Fintech Mena Unbundling Financial Services Industry

A REPORT BY
FINTECH IN MENA
Unbundling the financial services industry
#stateoffintech
TABLE OF CONTENTS
FINTECH
THE OPPORTUNITY FOR MENA
The global fintech revolution ............................... 07
The arrival of fintech in MENA ............................. 13
MARKETS
DRIVERS AND BARRIERS FOR FINTECH
Five drivers for fintech ......................................... 20
STARTUPS Four barriers for fintech ....................................... 25
EMERGING FINTECH SOLUTIONS
The fragmented MENA market ............................ 31
MENAs payment sector ...................................... 41 Scaling and competing ....................................... 35
MENAs lending sector ......................................... 43
MENAs second wave sectors ............................ 45
ECOSYSTEM
KEY CHALLENGES TO OVERCOME
The fintech ecosystem ....................................... 52
OUTLOOK Policies and regulations ...................................... 55
WHAT TO EXPECT NEXT
Human capital .................................................... 59
Sector trends ...................................................... 71 Support and investment ..................................... 62
Fintech goes mainstream .................................... 43 Market and demand ........................................... 69
RECOMMENDATIONS
REALIZING THE FINTECH OPPORTUNITY
Stakeholder recommendations ........................... 78
APPENDIX Fintech hub recommendations ........................... 83
FIND ANSWERS FOR YOUR QUESTIONS
Methodology ....................................................... 86
Glossary ............................................................. 87
EXECUTIVE SUMMARY
The fintech (financial technology) sector is rising globally, and has already arrived in the Middle East and
North Africa (MENA). In fact, the number of startups offering financial services in the region doubled
from 46 to 105 in the last three years (2013-15).
Fintech startups have sprung up in 12 Arab countries, yet 3 in 4 startups are based in the UAE, Lebanon,
Jordan or Egypt. The UAE is the most dynamic hub with a 4-year CAGR of almost 60%, and payments are the
most popular sector, accounting for half of all MENA-based fintech startups. 60%
The rise of fintech in MENA is driven by four opportunities: 86% of adults dont have a bank account, and
SME lending stands at half of the global average; at the same time, the volume of ecommerce is set to
quadruple over five years, and 1 in 2 bank customers is interested in new digital services.
Declining customer loyalty is not necessarily bad news for banks though: the three main obstacles for fintech
startups are visibility, customer education, and trust. This is why almost 9 in 10 fintech startups seek 86%
collaborations with corporations, and banks are well positioned to integrate into the growing fintech ecosystem.
MENAs fintech startups provide a wide range of services to private, corporate and governmental
partners. The most mature sector, payments, includes startups offering bill payment, mobile and online
payment solutions as well as wallets. Payment service providers (PSP) have sprung up as well,
integrating a variety of services into a platform.
Lending startups include crowdfunding, money circle, peer lending and loan comparison platforms. Finally,
second wave startups specialize in international money transfer, wealth management, insurance solutions and
blockchain-based services such as cryptocurrencies.
- 03 -
EXECUTIVE SUMMARY
The core challenges reported by MENAs fintech entrepreneurs concern regulations, hiring and retaining
talent, as well as raising investments. 1 in 4 fintech startups shut down, and only 10% account for the
majority of investment and employees. Taking a closer look, positive dynamics seem to improve all of
the three challenges.
A variety of reforms and new regulations point to increased awareness on a policy maker level.
The launch of the regions first fintech sandbox in the UAE and the new mobile money regulations in Egypt are two
recent examples of this new commitment.
Professionals drop out to launch startups. The average fintech entrepreneur is a male university graduate in his late
20s or early 30s, with experience abroad. 4 in 5 startups have at least one cofounder with prior work experience in a
financial services company. In total, MENA-based fintech startups employ over 1,600 people in MENA.
Only 1 in 4 fintech startups went through an accelerator, yet 2016 added two fintech accelerators and a sandbox to
the ecosystem. From 5 startups, 2 already collaborate with banks and another 2 aim to do so in the near future, and
7 other industries have been mentioned as attractive partners, namely telecom, ecommerce, retail, media, insurance,
logistics and aviation. MENAs fintech startups raised $100 millions over the last decade. Pointing to a sharp
increase of funding activity, around $50 millions in investments are expected for 2017. This is mainly driven by a
significant increase in Series A, B and C deals up from an average of 30% in the past to 65% moving forward.
Fintech is poised for greater visibility by 2020. With the payment sector showing early signs of
consolidation especially in the GCC region, it can be expected that second wave startups enter the game
wherever fintech gains a foothold.
In total, we project around 250 fintech startup launches by 2020. Their failure rate can be lowered, their market
share can grow faster and job creation can increase. Unlocking a virtuous cycle requires governments to step in
and provide the foundations on which entrepreneurs, investors and customers democratize financial services.
An alliance of policymakers, investors, innovative corporations and entrepreneurs can place the UAE among
Asias most promising fintech hubs. Lebanon, Jordan and Egypt stand good chances to become hubs for
fintech as well.
- 04 -
THE GOAL OF THIS REPORT
This report was created with the aim to inform entrepreneurs, investors, policymakers, large corporations and the general public
about the opportunities and challenges for fintech startups in MENA.
IN PARTICULAR, WE ARE TRYING TO

ANSWER THE FOLLOWING QUESTIONS:
What are the drivers and barriers for fintech in MENA?
What solutions are fintech startups providing?
What are the key obstacles these startups are facing, and where do we see improvements?
What is the potential of fintech for the region?
What needs to be done to unleash this potential?
- 05 -
FINTECH
THE OPPORTUNITY FOR MENA
THE GLOBAL
FINTECH REVOLUTION
THE ARRIVAL
OF FINTECH IN MENA
THE GLOBAL FINTECH REVOLUTION FINTECH
WHAT IS FINTECH?
Financial technology describes tech-enabled
products and services that improve traditional
financial services. They are faster, cheaper,
more convenient or more accessible. In most
cases they are developed by startups.
Startups are young companies that attempt to
scale by creating new markets or by gaining a
significant share in established markets
through a better value proposition. Hence,
fintech startups are young, small companies
that promise to significantly improve the way
individuals and companies bank by FINTECH
collaborating or competing with established
financial service providers.
- 07 -
WHAT IS HAPPENING GLOBALLY?

Innovation in finance picked up later than it did in media, retail or communication. However, since 2010 thousands of fintech startups
have raised over $63 billions around the globe (Fig. 1).
Figure 1 | Global investments in fintech ventures (in USD million, 2010-July 2016)
22.3
16.1
12.7
4.6
3.2
2.5
1.8
2010 2011 2012 2013 2014 2015 July 2016

Asia Rest of World Source: Accenture analysis of CB Insights, 2016
- 08 -
Between 2010 and 2014, the rise of fintech investments was driven mainly by three hubs - Silicon Valley, New York City, and London. However,
while the US still accounted for over 50 percent of all fintech investments in 2015, Asia's share had tripled from 6 percent in 2010 to 19 percent
in 2015. In fact, all regions of the world now fall into one out of three stages of the fintech cycle: frontier, emerging, and developed fintech
ecosystems. (Fig. 2).
FRONTIER EMERGING DEVELOPED
In a frontier ecosystem, the vast majority of In the emerging ecosystem, a first cohort of Finally, developed ecosystems reach
fintech startups are still in the idea and early high-growth fintech startups captures saturation. Fewer but significantly larger deals
stage. Funding is slowly picking up as significant customer bases, fueling three-digit are centered around high value companies
entrepreneurs maneuver with little support annual investment growth rates and and unicorns. Hence, year-on year growth of
around regulations, customer acquisition, and increasing the strategic imperative for investments is slowing down. Today, only the
partnerships. incumbents to engage with the newcomers. first-movers have reached this stage namely
the USA and parts of Europe with their
globally leading fintech hubs.
Figure 2 | Regional growth in fintech investments (in percent, July 2015 June 2016)
SOUTH AMERICA USA AFRICA EUROPE MIDDLE EAST INDIA CHINA SEA AUSTRALIA
265% 44% 82% 55% 71% 30% 252% 50% 343%
BERLIN
LONDON
SILICON VALLEY NEW YORK HONG
DUBAI KONG
ABU DHABI
SINGAPORE
SYDNEY
Frontier Emerging Developed Fintech hub Sandbox
Source: IC Dowson and William Garrity Associates, EY, TechCrunch
- 09 -
WHAT ARE THE Figure 3 | Fintech Sectors (global state, as of mid 2016)
KEY SECTORS? ANTICIPATED # OF % OF MENA CORE

DISRUPTION UNICORNS STARTUPS (2015) CHARACTERISTICS
Fintech was initially associated with three
services lending, capital raising, and payment
solutions. Crowdfunding platforms, peer-to-peer FIRST WAVE
Payments 70% 5 50% SECTORS
lending networks, and payment solutions such
as PayPal build on the megatrends of the Scales quickly
emerging internet economy: the sharing
Share in overall deals
economy, social networks, and ecommerce. Lending &
80% 8 34% declines in developed
Capital Raising markets
This pattern has been repeated across the US,
Europe, and China. And it pays off: globally, 13
Money
out of 17 fintech unicorns fall into the first wave 50% 1 SECOND WAVE
Transfer
sectors (Fig. 3). However, quite recently three SECTOR
trends indicate the rise of a second wave sector
that brings financial technology to international Wealth Scales slower or
38% 1
money transfers, wealth management, and Management
Difficult customer
insurance. Blockchain, still in its early days, is 16% acquisition and/or
potentially transforming technology that goes
well beyond finance. Insurance 26% 2 More regulations and
more risk involved
This sector breakdown is found in all ecosystem Share in overall deals

stages frontier, emerging and developed. increases in
However, second wave sectors gain more
Blockchain1 0 developed markets
prominence once an ecosystem is more
developed: they build on the acceptance of first
wave technology by customers and regulators.
Frontier Emerging Developed Fintech hub
1 Blockchain is a nascent technology potentially disrupting a wide area *reported by executives, PwC global fintech survey, 2016 ** CB Insights, 9/2016 *** Wamda Research Lab, 2016
of banking and non-banking services in the long run.
- 10 -
FIRST, FINTECH IS GAINING WIDER ACCEPTANCE.

Technological progress, banks reaching out to entrepreneurs and regulators opening up all contribute to the
emerging second wave sector. UK-based TransferWise, for example, offers international money transfers that are
eight times cheaper and five times faster than banks.2 It now has one million monthly users sending almost $1 billion
across the globe every month.3
SECOND, FINTECH INNOVATION IS REACHING EMERGING MARKETS FASTER.

