Just as the internet has transformed communication and connectivity, fintech is now revolutionizing the world’s banking and financial ecosystem. Fintech’s evolution is a testimony to how it has changed the financial sector and will further disrupt it.

Early days

In the 90s, when the internet started booming, a diverse group of individuals came together to develop a digital payments ecosystem. PayPal was perhaps one of the first entities to provide customers with a reliable system of making fast, effortless and cashless payments. After a roller-coaster journey following early successes, PayPal was eventually acquired by eBay. One of the co-founders and members of the “PayPal Mafia” eventually went on to create Affirm, a prominent fintech player in the BNPL (Buy Now Pay Later) segment.

The early 2000s saw many companies trying to emulate PayPal and offer cashless payment systems. The progress of technology helped them in their endeavor. However, the events of 2008, culminating in the collapse of Lehman Brothers triggered a massive global financial crisis (GFC). Subsequently, general distrust in the banking system saw cash become king again. Resultantly, the digital money ecosystem saw limited traction till the smartphone became ubiquitous.

The smartphone gave a boost to the digital payments industry and electronic wallets acquired universal acceptance. The penetration of the smartphone, even in developing countries such as India, heralded a new age of progress in the fintech space. China became the new epicenter of a revolution in fintech as evidenced by the success of Alibaba and Tencent.

Alipay led the success of the wallet and payments businesses in China. India followed suit with players such as Paytm and PhonePe, along with Government-backed mechanisms such as UPI, leveraging the general consumer’s preference for transacting over the internet, particularly through the smartphone. The emergence of alternate digital currencies (cryptocurrencies) and exchanges has further fuelled the innovation trajectory in the digital finance domain. In 2020, COVID-19 acted as an accelerant to many of these emerging fintech trends. Newer models emerged in lending and banking, including BNPL (Buy Now Pay Later) and neo banking, to move fintech to the next level of innovation.

However, with the exuberance comes to the inevitable excesses and these excesses have been exposed this year. A much-needed adjustment has been brought about to the overall fintech ecosystem.

The purge

The world has been in the midst of a 14-year liquidity binge post the GFC. Every binge inevitably leads to a hangover. Fintech as a sector was also a direct beneficiary of this abundant liquidity in the global financial system. These fintech businesses were seeing their valuations getting inflated on the back of benign liquidity conditions. As the liquidity tap has turned, it has become apparent that many of these businesses were on shaky foundations with sub-optimal business models and cannot continue to function in their current form. We are now seeing significant corrections in valuations.

In 2022, European fintech player Klarna raised USD 6.7 billion USD 800 million at a valuation of USD 6.7
billion, significantly lower than the USD 46 billion valuation that it had touched in June 2021. Likewise, Stripe, the payment processing platform, saw its valuation drop by 64% since its previously marked price. Similarly, shares in publicly listed Affirm, a BNPL player, fell by more than 80% in 2022.

New-age fintech start-ups are now set to compete with large tech behemoths such as Apple and Amazon. The industry is now seeing strategic initiatives, such as Goldman Sachs creating a D2C platform – Marcus, for digital consumer banking. Some of these moves seem to be challenging the traditional take-deposit-give loan model of banking. Amazon for instance is working actively to unbundle traditional banking products and the company remains very focused on building financial services products that support its core strategic goal: increasing participation in the Amazon ecosystem.

Real & significant opportunity in fintech

Businesses need to differentiate through a unique advantage. It is imperative that businesses are focussed on thinking about what is it that truly differentiates them and how durable is the differentiation. Currently, many segments within the fintech ecosystem especially in India have multiple businesses with little or no differentiation. This is undesirable and needs correction.

The future will be about smart AI and further innovations in products/services and customer experiences including hyper-personalization. Voice payments, an AI-powered tool, is likely to be a notable innovation. The Voice Payments Report in 2017 predicted that 31% of US adults would adopt voice payments in 2022, a big jump from 8% then. Three significant factors will reportedly fuel the growth: proliferation of voice-enabled devices, technological improvements in AI, and robust solutions for voice payments. Many financial institutions, payment providers, and fintech players in the US, including Capital One Corporation, PayPal, Amazon, Apple, and Google are actively pursuing the creation or inclusion of voice payment technologies in their offerings.

While the jury may be out on the fate of the crypto ecosystem, it’s base technology – Blockchain, still holds promise. Blockchain technology still has the capacity to bring about newer innovations that will have powerful use cases and applications.

It will also be interesting to see how social media-hosted payment platforms perform. Most interesting would be the way forward for Twitter — after its acquisition by the maverick billionaire Elon Musk. Many observers, including us, would not be surprised if Twitter emerges as a significant fintech player with an embedded payments layer.

The global fintech sector could be entering a period of a renaissance after the adjustments brought about by the shifting global macro environment. While longer-term opportunities from the sector will continue to be present, investors will need to be very discerning and those who will deploy capital prudently from here on will end up delivering outsized returns over time.

The post Fintech: The game changer appeared first on International Finance.

Even though the tech industry thinks of itself as progressive and forward-thinking, there is still a significant gender gap in roles from entry-level and junior to senior management and the C-suite.

The media routinely covers the subject, and organizations that want to handle it do so. Yet we continue to observe glaringly unequal percentages of gender diversity every year. Why, then, do we not perceive a change?

Having been on both sides of the hiring table, we find ourselves in a unique situation as we approach our tenth year in the business. However, considering what we’ve seen, we can provide critical insights from our own experience to give businesses something to think about as they work to become more inclusive.
What did we find?

The ability to influence change goes hand in hand with hiring power. During the three years, we’ve worked at IFM, the company has grown a lot, and we are happy to be in a position where we can use our hiring power to fight against gender inequality in the industry.

When we went through the hiring process for ourselves, we noticed a definite gender divide in the applications that didn’t always reflect the candidates’ experience and skill sets when we offered two opportunities, one junior and one senior.

Women often applied for lower-level jobs even though their experience was better suited for higher-level positions, and the same was true for men. Therefore, we believed providing the applicant with this feedback was crucial to boosting their self-assurance and promoting a constructive critique of their skills.

Because of this discovery, we had to carefully rethink how we describe our company, the jobs and responsibilities, and the commitments we ask employees to make about their roles in our communications with the outside world. Here, we provide our top three findings:

Make job specifications clear

As a hiring manager, the first step to attracting candidates with the best skills is to make sure you know the difference between a senior and a junior and what the experience and expectations are for someone at this level.

You can tell if a candidate is overselling or underselling themselves by mapping their basic skills and experience to their level of seniority and figuring out the best way to bring this up in the interview.

Use the right language

After establishing these standards, the job application must appeal to everyone. Employers should think about how the language of the job advertisement reflects business policy and how the reader will interpret it.

We learned that some job descriptions use words and phrases men are likelier to like. We could attract a wider pool of candidates by making small changes to our job descriptions to use more inclusive language for both genders. Instead, we beg people in charge of hiring to look over their current job postings and think about how the language makes candidates feel.

Make it equally attractive to everyone

Ultimately, a job and a company’s culture should appeal to people of any gender, race, social class, or income level.

Since questions about a candidate’s well-being are the ones most likely to come up in an interview, including them in the job description is expected to draw in top prospects. Consider the guidelines for working from home, mentorship, and parental leave benefits.

Customizing management

Industries that men once dominated often don’t have management teams with skills that match the growing number of women in the workforce. But as workplaces change, managers need to learn how to deal with different ways of communicating and working to make them more appealing to women. The main goal of people in management positions is to bring out the best in their teams so they can make better products. The outcomes will be better the more we collaborate with our team. What, then, is the solution? As women in the industry, we need to bring more empathy to management if we want to help women get jobs and make significant changes.

Going forward

We believe it’s a challenging issue, and we’re beginning to see that corporations diversifying their workforces in one way don’t always succeed. So, to make fundamental changes that aren’t limited by or dependent on outside forces, we would argue that we need to study and understand each unique process, culture, and position.

We credit some of our best ideas to the various teams we hire because creativity and doing the best work for clients can only happen when the groups disagree

Where do we go from here?

Fintech companies of all sizes concur that a commitment to diversity is a social good, but how are they presenting the case for doing so on a financial level?

You might think that the strong business reasons for having more women in the finance industry, especially in fintech, would be enough.

After all, it seems straightforward enough: more products that address specific needs plus more women working in fintech firms equals more customers. But, of course, anyone can do that math.

But a new look at how women are represented in the fintech sector for the Fintech Diversity Radar and our FDR1000 index of fintech companies shows a very different and often surprising picture.

Many of the interviewees in the study released last month were confident in the financial impact that more diversity in the workforce, culture, and thought processes can have on the bottom line.

Putting aside the performance benefits of diversity, which are well known, diverse teams can do a lot more to attract talent, keep talent, and get employees involved significantly as the demand for skills expands globally.

Why is diversity such a complex topic?

