Page 88 - SAMENA Trends - June-August 2021

ARTICLE SAMENA TRENDS

The potential of the GCC fintech market has opportunities in new territories. United States during the last few years,
not been lost on international companies. including Citi Pay, Wells Fargo Wallet,
In November 2020, it was announced that The deal will allow stc pay itself to shift its Chase Pay and Capital One. Many banks
Western Union had agreed to buy a 15% focus towards global expansion. Although have bowed to intense competition from
minority stake in stc pay at an overall the two parties have been engaged in a popular digital wallets such as Apple
valuation of US$ 1.3 billion (a 10% stake strategic partnership since October 2018, Pay or Google Pay by integrating with
at US$ 133.3 million, and a further 5% at Western Union’s newly acquired formal them instead. In Europe meanwhile,
$66.67 million if stc pay manages to obtain shareholding will strengthen its incentive pure payment players such as Worldline,
a digital banking license). The transaction to support this expansion. Worldpay and Ingenico have acquired
is expected to close during the first quarter multiple targets in recent years, helping
of 2021. As a result, stc pay’s 4.5 million customers them to increase transaction volumes and
will have access to cross-border financial expand their range of services.
This transaction will be a boon to the Saudi services. For example, they will be able
authorities in their bid to increase the value to send remittances to other customers’ In the GCC region itself, consolidation would
of the national fintech market to US$ 33 e-wallets in Africa, Asia, Europe and Latin largely stem from a shortage of relevant
billion by 2023. In particular, it will further America through Western Union’s partners, capabilities, like leading-edge technology
strengthen the “payments and currency or by using its extensive network of agents platforms or research and development,
exchange” component, which accounted for cash transactions. within individual companies. After all, the
for 41% of the total Saudi fintech market market for the various elements of the
in 2019. Given that the e-wallet market occupies fintech market, such as e-wallets, near-
such a significant share of the overall field communication, blockchain and
With stc pay becoming the first fintech fintech sphere, this landmark deal offers virtual reality, is only embryonic. Moreover,
unicorn (valued at more than US$ 1 an opportune moment to take stock of its although traditional banks have become
billion) in the Middle East, the high- current status in the region and consider stronger in data analytics, many have
profile minority stake purchase marks a its future direction. Two paths are possible: prioritized investment in compliance over
symbolic watershed in the development First option: The regional e-wallet market capabilities, although data and open APIs
of the regional fintech market, and brings will follow the same trend of consolidation are likely to emerge as top of the agenda
its potential to the attention of even witnessed in mature markets. Several following the open banking announcement.
more international investors seeking e-wallets have been discontinued in the
Second option: The other possible direction
for the market is that smaller e-wallet
start-ups will engage in product innovation
beyond the payments segment. We can
see relevant examples from throughout the
world. Paytm, a popular e-wallet in India,
offers gaming services through its Paytm
First Games brand which has more than
half a million active daily users. E-wallets
also have opportunities for expansion
through avenues such as merchant loyalty
programs, customized financial guidance
or planning tools.

Time will tell which precise direction the
GCC fintech market will take. However,
after Western Union’s investment in stc
pay, rapid growth looks a certainty.
About the authors:
Jorge Camarate and Jad El Mir are partners, and Dr. Antoine Khadige is a principal with Strategy& Middle East, part of the PwC network.

This article originally appeared in Gulf Business, February 2021.

88 JUN-AUG 2021