Technology and Innovation: Driving Financial Inclusion in MENAP
Egypt has been on the path of bringing financial inclusion to the country at the back of government initiatives. We take a step back to explore MENAP’s FinTech industry and its future, with Egypt’s Paymob.
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The MENA region has been providing support to FinTechs and start-ups via initiatives either by regulation or incentivizing the ecosystem. This encourages more FinTechs to grow and contribute to the region’s overall growth and its digital economy.
On Governmental Initiatives
More regulatory frameworks have been established in the region in recent years, which has helped the ecosystem to thrive. Since the pandemic, the Central Bank of Egypt has shown great support to the Egyptian market – launching the 100K Point of Sale (POS) initiative (which later expanded to 200K POS in 2021 – 2.2X the size of the pre-existing market of POS prior to Covid-19) promising to finance banks’ purchase and distribution of 100k new POS machines as part of a wider plan to expand the use of e-payment services.
The Saudi Arabian Monetary Authority (SAMA) launched its Payment Services Provider (PSP) regulation in late 2019, and the Central Bank of the UAE launched the Retail Payments Services and Card Scheme licensing framework in 2021 to help promote digital payments whilst supporting competition and innovation.
Initiatives launched by the Central Bank of Bahrain (CBB) and Central Bank of Oman (CBO) have also been home to innovative FinTechs across the region. The continued focus and investment into aiding financial inclusion across Egypt, and the region, is very promising and exciting to see.
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On Paymob’s Expansion and the Motivating Factors
The motivators differ from one market to the other.
Generally, we are motivated by i) the number of SMEs in the market vis-à-vis the population, ii) the current digital financial status of SMEs and the available offerings and iii) the number of potentialities of APMs in the market. Also important is a focus on the existence and flexibility of clear, enabling regulatory frameworks to serve SMEs and micro businesses.
In Pakistan, the FinTech landscape is growing rapidly. The nation has one of the largest unbanked populations with over 70% of the population financially excluded, creating a large undocumented economy. To increase financial inclusion, we have seen a growing acceptance and welcome by the regulators of technology to create customized, convenient, and affordable financial services with a reach to the remotest areas of Pakistan. The State Bank of Pakistan and the government formulated a National Financial Inclusion Strategy in 2015 which has resulted in multiple initiatives that encourage FinTechs to tackle the challenges faced in the market.
The State Bank of Pakistan’s initiative to launch Raast – the first phase of Pakistan’s Instant Payment System – has further opened access to finance for FinTech to create use cases and implement them in the market. We have seen FinTechs particularly focus on financial inclusion and digitizing financial transactions for their business models.
Looking ahead, Pakistan’s FinTech ecosystem is very promising. Pakistan has c. 5 million SMEs with only 96,000 POS devices in the market - deployed at less than 35,000 unique merchants. Therefore, a large majority of the merchants remain devoid of basic payment infrastructure. Similarly, in a country with a teledensity of over 88% (almost 195 million subscribers), smartphone adoption of over 52% (116 million subscribers) remains a ripe market opportunity for FinTechs to capture. The payments segment is most likely to be the fastest-growing industry in Pakistan leveraging the potential of the untapped market.
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On the Future and Challenges of Digital Financial Services
MENAP is a leading region with a positive outlook for GDP growth in 2022. Real GDP growth is forecast by the IMF at 5% – which would provide a stable fertile ground for FinTechs to grow in times when other regions suffer from stagnation Moreover, the MENAP region is rich with APMs and innovative solutions with more focus on SMEs from the governing bodies. As they continue to grow, it gives greater opportunities for innovative FinTechs, such as Paymob, to service the fast-growing markets. Operating in an upcoming region with different use cases and underserved SMEs keeps us excited as we have gained great experience in serving the needs of small business owners. With our ambition to be at the forefront of providing unified digital commerce solutions – not only in the region but globally – we continue to believe the FinTech industry serving SMEs still has huge potential to develop.
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