Emerging Venture Markets: FinTech and the greater innovation

The evolution of FinTech amidst a greater drive for innovation in Emerging Venture Markets.


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The 12 Megadeals closed across MEAPT in 2021 were equal to all Megadeals raised in the past 4 years. This point foreshadows the exceptional year VC ecosystems across Emerging Venture Markets have had. The unprecedented funding surge we’ve witnessed across geographies, while catalyzed by an imposing global pandemic, has been years in the making. As a result of elevated market expectations of on-demand servicing, keen entrepreneurial eye for opportunities in Tech disruption, and robust investor confidence, industries of digitization like Transport & Logistics (T&L), E-commerce, and FinTech became main drivers of ecosystem growth.

Emerging Venture Markets have reached a high level of intricacy where the development of one Tech innovation in one business, becomes widely adopted across industries and quickly emerges with intricate and diversified applications. The development of AI-powered dashboards that can predict demand, manage customers and automate user interactions for example has been as useful for PropTech startups like Hotdesk, or Evitko, HealthTech startups like Sotech, or Yodawy as it has been for transport startups like Careem or T&L startups like Trukker and Appetito. This being said, it has become visible that the progress of one industry, especially in its Tech infrastructure, paves the way for that of all related industries. Following that perspective, one cannot compartmentalize the boom in E-commerce without the growth of T&L; surely, the growth of these two industries has pushed the FinTech sector across EVMs to become a rising star across investor boards region-wide. 


 



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In a feat unique to Emerging Venture Markets, investor interest, and government regulations have been focused on Tech ventures in nascent and budding geographies like Iraq, Pakistan, and Nigeria as much as they are in established markets like the UAE, albeit with relatively different motivations. When considering FinTech innovations in markets like Egypt or Nigeria, one of the main drivers of market entry has been servicing large populations of the unbanked and setting up payment infrastructures that work. In Egypt,  FinTech alternatives like Dopay are providing Tech-powered solutions to roll out salaries for noncard holders while startups like Paymob are providing businesses with tools to facilitate offline and online payments from customers. In Nigeria, 2 of the 6 megadeals reported historically were closed last year by FinTech giants, which are now positioned as strong competitors to traditional banks, Opay and Flutterwave- the first providing direct solutions for customers to pay, transfer, and receive payments while the latter is building accessible and Tech-driven payment infrastructures for institutions and individuals alike.  In more established markets like the UAE and KSA, FinTech has been a great driver of innovation which positions the sector as a hero industry if the gulf is looking to diversify its economy and pivot away from oil dependency. 

To put things into perspective, the FinTech sector in the UAE grew from accounting for a mere 6% of all funding in 2019 to a whopping 18% in 2021, or from 14% in KSA over 2019 to almost 17% in 2021. Even though the prominence of the sector seemed to unravel in 2021, driving more than 30% of all invested capital across MEAPT, early signs of industry impact in MENA could be traced back to 2016 and the emergence of the first-ever regulatory sandbox in Abu Dhabi. MEVP’s white paper “Evolving MENA FINTECH Landscape, Regulatory Sandbox Initiatives by MENA Countries” lists many of the star players which came as a result of facilitated and de-risked innovation environments. Most interestingly, startups graduating from regulatory sandboxes across the UAE, Bahrain, and KSA have been pioneering next-generation technologies, and while FinTech-driven, disrupted several industries like InsurTech, Capital Markets, Blockchain and Cryptocurrency, and the Banking Sectors. Highlighted in the paper were exemplary graduates many of which raised sizable rounds last year including insurance comparison platform Yalla Compare, investment robo-advisory platform Sarwa, and open banking platform Tarabut Gateway

Next week, as we start the release of our EVM End Of Year Reports, we’re excited to explore the data aggregated from over 1,000 funding rounds across geographies, in a chance to observe just how far has innovation and digitization materialized in our Emerging Venture Markets. 


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