The research, which is mostly about how women fit into the fintech industry, finds that fintech founders have to deal with specific and complicated problems. Interestingly, the difficulties persisted across all regions:

Due to the lack of gender balance, many executives at fintech companies agree that men’s ideas dominate at every step of the fintech value chain. As a result, growing companies need to find a balance between their commitment to diversity and the challenges of building teams rapidly and at a large scale in new places.

When it does exist, data and best practices for benchmarking and tracking progress are sparse and inconsistent. Even though the structure of developing fintech organisations makes it easier to adapt, the resources needed to meet diversity goals often get in the way. Even with these problems, the study finds an excellent way to deal with diversity and shows how to turn diversity promises into actions and results.

Future-fit

Sofia Nunes, co-founder and head of diversity, equity, and inclusion at unicorn BaaS cloud banking platform with headquarters in Germany, says that intentional diversity starts at the very beginning of a business. “We were quite explicit about the kind of diversity we desired in the workplace and how significant it was to us.” When it came to hiring, onboarding, and creating an inclusive atmosphere, we paid close attention to this. We were aware of the advantages for the business. ”

Jumo, a provider of financial platforms, is working hard to ensure that the company’s diversity is reflected in its product development in Africa, which has a higher percentage of women-led fintech businesses than anywhere else in the world.

“We are aware that belonging, diversity, and inclusion make us stronger.” JUMO is a better place to work because it embraces diverse experiences, perspectives, and ways of thinking, which not only helps us produce better products. The company’s ESG and Campus Lead in South Africa is Jade Potgieter.

Where’s the money heading?

Even though the efforts of individuals are admirable and provide evidence that should make the whole sector change, a “diversity stampede” is still unlikely without the money to support it.

According to the Diversity Radar study, women in fintech are a new 1% club. Only 1% of venture capital funding worldwide goes to companies started by women. And even though we should be 200% proud of their accomplishments, maintaining the status quo is not an option.

We require targeted investment to overcome the herd mentality and ensure diversity in fintech firms from the start.

“We require targeted investment to overcome the herd mentality and ensure diversity in fintech firms from the start. We think diversity is a powerful force for performance. Because diversity fosters creativity, innovation, and market awareness,” Stine Jersie Olsen, Head of Investor Activities for Growth and Impact in Denmark, said in a statement.

To change, pay attention and learn

The research also touched on the fourth topic, which is the role of culture in fostering the success of employees from different backgrounds and skill levels. This topic is frequently discussed but much more complicated to implement (especially in large-scale businesses).

“We employ flexible working methods. We don’t work in a nine-to-five setting. This has been designed and cultivated to give us the freedom to work at our peak potential when it suits our productivity rhythms,” explains Jade Potgieter of JUMO.

AZA Finance is another African fintech company that runs specialised programs focusing on type, role, and aptitude. The company is now setting up mentorship programs to help it achieve its goals.

Premo Ojokojo, AZA’s Head of People Operations, states, “We’re clear on the final result.” We’re searching for younger women who want to learn more about engineering, software, and product management, particularly in the technical fields of product and engineering.

True diversity requires more than corporate declarations of intent, and it is a responsibility that extends far beyond the confines of the HR department. It needs commitment and leadership from executives to create an inclusive culture where, for instance, all questions are treated seriously regardless of who asks them or where they come from within the organization.

One of only 65 companies in the FDR1000 index of 1000 best performing fintech firms with a female CEO, Global Processing Services (GPS), based in the UK, stated, “I think the listening forum was vital to getting to the bottom of where some of the main areas for development are.”

In conclusion, fintech is an industry that is growing rapidly and is attracting more women. However, there is still a long way to go in terms of gender diversity. The fintech industry needs to continue to try to attract and retain more women in order to create a more diverse and inclusive industry.

The post Gender diversity in fintech appeared first on International Finance.

MENA’s trillion-dollar economy is transforming because E-commerce and Connected Commerce (C-commerce) are becoming extremely popular and may serve 40% of the retail market and connect 20 million micro, small and medium-sized enterprises in the geopolitical area.

Zbooni, an E-commerce platform in MENA, introduced the first white paper in the region on the flourishing sector and claimed businesses could improve sales by trading on the platform and engaging with channels that customers prefer to watch.

The platform shared opinions and insights from leading brands like Checkout.com, Tik Tok, and Chalhoub Group. The research found C-commerce in action in social, chat, and messaging apps like Whatsapp and Snapchat, which provide both online and physical stores with a way to convert real-time conversations into sales.

The perks of C-commerce
The CEO of Zbooni, Ramy Assaf, said the region missed the first wave of E-commerce and has been trying to catch up with the rest of the world. But he added that MENA is taking full advantage of the new wave of C-commerce. “We are at the cusp of an exciting retail transformation built around personalized selling. C-commerce has the potential to serve businesses across a wide variety of industries, whether they are brick-and-mortar, online-only or omnichannel. C-commerce shines when there is an interaction preceding a transaction,” he added.

He claimed that many in the region are hooked on social and chat apps. Ramy iterated that C-commerce is the future, and shopping will naturally evolve to be as simple as chatting online.

There is a remarkable finding in Zbooni’s data compilation. C-commerce helped traders and customers connect online and offline. Moreover, they had a sales conversion rate of over 80%, while traditional E-commerce had only 3% of potential customers.

Digital marketing through apps
Group director and partner at Al Maya Group Kamal Vachani believe that digital media is a powerful tool in boosting retail sales in the area.

He added that in this digital era, people are comfortable buying online. E-commerce and C-commerce blew up exponentially during the pandemic, and businesses expect the trend to continue. The Al Maya Group director remarked that people are scrolling through different platforms to get the best deal on their purchases.

The rise of E-commerce
In the first quarter of 2022, the E-commerce sector grew by double the rate of point-of-sale transactions in the UAE, as per Network International.

Network International is a leading enabler of digital commerce in MENA. They pointed to increasing online spending, including credit and debit card transactions. A large chunk of it is digital payments in the government sector, but transactions at supermarkets, restaurants, and convenience stores were significant.

Ian Jiggens, head of advisory and information services at Network International, said that the phenomenon was not just because consumers were taking businesses from physical stores online; they were also transitioning from cash to digital payments.

The next phase: C-commerce
Human-to-human conversations have higher sales conversion than bots or impersonal experiences on a website. C-commerce allows a merchant to peddle and speak with his customers and provides an enhanced sales experience with fewer sales friction, sales conversion, and increased customer loyalty while reducing potential refunds and returns.

TikTok in Arabia
TikTok’s middle east user base is skyrocketing. Almost 95% of web users in MENA use Instagram, YouTube, and TikTok. TikTok, which uses short-form content less than two minutes duration, has been exceptionally popular. The byte-sized clips are highly informal and lucrative and make engagements exciting. Some TikTok creators earned more than an average S&P 500 CEO.

TikTok has reached billions of subscribers rapidly. Some studies suggest that TikTok was more popular than Google in 2021. The platform’s success is evident because its competition keeps mimicking its features. For example, YouTube introduced shorts, and Instagram launched Reels to compete with TikTok.

Users spent about 80 minutes daily on the Chinese platform, the most duration among all social media apps. TikTok has also grown 50% in 2021 and had a 100% rise in the number of people using the digital space for discoveries.

The statistics are mindboggling because TikTok was already successful in 2020 and had a large user base. The rapid acceleration in tech adoption during the pandemic could be responsible for some of that conversion. But the tech updates must have aided other platforms as well. So, why is TikTok such an outlier?

The intimacy of short-form content
The algorithm of TikTok is robust and can learn a user’s affinities and interests and quickly personalize their feeds. It also has one of the simplest designs, with the interface displaying only one video at a time, making navigation easy. These uncomplicated features draw a lot of young people to the platform.

Plus, the short-form video format is time-conserving, engaging, and similar to natural communication. Short videos are like quick chats with friends, while long ones are like formal presentations.

TikTok has pioneered short-form video content in MENA, which has seen a massive adoption of the format, with 20% of digital media time spent on it.

The real secret behind TikTok’s success is its creator community. The app has made content creation democratic and opened a creative outlet for everybody. Almost anyone can make a TikTok video, which feels very personalized.

TikTok’s micro-influencers are its foundation. They have created quality content while expressing themselves and building a robust online community. Many studies show that while making a purchase, consumers value micro-influencer endorsements more than celebrity endorsements.

The impact of influencers
Micro-influencers promote brands they care about, spread brand awareness, and boost sales through C-commerce. Over 50% of consumers in MENA cite micro-influencers as critical to their buying decisions. TikTokers can monetize their content and endorse products while building lasting relationships with their audience.

TikTok’s reach in the market is so strong that brands can no longer afford to overlook it. Historically, brands followed where their consumers went. They advertise on TV, Google search, Facebook, YouTube, and Instagram.

Brands will have to adopt TikTok for advertisements sooner or later. Big brands only spend 5% of their ad revenue on a platform where customers spend 20% of their time and provide 80% sales conversion.

