Financial technology (fintech) is transforming traditional banking and bringing it closer to the likes and preferences of today’s digital-savvy youth and future generations.
Fintech across the Middle East is set to grow at an annual rate of 30% and expected to raise over $2 billion in venture capital funding by 2020.
Which areas of fintech in the region are faring well and who are some of the new arrivals or appointees on the scene aiming to disrupt finance as we know it?
Thriving fintech sectors
A new report by Indian fintech consulting firm The Digital Fifth, titled “Digital Evolution in the Middle East”, shows the growth of the region’s fintech sector has been largely driven by the payments segment: Online payments, bill payments, digital wallets, and money transfers.
The segment is represented by startups like NymCard from Lebanon, PayTabs from Saudi Arabia, and Vapulus from Egypt.
Digital lending is rapidly evolving on the back of a massive small and medium-sized enterprise (SME) funding gap of $240 billion, the report says.
Notable startups operating in the space include Beehive, Souqalmal.com, and Eureeca from the United Arab Emirates, as well as Liwwa from Jordan.
Sectors like insurtech and wealthtech are still nascent though are poised for strong growth, according to the report.
Data security, talent shortage, access to funding and rising international competition are top challenges facing fintech growth.
A Deloitte study released in June 2020 found that data security was amongst the top concerns for consumers when it comes to using fintech solutions, with 40% stating they were worried about the security of their personal data.
Fintech companies are facing rising competition from foreign firms entering the Middle East.
Earlier this year, three international fintech startups announced plans to expand to the region: Singapore-based wealthtech startup Kristal.AI, US-based payments startup Baton Systems, and Belgian blockchain startup SettleMint.
In the UAE, a booming e-commerce sector has grown at an annual rate of 33% and enjoys high adoption of mobile money which currently stands at 25%, the Indian report says.
Fintech growth in the UAE has been largely driven by strong government focus on fintech development, notably in free zones like the Dubai International Financial Center (DIFC) and the Abu Dhabi Global Market.
The UAE is also home to top accelerator programs such as DIFC Fintech Hive, and government-driven funding programs like the $100 million DIFC Fintech Fund have attracted their fair share of local and international talents.
The UAE currently hosts a third of all fintech startups in the Middle East, with payments and lending being its two biggest segments.
Fintech movers and shakers
tabby, the first ‘Buy Now Pay Later’ provider to operate in both Saudi Arabia and the UAE, announced that it has been permitted to operate in SAMA’s Regulatory Sandbox environment.
tabby provides shoppers with the flexibility to pay for their purchases in a single deferred payment, or in multiple interest-free installments through the use of any debit or credit card.
Abdulaziz Saja, KSA general manager of tabby, said, “tabby aims to democratize access to credit by providing shoppers with on-the-spot, flexible payment options. This will also help alleviate retailer pains in the current cash strapped environment and help boost their sales.”
Supporting 180+ merchants currently and growing fast, tabby extended its offering to 10,000 e-commerce merchants by partnering with KSA’s e-commerce platform, Salla.
tabby also joined Visa’s Fintech Fast Track program allowing to more easily leverage the global reach, capabilities and security that Visa offers and to partner on a number of initiatives including launching Visa-card products to tabby’s growing consumer base and accelerating cashless adoption with consumers across tabby’s key markets.
Nium, a global financial technology platform, recently announced its expansion into the Middle East, with the appointment of Ayoub Jemail as its new General Manager, Business Development for the region.
With nearly three decades of experience in the financial and technology space, Ayoub was most recently Regional Vice President of Sales and Business Development at Transpay, a company recently acquired by Mastercard.
“With the fintech market estimated to reach a value of $2.5bn across the broader MENA region, and the launch of 5G later this year to help boost Internet speed and usage, there is tremendous room for growth for what financial technology can do in this region,” Ayoub said
Nium currently operates its Send, Spend and Receive business in over 100 countries, 65 in real-time.
Bahrain grants UK Fintech Fasset a first-of-its-kind authorization to test blockchain-based solution for addressing the $15 trillion sustainable infrastructure funding gap by 2040, a figure estimated by the World Economic Forum.
Fasset is a provider of blockchain-powered platforms for the financing of sustainable infrastructure, has received authorization to test its solutions for the tokenization of hard assets in Bahrain’s FinTech Regulatory Sandbox.
The authorization, issued by the Central Bank of Bahrain, is the first of its kind in the world. The company has raised some $4.7 mn in pre-seed investment from strategic backers in the UAE, Saudi, Bahrain, Kuwait, and Singapore.
Fasset aims to address climate change acceleration through its two flagship products: Fasset Enterprise Platform (FEP) and Fasset Exchange (FEX).
Fasset aims to increase investor exposure to assets that were previously illiquid, inaccessible or had high barriers to entry. Simultaneously, asset owners can bypass costly middlemen to directly list their assets on an exchange, gain faster access to liquidity, and court a wider base of like-minded investors. FEP breaks down large assets into smaller “pieces” or tokens using blockchain technology. FEX is a platform where these tokens can be traded.