Product

A business credit card for the Saudi Arabia market. It has been launched by a leading commercial bank (SA Bank) in the country, and is issued by Mastercard. It is targeted at small and medium sized enterprises (SMEs).

Elevator Pitch

<this pitch is to an SME business owner/operator>

"While you focus on business growth with a lean team, we appreciate that 'saving time and money' is top priority. That's exactly what our business credit card will do for you. It can extend your payables cycle by up-to 55 days (for free), while reducing time & effort spent on making payments and managing everyday company spend. We say this from our experience of working with 100s of businesses like yours. Would you like to find out more?"

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Understand the Product

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1. What is the fundamental need or want that the product is solving for?

• An effective payment channel for specific use-cases e.g., employees spending on travel/hotels/dining/entertainment (instead of using cash, cheques); company paying for online goods & services such as cloud services, subscriptions (avoiding bank transfers, direct debits)
• Extend payables cycle and create room from a working capital standpoint (while avoiding excessive or expensive borrowing for short-term liquidity needs)
• Reduce time and effort spent on employee/office spend, payment approvals, reconciliation / reimbursement post payments etc.

2. What are the basic features and functionalities that the product provides?

Core features

• A single company-wide credit card limit, under which multiple physical cards can be issued to employees and departments
• Cards can be used for online and offline spend, subject to merchants / beneficiary accepting cards
• Cards are issued by Mastercard, so high acceptance levels in the domestic market and globally
• Two repayment options;
• • as a charge-card; every month the full amount owed has to be repaid, or
  • as a credit card; every month at least 5% of the owed amount has to be repaid (a monthly interest fee will apply on the amount unpaid)

Ancillary features / benefits

• Corporate Liability insurance to protect company against unauthorised use by employees (up-to a certain limit, and subject to conditions)business-and-corporate-cards-clw-insurance-termsksa2023.pdf
• 3D Secure for additional security for online transactions (typically using OTP as the 2FA)
• Ability to set spend controls; spend limit per card, block certain vendors / categories
• Mastercard's proprietary expense management and card admin platform (SmartData) - to issue / terminate cards, set controls, monitor employee and company level spend (can help identify top vendors and provide info for negotiations), expense management workflows (transaction reporting to employee submissions to manager approvals)
• Exclusive offers and discounts; lounge access (MC Travel Pass); Access to savings with vendors (Easy Savings Specials) - productivity (Google Workspace, Adobe, Docusign etc.), office supplies, coworking space, car rental, logistics, HR, marketing, communication, finance etc. - see below

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- (while the card helps avoid cash payments for low-ticket spend it) Use for cash withdrawals if needed

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3. What other ways are users using to solve the same problem? If it is a new category, how else were people solving the problem?

Market context

Due to rules under Islamic finance (and concerns around charging interest), credit cards are a late entrant to the market. Debit cards and pre-paid cards have been around longer, and are quite popular. The credit card proposition while relatively new, is offered by a few providers now.

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Alternate methods of payment include (in the absence of credit cards)

• Use cash for in-person payments say for hotels, dining, local transport
• Use personal cards (credit or debit), and then claim reimbursement
• Use company pre-paid or debit cards, this will require funds in the bank account
• Pay using cheques, bank transfers or the owner's credit card
• (if company is cash strapped), use overdraft or bank facility (this situation may impact the levels at which they can do business e.g., saying no to some customer orders, or buying less from suppliers)
• Employees may depend on finance department or finance manager to pay for their spend (e.g., T&E); share details, get approvals, request payment to be made (can be manual and inefficient)
• For online company spend, bank account transfer and direct debits may be used​

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Core Value Proposition

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The main benefit of the business credit card is that it provides the company with an effective channel to decentralise and yet streamline regular company spend (e.g., employee travel & entertainment, office supplies, online subscriptions, one-off marketing / HR spend); from receiving approval, to making the payment, to reconciliation, to monitoring, to controlling, to reimbursing.

User flow (highs or lows, felt at each step)

1.     Provide personal details to the card admin, and apply for a card (there can be friction if the platform / process is cumbersome, detailed guides are not available etc.)