TikTok has already planned and has introduced Spark Ads in MENA. It’s a new native ad display format that amplifies the community’s relevant content.

Brands can use Spark Ads to amplify original creative videos and build an effective content strategy. They also provide the Duet and Stitch features which enable the community to reinvent, rebuild and reinterpret their community.

Another major event was TikTok’s partnership with the e-commerce building platform Shopify. It’s a bridge between Shopify merchants and TikTok influencers.

Shopify’s Vice president of product Satish Kanwar said that even Shopify merchants without a strong TikTok following could connect with new customers using authentic and genuine TikTok content.

TikTok will begin testing new commerce features to make discovering Shopify merchants easier for users in MENA and shop their products within the app as a part of the partnership.

C-commerce is now a pivotal force that merchants utilize to expand their audience and reach their customers, thanks partly to the Coronavirus pandemic. Market research company eMarketer expects the C-commerce sector to soar by 35.8% to $36.62 billion in the US.

As users discussed and learned more about new devices and virtual technologies, the consumption of technology-related material on the site increased by 302 percent last year across the Gulf Cooperation Council region. According to TikTok’s most recent What’s Next report, beauty-related content surged by 169 percent in the area, with many users posting makeup lessons and skin-care routines. Additionally, among the top content categories, food and fashion saw growth of 197 and 287 percent, respectively.

The rise of #TikTokMadeMeBuyIt has been one of the platform’s most noticeable recent trends. As of June 2022, videos that included the hashtag had received a combined 13 billion views worldwide.

An Indian ex-pat in Saudi Arabia, Mohammed Sabir KT, said he books all his flight tickets from agents who advertise on TikTok.

Small businesses like the Japanese cheesecake franchise Uncle Fluffy in Dubai are utilizing the network. The brand of Uncle Fluffy, known for its entertaining and compelling content, has been significantly reliant on TikTok. TikTok offers (the brand) extremely organic engagement that significantly boosts brand recognition.

Uncle Fluffy wanted to expand its TikTok presence and gain more fans to capitalize on this interaction. With Spark advertisements, a native ad format that enables marketers to promote their organic content (or the material of other creators) as TikTok commercials, it promoted its original content.

Through the efforts of this campaign alone, Uncle Fluffy gained 878,000 new followers in just 14 days, helping him reach one million followers.

Big companies will soon catch on to the disparity in ROI, TikTok is likely to boom even further, and ad revenue for short-form content will shoot up.

The trend will accelerate during Ramadan as consumers accept advice from trusted influencers. It’s a great opportunity for brands to communicate with their consumers while influencers earn a living doing the things they love.

The post C-commerce to revolutionize trillion-dollar MENA retail Market appeared first on International Finance.

In an interview with International Finance, newly appointed EBANX chief executive officer and co-founder João Del Valle said that the unicorn wants to be the leading payments company in LatAm. Brazil, where EBANX is based, is the largest e-commerce market in LatAm. In 2020, its online shopping revenue amounted to R$126.3 billion despite the pandemic and economic uncertainties. The e-commerce market in LatAm grew by 8.49 percent and reached $200 billion in market value in 2020, according to a study by EBANX. The region is also home to more than 650 million people and 33 different markets. Two of the largest markets in the region, Brazil and Mexico, alone have populations of around 210 million and 130 million respectively.

This shows the immense potential of the sector and hence it is attracting global e-commerce retailers into the region. The size of the e-commerce market in Latin America is immense and there is still a large part of the population that still does not shop on an e-commerce platform. This is good news for the sector because it provides scope for the online market to grow. Another important factor to consider is internet penetration in Latin America. According to Statista, as of the first month in 2021, at least eight out of ten people living in the countries such as the Bahamas, Chile, Barbados, Costa Rica, St. Kitts and Nevis, and Argentina were online.

In contrast, less than half of the population in countries such as Nicaragua, Honduras, and Haiti had access to the internet. The regional average of Latin America and the Caribbean stood at 64.13 percent. Since the pandemic has forced people to stay at home, a greater emphasis has been given to technology and people are going online to satisfy their wants.

Recently, EBANX has shifted its focus to Central America and wants to grow its presence in the region. João Del Valle believes Central America has the perfect foundation for the exponential growth of e-commerce. By bringing its technological solutions to the region, EBANX wants to attract global e-commerce giants into the region’s market. In this exclusive interview, João Del Valle discusses the launch of EBANX ONE, his vision for the company and the company’s plans going forward.

IF: Can you tell us a bit more about EBANX ONE?
The launch of EBANX ONE is an exciting milestone for EBANX, since it consolidates, in one single platform, all we’ve been doing for almost ten years regarding payments, security and technology in Latin America. ONE is a unique solution in the market that unifies international and domestic settlement, paying and payout services, for companies with local or international operations, so they can seize the full potential of Latin America by adding or switching between countries and business models, with full flexibility.

This is something extremely complex, especially in LatAm, where each country has its own regulations and norms – and this is why no competitor has anything like it. The flexibility of ONE is the big thing and the big news; it’s everything that global enterprise merchants want, because it allows them to expand to any other country in LatAm with just one click, at a speed that doesn’t exist in the market, and with the business model they prefer.
ONE also marks a revolution in EBANX’s business model: from now on, we are not only a cross-border payments company; we deal with any and all types of payment in LatAm.

All of this was only possible due to EBANX’s deep expertise in the Latin American market, which enabled the development of our own technology, with high consistency, speed and quality of execution, in addition to a unique FX solution and global payment reconciliation that addresses all the complexity of the LatAm markets.

Finally, I’d like to stress that the launch of ONE follows the expansion of EBANX to new Latin American markets, in the midst of a unique moment of financial and digital inclusion in the region. All of this demonstrates our commitment to LatAm, and to increasingly generate access for LatAm consumers.

What is your vision for the company?
EBANX wants to be the leading payments company in Latin America, giving access to the best products and services worldwide. We want to be a bridge between global companies and LatAm, helping them to best seize the region’s opportunities and pushing further the financial inclusion in the region. All of this, of course, with high levels of technology and security, with a built-from-scratch payments platform and an optimal payment performance that only our extensive and deep network on the ground can provide. With the launch of EBANX ONE and the expansion into new markets, we expect to grow our processing volume five times over the next three years.

Can you tell us about your plans in Central America?
Central America is the next big thing when it comes to Latin America: after Brazil, Mexico, Argentina and other major markets, global companies are now aiming for Central America as a great yet unexplored market, with a huge demand for digital products and services.
It’s the go-to market in LatAm. And why? Because Central America has the perfect foundation for the exponential growth of e-commerce. Its population has high levels of connectivity and digitisation, but e-commerce and digital payments are still in early stages, with few localised payment options and online stores. In other words, we have rapid digitization and a population eager to consume global products and services.

EBANX comes to Central America to help drive this process, connecting with local players and opening the region for global companies. We want to actively participate in digital growth in the region, and also learn with consumers and the local ecosystem. We have launched operations in Costa Rica, and we’ll be in El Salvador, Panama, Guatemala and the Dominican Republic within the next few months.
We believe that Central America is not only under looked by global companies, but it is still underserved in terms of digital products and services. EBANX’s entrance into the region is going to create a real impact on Latin Americans’ lives, and a real bridge to the region for businesses. We are very excited about this possibility.

Also, share your insights with regard to the e-commerce sector in Latam. Do you see the market becoming one of the fastest-growing markets in the world?
Absolutely. Latin America is already the fastest-growing digital market in the world, according to data from EBANX and AMI (Americas Market Intelligence): the region grew 18% in 2020, pushed by the digital inclusion during the pandemic, and reached US$ 210 billion in market value. This year, it should accelerate 32%, with rapid growth of online retail and digital products and services, such as streaming, online gaming, and SaaS. More than 50 million people joined e-commerce during the pandemic in LatAm, a jump of up to 30% in some countries. Mobile shopping is booming, people got used to buying online during the pandemic, and this trend will continue to be true.

Although these are very impressive numbers, there is still a lot of room to grow in Latin America. E-commerce, for instance, only represents 6% of total retail sales in the region. Digital payments have just gained traction, with the use of digital wallets and instant payments in Brazil, for example.

This is why our focus at EBANX is 100% within the LatAm region. Latin America is the place to be in 2021 for e-commerce. EBANX wants to offer the best payment solution to our merchants, so they can offer the best payment experience to their Latin American consumers.

Can you shed some light on the financial and digital inclusion in Brazil, and also Latam?
This is a unique moment in Latin America in terms of digitization and financial inclusion. The pandemic had a hard hit throughout the region, and unfortunately, it still rages in many countries. But it also pushed forward access to financial products and services, and especially to digital payments. In Brazil, for instance, millions of people had access to their first digital account, thanks to the governmental emergency aid, which was deposited in a federal bank digital account. Digital wallets have boomed: in Brazil, you see QR codes everywhere, which people use to pay for groceries, pharmacy and even for their daily bread through their cell phones. Brazilian’s instant payments system, Pix, was also launched during the pandemic, with great success. And we see the same movement in other Latin American countries where fintech companies offer new products day by day, new regulations being published to boost competition, instant payments helping to democratize financial services throughout LatAm. It’s a very exciting moment to be in Latin America.

