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Building is easy; knowing what not to build is much harder!

noreply@blogger.com (KMan) — Sat, 17 May 2025 11:09:00 +0000

Building is easy; knowing what not to build is much harder.

Complexity isn’t just extra code -- it’s a tax on your team’s time, attention, and user trust.

At Ignyte (DIFC Innovation Hub), I challenge founders to show a paying customer generating revenue within days. This forces focus. And users love friction-less experience.

I often tell engineers: write it in a single file or keep it as low-key as possible. If your prototype lives in one script, you’ll understand every line.

A payments startup I advised at Ignyte a couple of weeks ago, the team first wrote a bash script to poll transactions and trigger emails. Only after it worked flawlessly for weeks did they translate it into micro-services.

Instead of dreaming up features, set a date and treat it like hardware launch. Give yourself sixteen days to demo version one. Constraints force creativity.

At another portfolio company, a two‑week sprint yielded a AI messenger bot that answered user questions - far more impactful than the six‑month roadmap they originally planned.

Have a “prune day”. Pick one feature nobody's touching and remove it. No debates. Cleaning the clutter allows to see code as trees in a forest: every branch you lop off frees sunlight for the rest.

A simple product demands simple messaging. At one accelerator cohort, I told founders: if your tagline needs a semicolon, rewrite it. Clarity in language signals clarity in design. Users trust what they understand.

Simplicity is a mindset. Originality. Which is getting scarce in this day and age of AI-plagiarism.

It’s choosing the hardest question. Like, "what do we refuse to build?" over “what else can we add?”. It means designing for removal, not addition. And in that space between complexity and clarity, real innovation happens.

Next Gen Customer Experience Metrics? Goosebumps and Double-taps!

noreply@blogger.com (KMan) — Fri, 09 May 2025 19:06:00 +0000

We keep asking: how do you measure customer experience?

As if it’s something objective. As if the way someone feels about a product can be reduced to a line on a dashboard.

We’ve spent years obsessing over KPIs, Net Promoter Scores, and elaborate customer journey maps. But none of it answers the only question that matters: Did it move them? In a world flooded with options, attention spans, and AI-generated everything, the only true signals left are the ones you feel in your skin, and the ones people can't help but tap twice. Goosebumps and double-taps aren’t just reactions. They’re the future of customer experience, and the only metrics that will matter in the decade ahead.

Here’s the problem: most companies measure what’s easy, not what matters.

Response time is easy. Empathy isn’t. Page load speed is easy. Wonder isn’t.

Think of Apple’s unboxing experience. Or Amazon’s “Buy Now” button. Or how Spotify just gets your taste in music without asking. No one fills out a form saying “I was deeply moved.” But they come back. They tell their friends. They form a habit. That’s experience. And it’s not rational.

Want a real measure of customer experience? Look at: do they come back without a reminder? Are they talking about you without being paid to? Are they quietly disappearing? Did anyone say “this made my day”?

Sometimes the signal comes from things you can’t quantify at all—like when someone pauses after using your product and just says: “That was nice.”

The irony is that the more companies chase metrics, the less human they become. They optimize for scores, not stories. For numbers, not nuance. They miss the edges—the unexpected parts where trust and emotion live.

And no one ever got goosebumps from filling out a survey.

So, what do you do instead? Talk to customers like a human, not a researcher. Ask them how they feel, not what they rate. Watch them use your product without guidance. Their confusion will teach you more than any metric. Follow behavior more than feedback. People don’t always say what they do, and they rarely do what they say.

In the end, experience isn’t data. It’s memory. Emotion. Whether they felt like someone on the other end actually gave a damn.

That’s how you know if the experience is working.

You’ll feel it.

So stop trying to measure goosebumps. Start trying to cause them.

Exponential Growth Mindset

noreply@blogger.com (KMan) — Thu, 01 May 2025 17:37:00 +0000

An ex-startup founder friend shared Sam Altman’s "13 Rules for Success," and it completely shifted the way I think about growth and success. They’re about changing your mindset. Lets call it "exponential growth mindset".

tldr? Footnotes.

If you've to take just one point out of this here's it: The idea that if you focus on creating something truly impactful, your past appears to be a mere "footnote" in comparison. This concept completely blew my mind. The idea that, with exponential growth, you could work on something so significant (every-single-time) that everything else you did in the past, becomes a mere afterthought -- that’s the kind of growth trajectory we should all aim for. This thought process propels growth in non-linear, exponential ways.

Compounding to growth

Sam talks about the power of exponential growth -- If you want to create something that outlasts you, you need to compound everything: your time, your relationships, your effort, and your ideas. The sooner you realize this, the farther you can go. If you’re stuck thinking in linear terms, you’re limiting your potential.

Be almost delusional

The second rule really hit home: to succeed, you need unshakable self-belief. People will doubt you, and that’s when your conviction needs to be stronger than your doubts. It’s not delusional if you’re right. If you don’t trust yourself, you’ll never have the courage to pursue big, unconventional ideas.

Original thinking is missing

Sam emphasizes that original thinking is crucial. Stop following the crowd. You can’t create something remarkable by merely following others. You need to think from first principles and be willing to test your ideas in the real world.

Get good at sales

No matter what you’re doing, at some point, you’ll need to sell something—whether it's an idea, product, or even yourself. Being able to communicate clearly and persuasively is vital. The key to great sales? Believe in what you're selling.

Make risk easy

Most people overestimate risk and underestimate reward. Early in your career, taking risks is easier because you have less to lose. But even as you grow, you need to keep taking calculated risks. Find small bets that have massive upside potential.

Focus

Focus is everything. It’s not about working more hours; it’s about focusing on what truly matters. Most people waste their time on low-impact tasks. Once you’re clear on your priorities, execute them relentlessly.

Work harder

To make it to the top 1%, hard work is non-negotiable. You need both talent and effort. The more effort you put in, especially early in your career, the more it compounds over time. The work you put in now will set you up for future success.

Be bold

Sam advises tackling hard, meaningful problems. Boldness attracts the right people, and when you’re working on something exciting, people will want to help you. Don’t second-guess yourself. If you're passionate about something, go for it.

Be willful

Success often comes down to sheer persistence. Keep pushing when everyone else would give up. Persistence is key because eventually, luck will favor those who keep going long enough. It’s not just about hard work—it’s about not quitting.

Be hard to compete with

To be irreplaceable, you need leverage. This could be through building relationships, acquiring unique skills, or developing a strong personal brand. Find a way to make yourself difficult to compete with.

Build network

Relationships are everything. The most successful people I know are the ones who help others without expecting anything in return. That’s how you build a strong network. Over time, your network becomes one of your most valuable assets.

Own things

Wealth isn’t built from salaries. It’s built by owning things that increase in value—equity in a business, real estate, intellectual property, etc. Own assets that scale over time.

Be internally driven

The most successful people are driven by their own internal motivations. External validation will never sustain you. It’s your internal drive that will push you to keep going when everything else fades.

Hopefully not too late for me :)

My vibe coding experience with SAT word list app

noreply@blogger.com (KMan) — Thu, 24 Apr 2025 20:30:00 +0000

I built a SAT vocabulary practice app for students. Not because I wanted to teach others, but because I needed it for my kids, and every other app out there was either bloated, gamified, or stuck in 2010. I just wanted a minimalist interface that showed me tough words, let me guess the meaning, and told me if I was right, with minimal delay, no clutter, no noise.

With a basic list of features, I decided to "vibe code" it. Tried a few:

Claude 3.5 Sonnet,
V0 (first version),
Manus (invite only version),
ChatGPT 4o,
Gemini (not Pro)
and of-course Replit. Screenshots (not in order) below.

Initial requirements as prompt

Craft a game for SAT students learning english vocabulary.

I'm thinking
- screen that shows a word with 4 choices of one word answers
- add gamification elements
- tap on correct answer should show
- meaning, with a "Say out-loud" button so that students can listen to how to words a pronounced
- show examples of related synonyms
- show examples of related antonyms
- example use word in simple sentence
- example use word in a complex sentence
- show buttons for next word, and previous word, which would take students to next/previous words
- a way to save progress
- show word count 1/20
- option to see separate lists (and count) of wrongly/correctly answered words
- a way to download/upload the wordlist, button should allow students to download wordlist in csv format
- add 20 words in the list by default
- add anything else that you think can help
- lastly, ensure that all action buttons are fully functional

First version

I wanted the app to be interactive: a screen that shows a word with four multiple-choice options. Tapping on the right answer should give you more than just a "correct" message. I needed context. Meaning, pronunciation, synonyms, antonyms, simple and complex sentence examples, and some way to track progress. Plus, buttons to move between words, and a save-progress feature so students could stop and pick up where they left off.

I fed these ideas into AI and within a mins, the first version was up. The frontend was a simple web page with buttons, cards, and animations. Just the forward/backward buttons worked. Nothing else worked. The backend? Still needed work. Plus, it initially had 5 word list, and wasn't uploading the famous 5000 word list. Tried, csv, excel, json formats.

The gamification

I wanted to make it feel engaging. So after each correct answer, there was a pop-up showing the word's meaning, with a “Say Out Loud” button for pronunciation. Plus, a list of synonyms and antonyms to expand the user’s vocabulary, and sentence examples that ranged from basic to complex. I wanted to make sure that the learning process felt progressive.

It took a while to get everything integrated, mainly because the webapp rest of the buttons were not functional. Although the word list was provided with: synonyms, antonyms, usage examples. Claude just wasn't able to understand how to enable the action buttons. Code kept on breaking. And the entire thing kept on hogging my tokens, uselessly wasted. I spent hours fixing these, testing each action call, and making sure I wasn’t overrun by the token limits. This wasn’t just code, it was a battle of configuration.

Saving progress

The user experience also needed to track progress: a “1/20” (for example) indicator that tells you how many words you’ve worked through. It was not able to implement local storage for session progress and syncing it with the backward/forward action buttons. Manus was the only tool that was able to provide with login option, so that a user could log in and pick up where they left off. But it wasnt functional.

I also added the ability to see lists of wrongly or correctly answered words. In memory session was working fine, but it did require a database (like Supabase or simple local storage) integration to keep the session persistent. Dint work though.

CSV download/upload

A feature I thought would be useful: allowing users to download their word list (in CSV format) so they could import it into other apps or study offline. It was a bit more complicated than I expected—mainly because formatting the CSV correctly while retaining the word’s metadata (synonyms, antonyms, examples) took a few tries. But once that worked, I added an upload feature too. The app now supports importing custom word lists, which felt like a small win. But this only worked with a Python code run locally on vscode (see last screenshot). That loads the 5000 words, but does not keep track of records, or scroll through it.

The backend & deployment hell

Once the app worked locally, I hit the familiar deployment snags. Vercel’s build process wasn’t as smooth as it should have been. I had linting errors. Environment variables that didn’t get pushed. Some files missing. Then I had to fix CORS issues when fetching data. None of these problems were major, but together, they slowed things down. Below screenshot is from Manus AI

In session tracking of progress was OK, but when I tried to integrate it a persistent datastore (eg: Supabase), I kept getting errors. So I took a step back and simplified the approach. For now, I’m storing the word data is stored in local storage (csv file), but user progress is not stored. Not ideal for scaling, but it's functional for a personal project :) Btw, was able to run this on Android as an app with the help of Python Emulator on phone. So this becomes an "app". Notice why there's a font option on the screen below? Because android is not able to act on its "responsive"-ness for the python code, and text becomes illegible, and therefore font sizer helps.

Final thoughts

SAT apps (varieties) are available in test mode (no domains/live yet). It’s functional. It’s simple. It does somewhat what I needed it to do: help learn SAT words without the excess fluff. The gamification appears interesting and the features like word tracking, CSV export, and pronunciation make it a solid tool for anyone looking to practice. But code-specific-AI agents still need a bit of work to handle complex tasks (beyond just snakes or flipper bird games). But this was couple of months ago, I'm sure this app can be vibe-coded much better and more improved now.

