The Mena region is home to over 800 fintech startups valued at over $15.5 billion. Despite this fair evaluation, the sector is nascent, as companies started operations only in 2015. But the region’s growth opportunities are humongous, as financial institutions have yet to reach a large portion of the population.
A study states that 136 million people, who constitute 67% of the adult population, in the region are unbanked or underbanked. But the positive sign is that 60% of that population is aged under 30, who are willing to adapt to new technologies. People here are tech-savvy and ready for change, as seen in the UAE, where 50% of the population has digital wallets.
Also, countries in the region, like the UAE, Bahrain, Egypt, and Saudi Arabia, have fostered policy changes to help fintech companies set up a base and grow. These countries have created exclusive zones, like UAE’s Digital International Financial Centre (DIFC).
They are also offering policy sandboxes, like the Innovation Testing Licence (ITL) of DIFC, Egypt’s Fintech Sandbox, and SAMA’s Regulatory Sandbox, which provide opportunities to smoothen operations for local and international companies. Also, Saudi Arabia, UAE, and Bahrain are leading the way in formulating regulations to make cryptocurrencies acceptable.
How Fintech Is Leading To Transformation Across The MENA SME Segment
Not surprisingly, the venture capital scene is picking up in the region, with a valuation of startups reaching $819 million in the first half of 2022, double the previous record and 14 times as compared to 2016. Investments in cryptos have also shot up, reaching $187 million, which again is double the earlier record.
Of fintech startups, payment platforms have received the highest funding at $1.9 billion since 2016, followed by crypto and mortgages and lending, getting $0.4 billion each. The other sector that is showing rapid growth is payment solutions for small and medium businesses. Foodics and Paymob, which have solutions for these enterprises, have received the highest funding this year.
Over the last two years, the “buy now pay later” (BNPL) segment has been the hot favorite of venture capitalists, who have put in $500 million. Tabby has received $150 million, and Tamara, which is based in Riyadh, has $110 million. A survey done by Checkout.com justifies this interest as BNPL is becoming the most favored payment method in the region. So much so that BNPL penetration at 24% in the region is higher than that of Europe, which stands at 23%. Not just B2C, BNPL is moving to B2B too, and Riyadh-based Lamaa, which focuses on the segment, received $5.5 million.
The region thrives on migrant labor and economy, and remittances from these countries have been traditionally high. Migrant laborers, who are unschooled in modern banking methods, sent $78 billion to their home countries like India, Sri Lanka, the Philippines, and Bangladesh. Hubpay, which has developed a platform for these laborers, recently received $20 million in Serie A funding.
Open banking solutions are too leading the fintech revolution here. Tarabut Gateway, Dapi, Lean Technologies, Spire Tech, Fintech Galaxy, Underlie, and Bankable API have been some of the leading players. The countries are also making policy decisions on open banking. While Bahrain has led the way, the others, like Saudi Arabia, UAE, and Egypt, are following suit.
The region is emerging as the cryptocurrency hub, with Dubai at the center of it. Top crypto exchanges like Binance, Crypto.com, and Bybit have all set up offices here, while Bybit has moved its headquarters to Dubai.
The conclusion is that the region is ripe for revolution, and countries here are progressing in the right direction to achieve fintech goals.