Did you know that by 2025, the fintech revenue in the Middle East and North Africa (MENA) region could increase almost threefold, from $1.5 billion in 2022 to between $3.5 billion and $4.5 billion? This growth is part of a quiet revolution that is reshaping the economy and society of the MENA region – the rise of fintech. This transformation is not just a trend but a paradigm shift in how financial services are delivered and consumed.
Fintech, a general term for ‘financial technology,’ represents financial services and technology convergence. It is disrupting traditional economic systems and democratizing access to financial services. In the MENA region, fintech is more than just a buzzword – it’s a lifeline. With a large unbanked population and a burgeoning tech-savvy youth demographic, fintech is poised to play a pivotal role in the region’s economic development.
To understand the impact of fintech in the MENA region, consider this: as of 2023, the region had over 250 fintech startups, expected to double by 2025. This rapid growth is a testament to the region’s entrepreneurial spirit and reflects fintech’s potential to address some of the region’s most pressing financial challenges.
The MENA digital payments market size is estimated at USD 226.53 billion in 2024 and is expected to reach USD 380.86 billion by 2029, growing at a CAGR of 10.95% during the forecast period. This segment of the overall fintech market shows a bigger growth percentage than all other sectors.
On the other hand, the overall fintech market in the Middle East and North Africa (MENA) region is expected to register a CAGR of greater than 8% during the forecast period (2024-2029). Another source estimates that MENA fintech revenue could increase almost threefold, from $1.5 billion in 2022 to an amount between $3.5 billion and $4.5 billion in 2025.
This growth is primarily fueled by local fintech innovators leveraging technology to revolutionize the way financial transactions are conducted in the region.
From enabling financial inclusion to fostering economic resilience, fintech is not just shaping the economy of the MENA region – it’s shaping its future. The fintech market in the Middle East and Africa (MEA) is expected to hit a CAGR of 21.42% from 2023 to 2028, and the regional market size is predicted to be valued at USD 39.26 billion by 2028 from USD 14.88 billion in 2023. These figures underscore the transformative impact of fintech in the MENA region.
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Drivers of the Fintech Boom in MENA
The fintech boom in the MENA region is not a random occurrence but the result of a confluence of factors that have created the perfect environment for this sector to thrive. Here are the key drivers:
1. High Smartphone Usage and a Young, Tech-Savvy Demographic
The MENA region is home to a young, tech-savvy population with one of the highest smartphone penetration rates in the world. This demographic is not just comfortable with technology but expects it to play a central role in their lives. Their demand for digital, mobile-first solutions has been a major driving force behind the fintech boom.
2. Supportive Government Policies and Regulatory Frameworks
Governments across the MENA region have recognized the potential of fintech and have implemented policies and regulatory frameworks that encourage innovation and growth in this sector. These initiatives have played a crucial role in fostering the fintech ecosystem, from setting up fintech hubs to offering incentives for startups.
3. Increasing Demand for Accessible Financial Services Among Unbanked Populations
A significant portion of the MENA population remains unbanked or underbanked. Fintech solutions offer an opportunity to bridge this gap and bring financial services to those traditionally excluded from the financial system. This has created a massive market for fintech solutions that cater to this segment.
4. The Surge in Regional Investment in Fintech Startups
The last few years have seen a surge in investment in fintech startups in the MENA region. Regional and international investors recognize the sector’s potential and are keen to be part of its growth story. This influx of capital has enabled fintech startups to scale and innovate, further fueling the fintech boom.
5. Cultural Nuances and Fintech Solutions
In the MENA region, cultural nuances have played a significant role in shaping fintech solutions. A prime example of this is the rise of Sharia-compliant financial products. These fintech solutions adhere to Islamic law and are gaining popularity, demonstrating how fintech can adapt to meet specific cultural and religious needs.
6. Role of Regional Accelerators and Incubator Programs
Regional accelerators and incubator programs have also nurtured the growth of fintech in the MENA region. These programs provide fintech startups with the resources, mentorship, and network they need to thrive. They play a crucial role in fostering innovation and entrepreneurship, further fueling the fintech boom in the region.
The fintech boom in the MENA region results from a unique blend of demographic, economic, and policy factors. As these trends continue, the impact of fintech on the region’s economy and society is likely to grow even further.
Fintech Revolutionizing Finance in MENA
Fintech is changing not just the way people bank but also the way economies function. It’s reshaping the economy as a whole. Here are some key areas where fintech is reshaping the economy in the MENA region:
1. Mobile Payments and Digital Wallets
Mobile payments and digital wallets are perhaps the most visible manifestation of the fintech revolution in the MENA region. They have transformed how people transact, making payments quick, easy, and secure. This has not only increased the efficiency of transactions but also brought a large number of unbanked individuals into the financial system. For example, Tamara is the GCC region’s leading shopping and payment platform. Shoppers in Saudi Arabia, the U.A.E., and Kuwait can split their payments into three instalments when they shop in Tamara, both online and in-store. This payment option is free of any hidden fees. It serves more than six million customers and 15,000 partner merchants.