Convenience Now Consequences Later

noreply@blogger.com (KMan) — Sat, 22 Feb 2025 12:31:00 +0000

Convenience Now, Consequences Later

Its CNCL not BNPL :) we/humans have a consistent pattern: when forced to choose between convenience and security, most people choose convenience. Not always consciously, but consistently - and ignorance is probably highest common factor.

We like things that are fast, easy, and seamless. We optimize for what saves time now, not what might protect us later. You see this everywhere, how we use technology, how we manage data, how we communicate.

I was at this Roseleaf bakery & cafe in Barsha, next to our office, grabbing coffee with a few colleagues when I saw a woman tap her phone five times before realizing she’d already paid twice. The transaction logs showed two contactless charges, seconds apart. It wasn’t fraud. It was frictionless. So frictionless that she didn’t even notice.

That’s the thing about convenience in payments. It creeps in quietly, offering comfort now, consequences later.

We reuse passwords. We accept all cookies. We skip software updates. We give our personal information to services we barely understand. We do these things because friction is annoying, and most of the time, nothing bad happens, until it does.

Security is invisible when it works. Convenience is visible every time. That’s why it wins.

This isn’t just about phones or financial apps. It’s how systems evolve. Platforms succeed by removing friction. The smoother the experience, the faster the adoption. But each layer of convenience is usually a trade against control, privacy, or resilience.

This is fine until a threshold is crossed. When enough people choose ease over caution, vulnerabilities compound. Breaches don’t usually happen because one person made a mistake, they happen because thousands did, at scale.

There’s a deeper problem, too: most people don’t know what they’re trading. The systems are complex. The risks are abstract. The cost of being secure is often just too high, cognitively or behaviorally. So people default to what’s easy.

The future will make this trade-off even harder. AI systems will handle more of our decisions. Automation will remove more layers of friction. That’s a good thing, until it’s not. The smarter the system, the more damage it can do when something goes wrong.

This isn’t a call to panic. It’s a call to awareness. We can build systems that are both secure and usable, but it takes intention. And it takes users who care enough to engage, even a little.

Convenience is seductive. But security is what lets us trust the systems we build. We need both, and we need to stop pretending we can get one without sacrificing the other.

The question is whether we keep making it by default, or start making it on purpose. It’s all about making informed choices and using the tools that best fit your needs and lifestyle. Frictionless payments (or anything) shape habits. And over time, they lower our defenses. We swipe and tap and click, assuming someone else is watching the gate.

What’s going to be the biggest disrupter to financial services over the next 10 years?

noreply@blogger.com (KMan) — Sat, 23 Nov 2024 22:18:00 +0000

I was asked by one of the VCs at Founder Institute this question, a while back: Biggest disrupter to Financial Services in the next 10 years?

Start with this: the current system is centralized, opaque, and inefficient. It's built for a world where a few institutions control everything—access, information, outcomes. That doesn’t scale well in a digital, fast-moving world.

Disruption comes when technology cuts out the middlemen and redistributes access. In finance, that’s already happening. The biggest driver? Decentralized finance (DeFi).

DeFi replaces banks, brokers, and clearinghouses with smart contracts and open protocols. It’s trustless, transparent, and global. The core idea: you don’t need permission to participate. You don’t need to trust an institution—you trust the math.

Think about lending. Today, it's gated! think about: credit scores, banks, documentation. In DeFi, you can access lending markets with just a wallet and internet. No gatekeepers. No cut taken by intermediaries. Just code doing the work.

The tech still has a way to go. It’s early, like Bitcoin in 2012, when you;d laugh if your friend asked you to buy. Anyway, usability, scalability, and security all need work. But that’ll get solved. Once it becomes as easy to use as a banking app, the shift will accelerate.

The real bottleneck is regulation. Governments and banks have a lot to lose. They’ll push back hard. But decentralized systems are hard to regulate because they don’t exist in one place. That’s the point. Once adoption hits a critical mass, there’s no going back.

The larger shift here is philosophical. The old financial system runs on institutional trust. That trust is eroding. People are looking for systems that are transparent by design, not enforced by policy. DeFi offers that.

There’s also a macro trend: the rise of the creator economy, microtransactions, remote work. The existing system doesn’t serve that well. Cross-border payments, small dollar flows—it’s all slow and expensive. DeFi handles it better.

So if you’re asking what’s going to reshape finance, it’s not a sleeker app or a marginally better digital currency. It’s a fundamental rewiring of how financial systems operate—permissionless, decentralized, and global.

That’s the bet. And it won’t just be a big disruption -- it’ll be a complete shift in how financial power works, which is where nation states are moving toward.

Is future fractional? Everythings getting tokenized

noreply@blogger.com (KMan) — Thu, 12 Sep 2024 16:43:00 +0000

I wonder why the buzz around tokenization? It’s a better way to handle sensitive data, and it's going to be a core part of how digital systems operate moving forward.

What’s the deal with tokenization?

Imagine this: you’re making a payment on your favorite shopping app. You enter your card details, and bam, payment completed. But here’s a twist: your actual card details never leave your device.

How?

That’s where tokenization comes into play.

Instead of sending your real card number over the internet, the payment system uses a “token” – a unique, encrypted identifier – that stands in for your card details. It’s like giving someone a secret code rather than the actual key.

This token is then used to process the payment. The real card number is kept safe and sound, away from prying eyes.

How it works

You enter your card into a wallet or app.
The app asks a token provider (like Visa) to generate a token.
The token gets stored on your device.
When you pay, the token (not your actual card) is used.

Does it matter?

It’s not just about security. It helps with compliance (think GDPR, PCI-DSS). It also improves UX—no more updating payment info across platforms when a card expires. The token handles it.

And it’s adaptable. The same model can be used beyond payments: for personal data in apps, healthcare, messaging. Anywhere sensitive data needs to be stored or transmitted.

Real-life example: Apple Pay and Samsung Pay

Apple Pay uses what’s called a “device account number” – a fancy term for a token. When you make a payment, Apple Pay sends this token instead of your actual card details.

Samsung Pay has a similar setup, using a “digital token” to handle transactions. These tokens are stored securely on your device, often within a special chip known as a Secure Element.

None of your real card data leaves the device or hits a merchant’s server.

Why tokenization is here to stay

Enhanced Security

Tokenization offers a robust layer of security by replacing sensitive data with tokens. It’s like using a decoy that’s useless without the real information.

Compliance and Regulation

With strict data protection laws like GDPR and PCI-DSS, businesses need to safeguard sensitive information. Tokenization helps meet these requirements by reducing the amount of sensitive data stored and transmitted.

Convenience and Efficiency

Tokenization streamlines transactions and makes managing payments across different platforms a breeze. You don’t have to constantly update your payment details; the token takes care of that.

Innovation-Friendly

Tokenization supports innovation in digital payments and beyond. It’s a flexible solution that can adapt to new technologies and use cases, from fintech apps to secure messaging platforms.

Tokenization and Real World Assets (RWAs)

You might be thinking, “How does tokenization apply to things like property or art?”

Well, here’s the scoop.

Whats RWA?

Real World Assets refer to tangible items of value like real estate, artworks, or precious metals. Traditionally, these assets are bought, sold, and managed through physical paperwork and intermediary processes.

Imagine owning a piece of art or a property. The ownership is documented in legal papers, and transferring that ownership involves a lot of red tape and manual processes.

Now, enter tokenization.

How tokenization changes the game

Tokenization can transform these physical assets into digital tokens that represent ownership rights. Here’s how it works:

Digitising the Asset: The asset is evaluated and then represented as a digital token. For instance, a property might be split into several tokens, each representing a share of the ownership.
Blockchain Recording: These tokens are recorded on a blockchain, a tamper-proof digital ledger. This means that each token’s history, ownership, and transaction details are transparently tracked.
Trading and Ownership: Tokens can be bought, sold, or traded on various platforms. This makes it easier for people to invest in high-value assets without needing huge amounts of capital.

Why This Matters, Again?

Fractional ownership: lowers the barrier to entry.
Liquidity: turns illiquid assets into tradable tokens.
Transparency: blockchain tracks ownership immutably.
Global Access: anyone with an internet connection can invest.

Real-Life example: Real Estate

Traditionally, buying property requires a hefty down payment, a complicated legal process, and often a lot of waiting around. With RWA, a property can be split into numerous tokens. Investors can purchase these tokens, thus owning a fraction of the property. This can significantly lower the barrier to entry for property investment.

For example, a luxury apartment worth AED 1 million could be divided into 1,000 tokens, each representing a 0.1% ownership stake. Investors can buy as many tokens as they can afford, making property investment more accessible. Remember the StakeApp? is going something similar "fractional ownership" in the UAE, however its not DLT enabled yet.

Ondo Finance: Tokenized exposure to U.S. Treasury bills and bonds (SEC compliant btw)
RealT: Tokenized real estate in the US
Tangible: Tokenizing physical luxury goods (real estate, wine, gold)

Challenges and considerations

Tokenization is a protocol-level upgrade to how we manage value and identity. First payments, now assets, and eventually almost everything involving sensitive or high-value data.

As systems get more digital and AGI begins to run more of them, tokenization will be foundational. Not because it’s exciting, but because it works.

the hands of artificial general intelligent (AGI) beings (most likely)!

Understanding API protocols: a simple guide

noreply@blogger.com (KMan) — Wed, 28 Aug 2024 19:12:00 +0000

Understanding API Protocols: A Simple Guide

APIs are a big part of how different software systems talk to each other. Let's look at some common API protocols, when to use them, and their limitations.

Representational State Transfer (REST)

REST is like sending letters. Each letter (or request) needs to have all the information the receiver needs.

It uses common web methods like GET, POST, PUT, and DELETE.
It can handle lots of requests at once.

When to use

REST is great for most web applications. Use it when you need a simple, scalable solution that works well with web technologies.

Use cases

Social media apps
E-commerce websites

Limitations

Can lead to over-fetching or under-fetching of data
Doesn't handle real-time updates well
Multiple endpoints can be hard to manage for complex applications

Web Hooks

Webhooks are like getting a text message when something happens.

They send updates automatically when specific events occur.
They're good for real-time notifications.

When to use

Choose webhooks when you need instant updates about changes or events in a system.

Use cases

Payment processing notifications
GitHub repository updates

Limitations

Requires the receiving server to be always available
Can be challenging to debug and test
Potential security risks if not properly implemented

Graph Query Language (GraphQL)

GraphQL is like ordering exactly what you want at a restaurant.

It lets you ask for just the data you need.
It uses a single endpoint for all requests.

When to use

GraphQL is ideal when you need flexible data fetching and want to avoid over-fetching or under-fetching data.

Use cases

Mobile apps with varying data needs
Complex dashboards with multiple data sources

Limitations

Can be complex to set up and maintain
Potential performance issues with nested queries
Caching can be more challenging than with REST

Event-Driven Architecture (EDA)

EDA is like a group of friends reacting to things happening around them.

Different parts of the system respond to events in real-time.
It's good for handling lots of events in big systems.

When to use: EDA is great for systems that need to react quickly to many events and changes.

Use cases

Stock trading platforms
Internet of Things (IoT) applications

Limitations

Can be complex to design and implement
Debugging can be challenging due to asynchronous nature
Potential for event storms in poorly designed systems

Simple Object Access Protocol (SOAP)

SOAP is like sending a package with very specific packing instructions.

It works over different protocols like HTTP and SMTP.
It has built-in error handling and security features.

When to use

Choose SOAP when you need strict standards and built-in error handling, especially in enterprise environments.

Use cases

Banking systems
Telecommunication services

Limitations

More complex and verbose than REST
Can be slower due to XML parsing
Less flexibility in data formats

Electronic Data Interchange (EDI)

EDI is like having a special language for business communication.

It uses standard formats for business-to-business communication.
It reduces manual work and errors.

When to use: EDI is best for businesses that need to exchange large volumes of standardized data.

Use cases

Supply chain management
Healthcare information exchange

Limitations

Can be expensive to implement and maintain
Limited flexibility in data formats
Requires all parties to adhere to the same standards

Simple Internet Service Embedding (SISE)

SISE makes it easy to add internet services to your system.

