Zain is partnering with Kuwait’s Boubyan Bank to create one of the first purely digital Islamic banks in the Middle East.
CEO of Boubyan Bank, Adel Abdul Wahab Al Majed told a panel at the Central Bank of Kuwait’s Fintech conference “Two years ago we decided to do a digital wallet. Everyone was doing it so we jumped in. By the time we reached the final stage all players were into it, so we looked at ourselves and thought, ‘does it really make sense?’” He subsequently called the deputy chairman of Zain group, Bader al-Kharafi, who told him his company already had a mobile wallet up and running. “He has over 3 million customers, I have 600,000, so together, we made a wallet for four million,” said Al Majed.
In 2016, Zain Cash became the first licensed mobile wallet in Iraq. The service now offers QR code payment services, money transfer, e-payments, fund disbursement, bill settlement and merchant online/offline payment, and is also offered in Jordan. In Saudi Arabia, Zain runs a micro lending platform. But the company had been exploring how to expand its digital and fintech services, ultimately deciding that partnering was the best way forward.
Bader Al-Kharafi said “Our digital partnership with Boubyan Bank will introduce an advanced platform to encourage the development of digital banking services. It will help support startups and emerging enterprises, and contribute to the incredible digital innovation taking place across the region.”
Research by McKinsey on urban customers in UAE and KSA revealed that 80% prefer to do a portion of their banking on computers, smartphones and tablets. This is hardly surprising given the demographics of the Middle East. According to the World Bank, 48% of men and 65% of women are unbanked. But 86% of men and 75% of women have a mobile phone. In addition, 100 million people in the region are under 30.
As a result, the Fintech market in MENA is booming, accounting for 12% of all deals, and resulting in a USD2 billion market in 2018, according to MENA Research Partners. Magnitt, a Dubai-based entrepreneurs’ network says that in the first half of 2019 there was $471 million in total funding and 238 deals, a 66% increase over the dollar volume in the first half of 2018. In the first half of this year, Fintech accounted for 17% of all deals, up 7% from 2018. But most of these deals are small, emphasising that the companies receiving investment are largely early stage and the industry is still in its infancy.
In comparison, according to the GSMA, sub-saharan Africa is responsible for 45.6% of worldwide mobile money activity or USD26.8 billion of transactions in 2018. The Central Bank of Kenya reports that 40 million people were responsible for USD38.3 billion in transactions in 2018, with a significant proportion of these using Safricom’s M-PESA. Again, Africa had a large number of unbanked customers, a youthful population, and strong mobile penetration.
The first generation of mobile payment was dominated by telecoms providers offering mobile wallets based on the use of USSD or SIM toolkits. There are now over 270 such deployments worldwide, with some – such as MPESA – being runaway success stories. But the second generation of mobile payment now sees established banks and challengers using mobile as a platform, with apps running on Android or iOS. This is possible because of even higher mobile penetration plus the availability of low-cost smartphones, which retail for as low as USD25 or less – enabling the use of smartphone apps for the first time.
With all these factors in play there is little likelihood of the Fintech market in MEA running out of steam any time soon. The only question is around the precise role that telcos will play in its future.
Digital banks, payment and lending platforms in MEA
- Neo by Mashreq
- Liv by Emirates NBD
- Meem by Gulf International Bank
- TPAY (Egypt)
- Beehive (Dubai)
- Fawry (Egypt)
- Careem Pay e-Wallet
- MTN Uganda – has over half the mobile money market in the country
- Zazu (Zambia)
- Kuda (Nigeria)
- Carbon (Nigeria)
- PalmPay (Ghana and Nigeria)
- Flutterwave (Kenya, Ghana, South Africa)
- Nala (Tanzania)
- Alcor (Malawi)
- OPay (Nigeria)
- SafeBoda Cashless (Uganda).
Fintech deals in MEA
- USD8 million into Dubai’s Yallacompare
- USD1.5 million for Jordan’s POSRocket
- USD1.3 million for Dubai’s Sarwa
- USD20 million for Saudi Arabia’s PayTabs
- USD1.4 million for Zambia’s Zazu
- USD1.6 million for Nigeria’s Kuda
- USD4 million for South Africa’s Nomanini