2. Innovative Lending and Crowdfunding Models
Fintech has also revolutionized lending and crowdfunding in the MENA region. Peer-to-peer lending platforms and crowdfunding sites have made it easier for individuals and small businesses to access capital. These platforms have filled a critical gap in the market, providing an alternative to traditional banks and financial institutions—for example, Beehive. Beehive, the first peer-to-peer (P2P) lending platform in MENA regulated by the DFSA, directly connects businesses seeking fast, affordable finance with investors who can help fund their growth. Its platform has allowed firms to borrow more than AED 2 Billion.
3. Digital Wealth Management and Investment Platforms
Digital wealth management and investment platforms are democratizing investing in the MENA region. These platforms provide users with easy access to a range of investment products and services, often at a fraction of the cost of traditional wealth management services. This has opened up the world of investing to a whole new demographic—for example, Wahed. Wahed, an American financial technology and services company, launched the first exchange-traded fund in the United States compliant with Sharia law. It operates in 130 countries and has offices in Washington, D.C., New York, London, and Dubai.
4. Emerging Trends in Blockchain and Cryptocurrencies
Finally, the rise of blockchain and cryptocurrencies represents a new frontier in fintech in the MENA region. While still in its early stages, the potential of these technologies to transform everything from remittances to contract enforcement is immense. Fintech is not just reshaping finance in the MENA region – As these trends continue, the impact of fintech on the region’s economy and society is likely to grow even further.
5. Fintech and Financial Inclusion
Fintech drives financial inclusion, particularly for women and underserved communities. By leveraging technology, fintech firms make financial services more accessible, affordable, and user-friendly, helping empower these groups. For instance, digital financial services can serve as an on-ramp for low-income women to adopt and use an extensive suite of formal financial products and services, expanding their choices and their financial and economic resilience and empowerment¹⁵. This democratizes finance and contributes to the broader goals of sustainable finance and impact investing.
Tamara – The First Saudi Unicorn
Tamara, a pioneering firm based in Saudi Arabia, has achieved a historic milestone by becoming the Kingdom’s first homegrown fintech unicorn. Founded in 2020 by Abdulmajeed Alsukhan, Turki Bin Zarah, and Abdulmohsen Al Babtain, Tamara has revolutionized the region’s financial landscape with its innovative solutions.
Tamara is a shopping and payments platform that empowers customers to manage their finances more effectively. It offers two main products: customers can pay for their purchases in 30 days or split their payments into three or six instalments. This model allows merchants to get paid regardless of when customers pay, making finances more manageable and ensuring a steady cash flow for merchants¹.
Tamara’s unique offerings have resonated with consumers in the region. As of 2023, it serves over six million customers and 15,000 partner merchants, including major brands like IKEA, SHEIN, Adidas, Noon, and Jarir.
Journey to Becoming a Unicorn
Tamara’s journey to becoming a unicorn is a testament to its innovative approach and the growing potential of the fintech sector in the MENA region. In less than two years, Tamara stated that the company’s annual revenue growth had increased six-fold. In December 2023, in a Series C equity funding round, a total of $340 million was secured by the company, bringing its total funding in equity and debt to $366 million. This funding round catapulted Tamara to unicorn status, marking it as a company valued at over $1 billion.
Abdulmajeed Alsukhan, Co-founder and CEO of Tamara, remarked on this achievement, “Saudi Arabia deserves its place on the world stage for financial technology. As Tamara was created by local entrepreneurs and nurtured by a supportive local ecosystem and market regulators, we stand here today, humbled and hungry, ready for our leapfrog moment. This achievement is a testament to the ecosystem, our incredible team, investors, and the collaborative spirit that makes this region a great place for talent to flourish.”
Tamara’s success story serves as an inspiration for other fintech startups in the region and underscores the transformative potential of fintech in reshaping the financial landscape of the MENA region.
Tamara and the Burgeoning Fintech Scene
Tamara’s success story is indicative of the burgeoning fintech scene in Saudi Arabia and the wider MENA region. The company’s rapid growth and unicorn status reflect the region’s increasing openness to digital financial solutions and the growing demand for such services. Tamara’s success is a testament to the potential of the fintech sector in the region, and it sets a precedent for other fintech startups to follow.
Impact of Tamara on the Local Economy and Consumer Behavior
Tamara’s impact extends beyond its own success. By offering innovative financial solutions, Tamara has helped to shape consumer behavior, encouraging more people to embrace digital payments and financial services. This shift has significant implications for the local economy, as it facilitates economic activity and fosters financial inclusion.
