Mala’a Joined Fintech Accelerator, Here is Why It Matters
In hopes for legal remedies to combat the “spaghetti” model
It is been a long, and bumpy road. Filled with ups and downs, just like any other startup. Nothing new of course, I have had my fair share of startuping in the past. However, this time, its a bit different.
Being a startup means lots of experimentation, pivoting, and doing your best to not fall for entrepreneur’s bias. Those issues range from the targeted segment, is your product fit for them or not (P/M fit), have you tested your ideas before spending lots of resources on them? etc. then your startup happens to be in a heavily regulated industry, which makes you face a new set of problems or to put it more clearly, barriers. Lots of barriers, the kind that forces talented individuals to not get into it in the first place.
Don’t get me wrong, regulation is good, it gives stability and clarity to all players in the value chain. However, it doesn’t allow for much change. It keeps things mundane and normal, where its up to the regulator to either leave things normal or drive change.
Navigating The Regulatory Landscape
“Navigating the regulatory landscape” is a fancy sentence we use on regular basis but what we mean is how can we launch a product without requiring a license which obtaining it is nearly impossible because it does not exist yet.
Now, going straight up to a regulatory body in a heavily regulated industry and ask for an exception won’t get you anywhere. Not that we didn’t try that already — worth the shot :)
So what do we do? we have 2 options: wait for the regulator to regulate your activity (no one is sure about the timeline) and the other option is basically researching and understanding everything related to your activity, how its regulated, how many entities regulate it and figure out how to proceed without crossing the legal framework.
There are 4 levels of data types or categories in Saudi Arabia, each level represents the security level and how to manage it. Level one is non-sesntive data that are not subject to any regulation or restrictions, level 2 is sensitive and private data, level 3 — the problem is with this level— which is:
Any customer content from private sector-regulated industries, subject to Level 3 categorization under sector-specific rules or regulatory decision; and sensitive customer content from public authorities.
which has a strict restrictions to protect individual privacy. Finally, level 4 is highly sensitive data relevant to governmental agencies (doesn’t concern 99% of startups.).
The Current Milestone & What’s Next
A bit of background here: Mala’a is a mobile application that helps users track their expenses automatically through registering with “Mala’a service” in their respective bank. Mala’a is a data driven product that utilizes advanced analytics and machine learning for transaction categorization, to provide insights and recommendations based on the user’s spending behavior.
Now for Mala’a, the hard work is done. Development has been completed, gained a thousand plus test users (sorry if you registered and haven’t tested yet) connected with 4 banks — and counting. We are also in later stages with one of the banks to commercialize. Commercializing is the tricky part, of course. Beta testing is fine, monetizing however is a different story.
Monetizing is difficult without the regulator’s blessing, even if you have managed to skip the licensing and/or sandbox stage. That leaves us with two options to move forward: we can reach an agreement with the regulator, or operate in the grey area. However, #FintechAccelerator was announced. which gives us hope for a third — and a better option.
What We Hope For In The Next Three Months
#FintechAccelerator is the most recent initiative from Fintech Saudi in conjunction with Flat6Labs a well-known regional startup accelerator. Fintech Saudi is the fintech arm of SAMA, and with them on our side, we believe we can reach our goal faster, and avoid operating in grey areas — although it’s normal for startups that tries to make a big change.
I am planning to publish a document (in the coming few days) that was developed during the back & forth conversations with the regulator:
How SAMA regulations affect Mala’a operations — a review of all related financial regulations and how Mala’a can operate within them.
which will show how Mala’a reached the current milestone in hopes it might help someone out there who plans to start a company, but faces the hurdles of regulations and he/she must delay their ideas until a clear path emerges. You might ask why, to put it simply: For the good of us all.
Thanks for reading.
