According to The Boston Consulting Group (BCG), today, 7% of all FinTech Companies in the Middle East and Africa are concentrated in the GCC
According to a new report by The Boston Consulting Group (BCG), FinTech companies in the GCC now account for 7% of all FinTech business in the Middle East and Africa region. Taking on the successful business models of the United States of America (USA), payment solutions account for approximately 40% of all FinTech business in the GCC. While the region receives the lowest amount of funding, when compared to the USA and Asia Pacific (APAC) markets, it has experienced the most explosive growth.
Globally, since 2000, the FinTech space has grown dramatically, and in the last six years the sector has more than doubled – from 3,000 to 8,000 companies – with total funding experiencing a growth of 80% from USD$15.3 billion to USD$78.6 billion. In that time, both payment solutions and crowdfunding/lending took the lead in terms of growth, as well as the proportion of funding the two markets attracted. In 2016, in fact, payments and crowdfunding/lending attracted a larger proportion of funding than their share of market in 2016. In MEA, it accounts for 8% of all Fintech companies, and is mirroring the growth of its western counterparts.
“We are witnessing growing innovation throughout the Middle East, and that is reflected in the gradual development of the FinTech sector across the region. Emerging start-ups are utilizing leading edge technologies to sidestep the constraints of legacy cost structures,” said Godfrey Sullivan, Partner & Managing Director of BCG Middle East. “The emergence of new sectors in the FinTech space is mirrored by the MEA market; we are just beginning to see the arrival of crowdfunding/lending, blockchain and particularly payment FinTech businesses cropping up across the region.”
Globally, the primary target of FinTech companies has been the retail, corporate and SME space, however, capital markets are also being affected as we see growth in trade and investments, data and analytics, blockchain technology and planning in the space.
The Shifting Space
Over the years, the USA has accounted for the greatest proportion of Fintech funding, while APAC and Europe, the Middle East and Africa (EMEA) have benefitted from the smallest share of the spend. However, investment into both the APAC and EMEA regions has been on a steady incline. 2015 was the first year that the FinTech growth was driven by APAC, rather than the USA.
“There is a penchant for technological innovation emerging from the Middle East. As a bridge between east and west, this market is privy to the halo effect of disruption in the financial markets from all corners of the globe, hence more and more FinTech startups that address the requirements of both regions, have emerged,” Sullivan added. “The dynamic changes in the financial ecosystem spawn the growth of innovation opportunities; to further this it is imperative to establish a grounded regulatory environment for new players entering the financial ecosystem.”
2015 was a big year for the crowdfunding/lending sector; half of all the largest FinTech financing deals were made in this space raising USD$6.8 billion in one year, making it the hottest new area in FinTech. Equity financing deals also hit record highs last year, and the average deal size surpassed historic levels. The hyped-up blockchain technology sector, however, generated just over USD$500 million in funding last year. In terms of funding maturity levels, blockchain technology and insurance FinTech clusters have only started to emerge.
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