Dubai: Private funding in Gulf-based fintech start-ups is expected to reach $2 billion (Dh7.35 billion) in the next decade, compared to the $150 million invested in the last 10 years, according to a new study by a regional research company.
According to MENA Research Partners (MRP), the UAE and Saudi Arabia are expected to play a key role in unlocking the growth potential in the Gulf Cooperation Council countries and shaping the MENA fintech sector.
$150mof private funding in Gulf-based fintechs over the last 10 years
The research company suggested that both countries will be at the heart of the evolving fintech transformation, powered by many factors — adopting a top-down approach for creating advanced infrastructures for the smart cities of the future, having the highest online connectivity per capita in the region, and representing 45 per cent of the MENA economies.
MRP estimates that the number of fintech companies in the region will more than double in the next three years, to reach around 260 start-ups from the current 130.
260fintech firms forecast in next 3 years, more than the current 130
“The call on private capital in the fintech space remains largely untapped, although we have seen some deals completed over the past few years. Today, we have a $2 billion funding gap of private capital investments in fintech start-ups, when compared to other emerging markets,” said Anthony Hobeika, chief executive officer of MRP.
He said that the private capital investment gap compared with the global average is much wider, at $10 billion. In the last ten years, private capital investments in GCC-based fintechs was a mere 0.007 per cent of the GDP, 10x below the emerging markets average of 0.07 per cent for that period and 43x below the global average of 0.3 per cent.
The study indicated that 35 per cent of the total investments in fintech start-ups in MENA over the past 10 years were made in 2017; or $52.5 million out of the $150 million invested between 2008 and 2018, were completed last year.
0.007%of private funding, as a share of GDP, given to fintechs in last 10 years
“This momentum is expected to prevail over the next few years, albeit at a much higher pace. This will be driven by many factors, not the least being the GCC governments’ initiatives. Regulators and government policies are increasingly supporting the fintech ecosystem and creating boosters for it to grow locally,” Hobeika said.
The study showed that the shift of economic power from West to East will benefit these GCC fintech hubs.
While 64 per cent of private investments in 2017 went to start-ups in traditional sectors, Hobeika said that there is a clear trend towards increasing investments in digital companies across the spectrum: e-commerce, fintech and technology in general.
“Private investments in fintech start-ups, specifically, are now on par with other tech start-ups, at an average of 12 per cent of all private investments last year,” he added.