Banker came up with automated escrow service after car purchase left him out of pocket
Generation Start-up: An online escrow service was a winning idea from a bad deal
When Ibrahim Kamalmaz bought a second hand car two years ago he had an unfortunate experience that inspired him to start a company to help protect other consumers from being victim to dishonest actions of the other party in a transaction.
Mr Kamalmaz purchased a Toyota SUV that had been modified and the seller told him that once he'd paid the Dh100,000 for the vehicle, he'd receive the original parts with him at home that were worth about Dh15,000. Those parts never arrived and the seller stopped answering his phone calls.
Instead of notifying the police, as there was no formal agreement between the two parties, he decided to get even in another way. He had heard from friends that such experiences were not uncommon and after doing some research online, he realised that there was enough evidence that such mishaps were frequent enough to merit finding a solution. Being a banker he had some expertise in financial transactions. So he went about developing an online escrow service that would prevent other people from being ripped-off like he had been.
"From that point I began to think that there should be some sort of way to secure your interests, that I can pay a certain amount of money for someone to hold it," Mr Kamalmaz recalled.
"I then started reading stories on the internet of people being scammed or entering into financial transactions that weren't clearly discussed. So from there was born the idea to create an escrow service."
An escrow service is usually associated with trust funds in the popular imagination. Money is usually kept securely by a custodian, typically a bank or a lawyer, for distribution to inheritors of a recently deceased tycoon. However, it is not just individuals who use escrow services. Firms also use such services when conducting deals, typically through a law firm. Corporate escrow services typically cost about US$10,000 in fees.
By chance he met a senior executive from the Abu Dhabi Global Market (ADGM), the emirate's nascent financial centre, and pitched him the idea to create an automated escrow service.
Mr Kamalmaz got more than he bargained for. The executive was impressed by his idea and urged him to submit his proposal for a start-up programme at the Abu Dhabi Global Market. Titanium Escrow was among five local and international financial technology start-up companies chosen for mentorship by ADGM as part of a programme to help them get off the ground. Those companies – which also include Now Money, CapitaWorld, Rubique and Finalytix – were selected from 11 applicants for its Reglab programme.
ADGM will take them through the testing phase and on to implementation.
Mr Kamalmaz says that while there isn't any funding involved, ADGM gives him invaluable support in terms of fostering new connections for developing the platform, or making new contacts at banks or whoever is in a position to make his business flourish.
"That was a really big step for me," he said. "It was a good development. They don't give you money but they give you a license, which is great because nobody has a license for this because it's a new idea. And they give you mentorship. So if I need a connection with a developer or a bank, they will connect me with whoever I need to be connected to. "
To boot, he notes, the ADGM uses English common law, an internationally accepted standard, that gives his business more appeal in the cases of any disputes that may arise.
Mr Kamalmaz's business is still in the development stage as his entry into the Reglab mentoring programme was only in May, but he plans to go live in September. It's too early, he says, to start thinking of financing and for the time being he's keeping his day job in a financial services firm, as much of the website development work is being outsourced.
In the meantime, before the service goes live, he says he is figuring out pricing for his escrow service for car sales and is considering a fee of between Dh100 and Dh200 per transaction. Some 300,000 cars change hands in the UAE each year and he is targeting 10 per cent market share or 30,000 cars. At a rate of Dh100 a car, the business is a Dh3 million revenue a year opportunity.
And that is just the beginning for the entrepreneur who has a far broader vision than just cars or simply doing business in the UAE. During his career at a number big UAE banks, he saw first hand how firms need escrow services to ensure work by contractors is completed such as in construction.
Mr Kamalmaz says he is planning to offer his services to corporations too but perhaps through a different brand than the one he is aiming at individuals who want to buy and sell things like cars and boats.
Mr Kamalmaz, who grew up in the United States and earned a degree in economics from George Mason University, says he has already run his idea for corporate escrow services by two lawyers and has received encouraging responses from them.
That is not much of a surprise as many financial services that can be automated are now increasingly going online.
The trend towards digitalisation, which includes the use of the Blockchain – a technology that secures digital transfers of data and transactions – in finance and cryptocurrencies such as Bitcoin, is revolutionising financial services.
Such digital innovations have the potential to upend traditional business models such as middlemen in finance that take fees for transfer of funds, or in asset management where computers instead of humans are making investment decisions more and more, forcing banks and other financial services to embrace changes and do their best to stay competitive.
That is a boon for companies like Titanium Escrow that are innovating and disrupting existing models.
Mr Kamalmaz also sees a positive impact from his business idea on the overall economy of the UAE as it could give a boost to small and medium sized enterprises. Many SMEs in recent years have gone bust because they haven't been paid on time for services rendered and such small businesses which do not have big reserves of cash are often reliant on timely payment for services rendered to pay their staff or replenish stocks if they are selling a product.
"If I'm a small business and say selling fuel to an airline and they say take 120 days to pay me back... I'm sitting for four months waiting to get paid to buy more inventory and sell again," he explains. "And this is why it really hurts the economy because the small guy suffers. And what are they going to do? They can't take the airline to court because they haven't been paid quick enough. If they were to use an escrow service, that wouldn't happen."
Ibrahim Kamalmaz, the founder of fintech company Titanium Escrow, reveals how his experience has inspired him to do more.
Who first invested in you?
Titanium Escrow's initial capital came from its founders. We welcome discussions with interested investors and additional funding will be sought in early 2018.
Which successful start-up do you wish you had launch?
What is your next big dream?
To cut transaction cost/risk across all parts of the business spectrum
What skills did you learn with your start-up?
Interbank payment systems, compliance, and money laundering regulation.