In the last decade, FinTech startups in the MENA region have raised well over US$ 100 million in funding. The reason is plain and simple – it’s a space that has to be disrupted in order to meet the speed needs of a growing digital economy. By 2020, the number of FinTech startups and the amount raised will more than double. At least that’s what Wamda’s latest report on FinTech startups concludes.
The best ideas in FinTech are the most boring, at least on the outside. On the inside, they create the greatest upside for the intended audiences and ecosystem. There are seven types of FinTech startups that must emerge in the MENA region, and propel the industry to its true potential.
The whole point of the internet is predicated on a meritocracy where monopolistic barriers to entry are lowered. So why is access to investors so limited and hard to come by? The region requires a new Arab spring in the form of democratising access to funding and the ability to lead a fund. P2P models exist and for a platform to truly stand out, it would need to commit an investment as well. By having its own skin in the game, the P2P platform would have a vested interest in making sure the investee grows the company and turns a profit. Simply being a platform isn’t enough. This model builds trust for those seeking to invest and those seeking an investment. The shared risk model is one of enormous interest among the investors we work with for digital products.
The crisis of 2008 should have taught the world a valuable lesson on the incentives that need to be in place for risk assessment on debt instruments and investments. Let’s just leave it at that. To stand out in this space, a FinTech startup will need to extract data from across social to gauge the multiple unseen risk factors associated with the jockey and the horse. From a business lending perspective, this could require tracking sentiments that gauge the risks and rewards associated with founders and the business models they deploy.
The overpriced service offered by lawyers with regards to drafting cross receipts and release documents needs to be disrupted at scale. It only slows down trade and hurts an entire chain of the ecosystem, upsetting meritocracy. FinTech startups need to emerge that offer structured transaction services within and across capital markets, along with settlements.
The reality is that most FinTech startups in the Middle East region are careful not to upset any large financial services firms that profit from upselling services in accounts and cards. For the sake of speed, a business must emerge that values the time of the customer and knows when not to upsell them on items they do not need.
The absurd charges associated with outdated and overvalued consumer financial products such as structured notes, annuities, and life insurance policies have to be done away with. The region requires a FinTech startup that comes in and behaves as the digital money manager that matches products and services to the income, lifestyle, purchasing behaviour (etc) of the client. To minimise downside losses, simple Vanguard index funds can be used instead, or the Dalio’s approach for risk parity. This would be offset by growth or contraction rates, including forecasts on inflation and deflation. For sure, our region needs this now.
If you’re interested in launching a FinTech startup, reach me on firstname.lastname@example.org today.