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Investor interest in the Middle East’s fintech sector remains strong despite the uncertainty arising from the coronavirus pandemic.
The latest analysis from KPMG revealed that markets in Europe, Middle East and Africa (EMEA) saw deals worth $4.6 billion in the first half of 2020, with the region sprouting new early-stage fintech hubs. Across the globe, fintech investments hit $25.6 billion through the 1,221 deals recorded from January to June this year.
According to KPMG, the fintech market in the Middle East is poised for expansion and diversification “for the foreseeable future,” despite an overall slowdown in deal activity. This growth will be fuelled by the launch of new initiatives that are geared towards supporting the fintech sector.
The acceleration of digital trends, including the rise of contactless or cashless payments, as well as e-shopping, is also seen to drive investment not only in direct fintech solutions but also in related enabling technologies, such as cybersecurity, fraud prevention and digital identity management.
Among those that will continue to gain interest are platform businesses, particularly in less-mature markets.
Initiatives
“Several jurisdictions within the Middle East have continued to work to become global hubs, and investment in the region was focused primarily on early-stage deals in [the first half of 2020],” KPMG said.
In the UAE, several initiatives have been launched to help foster the growth of fintech, such as the RegLab, a sandbox style programme, as well as accelerateHER, which seeks to address the underrepresentation of women in the technology space.
“These, combined with start-up funds, are likely to be a big part of developing the UAE’s fintech ecosystem over time,” said Abbas Basrai, partner and head of financial services at KPMG in the UAE.
Slowdown
However, KPMG noted that new deal activity worldwide has slowed down “dramatically” due to the pandemic, except in high-priority sectors like payments.
“A sharp drop in M&A investment drove its global decline. During [the first half] M&A accounted for just $4 billion of fintech investment globally compared to $85.7 billion [in the second half of last year],” KPMG said.
“The stalled M&A reflects both a general slowdown in deal activity, and investors pressing pause on major deals to re-consider valuations and risk appetite given COVID-19,” it added.
(Reporting by Cleofe Maceda; editing by Seban Scaria)
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