Bondsmart has been developing its proposition for the past eighteen months. If you don’t know what we do read more here. We were at a stage where we needed to look at pilots, pre-sales and getting out into the marketplace and DIFC Hive ticked many boxes. Here’s our story how we chose to apply for DIFC Hive.
In Q2 2018 we needed ways to reach an audience that was motivated on technology change within a large enough commercial organisation and in a market that had inert demand our solution could move. Why these three things?
- Need for an audience that was motivated for technological change. From the outset of the business, we had decided that B2B2C was our preferred route to market. B2C is expensive to build the brand and our solution did not seek to dislodge the way investment sales were done, we purely re-engineered it. We, therefore, needed to identify groups that had large mass affluent clients and people empowered to introduce new solutions into an organisation.
- Large enough commercial organisation. When segmenting the customer number and size is an easy metric to divide clients into three tiers (gold, silver and bronze or 1,2,3 – whatever is an apt description for your tiers). As our focus was on organisations with a large retail customer base (why: because our model is to take a big value asset and break it into bitesize pieces) our focus on was Tier 1 and Tier 2 organisations. In reality, we needed these to be national champions rather than global as investment solutions generally are limited by the country conduct of business rules. Dubai had a large mass affluent client base (350k households) and concentration of large financial institutions organisations. That gave us a pool of sufficient large organisations to target that had the critical mass of clients we could help. The table below gives a snapshot of some stats.
|GDP per capita US Dollars||39,767||43,900|
|Five bank asset concentration||84%||64%|
- Inert demand we could move. I have had the benefit of being able to work in financial markets across the globe so was aware of trends in UAE and changing investment market. The UAE is a market where mutual fund penetration is low compared to other developed markets (<1% of their wealth for mass affluent investors). Direct security ownership is high. This is good as our model is to fractionalise direct assets. There is a large cash deposit culture too so the psychology to invest and lock away fitted with our buy and maintain strategy for bonds. Additionally, regulations and commission disclosures were coming into effect so transparency was on the table. The market structure, changing dynamics and wallet size of our target market saw we had a customer base in the UAE ideal for our solution.
So seeing where our business had reached and a market we could enter it was time to look at making it happen. Knocking on doors some cold and some warm through our network led us to the realise that fintech was a young concept in the UAE but the country was an advanced user of technology (smartphone penetration is 91% vs UK 85%). The industry had realised that technology was changing so it was interesting to see that one of the main UAE regulators had introduced a financial accelerator and working hub. We learnt of DIFC Hive existence and decided to apply when its doors opened. When this happens, we shall share how we approach applying.