Egypt is fast becoming a Fintech leader in the Middle East and North Africa market, due to the supportive environment created by the government and the opportunities spurred by COVID-19.
This phenomenon has been improving in recent years, making the country well-positioned to become a leading global Fintech hub in the MENA region.
In its 2019 forecast, Fitch Solutions projected that Egypt’s Fintech market will flourish, driven by domestic start-ups, and this has been exactly the case.
Accordingly, Fitch Solutions believe that this trend will continue over the medium-term as it is supported by several factors that will favour the uptake of digital payment services.
More importantly, these include sustained investment, a complementary regulatory environment, the Covid-19 pandemic, lower financial inclusion in domestic and neighbouring markets and the sizeable tech-savvy youth population.
The COVID-19 pandemic presented some headwinds for the expansion of Fintech services globally owing to decreased investor sentiment. This notwithstanding, Venture Capital investments flowed into Egypt’s Fintech space in 2020, mainly from international investors.
Following data from MAGNiTT, a platform facilitating investments into start-ups in emerging markets, Egypt recorded 22 percent of total investment deals in the MENA region in 2020. Flow of funds received amounted to US$190 million in VC funding.
Considering the size of investments made Egypt the second-largest recipient of funds, behind the United Arab Emirates (UAE), indicating Egypt’s level of attractiveness to investors.
Furthermore, the pandemic has added impetus to fintech and e-commerce investments and enhanced the uptake of mobile wallets.
The National Telecoms Regulatory Authority (NTRA) of Egypt released figures indicating a massive surge in the uptake of e-transactions over 2020, increasing 156 percent between March and October 2020. This is attributed to the customer pivot away from cash and physical banks accelerated by the Covid-19 emergency, Fitch Solutions indicates.
Egypt’s regulator and government have created a supportive environment for the uptake of fintech services and for entrepreneurs wishing to enter the space. Part of the country’s Vision 2030 project is to expand fintech adoption nationwide and, in 2020, the government released the Banking and Central Bank Law, (replacing the previous version written in 2003) in which it discussed digital payments for the first time.
Furthermore, the Central Bank of Egypt (CBE) launched the FinTech Egypt Platform which connects start-ups, financial institutions and investors, and aims to allocate USD1bn to support local fintech enterprises in their incubation process.
In response to the changing behaviour generated by the pandemic, the CBE reduced or waived fees and charges on e-payments, oversaw the distribution of free point-of-sale (POS) terminals and increased the number of contactless payment options.
Egypt’s large unbanked proportion of its population creates a sizeable market on which to leverage fintech applications, and the relatively underdeveloped nature of neighbouring markets creates scope for Egyptian start-ups to expand their operations.
Furthermore, Egypt’s youthful, tech-savvy population supports the uptake of advanced data services. Two-thirds of the population are aged under 35, with this segment estimated to form the majority of mobile internet users (52.4mn, or around half of the population at the end of 2020).
While there are upside risks to the forecast of Fintech market, Fitch Solutions caution that the sector is still fairly immature, especially when compared to developed markets. However, on the other hand sustained investment has resulted in critical progress over a relatively short period of time.
