Fintech occupies a large part of our lives nowadays, having become integrated into the smallest financial details and perhaps showing signs it aims to replace the role of traditional banking.
But even though this sector is still nascent, the MENA region is poised for significant growth with the emergence of fintech companies and digital banks.
Growth of digital services
According to the Chairman of the Board of Directors of the Arab Monetary Fund, the volume of digital services worldwide exceeded $8 trillion in 2021, with estimates that this number will exceed $10 trillion by 2027.
Asad Ahmed, General Manager and Head of Financial Services in the Middle East at Alvarez and Marsal, expects the sector to reach a record $3.45 billion in 2026.
This growth comes following fintech companies’ ability to attract digital natives who can use these services to fit their lifestyles in the GCC.
Last year, millions of new customers adopted digital services especially following the Covid-19 crisis which drove conventional banks to cooperate with fintech to accelerate digital payments.
The figures indicate that the rate of adoption of digital payments by customers in the Middle East and North Africa is at an impressive 53 percent.
While the rate of digital remittances amounted to 41 percent, according to data from Readsair2.
The approval rate in the categories of payments and remittances is high, exceeding 40 and nearing 50 percent.
Saudi Arabia and the UAE
This demand prompted a large number of international companies, including in the Arab and Gulf region, to develop digital payment solutions. This ranges from mobile applications to online banking and digital card issuances.
As for companies specializing particularly in fintech, their numbers have increased dramatically, especially in Saudi and the UAE.
in Saudi, fintech companies increased by 37% in 2021, while the volume of investments in the sector exceeded 1.3 billion riyals in the same year.
The Kingdom, the largest financial market in the region, is leveraging fintech to prepare for the launch of open banking services in H1 2022, where financial technology companies can thrive.
As for the UAE, the market value is expected to reach a record $2.5 billion by 2022 and currently hosts 46 percent of Fintech startups in the MENA.
The most prominent categories
Youth is the dominant segment taking a prominent position in the fintech field.
Since Saudi is the largest market in the GCC, with 70 percent of the population under the age of 30, it explains the emergence of this category in the establishment of fintech companies.
In the UAE, the situation is similar, with youth being the primary driving force in the trend towards technological innovation.
However, this sector is no longer limited to ambitious youth, but rather attracts stakeholders in traditional banks.
Finance professionals venture into this sector driven by the high rewards and low risks involved compared to those of traditional banks in areas such as credit, market risk, or insurance underwriting.
Egypt’s share
Fintech is seeing an expansion among Egypt’s youth, as well.
A recent report issued by the “Fintech Egypt” initiative of the Central Bank of Egypt indicated that the ages of the founders of these companies in Egypt up to 2021 ranged from 25 to 35 years, or more than 50 percent of the population by ratio.
In terms of the most in-demand skills, technology and software topped the list with 75 percent, followed by business development and product management at 55 percent, and sales and customer support at 40 percent.
The report indicated that fintech startups have a tendency to expand into foreign markets. Twenty-four of the companies surveyed have expanded in this field at the regional and international levels. These companies have a significant presence in the MENA, the GCC, and Europe.
The report showed that the most prevalent sectors in the field of financial technology in terms of the number of startups are the payment and remittance sectors with 30 percent of 122 companies in total, followed by lending and financing at 13 percent, while the other sectors vary relatively equally.
