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Global & MENA FintechSector PerspectiveNovember 2020Prepared by:Phoenician Invest Ltd. (a subsidiary of More Capital)DD-16-118-005, 16, Wework, Hub71, Al Khatem TowerADGM Square, Al Maryah IslandAbu Dhabi, United Arab EmiratesTel: 971 50 671 9088Email: info@phoenicianfunds.comwww.phoenicianfunds.comJad SalameMohamed IbrahimSaeb NahasRamzi MneimnehAhmad Tuffaha
Attractive global & MENA fintech opportunitiesEnablersDigitally nativepopulation developingneeds for convenienceGrowing mobileinternet penetrationOpportunity1Maturing fintech sector with attractive Series B deal flow in Europe and US47% 1900 67USD 34 Bn 10-80xTech, MediaTeleco, and FIsembedded fintechinto their modelFintech deals in2019 of which46% Series B &above (up from36% in 2018)VC-backed fintechunicorns worth acombined USD244.6 BnVC-backed fintechdeals’ value in2019 (up fromUSD 26 Bn in2018)Return onsuccessful SeriesB & aboveInvestments onIPOIncreasing dataavailability2AdvancingTechnologies andDecreasingcomputational costSupportive regulatoryenvironment(e.g., PSD2)Emerging MENA fintech sector presenting appealing opportunities for early stage deals125 280 Mn USD 240 Bn3xUSD 6.2 BnFintech deals todate of which80% early stagePopulation out ofwhich 51%individualsunbankedSME funding gapecommercegrowth 20172022, reaching anexpected USD28 Bndigital bankinginfrastructurespending yearlySources: CB insights; PWC: Collision and fusion within Fintech; 2019 MENA FinTech Venture Report, Magnitt, Global Findex Database; Wamda, Payfort2
1GLOBAL FINTECH TRENDSTraditional financial services undergoing paradigm shiftDrivers of OpportunityPrevailing legacy systemsRequiring high costs & long lead timesfor changes/ adaptationLimited innovation and customizationof products and offeringsCatering to the changing customerbehavior and preferences (Digital ondemand approach)Traditional security technologiesBasic business intelligence andanalytical tools leaving data open tobreachesIncreasing regulatory & compliancerequirementsBasel III, IFRS9, MiFiD 2Changing LandscapeEmerging Fintech friendlyregulation and open datalegislation e.g., PSD2, Openbanking regulation in EuropeEmergence of FintechDigitally enabled products andservicesConvenient, cheaper and faster userexperience and serviceEmerging regulatorysandboxes for swift solution/product testing and launche.g., FCA regulatory sandboxAdvanced and state of the artinfrastructure toolsInnovative technology layers providingbanks with agility using contextualizeddata and customer data analyticsAvailability of advancedtechnologies, infrastructureand data at a decreasing coste.g., AI/ ML, Cloud basedplatformsInnovative cybersecurity systemsModern technologies (e.g. ArtificialIntelligence) offering robust and securedata environmentsUpdated guidelines ontechnology and securitymanagemente.g., GDPR in EuropeRevolutionary new generationplatformsBlockchain enabled applicationsincluding crypto currencies,decentralized contract validationSource: KPMG “Regulation and supervision of Fintech”, 20193
1GLOBAL FINTECH TRENDSFintech disrupting various financial services verticalsDigitally native/ only banking platforms also called neobanks which leverage technology across the banking valuechain from account opening to servicingDigital Bank10 Mn customersDigital Bank4 Mn customersMigrant Banking10K accountsAudit, risk and regulatory compliance software includinganti-money laundering detection, fraud detection,contract/ID verification, risk management solutionsDigital IDVerification1,500 gital RiskSolutions10 banks signedBill Management, personal and credit accounts’ tracking,wealth management platforms, robo-advisory, and otheranalytics toolsSaving andInvestmentUSD 228 Mn infundingDigital BrokerageUSD 912 Mn infundingRobo-AdvisorUSD 15 Mn in AUMsBanking &DigitalChallengersInfrastructure/Regtech s/OnlineTransactionDigital payments processing, card developers, subscriptionbilling software tools, and International money transfersFX & RemittancesUSD 5 Bn GTV/MoOnline Paymentand Lending85 Mn consumersMobile DigitalPaymentsOperating in 4countriesDigital alternatives for underwriting claims, distribution,and/ or brokerage platformsInsuranceTechnologyHealth Insurance250K businesses &individualsLending &CrowdfundingUsage BasedInsuranceUSD 3.7 BnvaluationAggregatorPresence in 9countries in MENAPeer to peer lending and alternative underwriting platformstargeting untapped segments including individuals, smallbusinesses, students, and micro financePeer to PeerLendingIPO, Mkt Cap of USD947 MnStudent Loans900K membersDigital ROSCAPlatform25,000 paying usersSources: Companies’ websites, Crunchbase4
1GLOBAL FINTECH TRENDSGrowing appetite to invest in fintech globallyGlobal VC-backed fintech funding by continent(2015-2019, USD Bn) *North AmericaAsiaEurope26.81.03.817.10.22.05.49.52015# ofDeals1,27515.10.41.46.76.618.60.43.0CAGRRest of the World34.5 19%2.2 82%6.5 34%7.1 7%18.8 13Source: Cbinsights “State of Fintech: Investment & Trends to Watch”, 2020* Ant financial excluded5
1GLOBAL FINTECH TRENDSIncreasing investor allocation to later stageVC-backed fintech companies by stage(2015-2019, in %)SeedSeries ASeries BSeries CSeries D Late-stage deals hit a 5-year high in 2016201717%20% 1%6% 2%8% 2%13% 3%16%24%26%37%33%20182019Source: Cbinsights “State of Fintech: Investment & Trends to Watch”, 20206
1GLOBAL FINTECH TRENDSExit activity showing signs of success in fintechExit ModeIPOStrategic Fit§ Companies looking to raise fundingthrough public capital markets andincrease their credibility andexposure§ Cross functional acquisitions todiversify offerings, broaden reach andSales to other fintechachieve synergiescompaniesSales to PrivateEquity§ Institutional investors focusing on thefintech sector and high growthcompanies (e.g., vertical/horizontalintegration with other portfoliocompanies to realize synergies)Sales to FinancialInstitutions orNetwork Schemes§ Financial Institutions/banks/schemeslooking to shift from traditional todigitally native solutions, and expandreach to provide a full spectrum offinancial servicesExample DealsPayment Processing 8.3 BnEurope (Euronext)Tax Compliance 1.4 BnUS (NYSE)Acquired by Paypal 2.2 BnEuropeAcquired by Intuit 7.1 BnUSAcquired by VEP 6.5 BnUSAcquired by EQT 3 BnEUAcquired by MorganStanley 13 BnUSAcquired by Visa 5.3 BnUSP2P Lending 1.2 BnLondon (LSE)Estimated 250M&A deals in 2018vs 200 in 2017(25% Growth)Sources: Mind the bride, Crunchbase “ Fintech M&A”, 2018, Cbinsights “State of Fintech: Investment & Trends to Watch”, 20207
1GLOBAL FINTECH TRENDSIn particular, Series B remains a sweet spotStartups Progression Benchmark (USA, 2018)Exit Return Examples3% Series E & AboveInvestment(USD, Mn)USD 20 – 50 MnUSD 50 – 100 MnInvestment(USD, Mn)9%Series DSeries D1224.52580.1x38.3x16.9xSeries ASeries BSeries C1725052N/A6.3x3.6xSeries B-ISeries B-IISeries C1025.810312.5x9.4x1.6xUSD 100 MnSources: Mind the bridge, Crunchbase “ Fintech M&A”, 2018, Cbinsights, EquityZen, DealRoomUSD 8.3 BnIPO ValuationUSD 2.9 BnIPO ValuationUSD 5 – 20 MnReturnat exit15%Series CSeries CUSD 1 – 5 MnReturnat exit30%Series BReturnat exit48%Series AUSD 50 – 500KInvestment(USD, Mn)100% Start-upsSeedSeries BUSD 5.42 BnIPO ValuationSeries B RoundsFunding SizeIf a startup were to exit having raised USD 20 Mn ,average multiple on capital raised is 3x (vs. lessthan 2.7x exiting before having raised USD 20 Mn)8