Can you tell us about EBANX’s technology that provides seamless risk management, fraud control and compliance?
Security is a key value for us at EBANX, and this is why we developed a fraud prevention strategy, EBANX Shield, specially tailored for Latin American markets. Using in-house technology and our extensive database, we keep the merchant’s operation safe in all countries, while guaranteeing optimal payment performance. We are very proud to say that EBANX has a much lower chargeback rate than the overall market: it was 0.42 percent in 2020 in all LatAm countries, whereas the benchmark rate for the region was 1.7 percent. This means not only more safety but also more TPV to our merchants.

EBANX’s direct connections with Latin American local acquirers, banks and other players help us to deliver the best fraud prevention strategy. Here’s the importance of having Latin American DNA: there is no way of approaching fraud in Latin America in the same way as other regions, and there is no one-size-fits-all fraud prevention strategy for all Latin American countries. Each country requires a single and custom strategy due to fraudsters’ varying behavior market to market, as well as local players’ approach to fraud.

What major challenges you had to overcome in your journey from a startup to a unicorn?
I would say that the biggest challenge was, and still is, to scale the company while attracting talented, senior people to work with. As the company grows, the challenges also scale, and you need more experienced people. To attract these people, and to retain the ones who work with you, is a challenge itself. It’s an ongoing battle, to be true. EBANX has recently raised a US$ 430 million investment round from Advent International, and part of this investment is going to be used in talent attraction. This is crucial for us to keep growing and offering the best payment service in Latin America.

What is the outlook of the fintech sector in Latam? How has Covid-19 impacted it?
Covid-19 accelerated the demand for digital products and services in Latin America, due to social isolation measures. Digital payments, banking solutions, e-wallets, e-commerce, SaaS, BaaS, cloud companies, all of these industries were deeply impacted by the pandemic. And, since LatAm still had a huge gap in terms of financial inclusion, with almost half of its adult population not having a bank account, it was only natural to see a boom of fintech companies, in order to fill that gap and provide access to digital products and services. There is huge demand and room to grow – and, as a consequence, investment is pouring throughout the region. We had a record in venture capital funding in Latin America during Q1 2021, mostly driven by fintech companies.

Of course, the first hit of the pandemic was hard in the whole region, and it continues that way. Businesses had to adapt, go digital, many of them closed, and there is unemployment, on top of the health crisis. But we also believe that the pandemic brought an opportunity to give access to millions of people to e-commerce, digital payments and digital products and services, and this will definitely change the way Latin Americans buy and live.

At EBANX, we saw the lower downs in our processing volumes in late March, April and May 2020, mainly in the retail vertical. But this behavior quickly pointed out to a change: not much time later, in May, we surveyed our Brazilian consumers about purchases on international retailers. Most maintained their average spending and intended to increase it in a post-pandemic scenario. We saw the same movement in Mexico. At the same time, we had merchants that grew impressively, like online games. Today not only the physical goods vertical recovered, but it’s growing, as well as the digital goods vertical.

Latin America is a 600 million people region, with a $5 trillion GDP. We continue to believe that Latin America has a great outlook, and a fruitful scenario for companies that sell SaaS, BaaS, streaming, and digital products and services in general.

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The funding round for Clik was led by Openway and Poems, the investment holding company of Phillip Capital.

Many global as well as Cambodian investors also participated in the funding round.

According to the startup, it will use the funds to scale its product engineering and customer service teams. It will also use the funds to officially launch in Cambodia by the end of 2020.

Matthew Tippetts, chief executive officer and co-founder of Clik told the media, “The closing of our seed round is a sign that investors are eager to back future proof platforms for the ‘new normal’ that will inevitably exist post-COVID. It also shows that investors see attractive opportunities for investment in Cambodia, especially in start-ups with robust regional potential.”

“After two years of scaling up and defining the fundamentals of our regional market strategy, we’re ready to accelerate our growth with the closure of our seed round. Our goal here is to offer merchants and consumers a much-needed and attractive digital alternative to cash,” he added.

Established in 2016, the startup currently has nearly 2,500 merchants and five financial institutions in its beta programmes. Reportedly, it  also has more than 56,000 merchants through their partners.

Its list of partners include retailers such as Ucare Pharmacy, convenience shop brand Kiwimart and local conglomerate Chip Mong Retail.

Clik is also integrating its platform with the National Bank of Cambodia as a part of the central bank’s Digital Currencies initiative.

The post Cambodia-based fintech startup Clik secures $3.7 seed funding appeared first on International Finance.

Fintech Abu Dhabi is a leading initiative created to further develop and transform the region’s fintech ecosystem. Governor of the Central Bank of the UAE Abdulhamid Saeed, told the media, “We are pleased to collaborate with ADGM to co-host FinTech Abu Dhabi 2020. ADGM’s goals are in line with the Central Bank of the UAE efforts solidifying our position as the regulatory body responsible for promoting the healthy development of the financial services sector and market behaviour.”

Fintech Abu Dhabi was launched in 2017 to support startups, innovations and financial services in Abu Dhabi and rest of the Middle East region. The event also showcases Abu Dhabi and the UAE’s efforts in establishing themselves as the MENA hub and partner for fintech innovation, research, talent development and collaboration.

The Governor further said, “Through the establishment of the CBUAE FinTech Office, we aim to create an enabling and tech-friendly environment to facilitate financial technology innovations in the UAE, while continuing to enhance the concept of financial innovation. We look forward to working with ADGM and other strategic partners to achieve our common goals of advancing technological innovation and raising the level of customer experience and financial inclusion in the UAE.”

It is reported that the central bank has also developed a fintech strategy and roadmap comprising five pillars to enhance the industry in the coming years.

The post UAE, Abu Dhabi to jointly host Fintech Abu Dhabi initiative in November appeared first on International Finance.

Approximately, half of the companies that paid AML penalties last year were banks. Obviously, the losses for financial institutions that are hit with AML penalties are not limited to just the penalties themselves. They pay a heavy price in terms of declining revenues, customer dissatisfaction, collapsing stock prices, and loss of reputation and brand value.

Rules-based software that used to be deployed by banks to detect money laundering is inefficient and leaves analysts with too many alerts to deal with that could be positive or negative. Solutions based on artificial intelligence are much more efficient in detecting money laundering, compared to software-based on rule-based approaches.

Today deep neural networks can reveal complex interdependencies among money laundering activities across the world leading to fewer false alarms and more accurate recommendations. One such fintech startup that stands out for its artificial intelligence-based AML software is Silent Eight, which is also one of the many fintech companies founded in Singapore by European entrepreneurs.

In the case of Silent Eight’s solution, the recommendations are supported by a written narrative explaining in plain English the decisions. Silent Eight’s machine continually learns as time goes by, and updates its algorithms to constantly improve the quality of its recommendations. The result is that it significantly reduces analysts’ time to review cases and arrive at correct conclusions.

The rising number of global fintech entrepreneurs who are heading to Singapore to launch their fintech startups stands testimony to the allure of the city state’s world-class business environment, regulatory framework, and global mindset. Coming from Poland, Martin Markiewicz is the co-founder and CEO of Silent Eight. Based in Singapore, which is now a major regtech hub, Martin provides the vision behind the company’s AI-based advancements in fighting financial crimes.

Silent Eight is the winner of the FinTech Abu Dhabi Innovation Challenge and the Monetary Authority of Singapore’s 2017 Fintech Hackcelerator award. In 2018, it won a top fintech award in Australia. The same year, Standard Chartered announced that as part of its efforts to lead the way in the global fight against financial crime through the use of regtech, it had partnered with Silent Eight to deliver cutting edge capabilities to its Financial Crime Compliance (FCC) teams.

In 2019, Standard Chartered’s fintech and ventures unit, SC Ventures invested in Silent Eight’s oversubscribed Series A funding round, becoming a minority investor in Silent Eight and reaffirming the global banking giant’s trust in Silent Eight’s solution.

With an educational qualification in mathematics, Martin is a serial entrepreneur. Before launching Silent Eight, Martin had made his mark, creating a few successful startups in Europe and Asia, which includes a startup that saw a successful IPO.

In fact, Martin launched his first startup, Konsultant.it, which provided software and hardware development solutions for small and medium enterprises in 2001. In between, he was the strategic sales director of Wola Info, a leading European IT company. Later Martin established SevenFlow Investments – a multidisciplinary engineering company with a track record of landmark projects. SevenFlow Investments would finally become a part of a highly successful IPO.

