This article was co-authored by thought leader Gaurav Sachddeva.
The Middle East and North Africa (MENA) region is undergoing a payment revolution that positions it as a rising star in the global fintech arena. Driven by a young, tech-savvy population and rocketing internet and smartphone penetration, the region is undergoing
a transformation fueled by regulatory innovation, technological advancements, and evolving consumer demands.
Akurateco, a global payment software provider with a strong presence in the MENA region, partnered with fintech thought leader Gaurav Sachddeva to dive into the trends and challenges that produced by the MENA phenomenon. Sachddeva, co-chair of the MENA Fintech
Association, co-founder and CEO of The Founders Majlis, and former head of Acceptance and Gateway Solutions at Mastercard MENA East, shared his insights on the dynamics defining this exciting market.
Digital payments and MENA transforming
The pandemic has significantly contributed to the development of cashless transactions in the MENA region. For payment service providers (PSPs) and fintech companies, this is a great opportunity to make a name for themselves and introduce innovations to
eager users.
The MENA digital payments market is experiencing instantaneous growth, driven by the massive shift to cashless transactions accelerated by the pandemic. Demand for convenient, secure, and innovative solutions is growing exponentially.
According to McKinsey, fintech revenues in the MENA region will grow from $1.5 billion in 2022 to $4.5 billion by 2025. In Saudi Arabia, e-commerce experienced a remarkable 60% growth in 2020, and according to the Boston Consulting Group, it is projected
to reach SR50 billion by 2025.
The region’s governments and regulators are playing a key role in this growth. For example, Saudi Arabia has a Vision 2030 program aimed at increasing cashless payments to 70% by 2025. It speaks of both ambition and the ability to act. The UAE has an equivalent, Smart Dubai, which stimulates the digital payments ecosystem and encourages the expansion of e-commerce.
The younger generation of MENA is extremely interested in the development of alternative payment methods, in particular buy now pay later (BNPL). Companies like Tabby and Tamara are actively using this to achieve success, developing flexible payment options
adapted to advanced users.
Thus, the region as jointly created the healthiest and most stimulating environment for the development of PSPs and fintech startups that use best practices and local features for optimal results. This also gives a good start to declare themselves in the
international market.
Regulatory innovation drives growth
Regulators in MENA are actively promoting effective execution rather than just policy making. This is particularly evident in developing and implementing modern frameworks that encourage innovation and open new business opportunities.
For example, the Saudi Arabian Monetary Authority (SAMA) has introduced regulations governing open banking in Saudi Arabia. Such progressive initiatives encourage collaboration between banks and fintech, creating a healthy ecosystem where innovation can
flourish without constraints. For example, open APIs allow fintech to give customers access to more personalised financial services and banks to diversify their offerings.
The United Arab Emirates is also undergoing rapid change. The country is implementing new regulations for digital assets and open banking, indicating a willingness to integrate advanced technologies such as blockchain and artificial intelligence into its
processes. Initiatives such as these support the development of the fintech ecosystem, attracting investment, and contributing to increased economic growth.
Judiciary base
The Gulf Cooperation Council (GCC) has set the tone in the region, setting examples for others to follow. However, North African countries like Egypt and Morocco are slowly moving toward a modern regulatory framework, implementing laws promoting fintech
and digital solutions, although the pace of reform has lagged.
Egypt passed
Law No. 194 on the Central Bank and the Banking System in 2020, which created a comprehensive legal framework for the development of financial technologies, including the introduction of digital payments and e-wallets. The law also allows the Central Bank
of Egypt to issue licenses to fintech companies, which encourages innovation.
In Morocco, the central bank (Bank Al-Maghrib) is actively working to regulate the fintech sector, particularly in the field of e-money and mobile payments.
Law No. 103-12 on credit institutions and similar organisations provides for the licensing and supervision of fintech companies, ensuring the security of transactions.
The MENA region is gradually becoming a hub for tech growth thanks to such regulatory innovations. And the stable legal framework and regulatory flexibility create a favorable environment for both startups and large companies.
The AI revolution in traditional banking
Thanks to AI integration, traditional banking in MENA is gradually shifting from reactive to proactive. AI-powered tools enable banks to personalise customer experiences and offer tailored products based on behavioral insights. However, Sachddeva points
out that achieving the "aha" moment in banking remains a work in progress.
Fraud remains a concern, particularly in markets with low credit card penetration. Payroll card users often hesitate to embrace online transactions due to security fears. Financial institutions are combating this with robust fraud prevention systems and
consumer education, but overcoming trust barriers remains challenging.
How are emerging trends changing payments?
Digital transformation trends are becoming more and more visible and defined as the payment landscape evolves. They directly result from the connection between user desires and changes in government regulation and technological advances. Here's what is driving
the evolution:
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Millennial-focused market: Tech-savvy consumers demand a seamless payment experience across all devices. With them, QR code-based payments at restaurants and BNPL services are gaining popularity.
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Growing alternative payment methods (APMs): Digital wallets like Apple Pay and local solutions like ANI in the UAE are transforming checkout. This makes the checkout process easier and more responsive to modern demands.
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Super apps and neobanks: Telco-led initiatives like STC Pay and banks like Neo in Mashreq are leading the growth of the all-in-one financial platform.
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Blockchain innovation: regulatory frameworks in markets like the UAE make cross-border payments faster and more cost-effective.
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Open banking: collaboration between traditional banks and fintechs causes innovations in services, e.g. in Saudi Arabia and the UAE.
These trends highlight the region’s ability and desire to adapt to global payment innovations. They also indicate it intends to become a key player in the worldwide fintech landscape. As a result, everyone benefits because businesses and users will benefit
from more efficient, secure, and personalised payment solutions, paving the way for sustainable growth in the coming years.
The role of technology in MENA's fintech growth
Technology underpins the region's fintech revolution. AI and machine learning enhance fraud detection, while blockchain simplifies cross-border payments. Multi-cloud adoption addresses regional cloud preferences, reducing costs and implementation time.
Unified orchestration platforms are also gaining traction. Gaurav Sachddeva notes, "Merchants are looking for a single API solution that seamlessly connects them to all acquiring banks and local payment methods." These platforms provide scalability and facilitate
market entry, both locally and globally.
The path forward
The MENA payments ecosystem is now on the cusp of a revolution, and it has been a long journey with many decisions to make. Regulatory forecasts, evolving consumer demands, and a surge in technological innovation have helped bring this leap closer. Another
critical clarification is the desire for collaboration between banks, fintechs, and regulators.
This rapid evolution opens up huge opportunities for innovation and expansion, creating a head start for companies looking to become leaders in this market. Whether it’s AI-powered personalisation, blockchain-powered cross-border transactions, or the rise
of alternative payment methods, the growth potential of the MENA payments ecosystem is impressive.
The opportunity to thrive in this dynamic market has never been more significant for both emerging and established players. Companies that embrace collaboration, invest in technology and align with the region’s regulatory vision are not just poised to capitalise
on a market that is shaping the future of global payments but also ensure the security and stability of their investments in the MENA payments ecosystem.