It's lightweight and doesn't need much extra work.
It can be used on different platforms and services.

When to use: Use SISE when you want to quickly add internet services without much overhead.

Use cases

Adding search functionality to a website
Integrating mapping services into an app

Limitations

Less widely used, which may limit community support
May not be suitable for complex integrations
Limited documentation compared to more popular protocols

Advanced Message Queuing Protocol (AMQP)

AMQP is like a reliable postal service for computer messages.

It makes sure messages are delivered and processed.
It works across different types of systems.

When to use

AMQP is ideal for systems that need reliable message delivery across various platforms.

Use cases

Financial transaction processing
Distributed systems in cloud environments

Limitations

Can be complex to set up and configure
May have higher latency compared to simpler protocols
Requires careful management of message queues

Message Queuing Telemetry Transport (MQTT)

MQTT is like sending postcards that don't use much postage.

It's good for networks with limited bandwidth.
It's efficient for Internet of Things (IoT) devices.

When to use

Choose MQTT for IoT applications or when working with devices that have limited resources.

Use cases

Smart home devices
Remote sensor monitoring

Limitations

Limited to publish/subscribe model
Minimal built-in security features
Not suitable for large data transfers

Google's Remote Procedure Call (gRPC) Framework

gRPC is like having a fast, efficient phone call between systems.

It's very fast and supports two-way communication.
It works well across different programming languages.

When to use

gRPC is great for systems that need high-performance, real-time communication between services.

Use cases

Microservices architectures
Mobile app backends

Limitations

Limited browser support
Steeper learning curve compared to REST
Requires careful management of Protocol Buffers

Web Sockets

WebSockets are like having an open phone line between a website and a server.

They allow constant two-way communication.
They're good for real-time updates.

When to use

WebSockets are ideal for applications that need constant, real-time updates.

Use cases

Chat applications
Live sports updates

Limitations

Can be resource-intensive for servers
Requires careful handling of connection states
Not suitable for occasional, request-response type interactions

These protocols, their use cases, and limitations, you can choose the right one for your project. Each has its strengths and weaknesses, so pick the one that fits your needs best.

How card networks outsmart correspondent banking

noreply@blogger.com (KMan) — Sat, 20 Jul 2024 16:34:00 +0000

How Card Networks Outsmart Correspondent Banking

Cross-border payments are essential for global trade and commerce, but they can also be complex and costly. Traditional correspondent banking relies on intermediary banks to facilitate cross-border payments, adding layers of fees, delays, and risks.

Correspondent banking, a system where one financial institution carries out transactions on behalf of another, often in different geographies, has been the backbone of international trade and finance for centuries. However, this model is increasingly perceived as outdated, especially in an era where digital innovation is paramount.

Card networks, such as Visa and Mastercard, offer a smarter alternative that bypasses correspondent banks and enables direct member-to-member settlements. Card networks, such as Visa and Mastercard, have capitalized on this opportunity by leveraging their advanced technological platforms to facilitate direct cross-border payments. These networks have introduced innovative solutions that bypass the need for intermediary banks, thereby reducing transaction times and costs. Moreover, they offer enhanced security features and the ability to handle multiple currencies, making them attractive alternatives for businesses and consumers alike.

This translates to faster transaction processing, lower costs, and improved transparency for businesses. In this article, we will explore how card networks avoid correspondent banks and how this compares to traditional correspondent banking. We will also look at some of the innovative B2B products and services that card networks provide to streamline cross-border payments further.

How Card Networks Avoid Correspondent Banks

Card networks are payment systems that connect card issuers, acquirers, merchants, and cardholders. They facilitate the authorization, clearing, and settlement of transactions made with payment cards, such as credit, debit, or prepaid cards. Card networks also provide rules, standards, and security measures to ensure the smooth and safe operation of the payment system.

One of the key advantages of card networks is their ability to provide real-time, digitally enabled cross-border payments. This is a significant improvement over the traditional correspondent banking system, which can be slow and cumbersome, often taking several days to complete a transaction. Card networks, on the other hand, can process payments almost instantaneously, providing a level of convenience and efficiency that is highly valued in today's fast-paced economy.

Unlike correspondent banking, which involves multiple intermediaries and bilateral agreements, card networks enable direct member-to-member settlements. This means that the card issuer and the acquirer can settle their transactions directly through the card network, without involving any correspondent banks. This reduces the number of steps and parties involved in the payment process, making it faster, cheaper, and more efficient.

Card networks also use various features and technologies to eliminate the need for correspondent banks, such as:

Pre-funding arrangements

Card networks require their members to pre-fund their settlement accounts with the network, ensuring that there is enough liquidity to settle transactions. This eliminates the credit risk and the need for correspondent banks to provide credit lines or guarantees.

Tokenization

Card networks use tokenization to replace sensitive card data with unique identifiers, called tokens, that are used for authorization and settlement. This enhances the security and privacy of the payment data, reducing the fraud risk and the need for correspondent banks to perform compliance checks or investigations.

Direct FX conversion

Card networks offer direct foreign exchange conversion services, allowing their members to settle transactions in their preferred currency. This simplifies the payment process and reduces the FX risk and the need for correspondent banks to provide FX services or hedging.

How Card Networks Compare to Correspondent Banking

Card networks offer several benefits over correspondent banking for cross-border payments, such as:

Faster transactions

Card networks can process and settle transactions in near real-time, while correspondent banking can take days or weeks to complete. This improves the cash flow and the customer experience for businesses.

Lower costs

Card networks charge lower and more predictable fees for cross-border payments, while correspondent banking involves multiple and variable fees for each intermediary bank. This reduces the operational costs and the overheads for businesses.

Increased transparency

Card networks provide clear and consistent information about the status, fees, and FX rates of cross-border payments, while correspondent banking often lacks visibility and certainty. This increases the trust and the accountability for businesses.

However, card networks also have some limitations compared to correspondent banking, such as:

Limited coverage

Card networks depend on the availability and acceptance of payment cards in different regions and markets, while correspondent banking can reach any bank account in the world. This may limit the access and the choice for businesses, especially in emerging or niche markets.

Regulatory challenges

Card networks have to comply with different and changing regulations and standards in different jurisdictions, while correspondent banking follows the established and harmonized rules and practices of SWIFT. This may create complexity and uncertainty for businesses, especially in areas such as data protection, anti-money laundering, or sanctions.

How Card Networks Innovate B2B Payments

Card networks are not only competing with correspondent banking, but also innovating and expanding their B2B payment solutions. They are leveraging their network advantage and their technological capabilities to offer new and improved products and services for cross-border payments, such as:

Visa B2B Connect

Visa B2B Connect is a non-card-based payment network that enables seamless bank-to-bank cross-border business transactions. Visa B2B Connect is built on Visa’s capabilities and formidable core payments experience with distributed ledger technology to provide direct settlements of large-value transactions. Visa B2B Connect leverages this network advantage by streamlining the B2B payment process further, offering features like built-in compliance checks and pre-funding arrangements.

Mastercard Track™ Business Payments Service

Mastercard Track™ Business Payments Service is a suite of B2B products and services that reduces complexity and risk, cuts costs, and automates processes for businesses around the world. Mastercard Track™ Business Payments Service connects buyers and suppliers through a single platform, enabling them to exchange payment-related data, manage invoices, and settle transactions in multiple ways, including card, bank transfer, or blockchain-based payments.

Card networks are transforming the way cross-border payments are made and received, offering a smarter alternative to correspondent banking. By avoiding correspondent banks and enabling direct member-to-member settlements, card networks provide faster transactions, lower costs, and increased transparency for businesses. Card networks also innovate and expand their B2B payment solutions, offering new and improved products and services that leverage their network advantage and their technological capabilities. While correspondent banking still plays a role in certain scenarios, card networks represent a significant step towards a more efficient and cost-effective future for B2B payments.

This I explained how card networks avoid correspondent banks and how this compares to traditional correspondent banking. It also discusses some of the innovative B2B products and services that card networks provide to streamline cross-border payments further.

Will Open Banking replace Credit Cards?

noreply@blogger.com (KMan) — Sat, 27 Apr 2024 11:08:00 +0000

Will Open Banking replace Credit Cards?

My latest article in the CEO Middle East magazine discusses will Open Banking replace Credit Cards?

The question of whether credit cards will ultimately replace open banking has generated significant discourse, resulting in a state of confusion and a lack of sufficient knowledge among consumers and businesses alike. The intricacies of these financial services are not widely understood, leading to uncertainty and a need for further education on the subject.

Read full story here: https://mags.itp.com/CEOME/2024/0207-CEOE-16-30APR2024/#page=16

Global Transactions: what are the predominant payment schemes?

noreply@blogger.com (KMan) — Fri, 26 Apr 2024 11:54:00 +0000

Global Transactions: What are the Predominant Payment Schemes/rails?

Are efficiency and reliability of payment systems are crucial for businesses and individuals alike?

I think so, from facilitating everyday transactions to enabling cross-border trade, various payment schemes play an important role in the financial services ecosystem.

Locally

Locally within the UAE, the Central Bank of the UAE oversees two main types of payment systems:

Large-Value payment systems (LVPS)

Includes the UAE Funds Transfer System (UAEFTS), facilitating significant fund transfers among participating entities.

Retail payment systems (RPS)

Manages a high volume of lower-value transactions, such as cheques, credit transfers, and card payments. Examples include the Image Cheque Clearing System (ICCS), UAE Wages Protection System (UAEWPS), UAE Switching System (UAESWITCH), UAE Direct Debit System (UAEDDS), and UAE Payment Gateway System (UAEPGS).

Cross border

And two prominent cross-border payment systems that facilitates transactions between financial institutions in different jurisdictions (primarily UAE & KSA), governed by agreed rules and standards, are AFAQ (GCC RTGS) and BUNA (Arab Regional Payment System).

Central Banking Digital Currencies

There's the "Aber" project, a joint effort by Central Bank of UAE and Saudi Central Bank (SAMA), aimed to assess a dual-issued digital currency (CBDC) for domestic and cross-border settlements experimenting with CBDC issuance, and benchmarking against other central banks.

Globally

Globally, a few predominant payment schemes operating globally, exploring their features, benefits, and regional applications.

ACH (Automated Clearing House)

A network for electronic bank transfers in the US, the Automated Clearing House (ACH) facilitates the movement of funds between accounts. Known for its low-cost nature and efficiency, ACH is particularly suited for bulk payments. Its widespread adoption makes it a cornerstone of the North American payment ecosystem.

Regions: Primarily utilized in North America.

Examples: NACHA (The Electronic Payments Association), Zelle.

SEPA (Single Euro Payments Area)

SEPA represents a standardized payments scheme for Europe, aimed at harmonizing electronic payments across the Eurozone. SEPA streamlines cross-border transactions within the Eurozone, offering a single rulebook for participating countries.

Regions: European Union member states.

Examples: TARGET2 (Trans-European Automated Real-time Gross Settlement Express Transfer System), SEPA Instant Payments.

Faster Payments Service (FPS)

FPS is a real-time payments scheme in the UK, enabling instant settlements with round-the-clock availability. With its instantaneous transaction processing, FPS ensures swift and seamless fund transfers, enhancing efficiency in the UK payment ecosystem.

Regions: United Kingdom.

Examples: Faster Payments Scheme.

The Clearing House Real-Time Payments (RTP)

RTP is a network for instant payments in the US, providing real-time settlements with push-to-pull capabilities. Offering broader reach and real-time settlements, RTP complements ACH, catering to the evolving needs of the North American financial landscape.

Regions: Primarily utilized in North America.

Examples: The Clearing House RTP.

SWIFT (Society for Worldwide Interbank Financial Telecommunication)

SWIFT serves as a messaging network for cross-border payments, facilitating secure communication between financial institutions worldwide. Renowned for its global reach and robust security measures, SWIFT supports various financial transactions, including international fund transfers and trade finance.

Regions: Operates worldwide.

