Investors poured $30.4 billion into fintechs globally in the first nine months of 2020, according to the Qatar Fintech Report 2021 released today by the Qatar Financial Centre and Refinitiv. Although with the MENA region accounted for less than 1% of global investments in 2019, the figures suggest the region is becoming increasingly attractive for investors.
The report highlights the exponential growth of the global fintech investments from just under $ 1 billion in 2008 to an estimated $34.5 billion by the end of 2019.
Despite jarring global economic uncertainty and financial market volatility brought on by the Covid-19 pandemic, fintech investment levels globally remained relatively stable during the first nine months of 2020. The largest investments were in payments, securing a quarter of VC funding, followed by digital banking and capital market solutions. Qatar’s current strategic fintech interests are closely aligned to these outlined areas.
Within the MENA region, 70% of fintech investment went to the UAE in 2019 (the most recent year with data over 12 months) followed by Bahrain. Qatar is also accelerating the development of its fintech ecosystem and is making significant strides in this regard.
The global outbreak of the Covid-19 pandemic came as a wakeup call for traditional financial institutions (FIs) in MENA markets and spurred growth opportunities in Qatar and elsewhere. The pandemic accelerated the implementation of digitalization strategies in Qatar’s financial marketplace.
Yousuf Mohamed Al-Jaida, Chief Executive Officer, Qatar Financial Centre, said: “The outbreak of the Covid-19 pandemic created new opportunities for financial innovation, which has attracted an influx of tech and FinTech companies seeking to set up operations in Qatar. The country offers FinTechs worldwide substantial opportunities domestically as an unsaturated market with ICT spending expected to reach $9 billion by 2024, boosting the competitiveness of its market and strengthening its position to emerge as a FinTech hub in the region.
“Qatar has made remarkable progress in the fintech space in a very short time. Several major developments have taken place in the last year, including the launch of Qatar’s National FinTech Strategy, the Qatar FinTech Hub (QFTH) and its incubator and accelerator programs as well as the Qatar Financial Centre (QFC) Fintech Circle and Tech Talk series to buttress the local ecosystem.”
Nadim Najjar, Managing Director, Middle East and Africa, Refinitiv, an LSEG (London Stock Exchange Group) business, said: “Although this funding performance indicates significantly slower fintech adoption in the region, it is also a sign of substantial untapped potential, especially in the Gulf. Key drivers for fintech solutions in the Gulf include above-average GDP per capita, high internet and online payment penetration, as well as shifting consumer preferences away from traditional financial institutions.”
The number of global deals has been in steady decline since the final quarter of 2019 indicating larger funding rounds in more mature fintechs. The average deal size for 2020 has increased to $21.5 million compared to $15 million in 2019. Around 72 funding rounds were recorded during the first nine months of 2020 compared with only 70 for the same period in 2019 as investors increasingly place larger bets on a smaller number of players. The US is by far the largest funding market for fintech investments, making up 51% of VC-backed investments in 2019, followed by 20% by Asia and 19% by Europe.