2.     Card is approved by admin and issued to the cardholder

3.     User receives the card at his home or office address (depending on company policy) – high

4.     User starts using the card for work related spend – high

5.     User can add it to Apple wallet for spend from phone – high

6.     User can use this for online spend (e.g., travel booking) - high

7.     User has to retain receipts of spend – low

8.     User has to prepare and submit monthly expense reports for approval – low

9.     User / admin may have back and forth on the expense report – low

10.  If there are personal expenses on the card, user will need to provide debit authority from own bank account – low

Understanding the Users

This is based on conversations with several business owners / business card users.

Why customers / users want it, and what they like and don't like

• Small companies need it for convenience; instead of giving cash to employees for petty / one-off spend; travel spend is more streamlined (doesn't need to go through tedious approval workflows)
• For some spend, it's essential e.g., cloud software providers may only accept card payments (especially overseas providers) - often founders have to use personal credit card and get reimbursed
• It provides the option to conserve company money for the 55-day interest free period
• Helps build credit history with the bank, although getting a line for a younger company is tough
• Features like virtual cards (with the ability to easily issue, set limits / controls) can be quite handy
• Some of the benefits like discounts productivity, enterprise software for the company
• On the other hand, company cards have lower loyalty points unlike personal credit card (can be offset with a cash back or rebate program)

ICP

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ICP prioritization table

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Understanding the Market

• Saudi has many established commercial banks like SNB, Al Rajhi, Riyad Bank, ANB, BSF; they offer business card propositions ranging from debit, pre-paid, charge, credit, purchasing cards
• Due to Islamic finance rules (and concerns around charging interest), credit cards are a late entrant to the market. Debit cards and pre-paid cards have been around longer, and are quite popular.
• New age Fintechs offering corporate credit cards and expense management tools are coming up (although most are in the PMF stage, unlike peers in markets like the US)

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Our product's 'right to win':

• Cross-sale opportunity to incumbent SME client base of 18-20k customers, especially clients with international ops
• Not every provider has the credit-card feature i.e., repaying only 5% of the money owed per month
• Better SEO compared to other providers; ranks first on Google searches across queries

What can we learn from other providers:

• Review pricing, try and be more competitive; lower APR / interest charges, better FX rate for x-border payments based on volumes, dispute fee charge only if unsuccessful
• Provide cash-back as an incentive, based on spend volumes and applicable interchange for the categories of spend
• No-one appears to have a virtual card proposition in the market! Is this an opportunity to pilot this for specific sectors and use-cases?
• Review benefits and ensure parity with other providers; features which appear to be lacking today for our product are extended warranty, purchase protection, concierge services, travel insurance
• In general websites and detailing is poor across providers. This could be an opportunity to further simplify and improve our online presence (website, content etc.) to double down on our SEO leadership
• Review spend controls and options, if relevant to customer base; some providers provide more nuanced options like limits by time of day, channel of sale, country of spend etc.
• Review appetite / need for further credit extension features; one provider offers a 12-m instalment payment on the back of card usage
• While expense management focused Fintechs don't have the balance sheet strength, incumbent customer base or brand visibility, they are very focused on;
• • Building a product that really works for small companies / startups (who may find the experience with banks tedious)
  • World-class UX with better data for monitoring / reconciliation / controls
  • High level of use-case focused features like one-off virtual cards with high customisability, innovative underwriting (e.g., monitoring funds in main bank account daily)
• Visa has a better market share in Saudi, does this mean there is better brand recall? Work with Mastercard to improve company's brand value in the business cards space

Market sizing

Saudi Arabia has c.1.2 million SMEs; 85.5% are micro, 13% are small, and 1.5% are medium

Micro; <10 employees, annual revenues < SAR 1m (USD 266k), 1.1m in total

Small; 10-49 employees, annual revenues - SAR 1-10m (USD 2.6m), 150k in total

Medium; 50-249 employees, annual revenues - SAR 10-200m (USD 5.3m), 20k in total

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Assumptions and Calculation

• Typical spend categories for SMEs are; Cogs (35%), payroll (25%), rental/mortgage (10%), marketing (5%), utilities / office supplies (5%), professional services (5%), travel & meals (5%), tech/software spend (5%), others (5%) - %'s allocated are broad assumptions based on online data
• Of this, card spend can apply to some % of cogs, marketing / advertising, tech/software spend, travel & meals, office supplies, utilities, professional services, one-off spends. Let's take it as 18% overall