Examples: SWIFT gpi (Global Payment Innovation) for faster payments.

CHIPS (Clearing House Interbank Payments System)

CHIPS is a real-time gross settlement system for high-value payments in the US, ensuring immediate fund availability. Renowned for its security and high transaction volume capacity, CHIPS facilitates large-value transactions with efficiency and reliability.

Regions: Primarily utilized in North America.

Examples: CHIPS same-day settlement.

RTGS (Real-Time Gross Settlement)

RTGS represents a system for immediate settlement of high-value transactions, ensuring final and irreversible settlements. Minimizing counterparty risk, RTGS provides a secure and efficient platform for processing high-value payments in various countries.

Regions: Utilized in various countries, including India, Australia, and Singapore.

Examples: India: NEFT (National Electronic Funds Transfer), RTGS; Australia: CHESS (Clearing House Electronic Subregister System); Singapore: FAST (Fast And Secure Transfers).

CBDCs (Central Bank Digital Currencies)

CBDCs are digital versions of central bank currencies, offering the potential for faster, cheaper, and more inclusive payments with programmable features. With ongoing developments in various countries, CBDCs hold promise for revolutionizing the payment landscape, offering enhanced accessibility and efficiency.

Regions: Under development in various countries globally.

Examples: China: e-CNY (Electronic Chinese Yuan); Bahamas: Sand Dollar; Nigeria: eNaira.

As the global economy continues to evolve in this rapid startup and AI technology growth, the role of secure payment schemes becomes increasingly paramount.

Understanding the features & functionalities of these diverse payment systems gives businesses + individuals understanding of complex modern financial industry. Whether it's speed of real-time payments, security of cross-border transactions, or just convenience, each scheme contributes uniquely to global finance.

Is there a future of financial APIs? OpenFinance vs. NextGenPSD2

noreply@blogger.com (KMan) — Sat, 20 Apr 2024 13:28:00 +0000

Is there a future of financial APIs? OpenFinance vs. NextGenPSD2

The OpenFinance API Framework and the NextGenPSD2 Framework are two different financial APIs that provide access to financial data and services, provided by The Berlin Group.

The OpenFinance API Framework

It has a broad scope, serving both consumers and businesses, including large corporations. It is designed to enable access to a wide range of financial data and services, including investments, loans, insurance, and merchant data. The framework builds upon existing NextGenPSD2 standards and introduces additional APIs that are still under development. While the OpenFinance API Framework offers the potential for greater innovation due to its wider scope, it is still in the early stages of development and may not be as well-established as the NextGenPSD2 Framework.

The NextGenPSD2 Framework

This, on the other hand, has a narrower focus, primarily serving consumers and small businesses. It is designed to provide access to bank account data and initiate payments. The framework is based on established RESTful APIs and uses a JSON format. It builds upon PSD2 regulations and is directly bound by PSD2 security and privacy principles. The advantage of the NextGenPSD2 Framework is that it is more established and has broader industry adoption, ensuring regulatory compliance. However, its limited scope may not meet the needs of all businesses.

Best API for you will depend on your specific needs and requirements.

Quick comparison

Feature	OpenFinance API Framework	NextGenPSD2 Framework
Purpose	Access additional financial data & services (investments, loans, insurance, merchant data)	Access bank account data and initiate payments
Scope	Broad; caters to consumers and businesses (including large corporations)	Limited; primarily for consumers and small businesses
Technical Details	Builds upon NextGenPSD2 standards, introduces additional APIs (still under development)	RESTful APIs, JSON format (established standards)
Regulation	Not directly bound by PSD2, adheres to its security and privacy principles	Builds upon PSD2 regulations
Pros	Wider range of data and services, potential for greater innovation	Established standards, broader industry adoption, regulatory compliance
Cons	Still under development, less established	Limited scope, may not meet all needs

OpenFinance API framework offers greater potential for future innovation but is still evolving. While, NextGenPSD2 framework provides a solid foundation for basic open banking needs but has a narrower scope.

Choosing the right framework depends on your specific needs, use OpenFinance API framework if you require access to a wider range of financial data and services, and are comfortable with a slightly less established solution.

Use NextGenPSD2 framework if you primarily need access to bank account data and payment initiation, and require established standards and regulatory compliance.

How Venture Capital will impact Middle East?

noreply@blogger.com (KMan) — Sat, 03 Feb 2024 11:11:00 +0000

How Venture Capital will impact Middle East?

Emergence of Powerhouses: The Transformative Landscape of Venture Capital in the UAE Post-COVID

In the last 5 years (especially right after COVID) we’ve seen a lot of new VC firms coming up in the UAE. A few most prominent VC firms are Wamda Capital, Middle East Venture Capital (MEVP), Shorooq Partners, Group42, Dtec Ventures (the VC fund of the Dubai Silicon Oasis Authority), and especially the sovereign wealth fund Mubadala (also through its venture investment arm, backed by Abu Dhabi government) substantially driving the local investment ecosystem. These major active investors can literally be counted on fingers.

Why UAE VCs are Essential for MENA Startups

These firms have a strong track record of investing in successful startups in the wider MENA region, and in the UAE. These are the main sources of funding for early-stage startups here, and are becoming essential for startups to develop and commercialize their products and services globally. This impacts positively in terms of capital requirements and expertise.

UAE Venture Capital Firms Pave the Way for Inclusive Startup Ecosystem

Given the demographics of UAE, there are 11.5 million people living here, out of which 80% are expats of different backgrounds. And these firms are investing in startups that are led by women and minorities thereby creating a more inclusive and innovative startup ecosystem. Therefore, this impacts positively towards building an organic vibrant innovation culture.

Moreover, VCs here are investing in a variety of businesses including ride-hailing, food delivery, e-commerce, and fintechs, and a few unicorns. The most notable include those of Noon and Careem. Careem(acquired by Uber for $3.1B) is a ride-hailing & food delivery company that operates in the Middle East and North Africa. Noon.com, which is a local e-commerce company (aka: local Amazon) that operates in the Middle East. And Swvl, tech-enabled (Egypt born) mass transit company – to name a few.

Therefore such unicorn funding not only attracts but encourages innovation and helps create a flourishing startup ecosystem that goes beyond tech-enabled startups.

Future-Proofing UAE: From Sand to Fintech Gold Rush by 2030

UAE has the “vision 2030” target to become a global talent hub. Dubai local government has itself a target called “Dubai smart” and reach fully autonomous (commute) trips by the year 2030. UAE has become a hive of fintech activity – 465 FinTechs there are set to generate over $2.2B in investment capital funding in the upcoming year, compared to merely $80M five years ago. FinTech and Innovation companies surge from 599 to 811, up 35% year-on-year (as of H1 2023). The UAE government is actively involved in enhancing laws and policies that foster the growth of the digital economy, creating an environment to attract global digital enterprises.

Venture Capital's Vital Role in Scaling Up UAE's Innovation Economy

All these endeavors by ecosystem partners significantly contribute to the innovation in UAE’s “scaleup economy”. This also means that the high concentration of scaleups could help support the expansion of the whole MENA innovation economy. VCs are playing a key role in the MENA ecosystem, and 92% ($8.4B, although negligible when compared with Silicon Valley or even UK) of capital raised by MENA scaleups comes from VC firms, CVCs, private equity funds, public-supported equity funding vehicles, governmental organizations, and family firms/groups.

UAE appears to be the front-runner of regional tech innovation, steadily transitioning to a post-oil economy.

Sources:
-https://www.difc.ae/whats-on/news/difcs-h1-2023-performance-strengthens-dubais-position-global-finance-and-innovation-hub
-https://www.dubaichamber.com/wp-content/uploads/2022/08/DubaiChamber_UAEVentureOutlook_eng.pdf

Building the dream team: strategic steps for forming a successful VC firm

noreply@blogger.com (KMan) — Sat, 27 Jan 2024 14:13:00 +0000

Building the Dream Team: Strategic Steps for Forming a Successful VC Firm

The process of "Forming a Team" is the foundation for successful (or unsuccessful) investment. At this particular stage it would be critical (in my view) to keep the talent density close to 100%. This stage is also important for executing the fund's thesis and achieving top decile returns.

As a process it has teamwork, domain expertise, and long-term relationship building (networking) & nurturing skills. Therefore, a well-structured & cohesive team has the capability to make/break the success of the fund. Considering the past track record & future potential. Also culture, promoting diverse perspectives and encourage healthy debate; and finally Diversity, where teams tend to outperform homogeneous people as they bring different perspectives to the table.

What are the high level steps to create a VC firm

Writing the Thesis
Forming a Team

Identify potential partners that who are known by the team for years
Develop a target list with those that are a fit with the Thesis
Organize a series of brainstorming sessions with the targets
Evaluate if a target is a partner or venture partner candidate
Determine target’s commitment to the fund’s goals and values
Discuss an offer with the target to gauge interest
Test the target for a month or two
Make the official offer after the fund is formed

Completing Fund Formation
Pitching Limited Partners
Closing a Deal
Preparing the Annual Report
Assisting Portfolio Companies
Helping with an Exit
Distributing Proceeds

Zoom into the step: How to form an outstanding team for a VC firm

Following are the detailed outline and sub steps involved in the project of Forming a (Venture) Team:

Identify potential partners that who are known by the team for years

Make a Partner Score Matrix (expertise, commitment, willingness to contribute to the fund, etc) from 1 (unlikely) to 10 (I want this person asap) that can be used to assign a weight to each vertical and calculate the total score for each candidate. This may include objective as well as subjective (gut) score.
Review the professional network of the existing team members; friends, former colleagues potential good fit
Identify individuals with whom there are longstanding relationships
Consider people who have a history of collaboration or shared successes
Look for people with complementary skills and experience, with a diverse range experience/perspective
Continuous: increase network size, other VCs & startup founders, entrepreneurs
Check if the person's share same values and approach to investing as of the fund’s thesis.
Assess their commitment

Develop a target list with those that are a fit with the Thesis

Define the a (thesis specific?) criteria that potential partners should meet based thesis, industry expertise, geographic focus, and fund's strategy.
Create a comprehensive list of potential partners who meet these criteria.
Review list of potential partners and select the best fit after considering the criteria (skills, experience, values, and commitment/etc)
Shortlist to 5-10 people (easier to evaluate 1:1)
Adjust the Partner Score Matrix when required, improvise

Organize a series of brainstorming sessions with the targets

Schedule meetings or brainstorming sessions with potential partners to discuss the fund's vision and goals (could be informal & relaxed to get their insights & feedback).
Prepare some discussion topics ahead of time (focused/productive)
Explore potential synergies and areas of collaboration, and how they can contribute to fund's success
Take notes during the brainstorming sessions
After, review notes, identify the key takeaways and assign a weights to Partner Score Matrix

Evaluate if a target is a partner or venture partner candidate

Review the score and see if a potential partner is a good fit
Talk to other people who know the potential partners.
Assess own (and other founders) relationship with each potential partner
Update Partner Score Matrix based on data so far

Determine target’s commitment to the fund’s goals and values

Engage in candid discussions with potential partners about their commitment to the fund's mission and values
Assess their alignment with the fund's long-term objectives and vision
Ensure that they share the fund's core principles
Review matrix and make final decision (invite/no-invite)

Discuss an offer with the target to gauge interest

Initiate discussions about joining the venture capital team
Present a preliminary offer or proposal, outlining the role, equity share, and terms
Gauge the potential partner's level of interest and willingness to move forward.
Update matrix

Test the target for a month or two

Start trial / probationary period, monitor
Evaluate their overall contributions and update the matrix
Review matrix and make final decision (go/no-go)

Make the official offer after the fund is formed

Formal offer to join the team
Specify the terms, responsibilities, and equity arrangement.
Ensure offer aligns with the fund's legal and operational requirements

How to create a startup investment process for a target firm?

Lets go through an example.