With his 16 years of experience in software and artificial intelligence solutions covering a wide range of applications, Martin has taken the challenge of helping banks outsmart financial criminals and money launderers, who are gaming their transaction systems, headlong. In an exclusive interview with International Finance, Martin speaks about the Singapore fintech startup ecosystem, the value proposition that Silent Eight provides to its users, the Singapore fintech’s growth, and the future of AML software.

International Finance: Could you tell us more about the background of Silent Eight founders and the motivation to launch an anti-money laundering startup in Singapore?

Martin Markiewicz: Before we started Silent Eight, we took a company from startup to publicly traded in Poland. Our track record of creating a publicly-traded company from an idea gave us the confidence to try something new.

We were looking to do something significant, something that would help people. Our strengths are in engineering and problem solving, so we were looking for a global problem we could solve that would make the world better. It sounds a little cliched, but it’s what we wanted to do. We kept coming across money laundering, financial crime, the challenges that institutions face to run their business and ensure exactly who they were doing that business with.

In essence, we understood the global damage caused by all these activities. We saw the billions of dollars being spent every year to fight financial crime, and we also saw statistics after statistics that showed the bad guys won way too often.

The way we build is from the bottom up, working with a customer to solve a problem. This led us to Singapore, a global financial centre, to launch our business in supporting banks to combat global financial crime.

If you examine our clients, they are clients with a global scale and to match them, we are expanding globally with offices in Singapore, New York, Chicago, Seattle, London, Hyderabad, and Warsaw.

What are the key challenges that AML solutions face globally, especially the volume of false alerts? How do Silent Eight’s solutions minimise this challenge?

The false alerts are just one of the many problems. There are a lot of major lawbreakers and bad guys who are trying to get into the financial system and freely move around it. What financial institutions need to do is investigate existing and potential clients, vendors, and other partners in terms of their activities.
We help with false alerts.

We investigate 100 percent of the alerts for our customers and solve them. We do not suppress them nor are they weighted or partially solved; they are either solved or not. This is one of our key differentiators. Our IP does not decide whether an alert should be solved or not and which way it should be solved. Our AI acts according to the specifications of our clients.

The removal of false alerts is the first step to achieve our purpose, which is finding true alerts. Solving false alerts is challenging, and it’s important. Finding true positives is what we are here to do. We help our customers keep clear of terrorists, drug lords, and sanctioned people, and this way we also secure the interests of firms that protect our clients and the broader financial system. But ultimately, it’s even bigger than that in scope.

Each time we help a client refrain from financing a person with bad intent, we make it that much harder for the person with bad intent to hurt people at scale. That’s what we are about; solving false alerts gets you to true alerts and solving true alerts saves lives, money, and jobs. This is exactly what we were looking to do.

So, what are the implications of Standard Chartered’s investment in Silent Eight?

Standard Chartered is one of our minority shareholders. One of the implications is that they have invested in us and that gives us a vote of confidence. It’s always a good feeling when a client using your product says “hey, can I invest in your company?” I hope the implication of this is that we will do great in the future.
I feel that our product is differentiated, and it’s a great fillip for a global bank to invest with their capital in a company that provides them a critical product, not limit their commitment to just words.

With regard to regtech, ongoing developments like the US-China trade war are creating new sanctions lists. How is Silent Eight keeping up with these dynamic developments?

We do not create or maintain sanctions lists. Our customers have other excellent providers for that. Our AI leverages those lists and learns and grows each time an input changes, including a sanctions list. This approach means no matter what new sanctions are added or changed we are ready to support our customers in abiding by their directives.

In terms of minimising human effort and maximising productivity, can you quantify the gains that organisations can make by using Silent Eight solutions?

It’s clear that the AI can process data and solve alerts at a velocity unreachable by humans. However, we do not view it as a clear choice between human or AI solved alerts. We see it as a very traditional AI-human relationship in that a human sets the rules, the AI does the work, and another human checks the work. It is symbiotic with each component in the chain responsible for the part they are best suited.

The other key differentiator between AI and human solutions is the AI is incapable of making a mistake, either through poor training, or bias, or tiredness or any of the flaws that we are made of.

On a daily basis you may have thousands of alerts. So how does Silent Eight system ensure that it scales to meet the hundreds of thousands of alerts?

Our system is built under a scalable infrastructure with a capacity to handle hundreds of thousands of alerts every day. It’s designed to work with the biggest financial organisations in the world across multiple jurisdictions and languages.

With the number of machine learning based AML solutions available in the market, what is the unique value proposition offered by Silent Eight to financial institutions?

The first key differentiator is there is no opaqueness in how an alert is solved. We show clients each of the agent results that created the solution and which set of client rules it followed. And each alert is auditable.

It’s important to reiterate, we do not weight, or recommend, give probabilities, or suggest, and we definitely do not suppress. We follow the rules the clients give us. It is as simple as that.

Each time we solve an alert we tell the overseeing analyst exactly why the alert was solved without any black box challenges. We provide the solution and the explanation how it is worked out.

For example, it is harder for clients to trust a score generated by the machine stating that “this case has only 5 percent probability of something serious.” In my opinion, that approach doesn’t help very much. On the other hand, what helps is the machine saying “Hey this is a true case or a false case,” and then further explaining the recommendation with supporting information. With that, clients can agree or disagree with the recommendation and justify their final decision. The idea is to ensure that the machine generates transparent, reliable, and explainable information.

Which are your key markets and where do you see the most growth in the next five years?

We have big projects with European and US domiciled global banks underway and many regional banks especially in the US. We really see our target market as anyone who is worried about the accuracy and consistency of their AML processes and who could do with an AI-based helping hand.

What are the advantages and challenges of scaling a regtech startup in Singapore?

As I mentioned earlier, Singapore would be the best starting place for establishing a business. I think the fact that we started off in Singapore is an advantage because of its great regulatory and business environment.
Singapore offers a great platform for us to build something like this. Also, it is a pretty small market unlike the US — so the mindset is to go global right from the start. We are currently surrounded by like-minded people with a similar approach. That’s definitely an advantage.

In terms of developing technology, what are your plans for the next five years?

Our technology is receiving awards nearly every month, so we are very happy with the status quo. We, like any client-focused business, continue to develop based on client feedback and we have a full roadmap of client-driven requests.
Right now, we are on a certain version of the product, and the next version will be much, much better than the current one. We will ensure that the product only gets better across all use cases.

What does the future of machine learning-based AML solutions look like? How do you see the technology evolving in the future?

I think machine-learning will be increasingly adopted as the benefits become more well known as opposed to the ‘terminator complex’ that tends to often to spring to mind when people hear about AI.

The space we are in right now is complex. We are constantly stopping people from doing bad things. It is important to remember that these guys bring a lot of resources and power into play. They are also constantly trying to dodge our efforts.

So, it only makes us believe that we should keep improving and getting better at using advanced technologies, such as artificial intelligence. I think the future in this space is tremendous. In the next five years, we are going to see a big shakeup in terms of who are the new market leaders. More and more players are coming up — offering advanced solutions that can be used by financial institutions without sacrificing their gains. In my view, this is the way to go. Mostly, we look forward to supporting our clients in redefining what it best looks like when it comes to keeping criminals away from the global financial markets.

The post Silent Eight: AML software that makes sense of alerts appeared first on International Finance.

Ideally human beings need to be able to plan and save for important life events and goals such as higher education for self or their children, marriage, buying a house or retirement. Walk into a traditional bank and ask for a final solution for one of these goals and you are likely to be sold a product that is profitable for bank or the agent rather than the customer. How do customers understand that the financial services options that they are choosing are contextualised to their lives and goals?

To answer this question, Laurent Bertrand and Robert Lonsdorfer founded Singapore fintech startup BetterTradeOff on the belief that by leveraging technology they could offer individuals as well as financial institutions solutions that provide transparent and unbiased financial information to make better decisions about their future.

The fintech startup’s flexible, modular, white label SaaS solution Aardviser can quickly and efficiently capture the financial status of a new or existing client of a financial institution to help it engage the customer with relevant financial solutions to build trust in financial institution-client relationships.

In November 2019, the startup launched a direct to consumer solution Up which helps individuals develop their own financial plan online helping anyone, regardless of financial acumen, to explore and plan a better future. Based on the concept of holistic lifetime planning, the platform dramatically simplifies the financial planning process.

For advisors it provides a collaborative tool that allows them to give clients a meaningful and intuitive understanding of their current financial situation, while enabling the advisor to deliver a transparent and unbiased plan for achieving a client’s future goals and dreams.

The direct-to-consumer solution provides people with a do-it-yourself tool for exploring and understanding different financial choices and outcomes. Interactive, highly visual, and fun to use, ‘Up’ makes it easy for people to see and understand the impact of each decision they make, while exploring a wide range of financial situations, including family composition; life events (such purchasing a new home); expenses and income; savings and investments (including tax implications); education costs and financing; insurance and debt.

