Digitizing financial transactions in the region: go startups!

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The rise of the fintech industry in the region throughout the years, proves that this sector has a big impact on emerging markets despite the various obstacles startups are facing.

Indicators mentioned in the last report of Wamda, assure that the fast growth in this sector is about to support such movement, especially in emerging markets similar to the Middle East.

In line with this market status, Fincluders Startup Challenge Amman took place in the Jordanian capital, gathering 15 startups from different countries.

The Technical Assistance Facility of the MENA impact investor SANAD Fund for MSMEs organized the event in collaboration with Oasis500, the Jordanian seed investment company and business accelerator.

Wamda interviewed few participants, fintech startups, mentors, and other experts in this sector. Questions revolved around the impact of the fintech industry on the emerging markets and the necessary factors to drive it forth.

Alternative bank delivery channels

The CEO of Luxembourg House of Financial Technology, Naser Zubairi, believes there is a big chance to improve banking transactions in addition to the ways banks use technology..

"Fintech has had a massive impact on the Western world, but I think its impact will grow more important in emerging markets,” said Zubairi. He added that there are more mobile phones in developing countries than people, thus, it is becoming a primary channel to deliver financial services in these countries.

Regarding the future of the alternative bank delivery channels provided by fintech, Omar Sati from DASH Ventures said: “The ambition and the innovation that fintech startups in the region are showing can make us have full-fledged digital banks similar to the UK for example”.

Trust issues?

Amina Nasri, cofounder of AfrikWity, the crowdfunding platform dedicated to North Africa, said that such platforms acted as the first phase of fintech applications which served as alternative financing solutions, where e-wallets were used to complete their funding operations.

When it comes to Besan Abu Joudeh, CEO & cofounder of Build Palestine, she believes that “trust is a core issue when one of the crowdfunding campaigns is launched on such platforms”.  She added: “In order to solve this problem, we work on a project by project basis  to build the trust in our brand. This way, we become almost like a regulatory body to make sure funds are delivered to the ones who deserve them”.

According to her, acting as a middleman, in addition to working with accredited banks in Palestine to collect crowdfunding money, can act as one solution to trust issues.

The dilemma of credit recording

Mahmoud Ibrahim, cofounder of SIMPAY, a mobile money provider aiming to connect the unbanked customers to merchants by processing payments in Sudan, guarantees that the credit scoring of their app users is credible. He explains that this record is well-documented as customers should submit personal ID information when purchasing a new SIM card.

Omar Sati, MD of DASH Ventures, in a mentorship session during fintech (Image via Misa Khudair).

Zubairi supported this idea referring to banks in Kenya, which take micro loans decisions based on data collected from smartphones, including contacts, credit and payment data.

Eric Modave, chief operating officer at the Arab Bank, and one of the mentors commented: “What fintech does is to think out of the box, using a different type of data, other than the one adopted by banks.” He explained that mobile phone companies review the users’ behaviors and commitment to pay their bills for example. Afterwards, they analyze these parameters to use it in the users’ credit records.

“The tracking system that our company developed works as an indisputable credit record,” said Wadih Hawi from POSrocket when asked if their startup uses their customers’ credit recordings.

Hawi explained that the cloud-based system that POSrocket adopts, helps monitoring the financial transactions record related to the sales transactions of the SMEs using their accounting system. This will create a sort of ‘credibility’ which could be relied on when business owners apply to small loans for example.  

This active regional fintech movement requires the industry’s stakeholders to invest more efforts and to enhance their collaboration with fintech companies in order to facilitate the financial transactions of many users in the region. This dynamism echoes the large investments in the fintech industry, expected to hover $20 billion by 2020, according to the Wamda report.

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