With digitalisation of financial services happening at an unprecedented pace in the Mena region, Fintech industry is seeing an immense growth in the region. From payments, banking, financial advisory, capital market and insurance, artificial intelligence (AI), data analytics, cloud and blockchain have reimagined the financial services sector in the region resulting in innovation, efficiency and greater financial inclusion. Against this backdrop, FinTech in Mena has seen immense growth in a very short period of time.
According to the MENA FinTech Venture Report by the region’s leading startup data platform MAGNiTT, FinTech is the top industry across Mena by deals in 2018 and 2019. A total of $237m has been invested in 181 deals since 2015 in Mena-based FinTech startups. 2017 was the breakout year for FinTech venture investment across Mena, with large investments including Network International ($30m), PayTabs ($20m) and Souqalmal ($10m). The year 2019 (YTD) has seen more FinTech investments than any previous year.
An industry comparison data shows that in 2018, FinTech overtook more traditionally invested industries, such as e-commerce and transport, and became the most popular by number of deals across Mena. Despite this, funding amounts are still low, given that investment has predominantly been at the early stage of investment.
With saturation in the e-commerce and logistics industries, FinTech has now surpassed all other industries by deals since 2018. FinTech ranks only 4th by total funding, however, driven by the fact that these deals have predominantly been made by earlier-stage accelerator programs. An estimated 13 percentage of all deals in 2018 and 2019 YTD attributable to FinTech, while the industry accounts for only 5 percent of total funding.
However, FinTech, while quickly developing, is still a nascent industry within Mena startup scene. The majority of deals have been at early stage. However, notable later stage transactions include: $30m for Network International, $20m for Paytabs and $10m for Souqalmal. An estimated 81 percent of FinTech deals between 2015 and 2019 YTD that were early stage investments. About 59 percent of all FinTech deals attributable to accelerators in 2019. This is a significant increase from just 7 percent in 2015. Series B and later stage deals accounted for 8 percent of total deals in 2019 YTD, as more FinTech startups are reaching later stages.
Digital adoption is key for technology disruption. The population in many countries across Mena is very tech-savvy, combined with a moderately high internet penetration, which is expected to increase considerably by 2025. Moreover, the online payments space still leaves a large opportunity, as more consumers are able and comfortable to pay online. Financial services across the Mena region have been ripe for disruption for a while. In many cases, existing platforms are antiquated, and consumers have limited choice. Consumers are hungry for FinTech solutions that can help them with their day-to-day needs.
FinTech is the top of many governments across the region. Many governments have increasingly become active, looking to support startups through regulations, licenses and other regulatory efforts. Most importantly, the capital availability from the private sector has increased as well over the years, with more investors making investments in Mena-based startups. Moreover, there has been an increase in the number of private accelerators and venture capital firms with a specific focus on FinTech.
The number of FinTech startups across Mena has grown quickly over the past years, increasing quicker in numbers than many other industries.