Insurance technology, for example, is a trend that began in the US and the UK around 2014. Telenor India, a major
telecom operator, adapted the idea in 2015 for a country where 93% of the population isnt insured. Within a few
months only, the micro insurance was adopted by 20 millions customers that owned smartphones but had no
access to affordable insurance.4
THIRD, THE MOST COMPLEX TECHNOLOGY WILL TAKE LONGER TO MATURE BUT
HAVE A MUCH STRONGER IMPACT.
Consider the blockchain startup Ripple which settles an international money transfer between two banks in 20
seconds. Traditionally, this process takes two to six working days.5 This transformative technology wont find instant
global adoption due to many unsolved challenges. However, it is expected that around 10 percent of global GDP
might be stored in blockchain before 2030.6
2 The Telegraph, 2016: TransferWise: The cheapest way to send money abroad. http://tinyurl.com/zf9h7ct
3 Bloomberg, 2016: TransferWise Raises Another $26 millions for International Growth. http://tinyurl.com/hyu5uau
4 India Times, 2015: Over 5 millions Telenor India users enroll for insurance scheme. http://tinyurl.com/hdpvs7z
5 SAP, 2016: ATB Financial Sends One of the Worlds First Real-Time Payments. http://tinyurl.com/h7rwaug
6 WEF, 2015: Deep Shift: Technology Tipping Points and Societal Impact. http://tinyurl.com/pe9ha6x
- 11 -
THE UNBUNDLING OF BANKS

The rise of fintech across countries and sectors empowered customers. Four out of ten banking customers expressed decreased
dependence on their bank as the primary financial service provider, according to a global survey.7 Collectively, fintech startups are thus about
to unbundle the traditional bank (Fig. 4).
The fast rise of fintech represents a challenge or an opportunity for banks depending on the startups strategy and that of the bank. A
minority of startups act as a direct competitor. The majority of fintech companies, however, seek to partner with banks. Their collaborative
offering can be integrated into a bank that strives to become more responsive to changing consumer demands and rising technologies.
Collaborative fintech becomes increasingly popular, and investors believe in it: global investments in collaborative fintech startups increased
by 138% between 2014 and 2015, compared to 23% in competitive ones.8
Figure 4 | The unbundling of banks (selected sectors, global examples; global rise of investments in fintech)
International payment settled in 2012 Wide range of secure payment 2013

20 seconds not 6 working days solutions online
Mobile platform enabling wide 2011 Connecting SMEs with 2013

access to micro insurance investors
B2B platform to customize 2013 Money transfer 10 times 2011

investment portfolios cheaper, 5 times faster
Source: Wamda Research Lab, 2016
7 EY, 2016: The relevance challenge: What retail banks must do to remain in the game. http://tinyurl.com/z3tye73
8 Accenture, 2016: Fintech and the evolving landscape: landing points for the industry. http://tinyurl.com/herpqs2
- 12 -
THE ARRIVAL OF FINTECH IN MENA FINTECH
FINTECH STARTUPS Figure 5 | Geographical breakdown of fintech startups (# of fintech startups by region, 2015)
ARE EVERYWHERE
The Arab world was home to 105 fintech
startups by the end of 2015 (see methodology
for the underlying definition). While these
startups span 12 countries, it is notable that
they are equally distributed between GCC
countries, the Levant and North Africa (Fig. 5).
29%
North Africa
N = 30
43%
GCC Countries
N = 105 N = 45
29%
Levant
N = 30
- 13 -
ALMOST 3 IN 4 FINTECH STARTUPS ARE BASED FOUR COUNTRIES

Four out of 12 countries host 73% of all MENA fintech startups (Fig. 6). These four countries represent MENAs potential fintech hubs.
The concentration in the four hubs reflects the fact that these are the regions most advanced startup ecosystems, which grew mainly due
to governmental support, the involvement of the private sector, good education levels and political stability.
Figure 6 | Four emerging fintech hubs (share of fintech startups by country, 2015)
UAE 30
Egypt 17
Jordan 15 12% 14%
N. OTHER
Lebanon 15 AFRICA GCC
Morocco 8
16%
EGYPT
Kuwait 6 29%
UAE
Saudi Arabia 6
Tunisia 3 14%
JORDAN
Algeria 2 14%
LEBANON
Bahrain 1
Oman 1
Qatar 1 73%
North Africa GCC Countries Levant

- 14 -
HALF OF ALL MENA-BASED FINTECH STARTUPS

LAUNCHED AFTER 2012
MENA is a frontier ecosystem in a global context (compare Fig. 2). However, 2010 marked the beginning of an accelerating fintech
creation (Fig. 7). Indeed, half of all MENA-based fintech startups were founded after 2012. Hence, while the majority of the regions
startups are still in their early stage, the industry is poised to witness its second cohort of scale-ups before the end of the decade.
Figure 7 | MENA-based fintech startups (cumulative, 2002-2015)
CAGR1 2006 - 2010 CAGR 2011 - 2015 105
26% 40% 84
X2
62
46
30
19
15
9
5 6 6 7
1 3
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Newly Launched Cumulative Launches Source: Wamda Research Lab, 2016
1 - CAGR Compound Annual Growth Rate: a geometric progression ratio that provides a constant rate of return or growth over the time period.
- 15 -
Figure 8 | Countries driving fintech growth (cumulative numbers by country, 4 year CAGR, 2011 - 2015)
IN FACT, THE UAE

IS DRIVING THE 105
FINTECH SURGE 4 YEAR
CAGR 37%
Fintech startup creation is happening almost

three times faster in the UAE compared to
29%
Egypt, which is explaining why they switched 57%
their respective positions Egypt used to
host more than 1 in 4 MENA fintech startups,
now this position is held by the UAE (Fig. 8).
50% 14%
14%
30 32%
The UAE now hosts 17%
16%
as many startups 10%
as two of the other 17% 21%
three hubs combined. 26%
27%
30%
30%
2011 2015
Other Egypt Jordan Lebanon UAE
- 16 -
AND PAYMENTS TAKE THE LEAD

In fact, payments and lending startups represent 84% of all MENA fintech startups. Second wave sectors reached a point in 2016 that
payment startups hit five years ago a total of 20 startups. All three sectors have now crossed the inflection point after which growth
accelerates (Fig. 9).
Figure 9 | Fintech startup creation (cumulative number of startups by sector)
60
50
40
30
20
10
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Payments Lending & Raising Second wave sector Inflection point
- 17 -
SECOND WAVE Figure 10 | Fintech sector breakdown (cumulative number of launched startups, 2015)
SECTORS ARE ARRIVING

EVERYWHERE
Across all countries, payment startups form
the most prominent sector. On the other hand,
every hub country already hosts one or more 16%
second wave sector startups. In fact, the
MENA average is close to 20% (Fig 10).
Although the small sample size on a country

level renders further analysis obsolete it is
noteworthy that every country replicated the
MENA average.
50%
The arrival of solutions for remittances,
investments and insurance suggest the
potential for fintech is only emerging.
34%
Payments Lending & Capital Raising Second Wave Sector
- 18 -
MARKETS
DRIVERS AND BARRIERS FOR FINTECH
SCALING AND
COMPETING
FOUR BARRIERS
FOR FINTECH
THE FRAGMENTED
FIVE DRIVERS MENA MARKET
FOR FINTECH
FIVE DRIVERS FOR FINTECH MARKETS
LESS THAN ONE IN FIVE ADULTS HOLDS A BANK ACCOUNT

Widely unbanked populations are a barrier for fintech startups that try to improve services for banked customers. Without a bank account
there is no credit score, no personal verification, and no involved established financial institution.
However, financial exclusion comes at a high cost for both individuals and governments. Increasingly, people seek to gain access to some
kind of financial service. The key enabler for this trend is technology.
With internet penetration increasing and smartphone adoption almost tripling in the non-GCC market, a massive increase in electronic
payment solutions can be expected. Startups serve customer segments that are difficult for traditional banks to reach, such as rural
populations. Banks become more challenged to innovate, often through partnerships. Telecoms try to replicate the Kenyan M-PESA model
that provides access to mobile money through a simple mobile phone.9
These efforts encourage startup creation not only around payments but micro investments, micro insurance and remittances.
DONT HAVE A BANK ACCOUNT HAVE A BANK ACCOUNT
9 The Economist, 2013: Why does Kenya lead the world in mobile money? http://tinyurl.com/o59nw6t
- 20 -
MENA SME LENDING STANDS AT 50% OF THE GLOBAL AVERAGE

SME lending accounts for 8% of credit lending by Arab banks across MENA, compared to 18% in middle income countries globally. This is
despite the crucial role played by SMEs in the region they represent 80% - 90% of all formal sector enterprises, and account for 80-90% and
20-40% of all private sector employment.10
Peer-to-peer platforms and crowdfunding for social and creative projects have proven to be popular across the region. Interestingly, SME
lending is especially scarce in GCC countries (Fig. 11). This is driven by SMEs poor financial reporting, unclear ownership, the lack of a
centralized collateral register and missing credit bureaus.11 Peer-to-peer lending platforms promise to leverage algorithms and big data to
unlock a new way of raising money for small businesses.
Figure 11 | Share of loans to SMEs by Arab banks (per country, in percent)
24
20 Global average, middle income countries 18
16 15
10 MENA average 8
6
5 4 4
2 2 2
1 1
Morocco Yemen Lebanon Tunisia Jordan Palestine Egypt Syria UAE Oman Kuwait KSA Bahrain Qatar
GCC Levant North Africa Source: International Finance Corporation, 2011
10 World Bank, 2012: SMEs Job Creation in the Arab World. http://tinyurl.com/zq22f39
11 The World Bank, 2014: Why supporting Small and Medium Enterprises in the Gulf is Different. http://tinyurl.com/joejgkn
- 21 -
ECOMMERCE SET TO QUADRUPLE IN FIVE YEARS

GCC countries rank significantly higher in financial inclusion than the rest of MENA. Coupled with a much higher smartphone penetration and
one of worlds highest per capita GDPs, many of MENAs highest valued startups come from the ecommerce industry. Souq.com, MENAs first
unicorn, counts 34 millions unique visitors every month.
Yet the relative contribution of ecommerce to the GDP of GCC countries is still five times lower compared to other high-income countries. This
is partially driven by the unique preference for cash on delivery (COD) even among customers that do have credit and debit cards.
Fintech plays a crucial role in that it will boost ecommerce and benefit from its growth forecast to quadruple from 2015 to a $20 billions
market by 2020.12 The degree to which payment startups offer fast, secure, and convenient services, including instalment payments, will
shape the adoption rate of its services, thus fueling the growth of the digital economy.
Increasingly, interest in payment solutions also comes from traditional businesses including airlines, hotels, and telecoms seeking to digitize
their services.
$20 bn
2020
X4
2015
12 AT Kearney, 2016: Getting in on the GCC E-Commerce Game. http://tinyurl.com/jov3bmt
- 22 -
ONE IN THREE BANK Figure 12 | Anticipation of disruption (MENA-based corporations or regional subsidiaries, by industry, in percent)
CUSTOMERS WANTS TO
SWITCH HIS BANK Telecom 100%
MENAs banked population is increasingly
looking for a digital banking experience. In
tandem with global13 and regional14 surveys Media 57%
pointing to decreasing customer loyalty, a
survey of 1,429 banking customers in MENA
conducted by YouGov on behalf of PayFort Other 40%
and featured for the first time in this report
found that 47% of bank customers were
interested in using services provided by new Internet/IT 40%
companies offering payment, lending and
investment solutions.
Conglomerate 33%
Although 49 of the 100 largest Arab
companies are banks and financial
institutions, the majority is struggling to
Aviation 25%
quickly adapt to this trend. Wamdas survey
of over 120 corporate executives in MENA
revealed that those working in the banking
Banking 9%
industry were the least concerned about
potential disruption to their industry (Fig. 12).
Anticipating Not Anticipating Source: Wamda Research Lab, 2016
13 EY, 2016: The relevance challenge: What retail banks must do to remain in the game. http://tinyurl.com/z3tye73
14 EY, 2015: Three out of four GCC customers would be ready to switch [...]. http://tinyurl.com/gr5fueg
- 23 -
88% OF FINTECH STARTUPS SEEK CORPORATE PARTNERSHIPS

Fintech in MENA had a particularly difficult start due to outdated regulations, a lack of specialized talent willing to leave their career track for
the uncertain journey of entrepreneurship, and difficulties to scale across the regions fragmented, small markets.
However, with the regions first batch of fintech startups scaling up, the question becomes pressing for banks and insurers: will they establish
innovation strategies that integrate into the growing startup ecosystem?
To accelerate the global best practice of corporate startup engagement, Expo 2020 Dubai and Wamda developed a Corporate Toolkit on how
to strategically work with startups.15
Collaborative Entrepreneurship, as the initiative is called by Expo and Wamda, creates win-win partnerships between established corporations
and agile startups. Corporations are ideally positioned to help fintech startups overcome their largest barriers.
88% of the surveyed fintech entrepreneurs

were either seeking or already leveraging
partnerships with corporations.
15 Expo 2020 Dubai & Wamda, 2016: The Corporate Toolkit for Collaborative Entrepreneurship. http://tinyurl.com/j25pb8y
- 24 -
FOUR BARRIERS FOR FINTECH MARKETS
BANKS MAY LACK INNOVATION, BUT STARTUPS LACK TRUST

