Why the regional fintech ecosystem is booming

Changing consumer needs and rapid technological development has given a massive impetus to financial technology (fintech), which has grown from strength to strength.

Since the first credit card launched with a magnetic strip in the 1960s, the intertwining of digital technology and finance to improve the offerings in the market, has seen constant innovation.

Furthermore, fintech’s adaptability across a slew of consumer sectors is propelling its widespread acceptability. Managing finances, trading shares, furnishing payments and shopping online (often on your smartphone) has never been more convenient.

The numbers add up: Ernst and Young’s Global FinTech Adoption Index 2019, surveying more than 27,000 consumers across 27 markets, revealed that China and India both hold an 87 per cent fintech adoption rate while the global fintech adoption rate in 2019 stood at 64 per cent.

Regionally, the MENA fintech market will reach a value of $2.5bn by 2022, according to research company MENA Research Partners.

INVESTOR ENGAGEMENT
Technological advancements have not only led to a notable increase in fintech startups, but have – understandably – led to substantial investor engagement as well.

Since 2015, $237m has been invested in MENA-based fintech startups across 181 deals, with 51 of those deals being made in 2019 alone, a report co-compiled by MAGNiTT and Abu Dhabi Global Market reveals.

Consumer demographics, internet and payments adoption, consumer attitudes, regulatory sandboxes, fintech funds and accelerators, and private capital availability remain key drivers of regional fintech adoption and startup growth, the report notes.

Regionally, the UAE stands out as the largest MENA hub for the industry, accounting for 46 per cent of all fintech startups. This growth has been backed by a tech-savvy consumer base, government support and programmes that underpin the startup ecosystem.

The Dubai International Financial Centre (DIFC) launched the $100m FinTech Fund in 2019 to accelerate the development of financial technology by investing in startups from incubation through to growth.

As part of the fund, DIFC invested in four fintech startups in June this year: FlexxPay – a cloud-based B2B employee benefits platform; Go Rise – a startup building a financial services platform for 250 million global migrants; NOW Money – a payroll services startup for Gulf-based companies; and Sarwa – a robo-advisory wealth management firm.

DIFC has registered over 100 fintech firms since the end of 2018, it announced in Q3 2019.

Outside the UAE, Riyad Bank in Saudi Arabia revealed a SAR100m ($26.7m) programme to invest in financial technology startups, while Bahrain launched its FinTech Bay in a bid to become the Gulf region’s centre for fintech, hosting co-working spaces and shared infrastructure for corporate innovation labs and startups.

Bahrain also offers a regulatory sandbox which allows fintech firms to experiment with new ideas and solutions.

The Covid-19 pandemic also highlighted its relevance at a time when people have been either unable to – or preferring to – avoid physical services. Some of the products that have seen the biggest increase in transactions include online banking and cryptocurrencies, according to experts.

Overall, greater investment, regulatory support and a digitised consumer base have inspired fintech startups to innovate and expand.

Looking ahead, the future of the regional fintech space looks bright.