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Avg. card spend per micro/small/medium enterprises - table below

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Total card spend and TAM (table below)

• • Revenue line-item 1: A baked-in interchange rate of 0.7% that card issuers make on all card spend
  • Revenue line-item 2: An additional 2.75% on all card-spend with Fx (assumed to be 3% of total)
  • Revenue line-item 3: Service including annual, issuance, pate payment, cash withdrawal etc. (assumed to be $100 for micro, $150 for small, $200 for medium enterprises)

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TAM = $608m

Total SAM; we assume that only 20% of micro, 30% of small and 40% of medium enterprises are credit / credit card worthy (given underwriting requirements)

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SAM = $162M

SOM = $32M (assuming we can obtain 20% market-share of SAM with our proposition and reach, especially in the small and medium enterprise segment)

While the SOM by itself might seem low, the 'business credit card' is one of several products that our bank offers to this client segment. Hence this product can either be an upsell/cross-sell to existing clients or a wedge product to bring in new-to-bank clients. This products becomes complementary to other products including bank accounts, deposits, payments, investments, lending, trade finance etc.).

Acquisition Channels

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Business credit cards are not unknown to the Saudi market, just relatively new when compared to the other card products (like prepaid, debit, charge etc.). Our product was launched last year, and is in early-scaling stage (assumed to have 50-100+ active customers).

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The acquisition channels have to be designed based on unique attributes at play

• Product is being sold by a bank, with an existing set of commercial banking products
• Bank already has c. 20k SME customers on its books (based on published data)
• Bank has a strong on-the-ground team of relationship managers and sales managers catering to this client base (which makes outbound a ripe and necessary channel by default)
• This client segment (SME) is typically relationship driven, and there is a fair level of dialogue needed before the product is understood, bought and used (unlike a PLG model in B2C or B2B)

Given above, below are the growth channels that that I'd like to focus on

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Outbound Sales

• Run detailed training sessions (with explainers, product demos) for Relationship Managers, Sales and Customer Service operators
• Prepare and provide sales & marketing collateral that frontline staff can share with prospects, including
• • Case studies (in English and Arabic) specific to sectors, use-cases
  • Marketing flyers clearing outlining benefits e.g., indicating benefits that startups could get from this proposition besides the core functionality e.g., discounts on co-working spaces, cloud / HR / payments software
  • Logos of peers / competitors using the product, alongside specific use-cases (e.g, real estate company using it for property spend such as furniture, utilities, paint)

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Events

• Run client webinars with prospective companies
• Sponsor industry events, panel discussions on related sectors / themes (e.g., B2B payments, eCommerce, working capital, international trade, digitisation)
• Hold joint events with government bodies (given focus on moving Saudi to a cashless society) and Mastercard (given their need to build brand recall in the market vis-a-vis Visa)

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External Partnerships

• Most SMEs work with external professionals e.g., accounting, audit, tax, legal
• Structure referral programs with accountants / firms who play an advisory role in finance related matters; incentives could be cross-referral of clients, joint industry events, invitation to bank client events

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Organic

• Continue SEO leadership and ensure relevant content on the web e.g., case studies, explainers, demonstrative workflows

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• (taking a leaf out of Fintech books) design improved & relatable UX for product website / landing pages with clear flows detailing product functionality, benefits, differentiation, onboarding, charges

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Client incentives

• Review competitor landscape to ensure parity with respect to benefits offered by our cards program
• Redesign pricing and financial incentives to attract clients and usage e.g., lower FX fee for higher volumes, cash-rebate on crossing a spend threshold etc.

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Partner Integration, Paid ads

• Not ideal at this stage of growth, will be more applicable in mature scaling

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The emphasis in the next 6-12 months is take the client numbers to multiple 100s, before we think about doubling down on the most effective growth channels.

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