Dubai: Mashreqbank is exploring a sale of its payments business in a deal that could value the division at around $500 million, according to people familiar with the matter. Masshreq is the latest lender in the UAE to consider pulling back from the sector.
The Dubai-based bank is working with Goldman Sachs Group to sound out potential buyers for the unit, which handles the processing of transactions made with credit and debit cards.
Deliberations are ongoing and no final decision has yet been taken, according to the people. Representatives for Mashreq and Goldman Sachs declined to comment.
Traditional lenders are increasingly putting their payments processors on the block in the face of competition from non-bank practitioners. In Europe, Banco de Sabadell SA and Italy’s BPER Banca SpA have been exploring deals for similar businesses, Bloomberg previously reported.
The Middle East could be the “next frontier” for mergers and acquisitions in the quickly consolidating industry, according to McKinsey & Co.
Private equity groups have meanwhile emerged as major investors in payments businesses by bringing the financial clout and technological prowess necessary to build scale in a market recently upended by the pandemic.
Mashreq’s competitors have already capitalized on the interest.
The Mashreq initiative will allow fintechs to launch their business propositions that need to have a payment card functionality through NymCard’s open APIs. The terms for the deal were not disclosed.
“We recognize the crucial role the fintechs play in growing financial inclusion and the digital economy and will continue to identify opportunities, invest and support our partners to help drive this growth,” said Fernando Morillo, Global Head of Retail Banking, Mashreq Bank.
The fintech sector in the Middle East is putting in a compounded annual growth rate (CAGR) of 30%. According to some forecasts, more than 800 fintech companies – in categories such as payment solutions, open banking, regtech and compliance, smart lending, insurtech, blockchain, and cybersecurity solutions - will raise more than $2 billion in VC funding.
First Abu Dhabi Bank is in talks with Brookfield Asset Management to sell its payments unit called Magnati. In 2015, Warburg Pincus and General Atlantic bought a stake in Network International Holdings, a payments provider backed by Emirates NBD Bank PJSC, before listing the business in London less than four years later.
Mashreq has been pivoting to digital banking recently in a bid to fend off non-traditional financial services startups. It’s one of the UAE’s oldest banks, with origins dating back to 1967, four years before the country was founded.
The bank has been reducing its network of branches in the UAE. Mashreq’s CEO Ahmed Abdelaal predicted that the traditional sites will “cease to exist very soon.”