Company name: Good Capital LLC

Process: Startup Investment Process for Good Capital LLC

Step 1: Sourcing and Screening

Good Capital LLC sources potential investment opportunities through a variety of channels, including:
Referral network: Good Capital has a large network of contacts in the startup and venture capital industries. This network includes founders, CEOs, VCs, and other professionals who can refer Good Capital to promising investment opportunities.
Online platforms: Good Capital also uses online platforms such as AngelList, Crunchbase, and LinkedIn to identify potential investment opportunities.
Startup events: Good Capital attends startup events and conferences to meet with founders and learn about their companies.
Screening criteria: large and growing market, differentiated product, experienced team, and a business plan that makes sense.

Step 2: Due Diligence

When a company passes the initial screening, Good Capital will conduct a thorough due diligence process to learn more about the company and its business. This process would include:

Review business plan, financial statements, and other relevant docs
Meetings with the company's founders and management team
Backroung reference checks with their customers, partners, and investors/etc.

Good Capital will also conduct market research to assess the size and growth potential, and competitive landscape.

Step 3: Investment Decision

Once Good Capital has completed their due diligence, they will make an investment decision.
If Good Capital decides to invest in the company, they will negotiate an investment agreement that talks about:

terms of the investment
amount of investment
current valuation
rights and responsibilities of the company and Good Capital
could also consider: impact investing, sustainability, diversity and inclusion

Step 4: Post-Investment Support

After Good Capital has invested in a company, they will provide the company with ongoing support and guidance, for instance: advice, mentorship, networking, fundraising, resources and expertise.

Good Capital is committed to helping their portfolio companies succeed. We believe that by providing our portfolio companies with the support they need, we can generate superior returns for investors.

In retrospect, I hope you've learned a little about various aspects of vc space, including investment process, traditional and venture builders. Gain experience working at a VC firm.

What are top 2 Traditional Funds and Venture Builders within UAE's startup investment space

noreply@blogger.com (KMan) — Sat, 20 Jan 2024 13:06:00 +0000

What are top 2 Traditional Funds and Venture Builders within UAE's Investment Landscape?

Types of VC funds: Traditional, Venture Builders, Outsourced, Special Purpose Vehicles, Specialty.

Traditional Funds

The traditional way of doing VC; VC funds that invest in early-stage startups, aiming for substantial returns. Example companies: Sequoia Capital, Andreessen Horowitz

Venture Builders

aka startup studios that create and launch startups from scratch. Eg: Y Combinator, Founders Factory

Outsourced Funds

Usually (online) platform VC funds that make investments on behalf of individual investors. Eg: BlackRock, SoftBank Vision Fund

Special Purpose Vehicles

Funds that pool resources to invest in specific deals. Examples can be industry specific (real estate, banking, etc)

Specialty Funds

funds that invest in specific industries or stages of growth, ie: tailored to specific investment needs.

Pre-seed stage traditional funds in the UAE

Mubadala Capital

Url: https://www.mubadala.com/en/what-we-do/mubadala-capital

It’s a global investment firm (owned by Abu Dhabi government) that invests in a variety of asset classes. An active investor in advanced technology. includes a direct investment business, a fund of funds business and the management. A few local startups they have funded: Amana Healthcare, Swvl, Namshi, Careem, Talabat

Ibrahim Ajami is CEO & Partner at Mubadala Capital with over 15 years of experience in the investment industry. He has a proven track record of investing in and growing successful businesses across a variety of sectors, including technology, healthcare, and financial services.

Shorooq Partners

Url: https://www.shorooq.com/

Abu Dhabi based firm, they invest in tech companies at the Pre-seed to Series-A stages that are fintech, software or platform companies, with capital between $1M to $3M. Recent pre-seed investment: Hafla, Lean (open banking startup, Bankableapi.com's competition in the KSA), Sarwa, etc.

Shane Shin, who is Founding Partner at Shorooq Partners with over 20 years of experience in the venture capital industry. He has a deep understanding of the startup ecosystem in the Middle East and North Africa (MENA) region. Born and grew up in Korea, educated in the US, China and Canada, worked in New York and San Francisco and now working in the Middle East

Pre-seed venture builders in the UAE

Turn8

Url: https://turn8.co/about/

US based with an office in Dubai; their thesis building companies that are solving global problems with disruptive technology by helping entrepreneurs create and scale their businesses from scratch. Their preferred industries are: HealthTech, FinTech, Transportation and Logistics, SaaS Platforms, Smart Cities, AI, and The Internet of Things.

Yousif Al Mutawa, co-founder and Managing Partner, is a highly experienced and accomplished innovation leader with a proven track record of success in establishing and leading CVC funds, accelerators, and internal entrepreneurial transformation programs. He has a deep understanding of the global startup ecosystem and a strong network of relationships with investors, entrepreneurs, and corporate executives.

Flat6Labs

Url: https://www.flat6labs.com/

UAE based, Helps entrepreneurs build and scale their businesses from scratch. invests in innovative and technology-driven startups enabling passionate entrepreneurs to achieve their ambitions and ultimately becoming their institutional co-founders. Some local pre-seed startup they funded: Namshi, Bazaara, Takalam, etc.

Ramez El-Serafy is the CEO & Managing Partner at Flat6Labs with over 16 years of experience in the venture capital industry. He has a deep understanding of the startup ecosystem in the Middle East and North Africa (MENA) region.

How the two Venture Builders are different from the two Traditional Funds

Basically the venture builder model aims to build startups from scratch by providing them with resources, expertise, and mentorship. They target early stage, and their thesis generally is to invest in a variety of startups, typically with a focus on a particular sector or technology.

Traditional funds

While Traditional Funds invests in existing startups, providing them with capital and guidance that can span from Early to late stage, however mostly those that qualify for investments are the startups that have already demonstrated traction and a potential for growth.

Venture builders

creates new startups as well as jobs, and support the country’s startup ecosystem. Traditional funds help in the growth of existing startups, and help them scale globally.

Positive impacts of each model on your local ecosystem

Both venture builders and traditional funds can have a significant positive impact, and the best suited model depends on its individual needs and goals.

Venture builders

has the potential to help increase the number of startups, fast; and in turn can help create new jobs. It can get more investment by attracting investors in great early-stage startups. VB supports the development of new technologies, as well as commercialization.

Traditional Funds

positive impacts can help startups grow quicker by providing them with the capital fast. It helps them scale globally by providing them access to outside investors and networks, and as a result attract more investments at all stages. These funds increase the success rate of startups by providing them with their specialist guidance and support from experienced investors.

Sources:

-https://pitchbook.com/news/articles/venture-startup-trends-charts-q2-2023
-https://www.cbinsights.com/research/report/us-venture-trends-q1-2023/
-https://hbr.org/1998/11/how-venture-capital-works
-https://www.toptal.com/finance/venture-capital-consultants/venture-capital-portfolio-strategy
-https://www.forbes.com/sites/rebekahbastian/2020/10/28/how-and-why-to-make-venture-funding-more-equitable

How important is Due Diligence when sourcing a Venture Capital fund?

noreply@blogger.com (KMan) — Sat, 13 Jan 2024 12:03:00 +0000

How important is Due Diligence when sourcing a Venture Capital fund?

Venture capital investment process is a multi-stage process that involves identifying, evaluating, and investing in startups. The different steps in the process are:

Sourcing
Due Diligence
Term Sheet
Investment and Documentation
Post-Investment
Follow-on Rounds and Exits

Due Diligence is one of most important step

Why? It is because (it appears) that this is the most crucial step which can have a significant impact (make or break) on the outcome of the entire investment. This is where “outliers-of-outliers” are discovered -- driven by data, patterns, experience, expertise, and probably gut. VC gurus has highlighted the importance of it (from 4x to 1000x) and therefore this becomes more pertinent step.

Moreover, the extent of the due diligence process highlights the diligent & meticulous nature of venture capital investments, where thorough scrutiny is applied to ensure that investments are well-vetted, and at the same time has the potential to cause delays for startups who are in need of quick funding. Therefore, as a fund manager I find it not only interesting but want to learn how to master it and find those 0.01%, fast with 100% chances of success!

Due diligence is a critical step in the venture capital investment process. It involves conducting thorough research and analysis of the startup to assess its investment potential. The due diligence process typically covers the following areas:

Management team

to assess the experience, expertise, and track record of the startup's founding team

Business model

to evaluate the startup's business model, including its target market, product or service, and competitive landscape

Financial projections

to check the startup's financial projections & its financial viability

Market potential

to assess the market potential for the startup's product or service

Intellectual property

to review the startup's intellectual property portfolio to identify any potential (positive or negative) risks

And more

It may also include other data points such as: industry, funding stage, customer satisfaction score (CSAT), net promoter score (NPS), revenue growth rate, profit margin, number of employees, number of patents, amount of funding raised, and current valuation (etc).

Due Diligence Best Practices

Here are some best practices for venture capital due diligence:

Be comprehensive & thorough

Should be comprehensive and cover all aspects of the startup's business, and involve a deep dive into the startup's business.

Be objective

The due diligence process should be objective and avoid personal biases, which can have unforeseen and unintentional impact.

Be timely & collaborative

Should be completed in a timely manner to avoid delaying the investment decision, by collaborating with internal + external stakeholders, and involve the startup's founding team whenever necessary.

“Hard” due diligence is about the numbers, and “soft” DD focuses on people: employees, customers, partners

VC due diligence is the process of evaluating a startup's potential before investing in it. This process involves gathering as well as analyzing information using various data points such as: financials, legal, market, product, business model, and founder or management team. DD helps minimize risks and maximize returns.

It can also benefits startups by uncovering their weak spots and help them prepare for future deals.

There are 3 core stages:

screening,
business due diligence,
and legal review

– and each state requires different type of info and analysis to assess the viability of the deal.

Challenges in Venture Capital Due Diligence and Key Focus Areas for Investors

Venture capital due diligence has its own challenges, such as lack of historical data, comparable competition, proven demand, PMF, and etc info gaps that make valuing a startup difficult. A few key items that investors should examine are:

financials,
legal status,
assets,
liabilities,
and human resources

A well-scoped due diligence review, prospective investors or acquirers will benefit significantly, becoming more informed about their proposed target, thus increasing trust in the fund manager. It can help deliver a stronger deal, enabling active dialogue, find the right fit/value to their “thesis”.

Follow a due diligence process when evaluating potential investment targets, including:

Initial screening,
market research,
financial analysis,
legal review,
tech assessment and customer validation,
product market fit,
management evaluation and reputation check.

Summarize findings in a due diligence report and make a recommendation to the Investment Committee on whether to invest or not.

Reverse due diligence is also a thing

This is where startup founders may check VC's background and reputation towards bigger success goals.

An in-depth investigation or audit of a potential investment or product to confirm all facts, such as reviewing all financial records, market potential, and anything else deemed material. May consult with industry experts and conduct market research to assess the market demand and potential adoption of a startup’s innovative medical device.

The most surprising thing for me when Adeo Ressi mentioned that the number of Unicorns in a city is directly proportional to the number of VCs in that city. That blew me away, simply because there is a general perception that Unicorns are those which have the greatest ideas.

No doubt. But it also means that there are other equally great ideas (if not greater) which are going unnoticed. If we extrapolate this observation, then there are hundreds and thousands of cities (read: ideas) which are deprived of these “VC-funding privileges'', which means the industry is sitting on a gold mine.

Concentration Conundrum, Intense Competition, and the Prolonged Journey from Sourcing to Return

By increasing the number of VC firms, we increase the 1) number of great ideas (Teslas, Googles, etc) 2) and increase the depth of the sourcing list, which increases my (as a fund manager) chances of finding “quality-outliers”. It would be interesting to find out why VCs tend to be concentrated in certain cities? Is it because of strong startup ecosystems, great talent, etc. Or, most investors (organically) live in those cities and therefore end up investing in “local” startups.

Besides that, given the age of the industry I find it surprising that the process is cut-throat competitive. According to online research only ~1% of startups actually receive funding. This means the vast majority is not able to raise venture capital funding. And I understand this is because every single one of them (the VCs) is looking for those “quality-outliers”, those 1%, extremely rare -- that VCs believe have the potential to generate high returns.

