How Dubai's Direct Debit is shaking up the system to save consumers from bulk payments

Ummair Butt is an entrepreneur who is willing to challenge the norm, shake up the age-old system and he is not afraid to fail. Conviction and persistence have defined the entrepreneurial journey of Mr Butt, who was only days away from leaving the UAE after his first business venture failed almost a decade and a half ago. Fast forward to the present day, Mr Butt is the founder and chief executive of Direct Debit System, a start-up pushing to ease the burden of bulk payments on consumers in the UAE. The venture is a paper-free UAE Pass identity-verified system made available to merchants, landlords, schools and other businesses that need to collect recurring payments. The start-up provides an all-in-one monthly solution and it is a direct result of challenges Mr Butt faced when he had to budget as a salaried parent in the UAE. After the failure of his insurance aggregator business back in 2010, he took a full-time job and with two school-age children, he had to write three cheques for the school and four for the rented apartment. The post-dated payments took the biggest toll on his finances, especially in September, as large amounts were drained from his account to cover school fees, books and other expenses. This was closely followed by the rent payment, which forced the seasoned finance executive to rely on his credit cards for living expenses. “I thought if me being an accountant can't control this sort of upheaval, it must be a problem for everybody else as well,” he says. The 48-year-old Briton, originally from Pakistan, found himself trapped in this vicious cycle of post-dated cheques and credit card payments. However, in 2012, the Central Bank of the UAE introduced a direct debit system, offering him a glimmer of hope. “I was very happy because at that time, I was a monthly salaried person. Had a little bit of debt from the failed business and I had two school-going kids,” he says, The direct debit option was the answer to the "huge imbalance” he faced, driven by the bulk payments he had to make. Direct Debit is a simple, secure and automated payment system, which allows merchants, be it a business or an organisation, to directly pull recurring payments from a customer’s bank account with authorisation. Utility bills, monthly subscriptions, rent and school fees are among the common expenses that can be channelled through the direct debit system, which also eliminates the risk of missed payments. The paperless process not only reduces the burden of bulk payments for payers, it also helps in improving cash flow for business and cuts administrative costs. Mr Butt, who studied accounting in the UK, had seen the transition of the British financial system, which has resulted in 97 per cent of the UK population using direct debit today. In the early 2000s, he volunteered to become a part of consultative committees of Bankers' Automated Clearing System (Bacs) UK, the regulator of direct debits, to help build the platform that made cheques largely a thing of the past. “It was a system which was bank-agnostic. A system which was sitting above the banks and now the new generation in the UK doesn't even know what a cheque is,” he says. Last year, Bacs' total transaction volume for payments reached 6.78 billion, out of which 4.83 billion were direct debit transfers, according to data by Pay.UK, the operator of Britain’s retail payments system. The global recurring payment market is expected to grow from $138 billion last year to more than $225 billion by 2030, driven by the shift of businesses towards recurring revenue models and increasing digitisation, according to data by market research firm Coherent Market Insights. The shift towards subscription and recurring billing will be further accelerated as consumers prefer the convenience of automated payments, it said in its report in December. Mr Butt says his experience in the UK is what inspired him to apply a similar approach in the UAE. The aim was to save people from the vicious cycle of dipping in and out of debts driven largely by bulk payments. To free up cash resources, Mr Butt moved to a cheaper apartment in Ajman and started investing half of his monthly salary into the development of a new direct debit system for the UAE. He switched to the task full time in September 2017 after resigning from his job and launched Direct Debit System. However, it took him several years to iron out the wrinkles, such as receivables involving more than one bank and battling paper-based latent processes. Mr Butt approached the UAE Central Bank and after three years of further collaboration and development, the system was allowed to act as an aggregator of direct debit for the Central Bank and was granted necessary approvals to become a licensed entity. The company was granted a no-objection certificate in September 2022 to access the central bank’s systems, he says. After another year of rigorous testing, the company took on its first client in September. It currently has 18 merchants on board offering customers direct debit facilities and Mr Butt expects the number to climb to 150 