2MENA TRENDSEmerging market fundamentals in MENALarge addressable market size and supportive fundamentals for fintech startups in MENA; Youngand tech-savvy population ( 3̴ 00 million population) with a median age of 28 years combined withhigh internet penetration that is expected to increase considerablyPopulation et Penetration (2018)66%̴ 2%̴1.4%GCC56.6̴ NA27.1 3K31.2 29K26.5 6KWorld(53%)Sources: World Bank Data Bank, Magniit “MENA Venture Report, 2019”, World Economic Forum9
2MENA TRENDSUntapped white spaces with potential for disruption 150 Mn individuals could be newly included infinancial systemShare of Loans to SMEs by Arab Banks (2015 - selectedcountries, %)MENA Banked Population (in % , 2018)95%OECD avg.77%GCC35%LevantNorth AfricaEgypt2.212.38.320170.73.014%2%Rest Of MENA6.815%8%GCCMENAMENA E-commerce Market Value (2017-2022, USD Bn)KSA18%Global average middle income countries49%37%Significant need for payments infrastructure drivingby e-commerceUAEUSD 240 Bn SME credit gap in MENA region with63% of SMEs not having access to finance28.52.910.08.92022LevantNorth AfricaMENATotal remittances inflows grew 9.3% to USD 53 Bnin 2017MENA Migrant Remittance (2017- selected countries , USD Bn)CAGR .7Lebanon Jordan1.1 0.4Ira q0.3KSA00.02UAESources: World Bank Data Bank, World Economic Forum, Union of Arab Banks, McKinsey Global Institute, Wamda “State of Fintech”10Kuwait
2MENA TRENDSEarly stage and growing ecosystemMENA Venture Investment in FintechMENA Fintech Landscape13 Fintech startups exited since 2015MENA region presents a large opportunity aheadPayments & Remittances6%21%100%MENAestimatedat 1% 9%Investment in Fintech2019 – USD BnIPO PaymentLebanonLending125 peerUAEBlockchainBlockchainwallet/ExchangeUAE81% ent/ GDP% of GDPWealth managementNorthEuropeAmerica28%25%AsiaRest ofPacific the World35%EquityPortfolioCrowdfunding ggregatorUAEPropTechRE ingTotal12%PaymentsolutionsKSAInsureTechDigital creditlendingEgypt2x ionsLebanonCredit riskmanagementsolutionsLebanonSources: CB insights, Wamda, Payfort, IMF, Magniit “MENA venture report, 2019”, thenational.ae11MigrantBankingUAE
2MENA TRENDSRegulations & initiatives supporting adoption of fintechSelected examplesCentral Bank of Moroccointroduced the Law 103-12that defines the scope for thecreation of the “PaymentInstitution” statusCentral bank of Egypt developed the“mobile payments regulation” todevelop sustainable financial servicesand shift towards a cash-less economyCentral Bank of Jordanintroduced a new law forelectronic transactions andpaymentsCentral Bank of Bahrain introducedcrowdfunding regulationsADGM’s FinancialServices RegulatoryAuthority (FSRA)published a guide onthe establishment ofdigital banks followedby a regulatoryframework for digitalinvestmentmanagers, or roboadvisersReglLabs8 MENA countries have createdsandboxes or RegLabsSAMA released ”rules governing microfinance companies”in Dec 19, payment regulations released in Jan 20, digitalonly bank guidelines released in Feb 20, and otherregulations as well as experimental permits awarededCentral Bank of Bahrain introducedcrowdfunding regulations andlaunched a RegLabSources: Various Central Bank websites, statements, and regulations, Magniit “MENA venture report, 2019”, Magniit Fintech Saudi 2019-202012
Global & MENA Fintech Sector Perspective November 2020 Prepared by: Jad Salame Mohamed Ibrahim Saeb Nahas Ramzi Mneimneh Ahmad Tuffaha Phoenician Invest Ltd. (a subsidiary of More Capital) DD-16-118-005, 16,Wework, Hub71, Al KhatemTower A
