The Middle East and North Africa (Mena) is set to experience a boom in fintech innovation over the next three years, propelled by a large unbanked population, VC inflows and the rapid emergence of a host of new startups, according to a state of the nation report prepared by local payment services outfit Payfort and entrepreneurial platform Wamda.
According to the report, the number of startups in Mena’s Fintech ecosystem doubled from 46 to 105 over the three years 2013 to 2015 and the region could see a total of 250 fintech startups launch by the year 2020.
Omar Soudodi, managing director of Payfort points to four main drivers for the nascent fintech scene: “SME lending stands at half of the global average; the volume of ecommerce is set to quadruple over five years; one-in-two bank customers are open to new digital services; and, finally, a staggering 86% of adults in the region don’t have a bank account. There is no doubt that the region’s fintech sector is going to continue to accelerate.”
Fintech startups have sprung up in 12 Arab countries, yet three-in-four are based in Egypt, Jordan, Lebanon or the United Arab Emirates, with the latter accounting for half of these. Collectively, these emerging technology firms already employ around 1,600 people.
Payments is the most developed of the sectors, with startups offering bill payment, electronic wallets, mobile and online payment solutions, including integrated payment services platforms.
Limited access to capital has so far constrained growth, with just $100 million invested in the sector over the past decade. But this is set to change over the coming years as regional government's and regulators smooth the path for inward investment. The report forecasts that some $50 million will be invested in the local fintech space during 2017 alone.
“We’re seeing the drafting of a wide range of reforms and new regulations, around the region, at a government and financial regulatory level, indicating that policy makers are now better informed and have a clearer vision for innovation and what drives innovation,” says Soudodi. “We’re also seeing more talented people choose entrepreneurship over corporate employment and more professionals from the financial sector identifying fintech opportunities.”