Dubai: Payment solutions account for approximately 40 per cent of all Fintech business in the Gulf Cooperation Council (GCC). While the region receives the lowest amount of funding, when compared to the US and Asia Pacific (APAC) markets, it has experienced the most explosive growth, according to a new research by The Boston Consulting Group (BCG).
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 per cent from $15.3 billion to $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.
Data shows that in 2016, payments and crowdfunding/lending attracted a larger proportion of funding than their share of market in 2016. In the Middle East and Africa, it accounts for 8 per cent 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 utilising leading edge technologies to sidestep the constraints of legacy cost structures,” said Godfrey Sullivan, Partner & Managing Director of BCG Middle East.
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 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,” said Sullivan.
Over the years, the US has accounted for the greatest proportion of Fintech funding, while APAC and Europe, the Middle East and Africa (EMEA) have benefited from the smallest share of the spend. However, investment into both the APAC and EMEA regions has been on a steady increase.
“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 start-ups that address the requirements of both regions, have emerged,” said Sullivan.
Last year (2015) was a big year for the crowdfunding/lending sector; half of all the largest Fintech financing deals were made in this space raising $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 $500 million in funding last year. In terms of funding maturity levels, blockchain technology and insurance Fintech clusters have just started to emerge.
