Bankers’ Automated Clearing System (Bacs) UK, the regulator of direct debits, to help build the platform that made cheques largely a thing of the past. “It was a system
which was bank-agnostic. A system which was sitting above the banks and now the new generation in the UK doesn’t even know what a cheque is,” he says.
Last year, Bacs’ transaction volume for payments reached 6.78 billion, out of which 4.83 billion were direct debit transfers, according to data by Pay.
UK, the operator of Britain’s retail payments system.
The global recurring payment market is expected to expand from $138 billion last year to more than $225 billion by 2030, driven by the shift of businesses towards recurring revenue models and increasing digitalisation, according to data by market research firm
Coherent Market Insights. The shift towards subscription and recurring billing will be further accelerated as consumers prefer the convenience of automated payments, it said.
Mr Butt says his experience in the UK inspired him to apply a similar approach in the UAE. The aim was to save people from the vicious cycle of dipping in and out of debts driven largely by bulk payments.
To free up cash resources, Mr Butt moved to a cheaper apartment in Ajman and started investing half of his salary into the development of a new direct debit system for the UAE.
In September 2017, he resigned from his job and launched Direct Debit System. However, it took him several years to iron out the wrinkles, such as receivables involving multiple banks and battling paper-based latent processes.
After three years of collaboration and development, the system was allowed to act as an aggregator of direct debit for the Central Bank and was granted necessary approvals to become a licensed entity.
The company was granted a no-objection certificate in September 2022 to access the central bank’s systems, he says.
After another year of rigorous testing, the company took on its first client in September.
It currently has 18 merchants on board offering customers direct debit facilities and Mr Butt expects the number to climb to 150 by the end of this year.
“The system is running really well at the moment [but] our number of transactions is still low. But with direct debit, adoption is always slow,” he says.
This year, the start-up hopes to achieve between 100,000 and 250,000 transactions a month. This would give the company the momentum to enter a new phase of growth in the next two years, he says.
The start-up charges its affiliated merchants fees but the service is free for individual customers who use the platform to make monthly payments.
The company is not profitable yet and won’t be in the green by the end of this year, but it would “certainly be profitable by the middle of next year”, Mr Butt says.
Direct Debit is also exploring other regions and territories. It has already established a UK subsidiary and plans to expand into Saudi Arabia by the end of this year.
Pakistan, India, Malaysia, Indonesia, the US, and Central Asian countries are also on Mr Butt’s list of target markets.
To meet the expansion goals, the company it is looking to bring more strategic investors on board.
“Raising money is not enough, we need an investor who is ideally somewhat related to our field and also could help us with regulators,” Mr Butt says.