Moreover, Tamara’s success has a ripple effect on the startup ecosystem in the region. It serves as an inspiration for other fintech startups and encourages entrepreneurship. Furthermore, Tamara’s ability to attract significant investment into the area helps create a more vibrant and supportive startup ecosystem.
Tamara’s impact on the local economy, consumer behaviour, and the startup ecosystem underscores the transformative potential of fintech in the MENA region. As more companies follow in Tamara’s footsteps, the fintech sector is poised to become a significant driver of economic growth and innovation in the region.
Challenges Facing MENA’s Fintech Sector
The fintech sector of the MENA region is dynamic and rapidly growing, and remarkable achievements are being made despite some challenges. Let’s explore both the challenges and the bright prospects that lie ahead:
- Cybersecurity Concerns: As financial services increasingly move online, cybersecurity becomes paramount. Fintech companies must ensure the security of their platforms to maintain customer trust and comply with regulatory requirements.
- Regulatory Hurdles: The regulatory environment for fintech is still evolving in many parts of the MENA region. Navigating this landscape can be complex and challenging for fintech startups.
- Talent Acquisition: While the region has a large, tech-savvy youth demographic, there is a shortage of experienced professionals in the fintech sector. This makes talent acquisition a significant challenge.
Despite these challenges, there are ongoing efforts and potential solutions to overcome them:
1. Cybersecurity Confidence:
With the digital transformation of financial services, ensuring robust cybersecurity is paramount. MENA fintech companies have risen to this challenge by investing significantly in cybersecurity measures. They employ state-of-the-art encryption technologies and implement stringent security protocols. This dedication to cybersecurity has not only protected customer trust but also facilitated seamless transactions.
2. Regulatory Adaptation:
The regulatory landscape in the MENA region is evolving, and fintech startups are adapting to these changes with resilience. Governments are actively engaged in creating a more conducive regulatory environment. The establishment of regulatory sandboxes has been a significant breakthrough. These sandboxes provide a controlled testing ground for fintech innovations, allowing startups to refine their solutions and ensure compliance.
3. Nurturing Talent:
While the MENA region boasts a tech-savvy young population, there has been a shortage of experienced professionals in the fintech sector. However, the tide is turning. The region is actively investing in talent development through educational programs and specialized training initiatives. Fintech companies are also attracting international talent to bring in diverse expertise, further enriching the sector.
4. Future Outlook:
The MENA fintech sector is on an upward trajectory, driven by innovation and resilience. As cybersecurity measures strengthen, regulations become more accommodating, and a skilled workforce emerges, the future is exceedingly promising. With the right combination of determination and collaboration, the MENA region is poised to become a global fintech hub, pioneering groundbreaking financial solutions that will shape the world’s financial landscape.
Fintech’s Impact: Real-Life Cases
1. Financial Inclusion: Fintech has emerged as an essential means to improve the financial inclusion of unbanked individuals in developing countries. This is particularly relevant in the MENA region, where most of the population remains unbanked or underbanked. By providing access to formal financial services, fintech makes everyday life easier, helping families and businesses plan for everything from long-term goals to unexpected emergencies¹. As account holders, people are more likely to use other financial services, such as credit and insurance, to start and expand businesses, invest in education or health, manage risk, and cope with economic shocks, which can improve their lives overall.
2. Digital Evolution: Technological innovation and digital finance have been reshaping the financial service industry, which has increased the productivity of services and changed people’s lives by meeting their expectations. These technological innovations create financial innovation that changes the financial system. The developments in financial innovation, generally taken as financial technology, i.e., Fintech, enable financial restructuring with technological advancement to attract nonfinancial customers into the financial sector.
3. Online Payment Gateways: The advent of online payment gateways contributed to the transformation of payment on e-commerce platforms by enhancing the practicality, usability, and accessibility of financial services.
These examples underscore the transformative potential of fintech in improving financial inclusion, reshaping the financial service industry, and enhancing the practicality and accessibility of financial services in the MENA region.
The Future of Finance in the Region
The Middle East and North Africa (MENA) region is on the cusp of becoming a global digital finance hub. The fintech sector in the region is experiencing robust growth, with MENA startups receiving more than US$2.5 billion in funding in 2021 alone. The universal adoption of digital technologies in MENA countries could reap huge socio-economic benefits, amounting to hundreds of billions of dollars each year and a much-needed surge in new jobs. The Dubai International Financial Centre (DIFC) has contributed significantly to the financing of several fintechs’ growth, including investment app Sarwa, cloud-based B2B employee benefits platform FlexxPay, and migrant-worker financial services platforms Now Money and Go Rise.
With its strategic location, supportive regulatory environment, and burgeoning fintech scene, the MENA region is well-positioned to become a global digital finance hub. As the region continues to embrace digital transformation, we can expect to see continued growth and innovation in its fintech sector, further solidifying its position on the global stage.