Another thing about the venture capital investment process is how long it can take as a process to fund the investment, and for investment to generate return (up to 10 years). From the initial sourcing of a potential investment opportunity to the closing of the investment, it can take several months or even longer. This is because the due diligence process is very thorough and involves multiple steps. In fact, CB insights claim the unicorn birth rate is at its lowest level in 6 years.

I understand VC space is not easy, and the investment process is complex and demanding.

Sources:
-https://www.cbinsights.com/research/report/venture-trends-q1-2023/
-https://news.crunchbase.com/venture/fastest-growing-states-venture-capital-investment/ https://www.forbes.com/sites/hollyeve/2020/07/06/venture-capital-is-not-the-funding-reality-of-most-startups-heres-what-is/
-https://www.cbinsights.com/research/report/venture-trends-q1-2023/

What are the benefits & risks associated with venture capital in the middle east?

noreply@blogger.com (KMan) — Sat, 06 Jan 2024 11:35:00 +0000

What are the benefits & risks associated with venture capital in the middle east?

Multifaceted Benefits of Venture Capital within the local UAE (and broader MENA) ecosystem

Capital resources

VC firms in the UAE (as well as accelerators) provide startups with all the resources (financial, infrastructure, regulatory, legal and etc) necessary to survive and thrive in emerging markets.

Expertise, guidance, network and mentorship

These vc firms bring valuable industry knowledge & guidance to startups, helping them navigate challenges, seize opportunities and connect to their network effectively. For instance, Mubadala has a lot of experience in diversified industries.

Economic growth

The successful impact of venture capital can lead to job creation, economic prosperity, and technological advancement in the UAE.

Diversity

Diversity is also evident in the 20+ sectors, ranging from Digital Assets & FinTech to HealthTech, AgriTech and ClimateTech.

VCs have the ability to significantly impact the future of humanity, and therefore there is a concerted effort to explore nuance & emerging technologies to promote a better living for humankind. Vcs are actively shaping it by helping solve today’s pressing global challenges to build a prosperous, sustainable tomorrow for humanity.

Unpacking Risks in UAE's Venture Capital Scene

Lack of experienced VC firms here

Since the country is still an “emerging” market developing its products & services, therefore early-stage startups have higher chances of failure than established companies. One can argue that this is just like in any other region however when compared to mature markets(eg: US), the VC space in the UAE is considered more risky because of lack of experience and therefore could lead to losses for both investors and startups.

And since these early-stage startups are not yet listed on any UAE public stock therefore difficult to sell. On top of that, it can take several years for investors to see a return on their investment, which means a longer investment horizon compared to mature economies.

Regulatory risk

The regulatory environment for VC investment in the UAE is still evolving (mostly driven by Abu Dhabi Global Markets (ADGM) and Dubai International Financial Center (DIFC), which means there is a risk that new regulations could have potential impact on VC investments. One example is when Wise (formerly TransferWise) opened their offices here in the UAE, and then they had to shut down operations due to regulatory mandates that the startup was having difficulty in complying with.

Political risk

Although the country is a politically stable country, given the history of the Middle Eastern and Levant region, there is always a risk of political instability, which could impact negatively on VC firms.

Talent shortage & risk of flight

Since it’s a small country (like literally, NY itself is 46% larger than the entire UAE; or even Delaware which is 1.25 times bigger than Dubai) with limited talent pool, so that can also make it difficult for VC-backed startups to find and maintain (if not increase) their talent density which is crucial for any successful startup to grow and scale.

Talent flight

One of the biggest prevailing risks is the potential of “talent-flight”. The country does not allow permanent residency status (or even the right to stay indefinitely), therefore great talent is always looking for alternate permanent options elsewhere (mostly US & Canada) to work and settle. Although the country has introduced long term visa’s such as Golden Visa which allow 10 years of stay, however it requires a permanent solution.

What are some common terms used in Venture Capital in the UAE

noreply@blogger.com (KMan) — Wed, 27 Dec 2023 11:07:00 +0000

What are some common terms used in Venture Capital in the UAE?

Venture Builders

Also known as “startup studios” or “startup factories,” these firms generate new businesses internally from their operations, rather than investing in external startups. They conceive, build, and launch startups, often playing a foundational role in the startup's inception -- having "skin in the game". Here within the UAE, eg: Turn8, Further, GlowFish, Raha Beach Ventures, etc.

Startup Accelerators

Accelerators help slightly more mature startups scale quickly and get them ready for major investment. Eg: Y Combinator, Tech Stars, Hub71, Innovation Hub (DIFC), Flat6 Labs.

Startup Incubators

Incubators nurture startups in their earliest stages, providing a supportive environment. Eg: DIFC Innovation Hub, In5, etc.

Lifestyle Businesses

Businesses that provide their owners with a steady income but lack the potential for exponential growth.

Limited Partners (LPs)

Investors in a venture capital fund, often institutional investors like pension funds, endowments, or wealthy individuals.

Initial Public Offering

An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance. This allows companies to raise capital from public investors.

Mezzanine Round

A mezzanine round is a late-stage round of financing meant to bolster a company financially before it goes public. It is typically the final funding round before an IPO and serves as a bridge between venture capital and an IPO.

Secondary Sale

A secondary sale in venture capital is the sale of a startup’s shares from one private investor to another, without the shares being made available to the public through an IPO. This allows early investors to cash out their investment before an IPO or acquisition.

Carried Interest

aka Carry, refers to the share of profits that the General Partner receives from the investments made by the fund. It’s a percentage of the profits, typically around 20%, that the General Partner receives as compensation for managing the investments.

Due Diligence

The process of carefully investigating and evaluating a potential investment opportunity to assess its risks and merits. In the context of venture capital, it includes analyzing the business model, financial statements, market potential, management team, and legal considerations.

Term Sheet

A non-binding agreement setting the basic terms and conditions of an investment. It serves as a template to develop more detailed legal documents.

Exit Strategy

A way for an investor to exit their investment in a company, typically through a sale, merger, or IPO.

Board Seat

A position on a company’s board of directors. After investing, a VC often takes a board seat to influence and monitor the company’s strategy and decisions.

Private Equity

A type of investment that involves buying shares in companies that are not listed on public stock exchanges.

Investment Deployment

The act of using invested capital for its intended purpose.

Institutional Investors

Organizations that invest on behalf of their members. Examples include pension funds and insurance companies.

Follow-on Rounds

Additional rounds of funding that a startup may go through after the initial investment, to support continued growth and development.

Investor Conviction

The belief and confidence that an investor has in the prospects of a startup, often influencing the decision to invest.

Post-Investment

The stage of the investment process where the venture capitalist provides strategic guidance, oversight, and other support to the startup after the investment has been made.

Secondary Sale

The sale of a startup’s shares from one private investor to another, often enabling earlier investors to exit their positions.

Endowments

Funds donated to institutions or foundations, where the principal amount remains intact, and only the income or interest earned on it is used.

Family Offices

Private wealth management advisory firms that serve ultra-high-net-worth investors.

Receivable Funds

A type of funding where capital is provided based on the accounts receivable of a company.

Revenue-Based Funds

Investment funds that provide capital in exchange for a percentage of ongoing gross revenues until a predetermined return multiple is reached.

Search Funds

Investment funds set up by entrepreneurs who raise a pool of capital to fund the search for a promising company to acquire and manage.

Secondary Funds

These funds specialize in buying existing stakes in venture-backed companies from early investors looking to exit.

Specialty Funds

These are alternative investment vehicles that deviate from the traditional venture capital model. They may be types of private equity or debt funds.

Special Purpose Vehicles (SPVs)

These are simplified funds that pool investments typically for a single, specific investment deal.

Outsourced Funds

These funds allow part-time or amateur investors to establish venture capital funds, simplifying the investment process and reducing administrative work.

Pass-Through Entities

A legal structure where an entity does not pay income taxes at its own level. Taxes are “passed through” to the owners, who report the income, deductions, and credits on their individual tax returns.

Pro Rata

A term that refers to the proportional allocation of something, such as ownership or investments. In the context of the article, it relates to the General Partner’s commitment to the fund based on ownership.

Hard Circled

A term used to describe committed capital from investors that is considered secure, though not yet legally binding.

PACT

A term used in this context to refer to a commitment letter from a potential investor expressing their intent to invest in the fund.

TVPI

Total Value to Paid-In, a ratio used to measure the value of a fund’s investments compared to the amount of capital paid into the fund.

Investment Memo

A detailed document prepared by venture capital professionals, summarizing the analysis and evaluation of a particular investment opportunity.

Carried interest

Carried interest = share of profits
The more significant earnings come from carried interest, which is a share of the profits from the fund’s investments. This is typically around 20% of the profits, with the remaining 80% going to the LPs. Example: if a VC fund of $100 million returns $300 million after a decade, the $200 million profit is split with $40 million (20% of the profits) going to the GPs as carried interest and the remaining $160 million returning to the LPs.

Valuation

Valuation = current market value
Basically estimated worth of the company, using different methods to value startups
Most common: discounted cash flow (DCF), gross merchandise value (GMV), comparable companies method, etc.

Inflated valuations

Venture capitalists sometimes contribute to overvalued startups, leading to market instability. WeWork, valued at $47 billion in January 2019, fell to $12 billion
Klarna raised $800m at a valuation of $6.7 billion, down 85% from $46B just last year
When market doesn't have all the info, a divide between market value and intrinsic value can appear.

Exit strategy

An exit strategy is a plan for how VCs will eventually get their investment back.
Some common exit strategies: going public or IPO, being acquired, or selling the company outright.

Secondary sale

A secondary market transaction is when shareholders of a company sell their stock to another investor. Or, the sale (of a startup’s shares) from one private investor to another = secondary sale. Enables earlier investors to exit their positions.
A venture secondary transaction involves the sale of private stock in a company that is backed by venture capitalists.

Liquidation preference

A clause in a VC investment agreement that gives VCs priority over other investors in the event of a liquidation event, such as a bankruptcy or acquisition.

Conversion rights

Conversion rights give VCs the option to convert their preferred stock into common stock at a certain price. This is typically done when a startup goes public.

Anti-dilution provisions

Protect investors from their investment potentially losing value. Anti-dilution provisions protect VCs from their ownership stake in a startup being diluted by future investment rounds. Variety of different anti-dilution provisions types, most common: weighted average price (WAP) anti-dilution provision and the full ratchet anti-dilution provision.

Full ratchet anti-dilution provision

A contractual provision designed to protect the interests of early investors

What is the API Banking Landscape in the Middle East

noreply@blogger.com (KMan) — Fri, 10 Mar 2023 21:00:00 +0000

What is the API Banking Landscape in the Middle East ?

Whats the driving force

Globally, traditional banking is moving toward open data. The key driving force is the urge to protect the existing customer base, and expand & own the customer relationship. Whilst minimizing operational cost has become significantly important given the rise of bubbling fintech’s, this opportunity comes at a time when incumbent banks struggle with low performance.

Open banking industry is currently estimated to have $11 billion of global market cap, and at a CAGR of 23.98% it is predicted to reach a value of more than $52 billion by 2027.

Different types adopted by nation states

The open banking space is either regulator-driven or market-led initiative, and has multiple frameworks across various jurisdictions. For instance, in the EU, PSD2 framework applies to payments data, whereas in the UK Open Banking (OB) framework additionally requires publicly available information such as branches, ATMs, bank products, and fees. The EU has started to get consultations on PSD3, moving towards standardization and more mature use cases. NextGenPSD2 is a more advanced framework developed by The Berlin Group.

Worth noting is the largest number of Open Banking APIs published so far is by Singapore’s DBS Bank with 200+ APIs for loans, rewards, fund transfers and deposits., while Australia’s most sophisticated framework on the other hand provides “read-only” rights and plans to cover industries beyond banking (e.g.: energy sectors, telecom, etc.)

In the middle east, banks are more risk averse and prefer to own customer relationships.

Bahrain

is a regulator driven market, and has active regulations based on PSD2 & GDPR. Egypt is also regulated and has data protection laws ready, however an open banking framework is a work in progress.

