Future of Fintech in MENA: Making its Mark on the Global Front
The Rise of Fintech - A Global Phenomenon:
World over, 2020 proved to be a phenomenal year for Fintech. VC investments in global Fintech touched $42 billion and 2,375 deals, a decent increase from the $40 billion invested into the sector in 2019¹. The median VC ticket size grew across all deal stages between 2019 and 2020. Transactions in the seed stage went from a median ticket size of $1.3M to $1.7M, while late-stage deals saw their median deal size rise from $10.5M to $15M. The US, arguably the world’s largest market for Fintech, solely accounted for 49% of the global Fintech VC funding in 2020.
MENA- Building a Formidable Fintech Future:
Fintech in the Middle East and North Africa reflected the industry’s global upward trajectory. Despite the onset of the pandemic, $135M was invested in MENA’s Fintech ventures in 2020 - marking the highest capital deployed since 2017. Over the three years, MENA Fintech VC investments grew at a CAGR of 37%. MAGNiTT’s Q1’21 MENA Fintech Venture Investment Report indicated that the industry is on its way to an even stronger 2021. With $68M invested into the sector in Q1’21, the quarter alone constituted 50% of all capital deployed in Fintech in FY’20.
Larger deal sizes were recorded across MENA’s top Fintech hubs. The median Fintech ticket size in the UAE jumped from under a million in 2020 to $3M in 2021 YTD. Similarly, KSA’s median Fintech deal size rose by 360%, hitting $2.3M in 2021 YTD (vs $0.5M in FY’20).
MENA is an attractive market for Fintech firms. The region is home to roughly 450 million people, including a significant proportion of unbanked populations. Faced with its own specific problems, MENA is witnessing a rise in niche Fintech solutions largely pertaining to remittances, banking penetration, and security of transactions.
MENA’s Leading Fintech Adopters in Q1 ’21:
UAE, KSA and Egypt have traditionally represented the three markets guiding Fintech’s progress in the region. In Q1’21, KSA-based startups fueled most of the industry’s growth. With a year-on-year increment of 250% in Fintech deal count and 2000% growth in VC investment within the sector, the country topped MENA-wide rankings across all parameters.
Fintech funding in Egypt grew by a remarkable 304% YoY but was overshadowed by capital deployed in two star startups from Bahrain and Lebanon. Tarabut Gateway and NymCard, raising $13M and $7.6M respectively, attracted more in funds than the $5.2M raised by four Egyptian Fintech ventures in Q1’21.
How MENA Differed in Emerging Fintech Solutions:
The focus of Fintech-led innovation seemed to vary across UAE, KSA and Egypt. Of the three countries, UAE’s Fintech ventures in Q1’21 offered the most diverse range of solutions. NOW Money, the startup to close the country’s largest relevant transaction in the quarter, provides low-cost remittances to migrant workers. UAE’s second largest Fintech deal was raised by North Ladder, a business focused on rewarding used items with quick cash. The unthematic nature of UAE’s emerging Fintech startups suggests a growing market appetite for Fintech adoption across various domains of life.
In KSA, on the other hand, ventures in the sector demonstrated a focus on B2B solutions. Fintech startups credited with raising three of the country’s four largest funding rounds in Q1’21 offer financial solutions specifically for SMEs. Lendo closed the highest valued of these deals, worth $7.2M. The evident trend in KSA’s Fintech ecosystem points to the technology’s increased application in business operations.
Fintech startups in Egypt involved in fundraising in Q1’21 mainly offered solutions for underserved consumers. The quarter’s largest Fintech deal in the country was closed by Dayra, a platform dedicated to providing financial services to informal economy workers and micro businesses. Another startup Cassbana uses artificial intelligence to offer financial identities to unbanked consumers.
Other solutions that gained traction in all three markets included peer-to-peer lending, flexible payment options for consumer shopping and advance employee salaries.
¹· "Pulse of Fintech H2'20". KPMG. February, 2021.