The good news for banks is that the threat stems less from fintech startups than from those banks that succeed with their innovation strategy.
Three out of four bank customers use the internet to purchase goods and services, and online payment services are used more often than
on-demand services (Fig. 13). This shows a faster uptake of ecommerce and online payments, compared to on-demand services. At the same
time, it highlights the fact that while online shopping has been widely adopted, fewer people are comfortable with online payments.
Figure 13 | Customer behavior (n=1,429)
Do you use the internet to shop, When shopping online, do you Do you use on-demand services
book flights, etc.? use online payment services? (food delivery, cab hailing apps)?
27%
37%
46%
54%
63%
73%
Yes No
However, virtually every other financial service receives a very mixed reception from bank customers mainly driven by three reservations:
Customers are not aware Customers prefer cash on Customers think new
of new services offered by delivery (COD), mainly due companies might be a
startups to security concerns scam
- 25 -
A LACK OF AWARENESS OF FINTECH STARTUPS, AND PARTIALLY

A LACK OF UNDERSTANDING SERVICES AVAILABLE AMONG THE
BANKED POPULATION
The survey shows that one in two bank customers is interested in fintech, but less than five percent have adopted offered solutions to date.
Although entrepreneurs point to customer acquisition as the fourth most pressing challenge, this finding points to a huge untapped potential.
Figure 14 | Are you aware of new companies in your country offering payment, investment or lending opportunities? (n=1,429)
50% 40% 10%
Skeptical Majority Untapped Potential Early-Adopters

40%
35%
30%
25%
20%
15%
10%
5%
0
No and I am Yes, but I am No, but I am Yes, I am Yes, and I am Yes, but using
not interested not interested interested interested glad I started them was not
using them convenient
GCC Levant North Africa
- 26 -
A LACK OF AWARENESS OF FINTECH STARTUPS, AND PARTIALLY A LACK OF

UNDERSTANDING SERVICES AVAILABLE AMONG THE BANKED POPULATION
Figure 15 | Are you looking for private investment opportunities / wealth management solutions? (n=1,429)
North Africa
15% 20% 8%
Levant
11% 19% 4%
GCC
11% 20% 6%
No, I don't understand this Yes, I am interested in regularly investing part of my savings Yes, I am using a service but I am not satisfied
- 27 -
SECURITY CONCERNS ARE A KEY REASON FOR COD PREFERENCE

AMONG THE BANKED POPULATION
Figure 16 | When would you abandon cash on delivery (COD) for another alternative? (n=547)
North Africa
67% 54% 18% 8%
Levant
64% 35% 24% 12%
GCC
54% 43% 18% 15%
If I am sure it is secure If it is cheaper than COD If COD is not offered by the merchant I will not use COD alternatives
- 28 -
SECURITY CONCERNS ARE A KEY REASON FOR COD PREFERENCE

AMONG THE BANKED POPULATION
Figure 17 | Think of some stores you purchase from on a regular basis.
They now advertise an app that allows mobile payments, i.e. you would no longer need cash. How would you feel about that? (n=547)
North Africa
24% 38% 34%
Levant
19% 35% 42%
GCC
22% 27% 47%
This would be amazing I am concerned about security, but I like the idea I still prefer to pay in cash
- 29 -
FEAR OF SCAMMERS KEEP UNSATISFIED BANK CUSTOMERS

LOYAL TO BANKS
Figure 18 | Would you use a new service that is faster and cheaper to send money abroad? (n=1429)
North Africa
22% 9% 14%
Levant
22% 12% 9%
GCC
29% 9% 16%
Yes - if it is offered by a bank I know Yes - if I know people that tried it before Yes - I am looking for new alternatives
- 30 -
THE FRAGMENTED MENA MARKET MARKETS
THE NON-GCC AND THE GCC MARKET

The markets for fintech in MENA can be analyzed across four domains (Fig. 19).
Figure 19 | Four market indicators
How much can people spend?
PURCHASING
POWER
GROSS
SMARTPHONE
How big is the market? DOMESTIC How widespread is daily
ADOPTION
PRODUCT internet access?
BANKED
POPULATION
How many adults hold

a bank account?
- 31 -
The per capita GDP in GCC The countries with the highest Smartphone adoption currently Financial inclusion is one of the
countries is one of the highest GDP are geographically correlates with per capita GDP: indicators where MENA as a
in the world and forms a strong dispersed. A high GDP it is significantly higher in GCC whole holds a negative record
contrast with non-GCC typically builds on both a larger countries. However, the rise of (Fig. 21).
countries. The use of population and a higher per affordable low end
purchasing power parity (PPP) capita GDP. A high GDP is one smartphones drive adoption in
adjusts the amounts to the of the most important poorer countries so that by
cost of living in respective indicators for an attractive 2020, North Africa will reach
countries. market, after considering the the adoption rates currently
LESS THAN 1 IN 5 ADULTS
business climate and stability. seen in GCC countries.
IN MENA HAVE A BANK
(Fig. 20).
ACCOUNT
Figure 20 | Smartphone adoption (% per region, 5 year CAGR, 2015, 2020) Figure 21 | Share of unbanked adults (in world regions, in percent)
78 High-income OECD economies 6%
18% 64
4% East Asia & Pacific 31%
61 Latin America & Carribean 49%
Europe & Central Asia 49%
South East Asia 54%

27 Sub-Saharan Africa 66%
Middle East 86%
non-GCC GCC
Source: GSMA Intelligence, 2016 Source: Global Findex Database, 2014
The high share of unbanked people can be attributed to a wide range of reasons including poverty, financial illiteracy, unreachable rural
population, and the prevalence of the informal economy. Financial inclusion could accelerate social and economic development and
contribute to stability and transparency.
- 32 -
TWO CUSTOMERS IN TWO MARKETS

Fintech serves two types of customers. The first is looking for basic access to financial services and doesnt hold a bank account. The second
is looking for an improved banking experience and additional services. The former depends on technology. A simple mobile phone can help to
transfer funds, however, most financial services require internet access and thus at least a smartphone. While todays unbanked population
also lacks smartphones, this will change by 2020.
NON-GCC MARKET GCC MARKET
Morocco Oman
POPULATION IN MN POPULATION IN MN
220 Jordan KSA 46
83% 17%
Egypt UAE
TOTAL GDP $ TOTAL GDP $
2.686bn
Tunisia Kuwait
3.099bn
46% Lebanon Qatar 54%
SMARTPHONE % Algeria SMARTPHONE %

27% 2015 64% 2015
61% 2020 Iraq 78% 2020
Source: Wamda Research Lab, 2016 Source: Wamda Research Lab, 2016 Source: Wamda Research Lab, 2016
Meanwhile, GCC countries have one of the highest smartphone penetration rates in the world.
These markets also host largely banked populations that increasingly expect a digital banking experience. The growth of the digital economy
further pushes for integration of payments into the digital economy.
But it is a simplification to think of the GCC as the high income market while non-GCC clients are the low income market. Poor migrant
workers constitute majorities in GCC countries, while the top ten percent in a large country such as Egypt make eight millions affluent
customers.
- 33 -
Figure 22 | The market potential of fintech in MENA (four indicators for selected countries, 2016)
NON-GCC MARKET
8 25
273 Morocco 39
AVERAGE
11 30 SMARTPHONE
83 Jordan 25 ADOPTION
997
2020
11 Egypt 23
14
127
11 Tunisia 27
27
61%
14 Lebanon 48
82 47
15 Algeria 22
583 50
15 Iraq 17
543 11
GCC MARKET
38 63
172 Oman 74
53 KSA 58
1,685 69
70 UAE 83
643 84
71 Kuwait 70
278 73
144 Qatar 83
321 66
Per capita GDP in PPP, in 1,000 USD GDP in PPP, in bn. USD Smartphone adoption in % Banked adult population in % Source: Findex, GSMA, World Bank.
- 34 -
SCALING AND COMPETING MARKETS
DRIVERS OUTWEIGH BARRIERS

Wamdas survey of MENAs fintech entrepreneurs found that acquiring customers and expanding into other markets form key challenges
(compare Fig. 28).
Acquiring new customers might be difficult, yet the potential is tremendous a survey among bank customers in MENA found that, while
almost one in two customers were interested in new fintech services, less than five percent have so far started using one (Fig. 14).
Scaling, on the other hand, is something that virtually all MENA-based fintech startups will have to struggle with as most individual markets of
the region dont exceed a few millions potential customers.
98% OF SURVEYED FINTECH STARTUPS PLAN TO EXPAND

Of the fintech startups surveyed, 40 out of 41 plan to enter new markets over the next two years. A regional breakdown of current markets
served shows that almost one in two startups already offer their service in the UAE.
The next most popular markets are Jordan, Egypt and Saudi Arabia.
Three in four fintech startups are planning to enter, or increase their presence in, GCC countries. The strongest increase in market presence by
MENA fintech startups, however, is happening in Sub-Saharan Africa (five-fold increase) and Asia (three-fold increase).
X5 X3
- 35 -
Figure 23 | Current markets served (% of fintech startups serving markets; n=41)
UAE 44
Jordan 39
Egypt 34
Outside of MENA 32
Saudi Arabia 29
Lebanon 27
Kuwait 24
Qatar 22
Oman 22
Bahrain 22
Iraq 17
Morocco 15
Algeria 12
Tunisia 10
One in three MENA
Palestine 7
fintech startups already
serve a market outside
Global 5
of the region
Syria 5
Yemen 5
MENA Outside of the Region Source: Wamda Research Lab, 2016
- 36 -
Figure 24 | Market presence of MENA fintech startups, by region (% of startups that serve one or more markets in respective regions, n=41)
73
61
51
48
46
30
24 25
23
20
15
10
7
5
GCC Levant North Africa Europe North America Asia Sub-Saharan

Africa
Current Presence Planned Expansion Source: Wamda Research Lab, 2016
- 37 -
OVER 20 INTERNATIONAL Figure 25 | Difficulty to compete (with local vs. international startup, n=41)
FINTECH STARTUPS HAVE

ENTERED MENA TO DATE
17%
The global rise in fintech drives the first 24%
cohort of international scale ups in the MENA
region. To date, over 20 startups from the US,
Europe, Australia and else-where entered the
Arab world. Competing against them is
difficult or very difficult for almost two in three
surveyed fintech entrepreneur (Fig. 25). 44%
However, the effect of more competition is not

only challenging there are multiple
opportunities and threats for local 76%
entrepreneurs.
39%
Local Startup International Startup

Rather Easy Difficult Very Defficult
- 38 -
OPPORTUNITIES THREATS
Educate the market Backed by stronger venture capital
Spur interest from corporations Stronger offering due to global scale
Employ future entrepreneurs Increase competition over talent
Test legal grey zones and set standards Secure monopolies/ can afford licenses
headquarters: United Kingdom headquarters: Switzerland headquarters: United Kingdom

founded: 2014 founded: 2012 founded: 2011
Dopay is a mobile banking solution for the Monetas is a blockchain startup that Launched by Skype's first employee and a
2 billions unbanked people worldwide. The envisions a world where everyone with a financial consultant, this startup on
startup went through the Barclays mobile phone can access all financial average facilitates international money
accelerator program and moved its main services. The startup offers central banks transfers eight times cheaper and five
office to Egypt. Its cloud-based payroll a way to issue digital currency that times faster than banks. The company,
platform removes the hurdle of paying everyone with a mobile wallet can access. which counts Andreessen Horowitz and
salaries to unbanked staff in cash. Dopay In 2016, the Tunisian central bank and the Sir Richard Branson among its investors,
issues Visa cards to account holders that national post choose this approach to is valued at above $1 billion and allows
enable them to withdraw cash from ATMs. move their eDinar on the blockchain users to sent money around the world,
Dopay raised $2.4 millions in early 2015. through a partnership with Monetas. including many MENA countries.
CASE STUDY mobile banking CASE STUDY blockchain CASE STUDY intl. money transfer
More Examples
Payments Lending & Capital Raising Second Wave Sector
- 39 -
STARTUPS
EMERGING FINTECH SOLUTIONS
MENAS
LENDING SECTOR
MENAS MENAS
PAYMENT SECTOR SECOND WAVE SECTORS
MENAS PAYMENT SECTOR STARTUPS
From bill payments to national payment transfers to choosing the best bank account to do all of the above, fintech has been able to improve
transaction services significantly. Bill payments become faster, more secure and more convenient. Mobile wallets replace cash in designated
stores. Payment processors allow people to sent money instantly inside a country.
BEFORE FINTECH AFTER FINTECH

