The State of Fintech in MENA

Lynn Bizri, Mar 27 2017

Fintech has become one of the hottest topics in the startup scene and is one that will continue to dominate in 2017, with over 1000 fintech companies worldwide disrupting and transforming the world of finance. In the past 7 years, consumers have become more and more accepting of alternative channels of payment, banking, lending, fundraising, etc., and the fintech ecosystem has also proved transformative for both the local economy and SMEs, nurturing technological innovation, improving customer experience and enabling growth opportunities for many sectors including software, data analytics, payments, platforms, mobile banking and algorithmic asset management systems.

Fintech’s growth can clearly be seen in the massive rise in investment, with around $50B invested globally since 2010, and $5.3B invested in the first quarter of 2016 alone, according to a fintech report by Accenture. With global investment predicted to reach $8B in 2018, and several fintech IPOs commanding multi-billion dollar valuations in the past year, the fintech sector is prime to reach the next level of maturity and move into the mainstream.

The State of Fintech in MENA

The MENA region has accounted for the smallest proportion of global fintech funding over the years (around 1%), however it has also experienced the most explosive growth, according to research conducted by BCG. Crucial elements needed to support the development of the ecosystem (such as business environment/access to markets, government/regulatory support, access to capital and financial expertise) all exist, and as investment into the region steadily increases, fintech has begun to build momentum. ‘We are witnessing growing innovation throughout the Middle East, and that is reflected in the gradual development of the fintech sector across the region’, says Godrey Sullivan, Partner & Managing Director of BCG Middle East.

Today, there are more than 50 fintech startups in MENA, according to research conducted by ArabNet, yet 72% of all fintech startups hail from four main fintech hubs – the UAE, Lebanon, Jordan and Egypt. Among those, the UAE takes a clear lead, hosting as many fintech startups as Lebanon and Jordan combined, exhibiting the lowest failure rate (13%) and having the highest share of frontier tech startups such as money transfer, wealth management, insurance and cryptocurrency. Yet among the seven emirates, it is Abu Dhabi that is leading the charts, having recently launched a Regulatory Laboratory (RegLab) that allows participants to develop and test their fintech propositions in a safe environment with lighter regulations.

RegLab is just one of many types of programs that are supporting and nurturing the creation and growth of regional fintech enterprises. Fintech accelerators, which are new to MENA, popped up across the region last year and currently include the  regional accelerator Fintech Factory, Fintech Hive (UAE), 1864 (Egypt), and AUC’s Venture Lab Fintech Accelerator (Egypt).

Fintech Hive, DIFC and Accenture’s new fintech accelerator program, is the latest accelerator to enter the market and aims to identify the best entrepreneurs within the financial services industry, and offer them the opportunity to test and modify fintech innovations, as well as access feedback from potential customers and funders. The program will start accepting applications for interested companies towards the end of March, with between 12 and 15 companies due to be selected by July. Emirates NBD, Mashreq, Visa International and HSBC will be the first local and international participants in the accelerator program.

The 1864 Accelerator was launched by Barclays Bank and Flat6Labs last year and is one of two local fintech-focused startup accelerator programs in Egypt. The 14 weeks accelerator seeks to foster the fintech innovation space in Egypt by enabling entrepreneurs to transform their disruptive ideas into commercially viable solutions. In the accelerator’s first cycle, which ended in December, 16 startups were chosen from over 200 applicants for a 5 day bootcamp, after which 8 finalists were selected to receive training, mentoring, office space, technical support, legal consultation and E£150,000 in seed funding in exchange for 10-15% equity. The 8 graduating startups included Bees365, Card Switch, Save.it, Olly, Yalla Nsadar, Carsurance, Entej and Moneyfellows.

In July, the American University of Cairo and Commercial Bank partnered to create AUC Venture Lab Fintech Accelerator, powered by CIB. The new specialized program aims to develop and support fintech startups in Egypt in areas such as digital and mobile payments, peer-to-peer lending, customer interface, personal financial planning, retail trading and investing and remittances. Through a 12-week acceleration program, fintech startups will receive specialized support to grow and launch their businesses, gain valuable insights from some of the smartest minds in the startup and fintech world and increase their impact on the Egyptian economy. Startups will be selected through a rigorous process based on the novelty of the idea, team’s track record and cohesion, scalability and potential for commercialization as well as the team’s tenacity and commitment to success.

Last March, PayFort, the online payments engine, announced the launch of its fintech accelerator Fintech Factory at Wamda’s 2016 Mix N’ Mentor event in Cairo. The accelerator was launched in order for PayFort to continue meeting the demands of their merchants and innovating faster by investing and collaborating with fintech startups. To be eligible for the accelerator, startups need to be in fintech and relevant to PayFort’s merchant base. In return, startups can receive up to $100,000 during the first phase; with the opportunity to possible receive additional funds through Fintech Factory’s investment partners at later stages. The fintech accelerator plans to invest in and enable 4-5 fintech startups a year.  

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