Fintech innovations have transformed how we transfer money, buy products, and invest, ushering in a new age of technological integration in finance. The adaptation to fintech varies significantly across regions. Initially, the Middle East and North Africa (Mena) region struggled to provide banking services, with a large unbanked population. According to World Bank data, around 50% of adults in the Mena region lacked banking access. However, in the last two years, the region has seen substantial fintech advancements, largely due to robust regulatory frameworks introduced by government initiatives focusing on economic development and financial inclusion. This has spurred the growth of numerous fintech firms offering innovative solutions and services. By 2023, the Mena region boasted over 250 fintech startups, with projections indicating a rise to surpass this number by 2025.
In contrast, Europe faced considerable challenges during the same period, leading to a lag in its fintech ecosystem. The European fintech market hit a low in 2022 but showed gradual recovery in 2023. Despite a modest 5% decline in mergers and acquisitions (M&A), the market demonstrated resilience. Although the public market was subdued due to low valuations, industry experts foresee potential new exit opportunities for highly valued European companies in 2024.
The critical question remains: Can the Mena region withstand crises? Current growth trends and market studies suggest a promising future for Mena's expansion. Reports indicate that the market, valued at $1.51 billion in 2024, is expected to reach $2.40 billion by 2029. Since the start of 2024, the Mena fintech sector has raised $59 million out of a total of $429 million. A key driver of this growth is the region's rapid technological adoption, fueled by a young, tech-savvy population and government-driven initiatives. This growth has attracted international companies to establish a presence in the regional market, intensifying competition and boosting the regional economy.
The World Economic Forum 2024 report on 'The Future of Global Fintech: Towards Resilient and Inclusive Growth' highlights that the US, Canada, and Mena region have emerged as leaders in the sector, showing remarkable growth rates. Comparing the macroeconomic ecosystems of Europe and Mena, the report identifies several key factors. In Europe, macroeconomic issues dominate, accounting for 62% of the factors, indicating a reliance on broader economic conditions for corporate performance. These factors make the region vulnerable to changes in inflation rates, GDP growth, and overall economic stability. Additionally, Europe's complex regulatory environment, at 52%, could hinder business innovation and expansion. The lack of digital and financial literacy among users, at 32%, underscores the need to develop a tech-savvy and financially competent population.
At the recent Money20/20 Europe conference in Amsterdam, it was clear that Europe aims to advance initiatives like the Digital Euro and European Payments Initiative (EPI), despite challenges in value and adoption. The macroeconomic factors in the Mena region show a similar reliance on economic conditions, though slightly lower at 59%. The region also faces a 34% shortage of skilled labor, highlighting the need for education and training investments to close the skills gap and promote sustainable growth. The report emphasizes the importance of a competent labor force, with 48% of fintech sector players considering trained staff as a key growth driver, and 38% identifying its lack as a significant barrier. This indicates that fintech in the region places a high emphasis on attracting, cultivating, and maintaining talent for improved competitiveness and long-term success.
The report also highlights the region's continuous efforts to promote technology, education, and economic diversification, aligned with forward-looking initiatives such as UAE Vision 2031, Egypt Vision 2030, and Qatar Vision 2030. Another significant topic discussed at the recent Money20/20 Europe conference in Amsterdam was the use of artificial intelligence. This technology holds promise and can be advanced in both Europe and Mena regions to support development. With the advent of AI, regions can achieve resilience when applied effectively. Fintech firms worldwide are integrating AI through human-technology collaboration, focusing on enhancing human abilities rather than replacing them. This transformative approach is reshaping the use of technology globally.