Cost: Transportation + opportunity cost of time spent Small fee, no time lost
Convenience: Often carrying cash, paper receipt Digitally verified, encrypted
Ecommerce/ B2C: No access to unbanked, high cost PSP/ payment gateways
headquarters: Jordan headquarters: Iraq headquarters: Egypt

Madfoo3at won the contract from the Ideal Payments partnered with Iraqs Fawry is a digital multi-channel payment
Jordanian government to build largest remittance company and a Belgian platform allowing customers to transfer
eFawateercom, the national electronic bill mobile money service provider to create money in a convenient way without the
presentment and payment service the Taif Ewallet app. The entrepreneurs, need for a bank account. The startup was
gateway. Since then, the startup has been who have experience with Goldman Sachs acquired for $100 millions in late 2015. As
working with 49 billers and connected its and the Trade Bank of Iraq, aim to create a of today, Fawry counts over 15 millions
system to 23 of Jordans 25 banks. As of solution for the unbanked that allows them customers and settles 1.3 million
mid 2016, the company is processing to receive their salaries in the app, pay for transactions every day. In addition to the
4,000 bill payments every day, bringing its fees, and send money to friends and option of sending money with mobile
total amount of processed payments to family. phones, it offers online accounts.
over $100 millions. Madfoo3at, which was
initially incubated at Oasis500, raised $5
millions in 2015 (Series A).
CASE STUDY Bill Payments CASE STUDY Mobile Payments CASE STUDY Online Payments
- 41 -
MENAS PAYMENT SECTOR STARTUPS
The future of retail is mobile - whether

online or offline - and Beam Wallet helps
businesses harness the potential of this
headquarters: United Arab Emirates headquarters: Egypt
with no additional investment, risk or
founded: 2012 founded: 2013
complication to their everyday operations.
Beam Wallet allows customers to link their PayMob is a Payment Service Provider
credit card to its app for cashless (PSP) that takes on the problem of Nadim Khoury, Beam Wallet
shopping experience. The startup, which wide-spread COD by offering convenient
raised a significant investment from Majd mobile payments. The startup is
al Futtaim in late 2014, had over 350,000 processing millions of transactions and
people using its mobile app at over 3,000 hundreds of millions of dollars per year,
stores in the UAE as of mid 2016. Beam according to its founders. In 2016 they
Wallet signed a partnership with telco raised an undisclosed Series A investment PayMob achieved a 75x growth rate in the
provider du and MasterCard to extend its from A15. first two quarters of 2016 and plans to
reach. reach 200x before the end of the year.
Fadi Antaki, A15

CASE STUDY Wallets CASE STUDY Payment Service Provider
More Examples
*examples of relevant fintech startups available in MENA countries
- 42 -
MENAS LENDING SECTOR STARTUPS
Lending and capital raising used to be a monopoly of banks. For a widely unbanked population and low SME lending rates by banks, this
situation had wide reaching repercussions. With crowdfunding, money circles, peer to peer lending platforms and loan comparison sites,
citizens and small businesses are empowered, as new opportunities emerge for those either looking to invest, or to fundraise.

Providers: Limited (family, friends) Community on platform
Credit score: Unreliable, difficult to obtain Generated online
Investment: Significant minimum amount Affordable to masses
Transparency: Limited Increased
We moved from the UK to Egypt because

the market is attractive and easy to
penetrate. We acquired 1,100 paying
headquarters: Egypt headquarters: Jordan users within three weeks, without any
founded: 2014 founded: 2013 marketing.
Moneyfellows is digital credit lending Liwwa enables private investors to provide
Ahmad Wadi, Moneyfellows
platform that is fully driven by the social SMEs with access to finance before late
network of its users. The money circle 2016, the startup channelled $2.5 millions
idea, known as gam`iyya in Egypt and to 104 companies, using an innovative
common in over 90 countries, allows credit scoring model. The startup raised
people to take out a loan without relying $2.8 millions in two rounds within 12
on a bank. It enables users to build a months, counting a regional bank among
63% of MENAs SMEs dont have access
credit score based on their performance in their investors.
to finance. The total SME financing gap
their money.
amounts to $240 billions.
World Bank, 2014

CASE STUDY Money Circle CASE STUDY Peer-to-Peer lending
- 43 -
MENAS LENDING SECTOR STARTUPS
headquarters: Lebanon headquarters: United Arab Emirates headquarters: United Arab Emirates
With Zoomaal, people and initiatives have Investments in real estate used to require Compareit4me brings transparency to the
a platform to pitch their ideas to a wide significant amounts of money, but Durise bank account, loan and, recently,
audience that includes the Arab diaspora. offers equity stakes in crowdfunded insurance packages offered by banks in
To date, the platform has enabled the commercial and residential buildings different MENA countries. Users can
transfer of $2 millions into over 140 starting with $5,000. Durise then manages compare not only prices but the features
projects ranging from a music album, a the property on behalf of the crowd, of those different products, saving them
documentary, to an innovative hardware allowing people to invest smaller stakes in the time to research themselves or, over
product and even a coworking space. In multiple projects in the UAE. years, paying significantly higher fees for
October 2016, the team launched less. To date, the company raised almost
Givingloop.org, a platform enabling $6 millions and now employs around 40
non-profits and social initiatives to raise people.
monthly donations from the community.
CASE STUDY Crowdfunding CASE STUDY Equity Crowdfunding CASE STUDY Loan comparison
More Examples
*examples of relevant fintech startups available in MENA countries
- 44 -
MENAS SECOND WAVE SECTORS STARTUPS
Beyond payment services, fintech startups target lending and capital raising, including international payments, wealth management, and
insurance services.
INTERNATIONAL MONEY TRANSFERS

Remittances are more than 3x higher than
Remittances to developing countries amounted to $431.6 billions in 2015.16 Among global official development assistance (ODA),
remittance flows, Saudi Arabia ranks second and the UAE fourth in amounts of remittances which amounts to $135bn.
sent annually, accounting for $36.9 and $19 billions, respectively. World Bank, 201517

Duration: 3-6 working days 1-4 working days
Cost: 7.4% of amount sent on average 0.5%-1% of amount sent
Safety, convenience: Receiver has to go to a branch in-app, mobile money etc.
More Examples
headquarters: United Arab Emirates

founded: 2016
Now Money is the first mobile banking app in the GCC countries. With 80% of the UAE
population earning less than $1,400 per month, bank accounts are out of reach for over 6
millions workers. The startup offers employers a bank account for every employee. Employees
can use the built-in mobile remittance function to send money home. NOWs cofounder won the
first place at the 2016 Women in STEM Conference pitching contest.
CASE STUDY *examples of relevant fintech startups

available in MENA countries
16 World Bank, 2016: Remittances to Developing Countries Edge Up []. http://tinyurl.com/zm3nwgh

17 World Bank, 2015: Global Monitoring Report 2015/2016. http://tinyurl.com/gqn8ovr
- 45 -
WEALTH MANAGEMENT
For a widely unbanked population, saving money means storing cash somewhere at home. For expats and high net worth individuals,
investing their savings means relying on a professional wealth manager. But for both segments, digital services have become available
internationally and they are making their way into the MENA region.
GCC countries, having one of the worlds highest per capita GDPs and significant expat communities, to date almost lack regional peers of US
startups such as Betterment and Wealthfront but this is changing. Education will be key to make the new solutions popular among potential
clients.
- 46 -

Small savings: Cash at home, current account Investment platform
Return on savings: Negative under inflation Interest rate
Security of savings: Not guaranteed Usually provided
Larger investment: 4% fee for AuM 0.25%-0.5% of AuM
Performance: Underperforms stock markets ETFs replicate stock markets
More Examples
headquarters: Egypt headquarters: United Arab Emirates

founded: 2015 founded: 2015
A platform for monthly investments with a Finerd provides tailored investment *examples of relevant fintech startups available in MENA countries,
Masareef and Wally are currently only budget tracking apps
clear mid-term goal that invests the solutions based on a person's income, risk
cumulative amounts while giving users the appetite and desired time frame for the
flexibility to change their plans. The investment. The platform is the first
visualized goal comes with offers for robo-advisor in the UAE and gained We build Finerd because there was an
discounts from various partnering significant interest especially from expats. obvious demand in the market. People
companies. No GCC resident is required to open an earn well, yet lack a pension plan. Right
account. now there is no good solution for their
money in the market.
David Martinez de Lecea, Finerd

CASE STUDY CASE STUDY
- 47 -
INSURANCE
If MENA has a high rate of unbanked adults, its uninsured rate is staggering. Insurance technology startups are very new globally, but
examples in India and Africa indicate that people are eager to enroll in microinsurance if offered the opportunity. In addition, comparing and
buying car insurance is becoming increasingly popular.

Accessibility: Banked population Everyone with a phone
Affordability: Middle and high income population Low income majorities
More Examples

founded: 2015
*examples of relevant fintech startups
Democrance connects large insurance providers with a variety of mobile operators to offer a
vastly uninsured region access to basic insurance products via their mobile phone. This first
mover for microinsurance in MENA thus eliminates the need for a bank account and offers all
stakeholders a clear value proposition. The penetration for microinsurance is
0.3% in MENA; but mobile penetration
stands at 120%.
Michele Grosso, Democrance

CASE STUDY
- 48 -
BLOCKCHAIN AND CRYPTOCURRENCIES

Blockchain is still in its infancy. Among its potentially endless applications are There is a strong analogy between
cryptocurrencies of which Bitcoin is the most famous. In MENA and globally, regulators have internet and Bitcoin.We can try to resist it,
been divided between opponents and enthusiasts. Blockchains underlying technology and safeguard the current mechanisms;
but the downside is all the innovation is
allows strangers to trust each other with no central authority being involved. This is achieved
going somewhere else.
through an open, distributed ledger and strong encryption.
Abdullah Almezairee, BITFILS

Intermediary: Crucial (e.g., bank, lawyer) Eliminated
Time: Several working days Actions take effect within minutes
Cost: Transaction cost linked to intermediary Significantly reduced
More Examples

founded: 2014
BitOasis is one of the regions first cryptocurrency startups. The secure wallet is currently
available in all GCC countries and allows people to purchase bitcoins. They can send this
money around the globe without using a bank account, at the speed of an email. The
multi-signature wallet security offers high security standards. BitOasis raised a seed round from
Wamda Capital and PayFort, among others in 2015.
*examples of relevant fintech startups
CASE STUDY
- 49 -
BEYOND FINTECH Figure 26 | Finance-related startups in MENA (examples across different sectors/ functionalities)
Financial technology increasingly interacts

Accounting
with various technologies and solutions Compliance
developed by other companies established Invoicing
ones and startups alike.
The lines are sometimes blurred however,

the surrounding sectors tend not to involve Platforms & Security &
financial institutions (and dont replace them directories encryption
either). And while it is not clear how these
trends will ultimately interact, it is noteworthy
that they started to reach MENA (Fig. 26).
FINTECH
Cloud &
Customer
big data
loyalty
analytics
Software as
a service
- 50 -
ECOSYSTEM
KEY CHALLENGES TO OVERCOME
POLICIES & REGULATIONS
HUMAN CAPITAL
SUPPORT & INVESTMENT