In an exclusive Interview with International Finance, the co-founder of BetterTradeOff Laurent Bertrand speaks about how the fintech startup’s twin solutions help individuals achieve holistic lifetime planning instead of piecemeal financial solutions that don’t serve the purpose. BetterTradeOff has raised over $3 million in its Series A, and is planning to instigate a Series A2 institutional fund raising of $10 million in the first half of 2020.

International Finance: How does BetterTradeOff’s product differ in the application of the concept of holistic lifetime planning compared to other financial planners? Among the many B2C financial planning solutions out there in the market, what is Up’s unique value proposition?

Laurent Bertrand: Up significantly differs from other platforms. Theplatform provides a comprehensive picture of all the elementsi mpacting a person’s financial plan, with real-time data, delivered in a way that’s interactive and visual, making it easy to see and understand the financial impact of every decision. This provides transparency and clarity with respect to a person’s financial needs, as well as the potential risks they face – helping them build a plan to both finance and protect their dreams. With all the elements at their fingertips, users can build a plan they can trust and find the peace-of-mind that comes with knowing they are covered. You can’t dream if you can’t sleep.

In addition, our solution has been designed to be easily deployed across jurisdictions (we typically open a new country in four to six months including incorporating all the relevant rules such as those involving taxes). This makes it easy and convenient to maintain our solution up-to-date with regulatory and economic changes, so large financial institutions can deploy our solution across their geographical footprint effectively.

How does the solution work?

It starts with a quick onboarding where we only capture the basics: age, household composition, housing, income, existing assets and retirement assumptions.

Having pre-populated your plan based on advanced statistics like salary evolution and living expenses and all the relevant rules like taxes, property and social security, we bring you immediately to your dashboard where you’ll see visualisations of your current financial situation – savings, net wealth and cashflow.

Rather than answering a hundred questions before getting any insight, you gradually increase the accuracy of your plan while acquiring an intuitive understanding of the financial impact.

This is where the fun starts – planning the future. You can select different financial goals, or dreams as what we call it in the tool – from retiring, buying a house, travel, sending kids to university, and so on – and simply drag and drop them into your plan. As you do, your financial situation is immediately updated, so you can see the impact of each selection.

This allows you to explore endless dreams and financial possibilities – ultimately – building the plan that’s right for you. The tool also allows you to simulate risk, such as visualising what would happen to the financial stability of your loved ones in case of your death, or should you face permanent disability – so that people can see the importance of incorporating the right level of protection, such as insurance, into their plan.

When you speak of financial advisors, what is the profile of the typical financial advisor that you are targeting?

Currently we partner with some of the world’s leading financial institutions, enabling their financial advisors to provide clients with a transparent and unbiased plan for achieving their life goals and dreams. Our B2B solution can be found in four countries: Singapore, the Philippines, the UAE and Switzerland.

Since BTO’s solution is available in Asia, the Middle East, and Europe, how does the solution ensure relevance across markets?

We use advanced analytics and statistics taken from every country of operation, to ensure that the life plan is not just comprehensive, but hyper-localised and market-relevant. We incorporate the relevant rules regarding family, taxes, property, social security, retirement, healthcare, insurance, investments to ensure that the results are reliable, and users can explore all their options.

In markets where people have not warmed up to algorithm driven financial planning how do you sell BTO’s value proposition?

There isn’t a single market where people don’t want to plan for a safer, better financial future. They might plan with Excel, on paper or with the help of a certified financial planner but in the end, in developing and developed markets alike, every one of us want to know how much is enough and how to achieve our goals and dreams.

BetterTradeOff takes care of the complexity for you and makes the process fast, intuitive, transparent and fun, helping you to feel confident in taking better decisions for your future. Armed with the knowledge of what you need to achieve your dreams, you can then easily use robo-advisors or traditional financials institutions like banks, insurances or brokers to trade or buy the financial products they need.

Can you quantify (if possible with numbers) the value financial advisoirs and their clients can derive by using your solution over a life time vs the traditional methods of financial planning?

Having deployed our solution in four countries with multiple leading banks and insurance providers in various setups, we have observed consistently the following key results

Effectiveness: investment size up to two times larger
Efficiency: up to 15 percent closure in the first meeting compare to the norm of three to four percent;
Acquisition: seven out of 10 surveyed clients recommend our solution
Activation for dormant and orphan clients

From the client’s side, what kind of data does the solution gather and what are the integrations required?

We collect only necessary data to build a reliable plan for the clients. They can see transparently how the information is impacting their financial future. They can input all their data manually or through secured API with data sources like bank accounts.

Uploading existing client data to avoid unnecessary re-entry is key in terms of change management. We naturally collect all activities happening on our platform for audit purpose as well as to support improved client experience through advanced analytics.

Our solution has been designed so our clients can gradually integrate with it from Single Sign-On for security to quotation engine and fulfilment.

To build momentum early-on, most of our clients start with light integration (upload of existing client data, existing financial products and white labelling) and gradually increase integration to generate further efficiency gains and seamless experience.

Which are your main markets today and which are your target markets? As far as your B2C solution Up is concerned what are BTO’s plans for markets outside Singapore?

The B2B platform is currently deployed in Singapore, the Philippines, the UAE and Switzerland. Discussions are already underway to add markets in Asia, the Middle East and Europe. Our direct-to-consumer tool – Up – was launched in Singapore last month (November 2019). We hope to launch in two new, to be determined, markets next year.

Rarely do fintech companies offer both B2B and B2C solutions. How do you plan to balance the demands of having both B2B and B2C offerings?

We are obsessed with making a difference for the end-client and that obsession applies to both our B2B and B2C solutions. What we observed very early on is that once end-clients are convinced about a financial decision, the next question becomes where to find the relevant financial products.

Our B2B and B2C solutions reinforce each other: we offer a broader distribution channel for financial institutions with our B2C platform while our B2B solutions can be used by professional advisors to provide the human touch so often required for life-decisions.

The post Lifetime financial planning: What is the better trade off? appeared first on International Finance.

According to the Saudi Vision 2030 envisioned by Crown Prince Mohammed Bin Salman of Saudi Arabia, the Saudi government’s goal is to achieve 70 percent epayments by 2030. Why did epayments suddenly catch the imagination of Saudis in 2019? What are the underlying factors and motivations? How likely is Saudi Arabia to achieve its goal of a cashless society and 70 percent epayments by 2030? What are the challenges that the Kingdom faces to achieve this goal?

Why epayments are seeing quick uptake in Saudi Arabia

Fintech innovation has disrupted the payment system globally. The Middle East is no different in this respect. The study published by the Saudi Arabian Monetary Authority (SAMA) and Saudi Payments Company revealed that most of the epayments carried out in Saudi Arabia were through debit or credit cards.

While card transactions accounted for almost 30 percent of all payments, other types included the SADAD platform and other electronic payments. The achievement revitalises the Saudi Arabian Monetary Authority’s plan to drastically reduce cash transactions and enhance transparency and efficiency in the Kingdom’s economy.

The study further revealed that Mada Sale Service Points recorded a significant increase in the number and value of purchase transactions as well. At the end of 2016, epayments enabled points of sales (POS) grew by 33 percent, while in 2017 and 2018 the growth rate was 35 percent and 46 percent respectively.

Over a period of time, the availability of Mada electronic payment devices has also increased at places like gas stations, pit stops, and convenience stores. As of September 30, 2019, there were around 421,000 Mada devices in operation in Saudi Arabia.  It is noteworthy that at the end of 2013, there were only 107,000 Mada devices functioning in the kingdom.

With regard to the quick uptake of epayments in Saudi Arabia, Ovais Shahab, Head of Financial Services at KPMG Saudi Arabia told International Finance that, “The payment ecosystem has become more diversified, most notably with the launch of STC Pay and Mada Pay in late 2018 and the arrival of Apple Pay to Saudi Arabia in early 2019. The pick-up of near field communication (NFC) payments in 2018 were also exceptional. It is essential to emphasise that Saudis, especially the young population adopt innovations and advancement at a faster pace than other countries.”

A disruption planned by the government

ePayments will help the Saudi government tackle issues such as money laundering, terrorism financing more efficiently as epayments are often logged and can be tracked back whereas cash transactions can’t be. In short, digital payments increase accountability.

According to World Bank data, formal banking reaches about 40 percent of the population in emerging markets, compared with a 90 percent penetration rate for mobile phones or mobile money or fintech services. Providing digital payment options allows easier market access for consumers as well as merchants. Currently, there are 21 entities under test permit in the SAMA Sandbox, including fintechs specifically focusing on payments.

These startups disrupt the payment model, and while some will work with the banks, they will all push the banks for more efficiency and cost-reductions of their payment models. Some startups focusing on crowdsourcing or loans will also take financing roles from the banks, all the way to managing international transactions. Simultaneously, epayments also help boost the ecommerce sector in the country. It effectively helps solve the complicated and physical problem of collecting cash for a product sold online. ePayments has also drive the sale and purchase of new digitised products and services.

