Fintech investments are fueling growth in the MENA region’s digital economy as consumers increasingly begin to conduct cashless transactions, following the Coronavirus outbreak. The region’s financial technology space is also benefitting from updated regulatory guidelines that may be more conducive for growth, according to consultancy firm Redseer.
One in four or 25% of all deals in the MENA region reportedly involved the Fintech industry, which has been able to attract around 30% of all the capital secured this year, leaving it set or well-positioned for steady activity with the substantial funding, according to Redseer‘s recent report.
As noted by the firm, Fintech “stood out head and shoulders above other sectors on funding volume and value.” The company added that “within Fintech, while payments and remittances secured the maximum number of deals, lending accounted for the largest share of money raised.”
This year, there were reportedly 220 deals focused on the digital economy and were valued at an estimated $2.1 billion, Redseer data reveals. Out of all these transactions, Fintech made up 25% of the deals (a total of 52 transactions) and 29% of the aggregate deal value (appr. $600 million).
As reported by MSN, the Coroanvirus crisis has accelerated the consumer shift to online shopping in the Middle East, resulting in a rise in the area’s digital commerce space.
Online sales volumes in the MENA region are on track to triple to $28.5 billion by 2022, up from just $8.3 billion in 2017, according to a report from MSN which referenced research carried out by Bain & Company and Google.
Consumers are now eager to use Fintech platforms and related services like virtual payments, remittances, accessing insurance and even digital lending. At present, the consumer adoption rate for virtual payments stands at 53%, meanwhile, that for online remittance payments came in at 41%, Redseer’s data revealed.
Notably, Fintech startups ranked the highest when it comes to customers’ future willingness to utilize their products, a survey revealed. Approximately 97% of consumers said they were planning to conduct digital transactions and 78% noted that they were eager to access online remittance services.
“Our Voice of Consumer analysis shows FinTech to have strong adoption and the highest future willingness to use,” Redseer’s report noted while adding that “already adoption is very high in payments and remittances at more than 40% to 50%.” The report also mentioned that “other Fintech sectors such as lending and Insurtech are more nascent currently but future intent to use is five times the current levels.”
At present, consumer adoption of Insurtech services stands at roughly 8% and lending at just 7%. But the future or expected use of such services stands at nearly 50% and 38%, respectively, the data confirmed.
Updated regulatory guidelines along with improved access to accelerators are the key reasons or factors supporting Fintechs in the MENA region and should help them secure additional capital.
Financial free zones like the Abu Dhabi Global Market and the Dubai International Financial Center have also played a key role in fueling the rise of the local Fintech industry via different initiatives like regulatory sandboxes, accelerator programs and various events.