MARKETS & DEMAND
FOUR CHALLENGES TO OVERCOME ECOSYSTEM
FOUR DOMAINS IMPACT Figure 27 | Fintech ecosystem (core domains affecting fintech startups)
THE POTENTIAL OF
FINTECH STARTUPS
The number of fintech startups launched and
the share of startups that successfully reach p. 55 p. 59
high growth trajectory is, to a large extent,

influenced by four domains. Together, these POLICIES AND REGULATIONS HUMAN CAPITAL
domains form the fintech ecosystem (Fig. 27). - Incentives for entrepreneurs - Skilled workforce
- Incentives for investors - Entrepreneurial culture
- Facilities, grants, programs - Financial services professionals
- Progressive fintech regulations - Incentives to work for startups
p. 62 p. 68
SUPPORT AND INVESTMENT MARKETS AND DEMAND

- Accelerators - Market size and growth
- Angel investors and VCs - Competition and business climate
- Corporate venture funds - Demand for innovative solutions
- Collaboration initiatives from banks - Trust & readiness to try fintech solutions
- 52 -
ONE IN FOUR FINTECH Figure 28 | Key challenges for fintech entrepreneurs (n=41)
STARTUPS SHUTS DOWN Dealing with

financial regulations
The failure rate for MENA fintech startups
(28 %) can, to a large extent, be attributed Hiring & retaining talent
to the challenges that entrepreneurs are
facing (Fig. 28).
Raising funds from
investors
To learn how to overcome these challenges, Acquiring customers

please refer to the recommendations (p. 72).
Expanding into
other countries
Competing against
established corporations
Fintech is probably one of the hardest
Competing against
industries to innovate in.
international startups
Ayman Ismail, AUC Fintech Accelerator
Building corporate
partnerships
Competing against
local startups
0 20% 40% 60% 80% 100%
Very difficult Difficult Rather easy Source: Wamda Research Lab, 2016
- 53 -
ONE IN TEN FINTECH STARTUPS SCALES UP

Among the startups that launch, a minority around 10% - grow fast, meaning they found ways to maneuver the cited challenges. Since data
on customers, revenues and month-on-month growth is kept confidential by the majority of startups, this phenomenon is best tracked through
the number of employees hired and investments secured (Fig. 29).
Figure 29 | Fintech scaleups in MENA
10% of startups get 10% of startups employ

43% of fintech investments 55% of fintech employees
10% 43% 10% 55%
1,650 employees
$61mn
n=41
n=90
Startups Investments Startups Employees

- 54 -
POLICIES AND REGULATIONS ECOSYSTEM
NO EASY START, FOLLOWED BY A GREY ZONE

Among 18 Arab countries, only four rank in the upper third globally when it comes to the ease of starting a business (Fig. 30). Given the
additional regulations on fintech, it can be argued that more companies would have sprung up throughout the region had there not been such
strict regulations. Laws governing licenses for financial service companies were designed with traditional banks in mind. Hence, once a startup
begins to offer financial services, it is likely operating in a grey zone. If in doubt, it should apply for the license which costs $1-$3 millions in
most countries. The startup would require a significant upfront investment before reaching traction. As a result, many startups seek
partnerships with banks early on. While this approach often suits the startup, many entrepreneurs would benefit from a regulatory regime that
adjusts to the new fintech reality.
Figure 30 | The ease of starting a business (MENA country rankings, 2016/17)
The majority of fintech startups are

operating in a grey area. Startups are
faster than regulations and regulators
sometimes need time to fully understand
the advantage of a new innovation.
Faisal al Bitar, Oasis500, Jordan
1 Easy
Launching the company was not difficult -
63
being a financial service provider is
difficult! Being a payment institution is
120 something new, there arent many options
to be a fintech, legally.
189 Difficult
Ahmed Wadi, Moneyfellows
Source: World Bank, 2016
- 55 -
INCREASING AWARENESS Figure 31 | Fintech regulations in MENA countries (select examples, 2000-16)
FOR REFORMS Fintech sandbox Blockchain payment system

With the exception of the UAE, no Arab country
E-Dirham payment tool. Mobile payment eDinar system for
has officially referred to fintech as an ADGM launches financial freezone. unbanked and remittances.
opportunity. However, several countries have ADGM launches RegLab (fintech sandbox). Moved on blockchain through partnership
started to acknowledge the benefits, especially Dubai launches Global Blockchain Council. with Monetas.
of online payment solutions. In the process,
several interactions between governments and Payment platform Blockchain payment system
fintech startups took place (Fig. 31).
Government launched Arab worlds first Microfinance legalized for non-banks
What is missing in those initial steps, however, national Electronic Bill Presentment and MoU with Visa for e-payment of gov. fees.
is a proactive, visionary approach to the fintech Payment (EBPP) called Sadad. Framework for cashless economy
industry. Payment startups gained traction after Links customers, commercial sector and published by Center for International
local banks. Private Enterprise (CIPE).
2008, meaning it took regulators almost a
New law on mobile money introduced
decade to embrace the new technology. What
Citizen arrested for trading bitcoins against
about lending that took off a few years later? Payment platform
US dollars on LocalBitcoins.com.
Crowdfunding remains illegal in many countries,
at least when equity is involved. Second wave Central bank launches eFawateer payment
platform with Madfoo3at. Upcoming payment system
sectors, who could have an even stronger
Bitcoin prohibited for financial institutions
impact, might face even more hurdles. BitCoin, digital wallets and mobile money
Regulations were developed with traditional legalized for financial institutions.
Bitcoin banned
financial institutions in mind. As fintech E-payment platform by central bank,
becomes a phenomenon that countries around telecom, and others to be rolled out by
Central bank licenses PinPay. end of 2017.
the world have to deal with, MENA regulators
Bitcoin prohibited for financial institutions.
can learn from various approaches, the worst of
which would be to ignore or discourage the
overdue innovation of financial services. Negative reform Positive reform No reform Payments Other Cryptocurrencies/Blockchain
- 56 -
OVER 85% OF FINTECH Figure 32 | Fintech entrepreneurs on financial regulations (MENA-based fintech entrepreneurs, 2016)
ENTREPRENEURS WOULD Rather easy Difficult Very difficult
RELOCATE FOR BETTER

REGULATIONS 5%
Although less than one in five entrepreneurs

In relative terms, dealing
describes fintech regulations as very bad, with financial regulations 46%
almost 1 in 2 report dealing with regulations to for your startup is
49%
be very difficult. If policymakers in any of
MENAs fintech hubs decided to introduce
fintech-friendly regulations, they might attract
dozens of growing fintech startups as 85%
would consider moving their headquarters to
n=41 numbers might not add up due to rounding errors
reap the benefits of more supportive regulations
in the future (Fig. 32).
2
12% %
Would you move to another

country to benefit from
fintech-friendly regulations?
85%
No Yes, maybe in the future Yes, we already moved here because of regulations
- 57 -
A FINTECH SANDBOX FOR BEIRUT, AMMAN AND CAIRO?

A fintech sandbox is a legislation that allows companies to test their innovation for a specific period of time without having to comply with all
regulatory bodies. It allows governments to learn about new innovations, banks and startups to test new technology, and is becoming
increasingly popular around the world.
Supporters argue a national sandbox for Lebanon, Jordan and Egypt would benefit not only
startups, but also banks and policymakers cautious about the impact of fintech on the
One of the key challenges in Jordan is the
stability of the financial system. Wamda spoke with at least one institution in each country lack of a fintech sandbox. Fintech, being a
that suggested they were working on a plan to push for a local sandbox. highly regulated industry, requires the
startup to work with a bank. For
Critics hold that there are more pressing challenges (e.g., accelerators, investment, acquiring entrepreneurs to test their solution, they
customers). In some instances, established banks gain preferential access to the sandbox, need at least someone that helps to
thus raising the question how far it would benefit entrepreneurs. Last but not least, it is often mitigate the risk along the way.
argued that the most promising startups would not go through a 12-month sandbox cycle.
Faisal al Bitar, Oasis500, Jordan
While sandboxes are a good step to boost fintech, they alone are not enough. Governments
can offer smart banking licenses, push e-payments further, and learn from other countries on
how to deal with cryptocurrencies. As always, the devil lies in the detail.
Any structure to test ideas away from the

regulatory eye would be great, but its not
Globally, the following countries have a sandbox in place or announced an upcoming
regulations that are stopping startups.
launch: USA, UK, France, Australia, China,Singapore, Thailand, Malaysia, Indonesia etc.
What is truly lacking are support
mechanisms look how the UK is
Abu Dhabis ADGM finance free zone is the only institution having launched a fintech encouraging entrepreneurs through
sandbox in MENA to date. coworking spaces, grants, tax breaks and
much more.
Having a fintech sandbox in MENA countries will be beneficial if the initiative is part of
broader efforts to foster innovation in the sector. Willie Elamien, Flat6Labs, Egypt
- 58 -
HUMAN CAPITAL ECOSYSTEM
FINTECH STARTUPS LOOKING FOR TOP TALENT

Entrepreneurs repeatedly mentioned the difficulty in finding highly skilled talent from the finance industry, as well as top programmers. Because
a good understanding of both finance and tech is critical, and because top talent finds attractive job offers in large corporations, the hiring
aspect for fintech startups is particularly challenging.
TALENT WAR TOUGH FOR MENA STARTUPS

To build a strong team, entrepreneurs face not only the challenge to identify applicants with The fintech industry is not easy, because
the right skill set, but have to compete with large corporations and the public sector. 64% of you need expertise in both technology
and finance.
the workforce finds working for a corporation more appealing, and 41% like to work for the
public sector. Only 12% of employees said that they themselves would like to work for a Ayman Abouhend, Wallstreetchambers
startup.18
A key reason are the overall low salaries earned at average MENA startups: 52% of entrepreneurs across MENA offer ranges between $250 to
$1,000 a month, while only 15% of the workforce is willing to work for less than $1,000 per month.19
$250 $1,000 0 $1,000
52% 15%
ENTREPRENEURS ACROSS MENA WORKFORCE

Source: Wamda Research Lab, 2016 Source: Wamda Research Lab, 2016
18 Wamda Research Lab, 2016: Access to Talent for MENAs entrepreneurs. http://tinyurl.com/z9tkep8
19 ebd.v
- 59 -
FOUR IN FIVE ENTREPRENEURS HAVE INDUSTRY EXPERIENCE

The majority of fintech entrepreneurs started their career at large corporations. The average fintech entrepreneur is a graduate with
international experience and industry-relevant work experience (Fig. 33). It is worth noting that two in five founders were entrepreneurs before
it is just their first time as a fintech entrepreneur.
Figure 33 | Demographics of MENAs fintech entrepreneurs (n=40) Source: Wamda Research Lab, 2016
What is your age? What is your educational background? How many years of work experience
do you have?
18 - 24 3% Secondary school 3% None 3%
25 - 34 50% Undergrad 18% 1 - 2 Years 8%
35 - 44 38% Graduate 48% 3 - 5 Years 13%
45 - 54 8% MBA 33% 6 - 10 Years 30%
55+ 3% 10+ Years 48%
What is your gender? Do you have international Are you a first-time Do you have previous work experience
experience outside of MENA? entrepreneur? in the financial services industry?
8% 56% 18% 5% 21%

21%
33%
92% 46%
Yes, in a leading position

Yes Yes, in an entry/mid-level position
Female Yes No, but this is my 1st fintech startup No, but my co-founder worked in the industry
Male No No, I was involved in fintech startups before None of our founders have an industry-relevant background
- 60 -
FINTECH STARTUPS Figure 34 | Fintech employees (# of MENA fintech startups by employees)
EMPLOY 1,600+
PROFESSIONALS 63%
Over 1,600 people report on LinkedIn being The largest 10% of fintech startups
currently employed at one of 90 examined created 55% of all fintech jobs.
fintech startups which are either based in
MENA or have their main office there. While
these numbers are only indicative, they reveal
three interesting insights: First, even by a very
cautious estimate, between one and two
thousand professionals in MENA work for a
regional fintech startup an industry that 35%
almost didnt exist half a decade ago.
Second, scaleups create most of the jobs in 28% 28%

fact, one out of two fintech jobs is created by
25%
nine scaleups, a startup that reached a fast
growth rate. This finding is consistent with
studies that found a minority of SMEs to
account for the majority of new jobs created.
12%
Third, as the vast majority of fintech startups
have been launched over the last three years, 7%
we can expect hundreds of jobs to be added 2%
by the next cohort of scaleups before the end
of this decade. < 10 < 50 < 100 < 250
Startups Employees Source: Wamda Research Lab, 2016
- 61 -
SUPPORT AND INVESTMENT ECOSYSTEM
ONLY 1 IN 4 STARTUPS WENT THROUGH AN ACCELERATOR...