How can Saudi Arabia achieve its epayments target?

To achieve its target of 70 percent epayments by 2030, the kingdom of Saudi Arabia has undertaken a number of initiatives. The launch of the Financial Sector Development Program (FSDP) is one of them. One of the key functions of this programme is to promote epayments and convert Saudi society to a cashless society by increasing the share of non-cash transactions to 70 percent in 2030.

Another important function of the programme is also to improve the availability of financial services in the kingdom. Saudi Arabia aims to increase the number of banked adults in the Kingdom to 80 percent by 2020, from 74 percent in 2016. The fact that Saudi Arabia has overachieved its own epayments target this year is an affirmation of the programme.

Ovais Shahab told International Finance, “The Saudi central bank SAMA has a forward-looking vision for a shared infrastructure and in 2018 it established its payment infrastructure department as an  independent organisation, Saudi Payments. Serving both banks and fintechs, it aims to provide a level playing field and interoperability and standardisation, this organisation is now also working on a faster procession platform for interbank transactions. Secondly, the SAMA Sandbox and Saudi Fintech, as support hubs are two initiatives of the government to grow epayments by supporting fintechs from outside the traditional banking sector to grow.”

The SAMA Sandbox is an experimental programme undertaken by Saudi Arabia’s central bank. The programme creates a platform for banks, regulators and financial service providers to come together and collaborate on the development, testing and creation of products that support new ways to pay.  It also creates a regulatory environment to analyse and interpret the impact of new technologies in the financial services market in the kingdom and to help transform it into an intelligent financial center.

Simultaneously, it provides a platform for financial technology companies and financial institutions that seek to provide innovative financial services to Saudi markets. The initiative is expected to enhance innovation in financial services and digital payments services. It will help financial technology companies test their products in a much-relaxed environment which will ultimately lead to the betterment of the financial sector and also increase epayments in the kingdom.

In the last two decades, SAMA has also introduced a number of epayment systems such as the Saudi Arabian Riyal Interbank Express and the online bill payment portal SADAD in a bid to increase online transactions in the kingdom. The recent launch of real-time payments in Saudi Arabia could serve as a catalyst for Saudi Arabia to achieve the 70 percent epayments target. For it to work, it is important that financial institutions in the country truly embrace real-time payments and the improvements it will bring to their customer experience.

Epayments challenges ahead for Saudi Arabia

When International Finance asked Ovais Shahab about the challenges Saudi Arabia faces to overcome in order to achieve its goal of 70 percent epayment transactions by 2020, he said, “Saudi Arabia has to embrace an omnichannel approach to its epayments infrastructure. Realtime gross settlement (RTGS) transactions are still done from bank to bank through SAMA, which only operates during business hours, so further integration and a faster platform are necessary. In other countries, such bank-to-bank transfers are already possible, and almost for free and such new systems have proven to be true catalysts for cashless transactions. Another possible challenge could be the focus on cash and low adoption rate of point-of-sale (POS) terminals outside of the major cities.”

Despite the availability of digital payment options now, many users may be accustomed to dealing with cash especially in rural areas and may be reluctant to adapt to epayments.

Saudi Arabia must also tackle the issue of trust and security to achieve its target of turning the kingdom into a cashless economy. The only way a consumer can be persuaded to make payments digitally over and over is by building his trust in the platform that he uses to make the epayments from. 40 percent of consumers in the Middle East have been victims of cybercrime, and almost 71 percent of them have witnessed cybercrimes one way or the other. Those who are have witnessed cybercrimes first hand in Saudi Arabia will be reluctant to transact digitally. The Saudi authorities must create a safe and secure environment for Saudi Arabians and safeguard its citizens and prevent cybercrimes.

Another challenge that any country pushing for digitalisation must address is cross-border payments. Payments made from one country to another could be expensive, slow and at the same time inefficient. Often national banking infrastructures fail to handle cross-border payments.

Saudi Arabia must invest in innovation and technology that ease the process of cross-border payments such as remittances. Also, the payment merchants must help businesses who operate globally compete in international markets by allowing their customers to pay in their native currencies. Often multi-currency cross-border transactions are difficult as one has to go through the regulatory hurdles in each national market. To boost epayments in the kingdom, Saudi Arabia must offer ease of payments when it comes to cross-border payments as well.

For fintechs to flourish in the kingdom, the government of Saudi Arabia must create a favourable regulatory climate for them. But stricter regulations and bureaucracy should not strike down the potential growth of the companies that facilitate epayments.

Saudi epayments platforms do their bit

The SADAD payment portal, introduced by the Saudi Arabian Monetary Agency, is one of the topmost epayments platforms in the country. SADAD connects businesses in Saudi Arabia with local banks and provides a platform to collect payments electronically through all the banking channels in the kingdom 24 hours a day. Besides SADAD, there are some other payment gateways that are operating in the Saudi Arabia payment scene.

UAE-based startup PayFort provides payment solutions to customers across the Middle East through FORT, its payments gateway. Fort facilitates SMEs, startups and even government organisations to accept payments through debit and credit cards. It is also the most widely used online payment gateway in Saudi Arabia.

Saudi Arabia-based HyperPay, which was launched in 2014, has established itself as one of the fastest growing internet payments services providers in the Middle East and Northern Africa region (MENA). The startup provides a wide range of smart, technology backed online payment processing solutions to businesses ranging from the SMEs to multinational companies.

Similarly, PayTab has established itself as one of the most trusted payment gateways in Saudi Arabia. It also provides a platform for businesses to accept payments online and in 168 different currencies. PayTab provides its services to SMEs, ecommerce companies as well as large multinational companies.

The success of the Kingdom’s cashless society goal also depends upon the wider acceptance of the epayment platforms by the local and expatriate population. The government on its part has created a relatively positive regulatory environment and innovation ecosystem for these companies to flourish. But fintech innovation and better customer experience are key to Saudi Arabia achieving its target of a cashless society.

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A study published by Disrupt Africa on active fintech startups over the last four and a half years in 28 countries found that African fintechs have incrementally increased in number to 491 in 2019. In November alone, Nigeria’s payments companies received $400 million in investments—pointing to venture capitalists’ and especially China’s deep interest to gain advantage from the continent’s expanding fintech ecosystem.

The recent developments in fintech investment pose the big question—why is Africa slated to outmatch the  top fintech investment destinations of the world?

Sub Saharan Africa is the fastest growing fintech investment zone

A new GSMA research found that Sub-Saharan Africa is one of the fastest-growing investment zones for fintechs. “The region’s fintech landscape has grown at an annual rate of 24 percent over the last 10 years,” Dapo Adewole, who is responsible for leading the Technology and Digital Practice across  Ernst and Young West Africa, tells International Finance.

The region’s fintech segment comprises more than 260 active companies, with 20 percent of them being international players. A leading independent newswire Medici conducted research last year that found that Nigeria and Kenya are the two African countries that boast the highest number of startups working toward financial inclusion.

These fintechs have already made a profound impact on the local people with rational approaches and nimble technologies. That coupled with a unique economic and demographic environment has established the Sub-Saharan Africa as an ambitious rival to evolving markets like Latin America and Asia. The fact is “it is characterised by a less-developed financial infrastructure and an unbanked population of about 66 percent as of December 2018,” Adewole explains, is the prospect for massive new fintech opportunities.

“Not hampered with what is now considered ‘old tech’ such as fixed phones, Africa has used the mobile phone revolution to increase financial inclusion across the continent.  This wave of innovation has continued to develop, not just geographically, but as payments are linked to most parts of a digital merchant experience the growth of smartphone is bringing new opportunities to fintech.  Consequently there are new opportunities in over the top smartphone-led initiatives such as PalmPay and OPay in Nigeria,” Greg Reeve, Director at PalmPay tells International Finance.

Mobile money startup OPay is capitalising on Nigeria’s 123 million unbanked, who account for 60 percent of the total population. “At OPay, we see this challenge as a major opportunity to deliver financial services for everyone with free, safe and easy to use mobile products under the promise of financial inclusion. Financial services should be available for everyone without regard for physical borders, boundaries or even social status,” Iniabasi Akpan, country manager at OPay Nigeria, said in an interview with International Finance.

In another example, ecommerce retail platform Jumia is helping to build the industry by solving every day challenges, including bills payment,s airtime recharges, loan approvals, or investment access. “The African fintech ecosystem offers tailor-made solutions that address local and specific customer circumstances,” Adewole explains, making them very attractive to global investors.

African fintechs: Major global investors at play

Venture capitalists have channelled huge investments into African fintechs highlighting Africa’s fintech revolution. In March, Mastercard invested $300 million in Africa’s largest payments processor Network International.

Investors put in $400 million in three payments startups in November alone. OPay, which is incubated by Chinese internet browser Opera, received $170 million funding in two series led by famed Chinese investors, including Sequoia China, IDG Capital and Source Code Capital — an equivalent of one fifth of all venture capital funds raised in Africa in 2018.

