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Antti Arponen: Fintech payment solutions will be catalyst for growth

With emerging markets in the Middle East and Africa continuing to leapfrog old technology, fintech payment solutions are in the right place at the right time

Fintech Africa Creative Commons
The potential of fintechs to provide cheaper and faster access to financial services is crucial for developing economies

The world of payments has been more resilient in 2022 than many thought possible. And the global payments industry continues to evolve at rapid speed.

After rebounding back from the coronavirus pandemic faster than most anticipated, the sector is predicted by analysts to double its revenue by the turn of the decade. Investors are increasingly looking to innovative regional fintechs to generate returns.

And despite global headwinds such as the ongoing supply chain crises and surging inflation, the global payments industry is seeing signs of recovery. This is particularly the case in emerging markets where there is huge demand and a need for innovative payment solutions in order to increase prosperity.

Payments and paytech generally across the Middle East and Africa are a dominant force across the wider fintech ecosystem.

No surprise, then, that the demise of paper currency in the region was already moving at pace prior to the onset of the global pandemic.

In countries such as the UAE consumer demand spurred a rapid increase in online payment transactions, growing at 9 percent a year between 2014 and 19, according to McKinsey, compared with Europe’s average annual growth of 4 to 5 percent. We can expect this trend to continue.

Emerging markets leapfrog old technology

With a young, tech-savvy population ensuring one billion (banked and unbanked) smartphone users across the Middle East and Africa, the opportunities for fintechs to grow and develop new alternative solutions – and the social empowerment and benefits they will bring – are endless.

This is being made possible through the use of advanced technologies such as blockchain (as a payment technology solution, rather than digital assets), which through decentralised payments is already proving that inclusion can be expanded more rapidly across the region.

Fintech is the right industry, at the right time, to be in this geography.

It offers the means to leapfrog old technologies straight to the new, reaching a huge and receptive market waiting to take advantage – and we have only just scratched the surface in this regard.

That’s why, while some older economies are seeing a decline in investor interest, it is the emerging markets where fintech valuations are attractive relative to history and developed markets where many investors are now looking.

Improved regulatory collaboration

The sector is not challenge free, however. With sustainable business models just as important as growth in fintech, being efficient with capital will be important to staying on top.

Having your own technology along with positive unit economics is key to scaling efficiently and faster so costs can become lower during the growth phase, ensuring money can be reinvested.  

Incumbent payment institutions are seeing a growing regulatory burden, making it harder to meet increasing payment methods and volumes and demand for real-time payments and cross border payments.

Fintechs owning and building proprietary technology and using innovative solutions such as blockchain are better placed to meet the Middle East and African region’s growing financial needs, while offering consumers alternative options to traditional financial institutions.

Regulators are also learning and improving – and increasingly welcoming opportunities to collaborate with fintechs on building out the digital financial ecosystems of the future.

There’s more institutional adoption on the blockchain side than there’s ever been before. And that means there’s more pressure back to the government and regulators on what are the right institutional approaches – learning from those regulators who arrived first.

Pyypl is one of the fintechs boosting financial inclusion by helping the unbanked take control of their money

Must have’ vs ‘nice to have’

The inherent disruptive potential of fintechs to provide cheaper and faster access to financial services is often viewed as a ‘nice to have’ in Western states. This is because traditional financial systems already serve the majority of the population’s financial needs.

The need in developing economies is significantly different. Here, the inability of banks to provide access to financial services for the majority is an impediment to growth and prosperity, making fintech innovation a ‘must have’.

This is especially apparent in African countries, where true economic development will be greatly enhanced by financial inclusion to liberate and release the potential of the underserved. 

With 800 million smartphone users across the Middle East and Africa without access to basic banking products and services, Pyypl’s goal for 2023 is to further expand its core offering to solve this problem.

Built around a prepaid debit card, users can buy goods and services both in-store via a physical card and online via a virtual card. By the end of 2025, Pyypl’s goal is to be present in 25 countries across the Middle East and Africa.

Offering multiple products that cater to a range of use cases tailored to markets across this region will be the best way to meet and adapt to the unique demands in each market.

The fintech that can truly achieve a business with this deep regional experience and best investor returns will be the one that is the best equipped with a multi-market solution to meet growing demand.

Antti Arponen is co-founder and CEO of Pyypl

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