BUT THIS IS ABOUT TO CHANGE
Industry specific accelerators in MENA are rare. As a result, only one in four fintech startups went through an accelerator with a
sector-agnostic approach. This presents a huge opportunity for financial service companies to either bring their global accelerator program to
MENA, or to partner with an established accelerator to test the waters. In fact, 2016 showed interest heating up with the first fintech
accelerators arriving in MENA (Fig. 35).
Figure 35 | MENA fintech accelerators
LAUNCHED 2016 POSSIBLY LAUNCHING 2017
May 2016 | Cairo, Egypt The regional CIO for MEA told
1864 Accelerator Computer Weekly in 2016 his bank
was investing in setting up fintech
incubators across markets such as
July 2016 | Cairo, Egypt
Dubai and Singapore.
AUC Venture Lab
FinTech Accelerator
ADGM signed a MoU with the UAE

November 2016 | Abu Dhabi, UAE branchof the Flat6Labs accelerator
ADGM Fintech Sandbox
to develop the fintech eco-system
in Abu Dhabi.
January 2017 | Dubai, UAE
Fintech Hive
- 62 -
88% OF FINTECH STARTUPS WANT TO COLLABORATE

WITH LARGE CORPORATIONS
Tough regulations or daunting grey zones, a lack of customer trust and a need for investors and mentors are among the many reasons for
entrepreneurs to prioritize corporate partnerships. Of those that have a partnership, the vast majority reports a clear benefit for their startup
(Fig. 36).
Figure 36 | Corporate partnerships in MENA (n=41)
Does your startup pursue partnerships with large corporations?
and do they benefit you?

12%
6%
11%
44%
44%
83%
Yes - we have partnerships Partnerships benefit us

Yes - we are looking for partnerships It is not clear yet if they benefit us
No - we are competing against corporations Their impact wasn't as expected
Source: Wamda Research Lab, 2016 Source: Wamda Research Lab, 2016
- 63 -
CORPORATIONS FROM 8 INDUSTRIES SIGN PARTNERSHIPS

Entrepreneurs are well aware that innovation in financial services is not limited to the banking industry. In fact, there are established companies
from eight industries that already signed partnerships with MENA fintech startups (Fig. 37). The highest increase can be expected in
entertainment, media and insurance. The presence of numerous startups in the former two industries could lead to interesting startup alliances
or even acquisitions.
Figure 37 | Existing and planned corporate partnerships (by industry; n=41)
78
68
62 61
50
47
39
35 35
28 29
21
17 17 17
11
Banking Telecom Ecommerce Retail Entertainment Insurance Logistics Aviation
Existing partnership Planned partnership Source: Wamda Research Lab, 2016
- 64 -
FINTECH STARTUPS RAISED $100 MILLIONS

The majority of deals in MENA came with undisclosed amounts. To get an understanding of the total amount invested in regional fintech
startups, Wamda used cautious estimates20 on undisclosed round sizes based on historical data (Fig. 38).
Considering minority acquisition deals as well as those investments that were reported in Wamdas survey but not found in publicly available
data, a total amount of at least $100 millions emerges as realistic estimate (Fig. 39).21
What is notable is that the transition from 2015 to 2016 presented the sharpest rise in fintech investments 43% by numbers of deals and
almost 100% by deal amounts.
Figure 39 | Total fintech investments (in MENA, in USD mn, 2007-2016)

Figure 38 | Fintech investment rounds in MENA (amounts in USD mn, 2010-2016)
USD in mn # of Deals
100
10
10
30
8
7
6 6 17
6
5
4
2 53
2
2
0
2010 2011 2012 2013 2014 2015 2016 Survey amounts Disclosed deals
Disclosed deasl # of Deals Minority acquisition Source: Wamda Research Lab, 2016
20 The cautious estimate uses the lower end of the range.
21 The survey asked for ranges, e.g. $0.5-$1mn. We used the lower end of the range (e.g. $0.5mn) and multiplied the total amount by 15% (given that some of the investments will be closer to the higher end of the range).
- 65 -
CORPORATIONS STARTED TO INVEST IN FINTECH AFTER 2013

Already in 2014, when the number of fintech startups launched hadnt doubled yet, a variety of investors started to bet on MENA fintech startups.
Between 2010 and 2013, at least $16 millions was invested; between 2014 and 2016, the amount totaled $36 millions. This amount came from
international venture funds, accelerators and most recently banks that started participating in the investments (Fig. 40). The advent of
corporations as investors is a sign that fintech startups have a clear value proposition while executives understand the potential of these startups.
Figure 40 | Background of investors per round (% of investor types per disclosed deals, n=37, 2010-2016)
Diversification reduces relative share of MENA
VCs to 50% - but the overall pie grew
100%
80%
73%
60%
50%
40%
20%
100% 50% 82% 60% 29% 64% 58%
0%
2010 2011 2012 2013 2014 2015 2016
VC (MENA) VC (intl.) Accelerator Corporation Bank Private Equity Angel Investors Source: Wamda Research Lab, 2016
EXAMPLES OF
INVESTORS IN
MENA FINTECH
STARTUP
- 66 -
STARTUPS ARE LOOKING FOR SERIES A DEALS

Three main trends will continue to characterize fintech investments.
First, the advent of upcoming accelerators and the high share of startups founded very recently implies a high demand for initial funds and
seed rounds.
Second, it is important to notice how the majority of investments are below $3mn, which implies that these startups had no chance of
receiving a banking license to operate independently.22 While many fintech companies built upon the infrastructure of banks and credit card
providers, this significantly inhibits the opportunity of so-called challenger startups that seek to partially replace traditional banks.
Third, the rise of nontraditional investors such as international VCs and corporations is timely as a small but promising sample aims for
significantly larger rounds to scale their companies. Fintech startups, in most cases, have to target vast markets to make their scalable
business model work. This requires significant investments.
03
01
02
FINTECH
STARTUPS
22 The amount required for a banking license varies between $1mn and $5mn according to various experts Wamda spoke to. In the UAE, for example, the amount of $1.5mn is required.
- 67 -
FINTECH FUNDING Figure 41 | Funding rounds (n=41)
DEMAND IN 2017 TO
SURPASS $50M Until today how much 7%
funding have you raised? 20%
Based on historical data, the average seed and
46%
the average Series A round amount for MENA
fintech startups has been taken into
consideration in order to estimate the 7%
investment demand for 2017.
46%
None <1M <3M
Based on Wamdas survey, even a cautious
<10M <25M
estimate points to at least $50mn that is in
demand. Not all startups that plan to raise funds
will manage to do so; and among those that do,
the round size might be significantly below the
historical average.
Are you looking to raise funds
However, other startups that havent within the next 12 months? 3
%
participated in the survey will raise as well. In 15%
addition, the rising share of Series B and C 15%
could easily produce an outlier that significantly 13%
Of the fintech startups looking for
increases the real amount invested. investment during 2017, 2 in 3 65%
aim to raise Series A, B and C.
35%
If $50mn would be indeed invested over 2017, it 38% 18%
would mean that investments grow 2.5 times
compared to 2016. This would be a strong
indicator suggesting that MENA is about to No Angel Seed
Series A Series B Series C
transition from the frontier to the emerging
market in fintech (compare Section 1.2).
- 68 -
MARKET AND DEMAND ECOSYSTEM
Fintech startups in MENA are facing five drivers and four barriers that impact their growth. What is more, the individual markets differ
significantly across four indicators. Scaling and competing is further affected by competition from international startups entering the region.
Together, this complex and dynamic environment requires careful analysis (Fig. 42). For a detailed analysis, refer to Section 2 on page 20.
Figure 42 | The market for fintech in MENA (four main areas for market analysis)
DRIVERS Regional level Country level COUNTRY INDICATORS
1. Less than one in five adults holds a bank account PURCHASING SMARTPHONE
POWER ADOPTION
2. MENA SME lending stands at 50% of the global average How much can How widespread is daily
people spend? internet access?
3. Ecommerce set to quadruple in five years
GROSS DOMESTIC BANKED
4. One in three bank customers wants to switch his bank
PRODUCT POPULATION
How big is the market? How many adults hold
a bank account?
BARRIERS COMPETITION
FINTECH
1. Banks may lack innovation, but startups lack trust
STARTUPS
One in three MENA fintech startups already serves
a market outside of the region.
2. A lack of awareness of fintech startups, and a lack of
understanding services available Over 20 international fintech startups have entered
MENA to date and local startups recognize them
3. Security concerns are a key reason for COD preference as potential competitors.
among the banked population
4. Fears of scammers keep unsatisfied bank customers

loyal to banks
- 69 -
OUTLOOK
WHAT TO EXPECT NEXT
2020
SECTOR TRENDS
FINTECH GOES MAINSTREAM

SECTOR TRENDS OUTLOOK
PAYMENT SECTOR STARTS TO CONSOLIDATE

In 2010, fintech just meant digital payment. Of the few fintech startups that existed back then, almost all facilitated payments mainly aiding the
ecommerce surge.
In 2015, payment showed first signs of consolidation, at least in the GCC market (Fig. 43).
This was expected given that payment startups started to take the lead in fintech in the region. Even in countries that had their first couple of
fintech startups very recently, those startups happened to be in the payment sector such as Ideal Payments in Iraq, launched in 2016.
Figure 43 | Acquired payment startups (disclosed sample, 2014-2016)
2014
Beam Wallet Cash Plus Innovate Payments
2015
Fawry CashU Cashnomix Tasshilat White Payments
2016
Taajr Emerging Markets Payment

(EMP)
Minority Majority Full Source: Wamda Research Lab, 2016
- 71 -
SECTOR TRENDS OUTLOOK
SECOND WAVE SET TO SURGE

Meanwhile, crowdfunding and lending platforms continue to grow especially with a focus on specific geographies or themes. Eureeca, an
equity crowdfunding platform, is one of MENAs first fintech startups that went global.
Towards 2020, startups from the second wave sectors will rise to prominence: they will work in remittances, wealth management, insurance,
and probably blockchain-based solutions.
Based on growth trends of payment, lending and second wave sectors, it can be expected that one in three fintech startups will fall into the
second wave sector by 2020 (Fig. 44).
Figure 44 | MENA fintech startup creation (share of launched startups by sector, 2006-2020E)
2010 2015 2020E
5%
5%
16%
31%
36%
50%
34%
90% 33%
Payments Lending & Capital Raising second wave sectors Source: Wamda Research Lab, 2016
- 72 -
FINTECH GOES MAINSTREAM OUTLOOK
250 FINTECH STARTUPS BY 2020?

