The Path to Sustainable Fintech Growth in MENA: SAP's Perspective To attract funding and become the next unicorn, a unified data platform strategy will be critical.
By Falk Rieker
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Transition to Sustainable Growth in the Fintech Sector
The Fintech sector is transitioning from a period of explosive growth to one that emphasizes sustainable and profitable development. Over the last decade, advancements in technology have propelled Fintech to become a leading sector within financial services, fueled by rapid digitization and shifting consumer preferences. However, a market correction that began in 2022 has tempered this fast-paced expansion, leading to a decrease in both funding and deal activity as economic uncertainties linger.
Growth of MENA Fintech Landscape
At the same time, the MENA Fintech landscape has expanded dramatically, with a surge in startups and innovative financial services. The region is home to hundreds of Fintech companies, addressing a variety of sectors, including payments, lending, insurance, and wealth management. This growth is fueled by a young, tech-savvy population eager for modern financial solutions.
Venture Capital investment in regional Fintech startups have seen significant increases, with funding reaching record levels in recent years. This influx of capital is vital for scaling operations and expanding product offerings. While this is very promising for the flourishing of the MENA Fintech sector, it also brings about a fierce competition for investment, for talent and for customer acquisition among Fintech players.
Challenges in Raising Capital
Recent studies indicate that there are just as many Fintech startups in MENA that are unfunded, as there are funded startups; making it harder to raise capital for a regional Fintech, than it is to raise capital for a regional AI, healthtech or foodtech startup.
Therefore, not only will it be important to address a specific niche with a strong value proposition, but Fintech startups will need to prove operational efficiency, high scalability to support hypergrowth, all while keeping a close eye on profitability and by total cost of ownership ('TCO'). They must check the mark on the most important key performance indicators ('KPIs') to be able to stand out from the crowd in the eyes of the investors. This is easier said than done.
To attract funding and become the next unicorn, a unified data platform strategy will be critical. From customer to operational data, from HR to finance data, Fintechs need to have a holistic view of their data to be able to surface game-changing insights that will help them steer their company in the right direction and grow profitably.
SAP: Supporting Fintech Growth
At SAP, we are proud to be one of the few software vendors that can address the end-to-end value chain needs of a Fintech from infancy to global Fintech unicorn. With SAP S/4HANA Cloud as the clean core Cloud ERP and back-bone for all other enterprise applications, SAP provides Fintech specific innovations, and modular design offering line-of-business solutions like HR, CRM and procurement, all residing on one common, unified Business Technology Platform, powered by SAP Business AI.
According to 2024 survey results shared by the Wall Street Journal, "Tech leaders are finally giving priority to the modernization of their ERP systems. ERP applications are the second-most likely to move to the cloud in the next two years, followed by databases."
Future Focus on Data Analytics and AI
As Fintech companies continue to align their business strategy with their technology strategy, there will be an increased focus on data analytics, unleashing the power of AI and on having seamless, natively connected systems across the enterprise to realize value. This is the reason why global market leaders like PayPal and Monzo have chosen SAP, and we're excited to see Fintech's in the Middle East use our solutions to help scale their businesses beyond what they thought was possible.
Explore the transformative trends shaping the Middle East's Fintech sector. Read or download your copy of "The State of Fintech in the Middle East" now.
This article was originally published on Lucidity Insights, a partner of Entrepreneur Middle East in developing special reports on the Middle East and Africa's tech and entrepreneurial ecosystems.