Visa announced a $200 million investment in Lagos-based Interswitch and local fintech PalmPay. Additionally, PalmPay received $40 million in a seed funding led by Chinese mobile phone maker Transsion.

An American investment firm Partech Ventures found that the total funding raised by the three fintechs represent a significant portion of the $1.2 billion in venture capital across the continent in 2018. Those fintechs emphasised that they would use the cash to expand into select parts of the region where only one-third of adults have bank accounts. This ties back into the formula that the unbanked population lacking access to the current financial developments have become one of the biggest boosters for Africa’s fintech modernisation — and for expanding investor interest.

“Global corporates like Visa and Stripe prefer to buy shares in Nigerian payment platform Interswitch and Paystack respectively considering their interest in Sub-Saharan Africa,” Adewole explains. Interswitch in a media report said Visa’s investment has valued the company at more than $1 billion — making it the first homegrown unicorn in Africa.

Also, three Nigerian fintech startups Kudi, OneFi and TeamApt raised $5 million each in funding in 2019. OPay, on its part, has been able to attract major investments because of a tremendous growth trend observed in Lagos, which ranks among the top 100 cities with a robust fintech ecosystem. Also, Lagos-based Flutterwave has established its own partnership with Visa and Chinese third-party mobile and online payment platform Alipay to offer a raft of digital payments between Africa and China.

“Things can move quickly when you get the right formula and are addressing the real underlying customer issues.  There are now a number of companies with good investments addressing a number of areas.  Some unfortunately will fail, others will pivot and find new opportunities and some will grow to be successful.  I suspect that some will become very large over the 10 year timeframe.  The important thing is that currently there is opportunity, market and talent — and that’s a strong mix.  With the right investment and a bit of luck we will see more big success stories coming out of Africa,” Reeve explains.

Chinese money hot after African fintechs trail

China has become vital to Africa’s financial services scene with internationally recognised firms investing in local fintechs. In August, Qingliu Capital, Jiuhe Venture Capital and Shaka Ventures poured an undisclosed amount into Lagos-based mobile payments provider Gona.

The two Chinese giants Huawei and Transsion are collaborating with Africa’s fintechs through partnerships and smartphone sales. A year ago, Chinese investors would have set eyes on Silicon Valley for investment potential but that has now shifted. Their focus is being redirected toward Africa because of the prolonging trade war with the US and the continent’s sudden tech eruption.

Experts believe that Chinese investors constantly need to explore new investment markets — and for that reason, the next obvious destination would be Africa — where business and consumer landscape is primed for development in the coming decade.

Are African fintechs the hottest in the world now?

Sub-Saharan Africa leads the world in per capita registered and active mobile money accounts, outlets, and volume transactions which have set the region apart, in terms of observable trends in fintech growth and investments.

It should be noted here that early developments on the part of some companies have made African fintechs the hottest in the world now. The challenges Kenya’s first mobile wallet M-Pesa faced in cross-border paymensts is being addressed by a Nigerian startup Flutterwave. The startup has integrated Africa’s fragmented payments system through a single API allowing local merchants to make transactions anywhere on the continent and to accept payments from an M-Pesa user. In fact, a large number of mobile payment providers in Kenya have transformed the payment landscape to an extent that 45 percent of the country’s GDP came from mobile payments infrastructure.

Now the fintech presence can be strongly felt across most urbanised African countries. Sami Louali, who is the Executive Vice President for corporate development and financial services at Jumia, makes a valid point to International Finance, “Africa has the world’s youngest workforce with a rapidly increasing rate of smartphone use.”

Although the continent is a latecomer to the fintech revolution, it has leapt straight into it with a a modern mobile infrastructure. “Mobile ubiquity enables scale and speed-to market that makes the cycle of innovation and experimentation much faster than in other sectors,” MFS Africa founder and CEO Dare Okoudjou says in an interview with International Finance.

Jumia is focused on mobile technology and the creation of supporting infrastructure. Even OPay is opening up a suite of digital offerings because “Technology and infrastructure are key components for the adoption of fintech services around the world,” Akpan says. “Currently, OPay has greater ambitions to consolidate the brand positioning in Nigeria and plans to bring more vertical services such as ORide and OFood. It also has further plans of expanding brand visibility to other African countries like Kenya, Ghana and South Africa.”

A majority of evolved fintechs are closely tied to the region’s payments infrastructure creating new business models and unconventional practices. For example, Lagos-based startup PalmPay’s new payment app will be preinstalled on Transsion’s mobile brand Tenco as part of a tie-up, with an estimated reach of 20 million phones in 2020.

“Complementary business models in Sub-Saharan Africa have made fintechs attractive to both private and public investors worldwide and targets for mergers and acquisitions,” Adewole says. “Overall, the sector exhibits promising signs of accelerating growth, ample investment and business opportunities.” The merits of this ambitious mindset for growth among African entrepreneurs are pulling venture capitalists from around the world toward them.

Does the fintech regulatory ecosystem suppport growth?

Africa requires a powerful regulatory framework, presaging a new fintech era. “While current laws in certain jurisdictions offer guidance and moderate protection, they will need to be continuously updated to cover issues that will arise from the development of fintech products. It is already happening, but pan African companies such as Jumia would like to see more alignment and coordination between the central banks of the continent,” Louali says.

Some African countries’ regulatory frameworks have already put financial inclusion and innovation on the forefront for further development. “The regulatory environment across the continent is certainly adapting to the growing demand for fintechs as governments are starting to establish incentives. The regulations are aimed to balance the growth of the sector while providing appropriate protection for consumers. In a few other African countries like Uganda or Tanzania, regulators are receptive to fintech developments and they see fintechs as an important driver for financial inclusion,” Adewole explains.

Countries such as South Africa, Kenya, Ghana and Uganda have developed an advanced data regulation framework. Yet, they face challenges such as non-existence of centralised approach to fintech regulations and no single regulatory policy on fintech.

“Fintech regulations can vary among different countries, which is why we’ve seen that a localised approach is necessary to ensure success,” Akpan explains. Regulators believe that a traditional prescriptive regulation might suit stable sectors, while it is not ideal to define a set approach for fintechs as they will always encounter last moment crisis. As Akpan describes, “It’s not a ‘one-size-fits-all’ approach, so being thoughtful about expansion and actively monitoring the regulatory environment is essential as these companies scale.”

Another unique challenge Louali states is the differences in African ecosystems, where some economies are led by banks and others by telcos. So the venture capital investments are naturally pulled toward larger economies — making it difficult for fintechs operating in smaller markets.

In Okoudjou’s view, “Regulation must be progressive, proportionate, and pro-mobile.” It is now the mobile channels are more easily accessible and affordable for the marginalised and poor customers. So these customers should be positioned at the centre of any regulation.

Secondly, the proportionate factor that Okoudjou mentions points to the fact that low risk of low-value transactions will not increase as they cross a border. The risk of those transactions decreases considerably when using a mobile channel over cash. Thirdly, it is of utmost importance to embrace mobile that is the present and future of digital transformation. “Regulators can focus on ways to leverage the strengths of mobile channels, rather than the ways in which mobile money is ‘less than’ traditional banking services,” Okoudjou explains, as it will reinforce the benefits of the pro-mobile period for people in Africa.

Despite that, many African fintechs are facing challenges related to a somewhat uncertain regulatory landscape. According to Adewole, “The gap in adequate ICT infrastructure across Sub-Saharan Africa is a major challenge that leads to the failure of some fintech startups.”  Paga, for example, started operations two years after being established because of constraints in obtaining an operating licence from the government.

Okoudjou says that real infrastructure challenges across the continent can be addressed with the help of platforms like MFS Africa that aim to connect various service providers including banks, mobile network operators and fintechs. For many, the continent’s fintech regulatory environment can be further improved by using social and economic impact assessment to outline regulatory priorities. That in turn will help to identify areas with insufficient domestic demand — or cherry pick the segment, technology or solution with the highest potential gain for the economy at large.

The unbanked frames the future of African fintechs

Africa’s fintech outlook heavily relies on favourable demographics, high mobile technology use and existing gap in financial inclusion.

“Fintech innovation is expected to increase in the region within the next five to 10 years. The number and diversity of African fintechs will multiply to provide innovative financial solutions to the large demography and customer segment including the untapped financially excluded market,” Adewole says. Sub-Saharan Africa’s fintech sector will continue to be dominated by payments solutions until the gap in financial inclusion is bridged. “It can be expected that the smaller segments will expand their footprints in the sector as consumers shift their attention to solutions that satisfy other previously underserved financial needs,” he adds.

The industry foresees a lot of market consolidation, especially in the next three to five years. “By examining the current ecosystem it will only become simpler and simpler to link mobile wallets at a continental scale,” Okoudjou concludes.

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