Kuwait

which is also regulator led, is working on an open banking framework however they have yet to publish data protection policies which is an integral part of open banking, open finance, and open data.

Saudi

Although market led, Saudi‘s SAMA open banking framework is expected to go live in this year (2022) while Qatar National Bank (QNB) has launched an open banking platform in partnership with Ooredoo, which is a well-known Qatari telecommunications company owned by Qatar government-related entities and 10% by Abu Dhabi Investment Authority (ADIA) in the UAE.

Oman

The Central Bank of Oman (CBO) is drafting the framework albeit Nigeria has published Open Banking draft guidelines, at the same time Israel is catching up with their recent Financial Information Services Law.

United Arab Emirates

UAE is unregulated so far and is herded by the market with a facilitative regulatory approach. However UAE central bank has started to draft the open banking policies.

Abu Dhabi Islamic Bank (ADIB) decided to use UK Open Banking standards, but Arab Bank (Jordanian Bank) is following EU/PSD2 and has their API portal. They’ve published open banking APIs for services such as Strong Customer Authentication (SCA), Account information, Account balance, Transaction history, Payments & Transfers.

RAK bank, Abu Dhabi Commercial Bank (ADCB), and Emirates NBD bank have launched their developer portals, and we have yet to see newsworthy progress from First Abu Dhabi Bank (FAB).

However, Citi UAE has opened full fledged retail and corporate APIs such as, Accounts list, Account statement and Customer inquiry, and includes bundled services.

Open banking is still in early stages and therefore most common use cases are retail focused (aggregators, payments, bnpl, etc.) so far with their neo banking initiatives.

Digital bank players are YAP (neo bank by RAK), MashreqNeo (by Mashreq), Liv (by Emirates NBD) have direct integration and reuse their core bank’s infrastructure. Wio Bank and Al Maryah Bank have their own licenses.

Banks in the UAE are striving to quickly move into this space and avoid risk of losing market share.

Third parties are the catalyst to innovation

As much as frowned upon by banks, third parties in general and FinTech specially are an essential component of innovation and open ecosystem.

The chart above shows the proportion of the country's population (prospects) vs local banks, and the growing number of FinTech.

The UK has the lowest number of banks compared to its population and the highest number of FinTech’s, and hence leading innovation.

Keeping the UK as a baseline, which is leading the open banking space, Egypt has 40 banks, and putting that in perspective, even if you double the current UK population from 67m (with 6 banks) to 134m, then the UK will end up with only 12 banks.

We can see the disparity in the middle eastern region which is far off the baseline and a lot of work needs to be done to develop the policies and build infrastructure where the new players are welcome, onboard is faster, and innovation can thrive beyond the financial services industry.

Current open banking players in the region

Tarabut

Tarabut Gateway from Bahrain, claims to be MENA's first and largest regulated Open Banking platform and aspires to become Plaid of the middle east. They’ve onboarded more than 3 retail banks.

Lean

Saudi owned Lean (LeanTech) claims to be building an integration layer on top of the (retail) banking infrastructure in the Middle East. They recently got approval to access the central bank’s (SAMA) sandbox, and are very active in the region including UAE.

Dapi

Dapi is a Y Combinator backed fintech in the UAE that provides open banking access to retail customers. It lets partners leverage open banking APIs and connect their app to users' bank accounts, initiate payments, and access real-time banking data.

In one of the meetups during the Seamless exhibition they confirmed that, in some cases, web scraping is done to ensure consent and connectivity. This may pose a slight risk when a bank decides to upgrade their online banking web portal, it will impact Dapi partners.

Rapidly growing open banking providers such as SaltEdge (Canada/UK), Tink (Sweden, acquired by Visa), aiia (Denmark, acquired by Mastercard), and U.K. fintech start-up TrueLayer. Bankableapi is another upcoming UAE based API aggregator platform with a lot of promises.

The API based open banking makes information availability on-demand, instant and accurate which increases competition. When moving to API banking, banks need to decide on the business model between Owning the platform, Partnership model, or acting as a utility by providing Banking as a Service.

Part III: “It’s not over, until I win” – How I passed CTP Exam?

noreply@blogger.com (KMan) — Wed, 08 Feb 2023 15:57:00 +0000

Inspiration: "Its not over until I win" – Les Brown

So what kept me hanging in there? The challenge!

What did I do differently?

Change in Strategy.

Failure on the first attempt made me go through some reflection moment. Things that I should do differently. Time Management, Prioritize, Focus, Persistence.

Well, my initial intention to attempt this exam was to learn about the Cash Management. However, I realized that I need to invest more time to build better understanding of the Treasury business as a whole (for instance working capital, funding, financing).

Although everything you need to know to pass the exam is in the Essentials of Treasury Management handbook, I figured I needed some other source of information in different format. Just so I could think of business from different scenarios’ perspective. Hence, I registered (~USD700/-) for Online Treasury Learning System (TLS).

This comes with hard copies (by post) that include all of the detailed modules and question base.

I kept my focus on the Online TLS only.

I think it’s a very good program with Module Specific questions, and formula based questions. You have as many examples as you want to practice. The key is to "Understand" what you are being asked; and in order to understand that, you must have the Concepts clear. When you submit a wrong answer to a question; the next screen shows you the correct choice/s and the "Rationale" behind that answer. So that helps in building better understanding of overall business flow.

Click here to go through TLS online demo: http://www.afplearningsystem.com/treasury/free-demo

A good, three to 4 months are required to build the momentum towards the exam day. Daily study is a must! Go through TLS test scenarios every day.

The other thing I would recommend is to start using a basic 4 function calculator regularly. This will make you comfortable and help pick up the speed to calculate complex questions quickly. Saving in large numbers in memory, memory addition/subtraction, rounding off, % increase, % decrease etc.

Exam Day

The test is an online Computer Aided Test (CAT) having 170 questions; which means, you have ~80 seconds per question approx.

IMO, make three rounds of 170 questions. Actually Online TLS can help you build that practice.

First round (Approx, 1hr): Walk-through the whole test to answer the easy questions – that you are 100% sure, which is on your fingertips.

Second round (Approx, 1.5hr): Go through formula based and answer difficult ones – mark “Very Difficult” as “To be Reviewed”

Third round (Approx, 1.5hr): Go through questions that are Marked-For-Review

You have to be very strategic to pass the exam.

The Result

The status of the result (pass/fail) you get to know on the spot at Pearson VUE Test site.

a

I passed the exam in second attempt (read, How to fail an exam: http://izlooite.blogspot.ae/2015/02/how-to-fail-exam.html), but finally nailed it. If you would like to know more about CTP Exam, check out my earlier post, What is CTP Exam: http://izlooite.blogspot.ae/2014/07/what-is-certified-treasury-professional.html.

However, official announcement is made by AFP during the first week of August. Announcement is sent out to all candidates who passed the examination. This email will allow candidates to look at their certificate and confirm the shipping address. During this process you will also be able to download a soft copy of your certificate.

As per (Window 2015A) Stacy Saul (Director of Examinations at Association for Financial Professionals), the current pass rate is: 48% (Very low, IMO).

Out of 170 questions - 150 are scored and 20 are not (un-scored). The un-scored questions are newly developed questions that must be beta-tested before they can be moved to a scored position. Un-scored questions are part of the Test Specifications.

Lessons learned: Practice, Patience, Persistence!

With all this in mind, I continue to believe that education/knowledge is an important step forward in personal growth, and is not meant to satisfy friends, colleagues, parents and the society. Its not just the certificate you get after passing it – the education, or the “journey” towards that education is far more than that. It is the value addition that we get every day because of learning something new; and help those in need.

Good luck!

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Part II: How to fail Certified Treasury Professional (CTP) Exam? Recipe to failure

noreply@blogger.com (KMan) — Tue, 07 Feb 2023 16:17:00 +0000

How to fail Certified Treasury Professional (CTP) Exam? Recipe to failure

This is Part II of a series of posts, sharing experience of Certified Treasury Professional Exam, and what is the recipe to failure?

If you want read Part I, here you go what did I do to fail?

Okay, so here is the trick.

Look for something entirely new (Treasury Management)

A book with ~1000 pages in Mandarin
Home-made flash cards
And of course - a couple of kids (add, as many as you like - not to mention, of your own)
Some Liquidity (that is: *Cash* not yet claimed by your wife)

Mix all of it well, and well… you’re all set to fail.

With nothing making sense... I had to think of a different approach, different angle.

Decided to change the strategy, and therefore started from the end part of the book.

Yes, the Appendix-part. Why?

Because that would help build understanding of the terms used in the book – so when I read chapters I am familiar with the keywords/terms. That’s One.

Two: Instead of the going through the chapters, I started the Chapter-wise Question/Answer section at the end. Why? Because that part was making sense a little, it was to the point and very specific.

Three: Prepared flashcards kept in my pocket – and started reviewing them daily during my travel in metro, back/forth to office and everywhere else.

Started attempting the mock exams on the third-party websites. Reviewing the answers, and explanation.

With above change in strategy, I started getting the hang of it. It appeared.

Formulae Havoc.

More than 60 formula from Treasury, to Payments, to Netting, to Forward, Futures, and Options – a Blackhole.

Nevertheless. It required practice.

A lot of Practice, And Patience And Persistence.

All Friday/Saturday mornings (early mornings, 6 to 10am) were for formula based questions only.

Days, Flying By

With this silence-before-the-storm, I realized I am left with 10 days only.

1 Week Crash Course

So, last week left I couldn’t gauge my comfort level yet with an exam in a week’s time:

· Read book end to end 2 times, Check
· Learn-by-heart more than 15 formulas, Check.
· Attempted AFP Exam-Prep-Guide 170 x 2 questions, twice, Check.
· Attempted, all of the Chapter-wise questions from TMExam-com, Check
· Attempted, all the numerical questions from TMExam-com, Check

Some-Thing is missing?! A thought, in the last week from the exam date.

A bleak thought: I should have tried AFP online practice questions.

Keeping above checks in mind, I kicked the thought out.

I was confident, decided to cover end-to-end once again in the days remaining.

I came up with a plan. The idea was to utilize all times of the day. As the legend used on the whiteboard (image below) has it:

M: Morning, 6 to 8am - Durations (2hrs each)
E: Evening, 4 to 6pm
A: Afternoon, 12 to 2pm
N: Night, 8 to 10pm
Flash: Meaning, review flashcards for those parts (P1, P2, etc.)
Test: Meaning, attempt a test for that Part.
P1: is part-1 of the book, contains 1 chapter(which is chapter-1, of course)
P2: is part-2, contains, 6 chapters
P3: containing 7 chapters
P4: containing 3
and P5: 3 chapters.

Yep, that’s the whiteboard that I borrowed from my daughter for that week on the promise that I’d buy her a Doll “Set” and she will not touch the board.

Well, knowing her she couldn’t resist herself to buck me up.

Dooms Day

With all uncertain progress, the testing day was there.

Hoping to pass with flying color.

Woke up early, and left the place around 7.

The testing center was Etisalat Academy, Muhaisna – Dubai.

Academy looked deserted. I walked through the corridors peeking in the all office rooms where I could find something and query about my examiner, and exam room.

While I walked around for a bit, luckily, a lady appeared on the front desk. She called someone and requested me to wait. I was 40 minutes early, so I waited. And waited and waited for next 30 minutes.

And an arab gentleman walked in. Apparently he was on the way to office, and was caught in traffic jam (very common *reason* in Dubai).

With 10 minutes left for the exam to start, I was getting impatient.

Judging myself, he told me not to worry and that I will have my full time (4 hours).

A little late, I finally entered the exam room, and started.

Well, and the result after 4 hours of exhausted energy.

Result, was printed on the spot: DID-NOT-PASS. Following image dump; a nice way of saying, You Failed.

Sad, a little mad, with heavy heart I came home and slept for hours and hours. Happy failing!

Next, read on: “It’s not over,until I win” - How I Passed CTP Exam?

