How did the unprecedented spike in Online ordering impact the FinTech VC and Entrepreneurial ecosystem over the past few years? We explore the rise of digital payment solutions and the pivot in capital investment as recorded in our FinTech 2022 Venture Investment Report.
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The rapid digitization observed across Emerging Venture Markets has been an anticipated phenomenon over the past years. Exactly 4 years ago Amazon announced its acquisition of UAE-based Souq.com for a disclosed valuation of $580M. This major milestone for the E-commerce industry in MENA was shortly followed by the launch of Noon, MENA’s all-encompassing online marketplace and Amazon contender now valued at nearly $1Bn based on recent disclosures. While at a slower footing than that of the global market (according to Statista, almost 1.92 Bn people around the world ordered online in 2021 with E-commerce sales hitting $3.5 Tln globally) the E-commerce space observed a rupture moment exactly as pandemic hit.
While MENA reflects some of the highest smartphone and internet penetrations in the world, reaching 80% to 90% in major markets, its adoption of online ordering and E-commerce propositions has been slower compared to global averages. Due to a mix of cultural cash-dependent tendencies, a lack of supported payment and logistics infrastructure, and a large segment of unbanked and underbanked populations, only about a third of retail transactions are conducted electronically, as recorded in research done by UK-based SQLI Digital Experience. However, as the Pandemic drove unprecedented retail demand to online marketplaces, contactless payment and other cashless solutions became critical. With government regulation boost and an unprecedented influx of capital, FinTech startups were able to set the stage for the evolution of online ordering- here’s how it was reflected in numbers:
(Image Source: Kearney Report)
As businesses pivot their offerings and investors reshuffle their mandates, the FinTech sector in MENA recorded 30 more deals between 2020 and 2021 than the past 3 years combined. As recorded in our FinTech 2022 Venture Investment Report, the MENA-FinTech sector recorded an all-time high of 108 deals over the past year nearing the $500M mark in funds. Surely, over the past two years leading up to MENA-based Rain’s $110M Mega Round in 2022, global and local investors backed next-generation FinTech solutions from digital asset and cryptocurrency exchange platforms, open and neo-banking, to CaaS (Cards-as-a-Service) solutions and Gen-Z P2P payment platforms.
However, major building blocks have been set in the facilitation of online financing and payment infrastructures. Exploring the later-stage deals (> $5M) closed by MENA-based FinTech startups accounting for 20% of all FInTech transactions between 2020 and 2021 we can spot traces of the surge in E-commerce demand in the backing of online payment ventures. Starting with the Backend, ventures facilitating SME transacting and B2B payment have observed sizable investments, from UAE-based Telr.com introducing API to facilitate online payment gateways to Saudi-based Lamaa providing BNPL and supply chain financing solutions, collectively aggregating more than $20M in funds. Most remarkably, we’ve also recorded B2B E-commerce marketplaces engage in FinTech plays reflecting exponentially on their investment tracks, we highlight KSA-based Retailo and Morocco-based Chari.ma- the key was micro-crediting and BNPL solutions.
BNPL solutions took center stage either as standalone ventures introduced by the likes of UAE-based PostPay and Egypt-based Sympl, or integrated into E-commerce offerings like that of Retailo, Chari.ma, and surely UAE-based BNPL-powered online marketplace Tabby; all five raising more than $158M collectively between 2021 and 2022. As reported by Forbes, BNPL purchases in the USA aggregated almost $100Bn last year in revenue growing by more than 80% since 2019. The attractivity for both SMEs and consumers lies in alleviating credit consumption- even further, this payment method has also been a powerful influencer for consumers way early in the decision-making stage.
For now, BNPL seems to be an attractive play for investors considering its remarkably promising regional/global market cap. However, will it be able to solve the challenge of accumulating late remittances by attracting a healthy mix of consumers with varied income stabilities; and how will BNPL providers in the market react to growing demand in the market? We’ll keep an eye out on the front.
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