The MENA region witnessed a strong growth in fintech startup creation the number of startups launched doubled between 2013 and 2015.
Now it is standing at a crossroads: Are we about to witness an increasing quantity and quality of fintech startups? Or is the current uptake in
startup creation fading and slowing down?
Assuming the payment sector to start consolidating, and finding a similar growth trajectory for lending and second wave startups, at least 250
fintech startups will be launched by the end of this decade (Fig. 45).
Figure 45 | MENA fintech startup creation (cumulative number of startups launched, 2005-2020E)
FORECAST
252
X2.5
105
X5
19
X3
6
2005 2010 2015 2020E

- 73 -
The number of startups is only one indicator to take into consideration. A decreasing failure rate can increase the number of available
companies. An increasing rate of high growth startups is even more important as they account for the majority of job creation, investments
raised, and markets served (compare Fig. 29).
Fintech comes with numerous spillovers that help drive the digital economy in the region.
With 250 startups, the MENA region will still lag behind other regions. For example, Switzerland alone is already home to roughly 200 fintech
startups today.23 However, 250 startups implies an incredible success for a region that hosted less then 20 fintech startups by 2010.
To ensure this growth, an action plan is needed that unites governments, progressive private sector institutions and investors.
A fintech action plan for MENA would

result in a 12-fold growth of fintech startups
within this decade.
23 LTP, 2016: FinTech in Switzerland: A Quick Overview. http://tinyurl.com/jkxjvt5
- 74 -
UNLOCKING A VIRTUOUS CYCLE FOR MENA

For MENA, fintech presents a historical opportunity.The window for this opportunity is rather short an inactive approach would see failures
increase, international competitors take over, and the most passionate entrepreneurs leaving the region for Singapore, London and New York.
To capture the opportunity, MENA governments need to take the lead. This is due to the
economic significance of the public sector which can be illustrated by global benchmarks of 2017 will be a defining year for fintech in
its contribution to GDP, its share of the overall employment, but also its power in many Egypt and probably in the region.
countries to curtail emerging financial solutions that are not licensed by the central bank.
Ayman Ismail, AUC Fintech Accelerator
Figure 46 | The virtuous cycle for fintech
POLICYMAKERS TALENT
Awareness of the positive spillover effects of fintech on a diversified Rise of high growth fintech startups inspires executives in banks to turn into
knowledge based economy followed by entrepreneurs, leveraging their work experience and professional network
A vision to implement national e-payment systems, create a national credit 01 A community of seasoned entrepreneurs emerges to provide relevant
scoring system and encourage non-traditional SME funding schemes, while mentorship to the growing group of fintech entrepreneurs
The rise of the UAE fintech hub sets new standards that encourage Fintech startups are increasingly perceived as attractive employers
emulation of successful frameworks such as the fintech sandbox program
02
04
MARKETS & DEMAND SUPPORT & INVESTMENT

Increased demand from banked customers (4-fold ecommerce growth) Fintech accelerators are high in demand and graduate scalable businesses
Increased access for unbanked customers (27% to 61% smartphone International accelerators open a MENA branch as a result
03
adoption) coupled with increasing trust and cultural acceptance Investments allow startups to scale faster with the first cohort entering
Financial literacy and changing customer preferences go hand in hand with similar markets outside of the region (e.g. financial inclusion in Africa); in turn,
more security and transparency Increased interest from corporations to acquire fintech companies
- 75 -
THE EXPECTED IMPACT OF FINTECH
The rise of fintech will accelerate the Forces I didnt expect are pushing for We are not competitors of banks - nor are
whole startup ecosystem in MENA; its payments; e.g. the federation of Egyptian we collaborators. We are connected to
positive spillover effects on a range of Industries FEI, is pushing now for cashless mobile operators that get a share of our
industries makes it a key enabler for future payments revenues.
growth.
Ayman Ismail, AUC Fintech Accelerator Mostafa Elshafey, DCBEgypt
Walid Hanna, MEVP
Digital New
economy Telco business
models
Hospitality Logistics Smart
contracts
Ecommerce Disruption
Media Financial Digital

inclusion bank I am totally convinced that the true fintech
Microloans Roboad-
visory
Cryptoc-
urrencies
disruptions are still in the making. So far
Fintech is not re-establishing the bank. Bottom fintech is a bunch of clever kids but when
of the
Banks as silos are turned into a much pyramid the kids will turn punk, we might see
more democratic institution through amazing things coming up to the market.
tech What makes fintech so appealing And at this time, daddy bankers might
is its spillover effect in developing start to have real nightmares at night.
countries on individuals, their ability to Especially if the fintech ecosystem has the
keep money secure, use their disposable With new payment methods and services idea of partnering with peers rather than
income, get the best deals. new markets will emerge. with banks.
Walid Faza, Wamda Capital Amine Azariz, Fintech.ma Paul-Henri Moal, Consultant
- 76 -
RECOMMENDATIONS
REALIZING THE FINTECH OPPORTUNITY
WHAT NEEDS TO BE DONE TO

UNLOCK THE FULL POTENTIAL
OF FINTECH IN MENA?
STAKEHOLDER FINTECH HUB

RECOMMENDATIONS RECOMMENDATIONS
STAKEHOLDER RECOMMENDATIONS RECOMMENDATIONS
FINTECH STARTUPS
Most fintech startups face four core challenges - regulations, talent, investments and partnerships, and customer acquisition.
To address them:
Hedge against the risk of being shut down on regulatory grounds. Some entrepreneurs partner with financial institutions which allows them
to operate under their license, others talk to the central bank. A few startups were granted licenses from various central banks - but they are
costly. The option of joining Abu Dhabis fintech sandbox is worth consideration especially for those using completely new technology (e.g.,
blockchain). Try to identify the key regulations affecting your business and think of ways to raise awareness around the obstacles they are
representing for fintech - you might be able to find allies pushing for change.
Hire and retain the right talent. Building a skilled, committed team that believes in the mission of the startup lies at the core of successfully
growing a company. Channels of hiring can, depending on the country, involve universities, entrepreneurship events and social media. Highly
skilled professionals are often reluctant to leave well paying positions, which is where offering equity in the startup comes in.
We have to educate the ministry of We told the central bank - look, we are an Often people complain about a lack of
commerce, the central bank every opportunity for you to learn from our investors, but if you have a good business
authority that may have jurisdiction over experience to understand [this type of model your problem is to find talent, not
our activity. fintech] better. When there was no investment.
objection from the central bank, the
An entrepreneur commercial banks understood that there David Martinez de Lecea, Finerd
was no additional risk and provided us
with banking services.
Another entrepreneur
- 78 -
Approach the right investors at the right time. There are a few regional funds that have already invested in fintech companies; they
understand what sets fintech apart from other industries. For those that have a product with a clear value proposition it might be the right time
to pitch - for those that consider to scale it depends on the role taken by potential corporate partners. In some cases, e.g. if the payment
market consolidates in a country, being the first to raise a series C investment can be a decisive advantage.
Have a clear value proposition for your corporate partner. Typically, signing the first partnership is the most difficult one. What are the
priorities of the company you are approaching, and how can you help realize them? If you offer something that might benefit them even if they
havent explored this option yet, present a robust pitch. Are you offering something that was successful in markets similar to your country?
Educate the market and watch out for competitors. Talk to key stakeholders, be transparent about how it works and where risk might be.
Keep it simple. Several startups include a short video clip on their homepage that explains their offering. Some had to become amazing at
pitching the benefits of their service to banks. For customers, trust is vital - partnering with established brands can increase this significantly.
Last but not least, be aware of competitors in your market - be they local, international startups or existing corporations.
We are looking at fintech in a slightly Partnering with a regulated institution Dont underestimate the challenge of
different way while we want to see rapid gives us more safety; its a key strategy. education we had instances of people
growth in ecommerce, we think that thinking they knew how everything worked
fintech is still in its infancy and faces lots of Ahmed Wadi, Moneyfellows and were surprised to find they didnt.
regulatory barriers, so we are willing to
look at them at an earlier stage. Craig Moore, Beehive
Walid Faza, Wamda Capital
Many insurance companies don't