by the end of this year. “The system is running really well at the moment [but] our number of transactions is still low. But with direct debit, adoption is always slow,” he says. Data indicates that currently 70 to 75 per cent of the company’s customers are westerners, as they are quite familiar with direct debit facilities in their home countries. “They're really jumping on ... and at the moment we have the highest number of sponsored merchants than any of the banks [individually]. Banks had 14 years to get there and we got there in four months." The start-up expects to sign up some "big-name merchants" soon and is this year targeting between 100,000 and 250,000 transactions a month. This would give the company the momentum to enter a new phase of growth in the next two years “to properly finish this cheque business and expensive credit card business from the country”, he says. The start-up charges its affiliated merchants fees but the service is free for individual customers who use the platform to make monthly payments. The company is not profitable yet and won’t be in the green by the end of this year, but it would “certainly be profitable by the middle of next year”, Mr Butt says. Direct Debit is also looking into other regions and territories. It has already established a UK subsidiary and plans to expand into Saudi Arabia. The company is already engaged in negotiations with the market regulator in the kingdom and aims to establish a presence in the biggest Arab economy by the end of this year. Pakistan, India, Malaysia, Indonesia, the US, and Central Asian countries are also on Mr Butt’s list of target markets. To meet the expansion goals, the company requires financing and it is looking to bring more strategic investors on board. “It's a big task to expand into these countries,” and the company would only select investors that are “right for us”, he says. “Raising money is not enough, we need an investor who is ideally somewhat related to our field and also could help us with regulators,” he says, without divulging how much money the company plans to raise in the next round of financing. I don’t have a single role model. But I do have a criterion and whoever meets that does become my look-up-to or go-to person; and that criterion is the scale of achievements in the business life. Insurance industry veteran Bassam Chilmeran, serial entrepreneur Elaine Jones and National Bank of Fujairah chief executive Vince Cook are among the picks for role models for me who I look up to or go to for guidance whenever I need it. Training yourself to deal with the fact that the higher you aim the bigger the challenge will be. Persistence is the key if you are attempting to succeed. Everyone should know that success is not something that comes by easily. It is not possible to be cautious if you are attempting to change a system that is so ingrained in our lives that it seems almost impossible to alter. We are up against the age-old system of cheques and people love that system because they have been writing cheques all their lives. We are also attempting to remove percentages paid on credit card payments, which is bound to upset some people. I simply cannot take on such challenges without being absolutely ready to take risks, no matter what the magnitude is. I always wanted to democratise top-class education through a technology platform. I yearn to provide an opportunity for students that could never afford the quality that the world’s greatest minds have to offer. My vision is to create a space where professors from Harvard and Oxford connect with millions of students from around the globe for a fixed fee of $1. For a dollar, any student from any background or country can get access to the latest cutting-edge technology and acquire new skill sets taught by the top minds from across the globe. I have the usual wish list of an ambitious entrepreneur: building the company to scale, make Direct Debit a top-class marketplace powered by the most advanced technology, lead the company to initial public offering stage and expand into at least 15 new markets in the region and beyond. I might play a different hand in a parallel universe. It would be interesting to see how DDS would turn out. In this realm, however, it was a pretty good approach and I believe I have made the best of what was available given the circumstances. People are complex. It is a huge mistake to see them or talk to them from your vantage point. No one cares about what you think; what truly matters is what others think. This was the best lesson I learnt from launching DDS. Just as a good hire pays dividends, a bad one takes away at least five other people’s progress. Do the right hiring as there is no way around it. Referencing candidates is never enough; see them work for a few hours with your team, look for subtle signs of weakness or toxicity. Take action immediately if you spot the office environment becoming toxic in any way.

How Dubai's Direct Debit is shaking up the system to save consumers from bulk payments

Generation Start-up: The UAE Pass identity-verified platform supports individuals and businesses for the collection of recurring payments