Abdullah Alothman, founder and co-chairman of Geidea Financial Tech and AO Holdings and co-founder of United Lemar Company Ltd.
The fintech sector in the Middle East has seen substantial growth over the past few years.
According to The State of Fintech report, the number of fintech start-ups is estimated to increase from 105 in 2015 to 250 in 2020, while fintech start-ups in the MENA region have raised over $100 million in funding in the last decade – the amount is set to double by the end of this year.
The region’s enormous youth population, coupled with the large number of unbanked or underbanked people who rely on cash and the recent development of a stronger regulatory environment, are key factors contributing to the exponential growth of the fintech industry in the Middle East. This year, the coronavirus pandemic has seen a surge in the use of homegrown apps as consumers move away from physical offerings and relocate their lives online to curb the spread of the virus.
International fintech start-ups are already starting to recognise the potential of the Middle East, with companies including Kristal.AI, Baton Systems and SettleMint all looking to expand into the region. Taken together, these factors mean that there is perhaps no better time for foreign investors to turn their heads to the Middle Eastern fintech market.
The digital generation
As revealed by the World Bank, more than 28 percent of the population in the Middle East is aged between 15 and 29. Representing over 108 million young people, this is the largest youth population in the world, giving the region opportunities to innovate around their economy and embrace a new digital era. This vast youth population translates into a wealth of potential customers for emerging fintech companies as they are more likely to welcome new tech and digital products, making the Middle East market stand out from established Western markets such as the UK and EU.
The large number of unbanked or underbanked people in the region presents new and exciting opportunities for fintech companies managing payment processes to bring cutting-edge technology. The World Bank also found that only two years ago, as many as 66.5 percent of the MENA region’s population was unbanked. A healthy portion of that figure in the Gulf region is down a large expat population with low and middle-income salaries. This is comparison to Europe and Central Asia, where around 35 percent of the population is unbanked — almost half the MENA’s figure.
What’s more, some of the mobile markets in the MENA region are the most penetrated in the world. According to GSMA, half of the 25 countries in the region had unique subscriber penetration rates of 70 percent or more by the end of 2018. In the same period, the global average was 66 percent.
GCC calling
There are countries in the Middle East, such as Saudi Arabia and the UAE, that particularly stand out as fintech leaders because of the supportive ecosystems that have been developed for fintech growth. This includes setting up the best regulatory frameworks to attract international and local firms and for fintech businesses to freely test innovative propositions in the market.
Last year, the Saudi Arabian Monetary Authority (SAMA) set up a regulatory “sandbox”, a framework that allowed financial institutions and fintech companies to do exactly that. In April, SAMA welcomed nine new fintechs to the sandbox, home to an existing 30 fintechs. The UAE, meanwhile, currently has three regulatory sandboxes. Although the UK is known globally as one of the most progressive regions for fintech innovation and growth, soon the Middle East won’t be that far behind.
The Middle East’s fintech sector is booming, with the pandemic acting as a catalyst for continued growth. There is no doubt that the region is becoming more and more appealing to international investors. Right now, instead of sticking with the West, investors should look at the new opportunities in the Middle East.
Abdullah Alothman, founder and co-chairman of Geidea Financial Tech and AO Holdings and co-founder of United Lemar Company Ltd.
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by Staff Writer
More of this topic
Behind the Middle East’s fintech boom
When it comes to market demand, existing infrastructure and demographic trends, fintech investors should be thinking about the Middle East
Abdullah Alothman, founder and co-chairman of Geidea Financial Tech and AO Holdings and co-founder of United Lemar Company Ltd.
The fintech sector in the Middle East has seen substantial growth over the past few years.
According to The State of Fintech report, the number of fintech start-ups is estimated to increase from 105 in 2015 to 250 in 2020, while fintech start-ups in the MENA region have raised over $100 million in funding in the last decade – the amount is set to double by the end of this year.
The region’s enormous youth population, coupled with the large number of unbanked or underbanked people who rely on cash and the recent development of a stronger regulatory environment, are key factors contributing to the exponential growth of the fintech industry in the Middle East. This year, the coronavirus pandemic has seen a surge in the use of homegrown apps as consumers move away from physical offerings and relocate their lives online to curb the spread of the virus.
International fintech start-ups are already starting to recognise the potential of the Middle East, with companies including Kristal.AI, Baton Systems and SettleMint all looking to expand into the region. Taken together, these factors mean that there is perhaps no better time for foreign investors to turn their heads to the Middle Eastern fintech market.
The digital generation
As revealed by the World Bank, more than 28 percent of the population in the Middle East is aged between 15 and 29. Representing over 108 million young people, this is the largest youth population in the world, giving the region opportunities to innovate around their economy and embrace a new digital era. This vast youth population translates into a wealth of potential customers for emerging fintech companies as they are more likely to welcome new tech and digital products, making the Middle East market stand out from established Western markets such as the UK and EU.
The large number of unbanked or underbanked people in the region presents new and exciting opportunities for fintech companies managing payment processes to bring cutting-edge technology. The World Bank also found that only two years ago, as many as 66.5 percent of the MENA region’s population was unbanked. A healthy portion of that figure in the Gulf region is down a large expat population with low and middle-income salaries. This is comparison to Europe and Central Asia, where around 35 percent of the population is unbanked — almost half the MENA’s figure.
What’s more, some of the mobile markets in the MENA region are the most penetrated in the world. According to GSMA, half of the 25 countries in the region had unique subscriber penetration rates of 70 percent or more by the end of 2018. In the same period, the global average was 66 percent.
GCC calling
There are countries in the Middle East, such as Saudi Arabia and the UAE, that particularly stand out as fintech leaders because of the supportive ecosystems that have been developed for fintech growth. This includes setting up the best regulatory frameworks to attract international and local firms and for fintech businesses to freely test innovative propositions in the market.
Last year, the Saudi Arabian Monetary Authority (SAMA) set up a regulatory “sandbox”, a framework that allowed financial institutions and fintech companies to do exactly that. In April, SAMA welcomed nine new fintechs to the sandbox, home to an existing 30 fintechs. The UAE, meanwhile, currently has three regulatory sandboxes. Although the UK is known globally as one of the most progressive regions for fintech innovation and growth, soon the Middle East won’t be that far behind.
The Middle East’s fintech sector is booming, with the pandemic acting as a catalyst for continued growth. There is no doubt that the region is becoming more and more appealing to international investors. Right now, instead of sticking with the West, investors should look at the new opportunities in the Middle East.
Abdullah Alothman, founder and co-chairman of Geidea Financial Tech and AO Holdings and co-founder of United Lemar Company Ltd.
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