understand our model, but once we
educate them and explain the benefit of
our platform, they are very excited about
it.
Michele Grosso, Democrance
- 79 -
INVESTORS
Fintech has arrived in MENA. With an estimated $100mn invested over the last decade and around $50mn demanded in 2017 alone, there
will be a significant uptake in startups seeking to raise Series A, B and C. On a seed stage level, more startups can be expected in second
wave sectors, especially in the UAE.
There is no proven model. Successful fintech companies in MENA operate in different markets and sectors, and the small sample sizes on a
country and sector level should not be used as indicators for the potential of a startup. Instead, it can be shown that fintech gained a
significant foothold on an overall, regional level.
Corporations can co-invest. The majority of fintech startups are looking for partnerships with corporations from different industries. This
presents an opportunity for investors to lead rounds with participating companies.
We witnessed a huge increase in fintech At the moment we wouldnt mind Our Impact Fund has 15 Lebanese banks
applications, especially over the last year. investing in a variety of different fintech invested in it, and we are actively looking
What is notable is the variety of fintech sectors as long as they have a proven or for synergies with them on fintech
startups approaching us. potential model for a recursive and opportunities.
transactional business model.
Walid Faza, Wamda Capital Walid Hanna, Mena Venture Partners
Fadi Antaki, A15
- 80 -
CORPORATIONS
Fintech startups can provide corporations with a competitive edge. Whether it is easier access to unbanked people or more convenience
for affluent millennials, corporations from a wide range of industries have an opportunity to engage with startups that have a clear value
proposition.
Banks have a trust advantage, but Fintech startups increasingly offer solutions that cant easily be built in house. Banks that have a vision
to become digital, dramatically improve their offering, expand and consolidate the customer segments and SMEs they are serving can engage
with startups in multiple ways. Joint go-to markets, accelerators and investments are only a few.
MENAs frontier markets are underserved. Bank customers in North Africa were particularly interested in cashless payments and money
transfers. However, to date, especially the Tunisian and Moroccan market have been underserved. With their regulatory reforms, political
stability and largely unbanked populations, this represents unique opportunity to lead the democratization of financial services.
This toolkit aims to raise awareness of the An international bank with its financial
different types of corporate-startup capabilities and capacities to mentor
collaborations and providing guidance to entrepreneurs can play a huge role in
corporations. accelerating the ecosystem in Morocco
and beyond.
Expo 2020 Dubai and Wamda
Amine Azariz, fintech.ma
www.coentrepreneurship.com
- 81 -
POLICYMAKERS
Fintech is not a threat. The fast-paced change driven by technology requires a vision to capitalize on peoples efforts to innovate financial
services. Existing regulations were introduced with traditional banks in mind. Today, not only developed countries but many emerging markets
introduce new frameworks to consider new types of financial services providers. A body that studies these regulations and provides advice on
how to implement similar schemes can help to maneuver arising questions on fintech.
A fintech sandbox is great if part of a vision. The sandbox can allow policymakers to learn
about new technologies and test it before licensing the company. However, as a mere facility Policymakers need to come together with
the initiative could loose much of its potential. Fintech should be integrated into e-governance the progressive private sector entities to
and a strategy for a less cash-based society or having an efficient credit scoring system. implement an action plan for fintech. In
the case of Lebanon for example, this
plan would emphasize the need for
Provide a national action plan on fintech. This can involve specific goals e.g., an
startups to being able to scale out of the
e-currency for the ed by 2018 or generic incentives for investors, grants for startups and a rather small market quickly.
legislation that defines fintech startups and adjusts the requirements to their abilities (e.g. cost
of a license). Elise Mousa, UK Lebanon Tech Hub
Partner with fintech startups. Some of the most notable fintech companies in MENA won contracts to work on a national payment gateway,
and there will be countries that make credit scores accessible to fintech startups which will create high growth companies. For going this
potential could see startups resettle in fintech friendlier jurisdictions.
- 82 -
FINTECH HUB RECOMMENDATIONS RECOMMENDATIONS
For the emerging fintech hubs in MENA, all stakeholders must come together to create a competitive, sustainable ecosystem that makes
fintech startup creation and scaling easier.
ALL FINTECH HUBS
While governments are best A key disadvantage for MENA is its Given fintechs important spillover
positioned to take the lead, only an fragmented market, which makes it effects on a wide range of industries
alliance with forward thinking banks much more difficult for a startup to and its central role in financial
and investors can create the fintech reach the population that is available inclusion, fighting corruption and
ecosystem needed for a sustainable to fintech startups launching in the empowering customers, this industry
transformation of the financial US, EU, China or India. A long-term should form a central plan in any
services sector. plan by leading countries to align action plan towards a dynamic
regulations as well as corporations diversified knowledge economy.
taking products to several markets
are key to overcoming this obstacle.
- 83 -
FINTECH HUB RECOMMENDATIONS RECOMMENDATIONS
UNITED ARAB EMIRATES LEBANON AND JORDAN
Replicate the success of Singapore and aim to become an Asian Implement a national action plan supported by the central bank,
fintech hub through fintech friendly regulations and more key ministries and interested banks to make fintech a key sector
public-private partnerships. of Lebanons ecosystem.
Take on the reported talent shortage with a GCC Assist scale-ups with a quick internationalization process to
entrepreneurship visa. overcome the constraints of a small market and increase the
Encourage corporate startup collaboration in fintech, especially employment rate in this sector.
with banks. Encourage fintech startups with a special license and integrate
them into e-government initiatives.
EGYPT
TUNISIA AND MOROCCO
Had Egypt the startup density (fintech per million inhabitants)
of the UAE, it would host 350 fintech startups Incentivize startups to build on top of the national payment
Capitalize on the fintech accelerators to convert parts of the system.
informal economy into a cashless formal economy with access to Remove monopolies and encourage competition and corporate
financial services. startup collaboration.
Support the cashless economy by integrating payment channels Activate a strategy that addresses financial inclusion and SME
for public sector employees and enable citizens to pay ministries lending.
through these channels. Offer support to high growth startups that enables them to scale
Encourage SME financing platforms with a credit scoring system. their services to similar markets, especially in Africa.
Award grants to high impact startups as they will create jobs and
solve problems on mass scale.
- 84 -
APPENDIX
GLOSSARY
METHODOLOGY
AUTHORS CONTRIBUTORS PEER REVIEWERS EDITORS PRODUCTION
Jonas Feller Omar Soudodi Walid Faza (Wamda Capital) Maya Rahal Nardeen Abdallah
Elias Boustani Teeb Assaf Chris Adelsbach (Techstars) Lucy Knight Amira Abou Shousha
Tarek Faycal William Altman Rachel Williamson Mohamed Sayyed
Edoardo Giorgetti Nardeen Abdallah Dana Ballout Seham Syed
Amira Abou Shousha Haitham Hawam
WAMDA
Wamda is a platform of integrated programs that aims to accelerate entrepreneurship ecosystems throughout the MENA region. Its core focus includes
media, community development, research and corporate and government advisory services. In the past few years, Wamda has become the leading
grassroots community and knowledge platform for entrepreneurs and supporting stakeholders.
The Wamda Research Lab (WRL) is Wamdas research program that produces studies on entrepreneurship in MENA and seeks to foster thought leadership
in this field. WRLs agenda is to inform investors, policymakers, and other stakeholders on the challenges faced by entrepreneurs in the MENA region, and
offer potential solutions for overcoming them.
| Website: www.wamda.com/research | Contact: [email protected]
PAYFORT
PayFort is the most trusted Online Payment Gateway in the Middle East working with Businesses, Governments, and Startups to maximize online
payment acceptance. PAYFORT is regional expert in payment processing technology and solutions across major markets in the GCC & LEVANT
COUNTRIES. Honored on how our dedication to being the leading online payment gateway in the Middle East has been recognized by various
partners and awarding bodies. Just very recently, industry-renowned Pay Expo MENA awards granted us the Digital Commerce Innovation Award for
establishing a successful online payment solution across the region. We also received Fintech of the Year November 2016 at The Entrepreneur MENA
magazines annual Enterprise Agility Awards, acknowledging our efforts in breaking down barriers to introduce the convenience in adopting secure
online payment methods. In addition to that Doha Bank, one of the largest commercial banks in Qatar, gave us this years Partners Award, as our
partnership agreement helped the Qatari market to open its arms to e-commerce. To cap off 2016 for our company, Crowdsourcing company Owler
presented us this years Hot in Dubai award for being a top trending company in the city.
| Website: www.payfort.com | Contact: [email protected]
Fintech in MENA: The unbundling of the financial services industry by the Wamda Research Lab is licensed under a Creative Commons Attribution Non Commercial-Share
Alike 4.0 International License (CC BY-NC-SA 4.0).
- 86 -
METHODOLOGY APPENDIX
OUR DEFINITION OF FINTECH

WRL considered startups that provide a financial service and have their headquarters in MENA. Startups that provide accounting software, list
bank loans on a platform without offering customers to sign up, or connect investors and startups without facilitating any financial transaction
were excluded. This narrow definition is without drawbacks, however, the aim of the study was to show innovation in financial services only.
(For more on the beyond fintech startups, see p. 50).
Furthermore, no startups launched in 2016 were considered. While we are aware of at least 15 new companies started in that year, it was not
possible to get a comprehensive overview before finalizing work on this report. It is noteworthy that Iraq became the 13th country with at least
one homegrown fintech startup in 2016. Being concerned with startups, a range of fintech companies have been excluded because they are
offered by governments for example, Sadad while others are run by mobile operators, such as AsiaHawala.
FINTECH ENTREPRENEUR SURVEY

WRL conducted a survey among over 80 fintech entrepreneurs in MENA between September and October 2016. Of those, 41 complete and
valid responses were received. While the small sample size put several restrictions on the analysis of smaller units (e.g., payment startups in
Lebanon), the survey did capture information from around one in two active fintech startups in MENA.
CUSTOMER SURVEY
PayFort tasked YouGov with carrying out a bank customer survey covering the UAE, KSA, Qatar, Lebanon, Jordan and Egypt. The 1,429
responses where collected between September and October 2016.
EXPERT INTERVIEWS
WRL contacted over 20 entrepreneurs, investors, accelerator program managers and experts to provide relevant insights on fintech in MENA.
The derived quotes of the featured 16 experts were approved by the authors. In rare cases, entrepreneurs asked their identity not to be
revealed.
SECONDARY DATA
WRL considered data provided by GEDI, the World Bank, the IFC, as well as leading consultancy reports. The case studies on startups build
on publicly available information provided in regional and international newspapers.
- 87 -
GLOSSARY APPENDIX
Accelerator: An organization that offers mentorship, training and networking in addition to small investments in exchange for equity to help
early-stage startups grow.
CAGR Compound Annual Growth Rate: a geometric progression ratio that provides a constant rate of return or growth over the time period.
COD Cash On Delivery: One of several payment methods when ordering goods and services online. This method is popular in emerging
markets. Its main disadvantage is the need for the delivery man to meet the customer at home and collect the cash or swipe the card.
Ecosystem: The sum of external factors that impact the success of a startup. In particular, policies and regulations, hiring and retention of
talent, support and investment as well as the market are important variables.
Fintech: Financial technology is leveraging technology to improve or disrupt existing financial services, as well as introducing new services and
reaching currently and underserved customers.
GDP Gross Domestic Product: monetary measure of the market value of all final goods and services produced in a country during one year.
PPP Purchasing Power Parity: adjusts prices in two different countries and currencies to make the income and price level comparable.
PSP Payment Service Provider: Company that offers businesses online services for accepting electronic payments by a variety of payment
methods including credit card, bank-based payments such as direct debit, bank transfer, and real-time bank transfer based on online banking.
Series A: A company's first significant round of venture capital financing.
Scale-up/ high growth startup: Startup that is consistently growing at a significantly faster pace compared to its peers. This minority of
startups accounts for the majority of new jobs created.
Startup: Company that is less than ten years old and build to scale.
- 88 -
FEATURED EXPERTS APPENDIX
We would like to thank the following experts for their time and insights:
NAME INSTITUTION COUNTRY
Abdullah Almezairee BITFILS Kuwait
Ahmad Wadi Moneyfellows Egypt
Amine Azariz Fintech.ma Morocco
Ayman Abouhend Wallstreetchambers Egypt
Ayman Ismail AUC Fintech Accelerator Egypt
Craig Moore Beehive UAE
David Marinez de Lecea Finerd UAE
Elise Mousa UK Lebanon Tech Hub Lebanon
Fadi Antaki A15 Egypt
Faisal Bitar Oasis500 Jordan
Michele Grosso Democrance UAE
Mostafa Elshafey DCBEgypt Egypt
Paul-Henri Moal Consultant UAE
Walid Faza Wamda Capital UAE
Walid Hanna MEVP Lebanon
Willie Elamien 1864 Fintech Accelerator Egypt
- 89 -
wamdaME wamdaME wamda PAYFORT @payfort PAYFORT
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A REPORT BY

IN PARTICULAR, WE ARE TRYING TO

What are the drivers and barriers for fintech in MENA?

What solutions are fintech startups providing?

What is the potential of fintech for the region?

What needs to be done to unleash this potential?

WHAT IS HAPPENING GLOBALLY?

2010 2011 2012 2013 2014 2015 July 2016

265% 44% 82% 55% 71% 30% 252% 50% 343%

KEY SECTORS? ANTICIPATED # OF % OF MENA CORE

This sector breakdown is found in all ecosystem Share in overall deals

FIRST, FINTECH IS GAINING WIDER ACCEPTANCE.

SECOND, FINTECH INNOVATION IS REACHING EMERGING MARKETS FASTER.

THE UNBUNDLING OF BANKS

International payment settled in 2012 Wide range of secure payment 2013

Mobile platform enabling wide 2011 Connecting SMEs with 2013

B2B platform to customize 2013 Money transfer 10 times 2011

Source: Wamda Research Lab, 2016

Source: Wamda Research Lab, 2016

ALMOST 3 IN 4 FINTECH STARTUPS ARE BASED FOUR COUNTRIES

North Africa GCC Countries Levant

HALF OF ALL MENA-BASED FINTECH STARTUPS

Figure 7 | MENA-based fintech startups (cumulative, 2002-2015)

CAGR1 2006 - 2010 CAGR 2011 - 2015 105

IN FACT, THE UAE

Fintech startup creation is happening almost

AND PAYMENTS TAKE THE LEAD

Source: Wamda Research Lab, 2016

SECTORS ARE ARRIVING

Although the small sample size on a country

Payments Lending & Capital Raising Second Wave Sector

Source: Wamda Research Lab, 2016

LESS THAN ONE IN FIVE ADULTS HOLDS A BANK ACCOUNT

DONT HAVE A BANK ACCOUNT HAVE A BANK ACCOUNT

MENA SME LENDING STANDS AT 50% OF THE GLOBAL AVERAGE

Figure 11 | Share of loans to SMEs by Arab banks (per country, in percent)

20 Global average, middle income countries 18

ECOMMERCE SET TO QUADRUPLE IN FIVE YEARS

12 AT Kearney, 2016: Getting in on the GCC E-Commerce Game. http://tinyurl.com/jov3bmt

88% OF FINTECH STARTUPS SEEK CORPORATE PARTNERSHIPS

88% of the surveyed fintech entrepreneurs

BANKS MAY LACK INNOVATION, BUT STARTUPS LACK TRUST

A LACK OF AWARENESS OF FINTECH STARTUPS, AND PARTIALLY

50% 40% 10%

Skeptical Majority Untapped Potential Early-Adopters

A LACK OF AWARENESS OF FINTECH STARTUPS, AND PARTIALLY A LACK OF

SECURITY CONCERNS ARE A KEY REASON FOR COD PREFERENCE

Source: Wamda Research Lab, 2016

SECURITY CONCERNS ARE A KEY REASON FOR COD PREFERENCE

FEAR OF SCAMMERS KEEP UNSATISFIED BANK CUSTOMERS

THE NON-GCC AND THE GCC MARKET

Figure 19 | Four market indicators

How much can people spend?

How many adults hold

78 High-income OECD economies 6%

Europe & Central Asia 49%

South East Asia 54%

Middle East 86%

TWO CUSTOMERS IN TWO MARKETS