Middle Eastern and African Region Sees Neobanking Sector Picking up Steam

Middle Eastern and African Region Sees Neobanking Sector Picking up Steam

by 8 December 2023

Though still in their early stages of development compared to Europe and the US, neobanks are playing a growing role in the Middle East and Africa (MEA) region by addressing challenges in accessing traditional financial services.

The Fintech Times identified 45 neobanks in the MEA region, comprising mostly of digital banking arms launched by traditional banks. This trend reveals that traditional banks in Africa are adapting to consumers’ changing preferences and technological advancements with digital banking solutions of their own.

Examples include Emirates NBD’s Liv, Mashreq Bank’s Mashreq Neo, ADCB’s Hayyak, Leumi Bank’s Pepper, ABC Bank’s ila Bank, Gulf International Bank’s meem, and Akbank’s AkOde in the Middle East.

Neobanks in the Middle East and Africa, Source: Fintech Middle East and Africa 2023, The Fintech Times, May 2023

Neobanks in the Middle East and Africa, Source: Fintech Middle East and Africa 2023, The Fintech Times, May 2023

Additionally, independent neobanks are being established in the Middle East to cater to the unserved or underserved population. These companies, which include Now Money, Rise and Yap from the United Arab Emirates (UAE), and Dopay from Egypt, are in partnership with traditional banks to leverage their banking licenses to offer services in a seamless and convenient manner. Papara in Turkey, approved as an electronic money institution in 2016, stands out for its non-bank dependent prepaid card that boasts over 17 million users.

Newly licensed digital banks also are entering the field with Saudi Arabia and the UAE having recently issued three such licenses, each.

Saudi Arabia has been among the pioneers on the topic, having started issuing its first digital banking licenses in 2021. The Saudi Central Bank (SCB) has so far granted licenses to STC Pay, D360 Bank, and Saudi Digital Bank.

The UAE, meanwhile, has issued a digital banking license to Al Maryah Community Bank, Zand Bank and Wio to provide online banking services, and granted Naqd preliminary approval in March 2023.

Israel also witnessed a significant development with the launch of its first bank in over 40 years, named One Zero. One Zero is a digital bank, without branches, based on innovative proprietary technology. It focuses on providing banking services to households and small and micro businesses, including providing credit, managing deposits, and providing advanced payment services.

Other nations across the Arab World are also advancing in their regulatory efforts. Egypt issued in July 2023 regulations on the licensing and registration of digital banks, and Qatar is looking to develop rules covering digital banking, open banking and crowdfunding, among emerging technologies and business models.

Shifting to Africa, the rreport notes that 21 digital banks were serving over 19 million customers in 2021, with 80% of these customers being located in two countries, namely Nigeria and South Africa.

Bettr and TymeBank, two neobanks from South Africa, were leading the region at the time by boasting 6.5 million and 4 million customers, respectively, the report says.

TymeBank is a challenger bank founded with financial inclusion as a core business objective. The company offers both personal banking and business banking solutions that are affordable and easy, relying on a combined online and offline distribution network to reach excluded customer segments.

TymeBank applies no monthly fees, pay-as-you-go-banking, and up to 10% interest on savings and an ease to open an account in less than 5 minutes, and launched in 2019.

Bettr is a digital banking platform founded in 2015 that’s building the “lifestyle bank” for the young African adult, as they grow through life, with a particular focus on the creator economy, gig work, social sharing features and stories. Notable features the company offers include QR code-based payments, digital and physical Visa cards, and transaction and savings accounts.

Bettr and TymeBank are followed by Chipper Cash, a US-headquartered and Pan-African neobank with 4 million customers; Alat, Nigeria’s self-proclaimed “first fully digital bank” boasting 1.5 million customers; and Zazu, a neobank from Zambia with 1.1 million customers, data from the report show.

Top neobanks in Africa by number of users in 2021, Source: Fintech Middle East and Africa 2023, The Fintech Times, May 2023

Top neobanks in Africa by number of users in 2021, Source: Fintech Middle East and Africa 2023, The Fintech Times, May 2023

Other key players in Africa include Orange Bank, a subsidiary of French telecom company Orange, and Kuda and FairMoney, both from Nigeria.

Kuda is a licensed microfinance bank in Nigeria that’s building a money app for Africans around the world. The platform aims to deliver convenient financial services including free money transfers, smart budgeting, investments and instant access to credit through digital devices.

FairMoney is a fintech company that focuses on digital lending services, providing small loans to individuals through its mobile app, in addition to investment products, savings, payments, and cards. The company, which operates in Nigeria and India, claims it gives 10,000 loans daily and says it boasts over 6 million users.

In the Middle East, the digital banking industry grew at a 52% rate between 2021 and mid-2023, driven by booming consumer adoption, supportive initiatives, and favorable demographic characteristics such as the region’s considerable pool of unbanked and financially underserved, its young and digitally-savvy population.

In Sub-Saharan Africa, the number of digital banks increased by 27% each year between 2012 and 2021, findings from a research conducted by BPC and Fincog show. This growth was spurred by the lack of traditional banking infrastructure, the development of highly innovative fintech solutions, and financial inclusion goals, the report says.


Featured image credit: edited from Freepik

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