Mena's nascent fintech market to grow by $125m a year
The Middle East and North Africa region’s financial technology market, where the number of start-ups is expected to top 250 by 2020, will grow by up to $125 million a year to reach $2.5 billion in 2022, according to forecasts.
However, despite significant advances in the fintech sector worldwide, the region’s fintech industry is still in the early stages, attracting less than 5 per cent of global investments in 2017.
“Global investments in fintech were about $31bn in 2017 and two thirds of it went to the US, while Europe and Asia attracted only $7.6bn and less than $1bn, respectively,” Amr Elsaadani, managing director and financial services lead at consultancy Accenture in the Middle East and Turkey, told The National.
“So you can imagine what happened in the Middle East … that [investment] is very low. Currently, I see fintech as a baby who has learned to crawl and will be running over the next two to three years in the region.”
The Mena fintech market is currently worth $2bn, according to a report by Mena Research Partners. The company forecast that increased annual investment will boost the number of fintech start-ups from six in 2005 to around 250 by 2020.
Alongside that, initiatives like Dubai International Financial Centre’s (DIFC) FinTech Hive, whose start-ups raised over $10 million in funding in 2017, are significantly disrupting the fintech ecosystem in the region.
But experts caution that financial institutions can get bogged down in regulatory and compliance issues to such an extent that innovation takes a backseat.
“From an industry insight, I see innovations being done but sometimes they are slow to move to the market. Financial institutes need to adopt a two-speed approach; they should make sure they are complying with regulations and also ensure they move towards the right technology,” said Mr Elsaadani.
“Countries like the UAE and Saudi Arabia are opening up for disruptors. Financial institutions need to realise if they will not innovate at right speed, then the next disruptor will do it and take their place.”
Arabian Gulf financial centres in Dubai, Abu Dhabi and Bahrain have launched several fintech programmes to attract venture capital funding and drive innovation in their economies. In June, DIFC partnered with UK-based Startupbootcamp for the development of a fintech venture capital ecosystem in the region.
On Monday, the UAE-based fintech start-up Monami Tech closed a seed funding round of $1m as it aims to expand across the Gulf region, including into Bahrain and Saudi Arabia.
“The first edition of FinTech Hive was very successful as the selected start-ups raised $10m but still we are far from the numbers that we see around the globe. I believe strong growth will come over the next two to three years.” stated Mr Elsaadani.
FinTech Hive essentially links cutting edge financial services technology to the region’s 3bn people and $7.8 trillion and growing GDP, while providing a platform that brings financial firms and technology start-ups in one collaborative, disruptive innovation supply chain.
New York listed Accenture was chosen to set up and operate this initiative due to its expertise in building and running three fintech Innovation Labs in London, New York and Hong Kong. Globally, the Labs’ alumni companies have raised nearly $1.2bn in venture capital financing in the last few years.
Mr Elsaadani believes the UAE and Saudi Arabia will be leaders in fintech growth in the region.
“The Central Bank of Saudi Arabia is taking steps in opening up the country for innovations in financial service industry. Right seeds have been sown and we will see how things will develop in next few years.”
Updated: September 11, 2018 03:53 PM