Part I: How to fail an Exam?

noreply@blogger.com (KMan) — Mon, 06 Feb 2023 16:00:00 +0000

Seriously? looking for a recipe to fail. Wow! Well then – wait no more, jump directly the section marked as “The Recipe to Fail”

However, if you were forced to descend on this land-of-rants via some strange looking link out of google search result then, may God be with you and I hope and pray this post wouldn’t disappoint you in on how to achieve the epics of failure.

Well, they say: “Failing to plan, is a plan to fail”.

But, hold on! Before you judge my ingenious self, let me quote, “Never confuse education with intelligence” – I don’t know whoever said that, but just keep that in mind while you scan through my rant.

Times make me wonder if it’s a genetic fault, or was a failed-experiment mutated in my genes by UFO hovering Dubai Skies while I slumber – as to why (unknown/strange) I happen to look for trouble (I was gonna write *challenges* but that didn’t sound just right.).

Anyway, so one fine Friday morning I decided to study for another mysterious *thing* called Treasury Management (related to banking); and I started the research.

Primary motivation was to understand the Treasury and Working Capital Management (now that I represent a team that sells best Treasury Solutions in Financial Industry), and came across a globally recognized certification exam called Certified Treasury Professional (CTP) administered by Association of Financial Professional (AFP). If you quickly want to know what this havoc was all about, my previous blog post may give you an insight: What is Certified Treasury Professional?

Flash Forward.

Applied, registered for membership

Submitted exam application

Paid fee

Scheduled test center

Order the book online that came in ~2 weeks later by post

Ready. and came up with a study plan, and “planned” to stick to the plan.

All set.

The Plan

A plan that eventually turned into an airplane and flew away. Starting with the chapters in the book I was hoping to build the momentum for the exam itself. So, every day I would come from office and dedicate an hour (at least, 3 hours at most) reading book page by page, chapter by chapter.

Day-1: Module1, Chapter1

The moment I picked the book, it felt heavy, like physically ~4kgs; can’t carry it around with you. Desk, a must have. Anyway, weight doesn’t matter (size does, pun-intended), and with all the enthusiasm, focused on chapter-1.

Day-2: Chapter1

Focused, trying to understand; with kids jumping around. Very detailed information, to an extent that most of the things I had to search online to make concept out it.

Some things, couldn’t understand, but… well: “way to go”(was the thought).

Day-3: Module-2, Zero progress

Next day I came in and found that my daughter was *reading* the book by sticking smiley stickers, so to buck me up she added smileys. Cute, but not cute. I was angry! She had to go through some scolding sessions, and free lectures that I gave on-the-spot. Well…

Well, started to read again, no momentum yet, no understanding, trying to stay focused!

Day-4: Enough of study, relaxing day.

And of course my son followed applied his artistic sense- I found the next day.

Day-5: Module-2

… Trying to keep my grip on – and losing *concepts* part of it; for a moment I though I am in attempting for some MBA courses. Seriously though, think about it: Capital Markets, Funding, Capital Structure, Dividends, Policies, Investments, Operational Risk Management, Cash Management, Payments, Liquidity, Collections, on and on and on the list goes.

Days 6, 7: Module-3

Zero understanding, lost interest… actually struggling to carry on

Days, 8, 9, 10: Lost the track of module

Lost it.

Stopped.

With the spilled tea when my son landed on my shoulders while jumping from the table.

Exhausted! I felt.

This is not working!

Couldn’t study for days, and weeks… thinking on how else can I move forward? Lol, and initially I thought I could kill it.

Well. Rethinking.

Days… going on:

Progress is Zero.

With mounting pressure of the exam date, I was thinking of alternate ways I could approach. My friend, DDG.com, surfing YouTube videos, strange-thick-dense-financial-lingo websites, and finally found something that started to make sense of this senseless book (I thought). Something that I was able to understand and relate to: investopedia.com

Very helpful resources for dumbos like myself; …and you’d find answers to things that you never even thought of. Yes, for free.

I found myself more interested in the video tutorials instead of the book; in any case I had to stick to the book.

Read on, Part II: Recipe to Failure...

Could ‘gamification’ help corporate banks improve customer loyalty?

noreply@blogger.com (KMan) — Sat, 11 Jun 2022 09:51:00 +0000

Could ‘gamification’ help corporate banks improve customer loyalty?

Gamification is the use of game-like mechanics in non-game contexts to engage users and motivate them to achieve their goals

Read full story here: https://www.arabianbusiness.com/opinion/could-gamification-help-corporate-banks-improve-customer-loyalty

There are hundreds of gamification tools out there, ranging from something as simple as points, badges, and leader-boards, to AI-based sophisticated reputations systems.

In all the use cases above you will notice one common denominator, which is that all these gamified products are based on B2C (Business to Consumer). It is because game theory by nature is B2C.

Bankable API Marketplace aims to bring Open Banking to mainstream by providing a platform that connects banks with third party providers.

How open are UAE bankers to the idea of Open Banking?

noreply@blogger.com (KMan) — Sat, 05 Mar 2022 15:14:00 +0000

How open are UAE bankers to the idea of Open Banking?

My latest article on the Arabian Business talks about how Open banking will help financial institutions to better shoulder heavy burdens of attracting customers and providing them product and services. Banks will be able to offload tasks such as product development, sales, marketing, operation, innovation, and even competition to ecosystem partners, have a look: https://www.arabianbusiness.com/opinion/how-open-are-uae-bankers-to-the-idea-of-open-banking

BankableAPI Marketplace aims to bring Open Banking to mainstream by providing a platform that connects banks with third party providers.

A quick look: Open Banking around the world

noreply@blogger.com (KMan) — Fri, 13 Aug 2021 13:14:00 +0000

So, what is happening with respect to Open Banking around the world? Alot!

The four forces of change continue to drive innovation:

Social
Political
Economic
Technological

I am a technologist first (banker second), and for me, technology is (and has been) the core driver for change. Of course, all of them affect financial markets and businesses equally however post COVID era is pushing for change exponentially.

A comparison of open banking initiatives around the world is interesting to see conducted by Bank for International Settlements [1].

On one hand from the perspective of Open Banking use cases, and what products & services are being offered using the open banking platforms, such as:

Banking product and service related information; sort of a general inquiry
Banking Account and Balance Inquiry
Funds Transfer Request

And on the other hand, the approach taken by those economies on how to apply open banking, such as:

Countries where Open Banking Compliance has been made mandatory by the regulator
Or, Formal rules and regulations introduced for Third Party Providers (TPP)
Or, a General Governance Framework
Or, countries who have taken steps to standardize Open Banking APIs
Or, just that Open Banking is being driven by the demand and competition in the market, countries such as UK

Most importantly, these initiatives allow payment service providers (PSPs) to offer services via digital channels. For example, products and services that previously may have required a visit to a bank branch and interaction with staff at a bank can now all be delivered via application programming interfaces (API). Examples include

consumer loans,
mortgages,
car loans,
account statements
and tools that analyse spending.

How European Union (EU) is responding to Open Banking

European Union (EU) is the region who is at the forefront of Open Banking and leading the way. Not only they have introduced formal regulation for third party providers (TPP, AISP, etc), but also made compliance to Open Banking mandatory, using Second Payment Services Directive (PSD2).

Currently FinTechs are booming and providing Account Aggregation services, Spending Habits, as well as Funds Transfer capabilities using Open Banking APIs.

Note that, perimeter depicted in this figure represents the scope of PSD2, which applies to payment services only. Individual jurisdictions within the EU may choose to broaden the scope of their Open Banking frameworks beyond the requirements of PSD2.

UK with a clear Open Banking approach

In the UK, a common market-wide API standard has been defined already, in order to allow for a seamless implementation. In addition, the UK Open Banking project has defined further standardized elements to help UK based PSPs to comply with PSD2 and the associated regulatory requirements defined by the European Banking Authority (EBA). [2]
The Open Banking standard set has been implemented across 90% of the UK payments account market and will allow third-party providers (TPPs) to offer competitive services across customers’ accounts held at their own bank.
UK Open Banking approach is aimed at improving competition in the retail banking market, therefore may eventually lead to an increase in peer-to-peer (P2P) payments.

Australia in the field of Open Banking

Compliance to Open Banking has been made mandatory in Australia, however they are yet to offer Funds Transfer related services. Generally, bank Product and Services related offerings are in place besides Account Aggregation services [3].

FinTechs in Australia is quickly picking up in that area as well, and data that could be shared with third party providers now include:

Personal: information such as phone number, email and address.
Account: balances
Product info: rates, fees and features of bank products
Transaction details: amounts spent

Open Banking API Framework for the Hong Kong Banking Sector

Hong Kong is providing governance framework for Open Banking in a phased approach. As well as build, the momentum towards market API standardization by generating market driven partnership. They have formulated Open API Framework as one of the seven initiatives announced by the HKMA in September 2017 to prepare Hong Kong to move into a new era of Smart Banking.

So far providing services such as account aggregation as well as funds transfer using Open Banking, along with ancillary services.

What does Open Banking mean for United States markets?

United States looks like is lagging behind and it completely at the behest of market to drive businesses into the Open Banking arena. There are however, FinTech who have started to delve into the Open Banking space however only limited to general and account aggregation services.

According to Forbes many of the payment service providers (PSPs) in the US are completely reliant on their core provider, to open banking and API enablement, such as FIS, Fiserv, and similar. However, their strategy roadmap targets some later this year (2021). Who knows? But know that there is a great Open Banking potential in the US markets.

How Open Banking is thriving in China and Argentina?

Argentina and China both are driven by an innovation-focused economy therefore Open Banking initiatives are relying on market driven partnerships. Both have the most digitally connected consumers.
Peoples Bank of China (PBOC) is reshaping of the whole value chain of banks, setting the guidelines and granted access to non-banks as well albeit on a more limited scale than for banks.
While Argentina does lag behind the two largest FinTech hubs, Brazil and Mexico, in Latin America.

Which country is innovating fastest in the Open Banking space?

Given that PSD2 and UK's Open Banking Standard were the pioneers, you would think EU reasonably is on the lead. Nevertheless, look around now, and open banking initiatives are popping up everywhere.

Hong Kong as well as Singapore, both are acting as the driving force behind Open Banking. The Monetary Authority of Singapore (MAS) is actively encouraging regional financial institutions to provide APIs in order to offer enhanced innovation and compatibility with other financial service providers.

Open Banking in the UAE and GCC markets

So far, Emirates NBD has provided open banking API sandbox so far. In addition, enabling access for budding FinTechs to play around and develop innovative solutions.

Central Bank of UAE, Dubai Financial Services Authority (DFSA) and Abu Dhabi Global Market (ADGM) continue to push for innovation in the financial services and encourage competition between FinTech startups to provide a boost to the country’s economy.

In the GCC, Central Bank of Bahrain, Saudi Central Bank (SAMA), and Kuwait Finance House are innovating within the Open Banking.

What’s next in Open Banking?

Budding FinTechs are using new creative ways to build innovative products and services, whereas for conventional banks the challenge lies in re-inventing [4] themselves and devise to new business and revenue models. For instance a PSP can look to transform into a platform provider such as Banking as a Service (look up bnkbl.com), or Distributor (Marketplaces), or a Producer such as by providing Open Banking APIs and generate new revenue streams.

This is the game-changing value proposition and the rapid growth associated with internet-based open application programming interfaces (APIs) driven platforms operating in the cloud. It is not just a matter of replicating Open Banking approach, but each economy is adopting to their own innovative ways to develop cross-industry solutions beyond financial services (think, Tink [5]). BankableAPI (bankableapi.com) is one such FinTech startup within the UAE that strives to mainstream the Open Banking by connecting banks with third party service providers rapidly.

[1]: https://www.bis.org/bcbs/publ/d486.pdf
[2]: http://www.wired.co.uk/article/open-banking-cma-psd2-explained
[3]: https://www.ausbanking.org.au/priorities/open-banking/
[4]: https://www.computerworld.com/article/3429561/what-is-open-banking-what-does-it-mean-for-banks-fintech-startups-and-consumers.html
[5]: https://tink.com/about-us/