In the first part of the review, I analysed the investment and fundraising side of the story. I concluded that 2021 saw accelerated growth in funding – by a whopping 380% – but that we are still in early days.

In the second, and final, part, we look at various key trends that we have witnessed in 2021 and what they mean to our overall growth journey. The regulatory landscape continues to, slowly, improve, attempting to keep up with regional standards and pace of innovation. We have started to witness several market leaders’ attempts to diverge from the rest of the pack, through sound strategic planning and effective execution to gain scale and sustainable market share.

Fawry is a great example of an early mover that was able to add value and scale in a growing market; others have had similar ambitions that they acted on but through very different strategies. 

The pace of regulatory progress continued in 2021, with several key initiatives

2020 was an important year from a regulatory perspective. A year that signalled more seriousness and urgency in creating the right regulatory environment for a flourishing fintech ecosystem. This has continued and accelerated in 2021. We saw significant progress on the FinTech law that governs non-banking Fintech activities. The law was approved by the house committee in October 2021 and finally signed and ratified in 2022. The law puts the Financial Regulatory Authority (FRA) in charge of regulating the NBFS space.

2021 has also brought new SPAC regulations while the new insurance law is expected to see the light sometime in 2022. Aside from new regulations, governmental entities continued to drive innovation and financial inclusion with several initiatives (e.g., instant payments, mobile contactless payments licenses, E-wallet portal (technically in 2022.) The Central bank of Egypt (CBE) has also continued to attract top talent to lead its Fintech agenda, with several promising senior hires to its Fintech and Innovation teams. There are still areas where we lag behind comparable ecosystems – e.g., E-KYC implementation and open-banking, let alone crypto and other cutting edges areas – but the urgency of some of the recent measures is promising. 

Buy-now-pay-later (BNPL) heating up 

The BNPL competitive landscape has become a battleground with several heavyweights and newcomers fighting for market share. ValU, EFG’s BNPL arm, continued to show impressive growth. After growing revenues by an impressive 344% in Full Year 2020, the company posted strong results in the first 9 months of 2021. Revenues were up 229% versus 9M 2020, to EGP 217m. But the race for market share is more intense than ever. Fintech giants Fawry and MTN-Halan have both entered the BNPL space and are not expected to settle for anything less than market leadership, with their strong expertise and deep pockets. We also saw a promising market entrant, Sympl, founded by ValU’s former Chief executive. Similarly, there are other financial institutions – including banks – that are seriously exploring the merits of dipping their toes in the BNPL space. 

There are, however, serious concerns – all over the world, not just in Egypt – about the impact of BNPL on the financial welfare of consumers who might be tempted into spending money they do not have. There has been a wave of regulatory tightening in several countries, to help educate consumers and also provide oversight to BNPL providers, that will definitely make its way to Egypt. 

Fawry and EFG are clearly planning for the long-term with several strategic investments

Both giants have been making strategic choices – whether investments or partnerships – that are very telling of their future bets. In the last two years, Fawry made several investments in local and regional players. The Fintech heavyweight had previously invested in Bosta, on-demand delivery start-up, in 2017 and again in 2020 and helped the company grow its operations. in 2021, they invested in AlSoug, Sudanese marketplace and will play a pivotal role in helping the company build its fintech app and scale its operations. They have similarly invested in elMenus, Egyptian food delivery platform, and Brimore, social commerce platform. The former positions Fawry well in the growing food and beverage sector, while the latter provides strong synergies with Fawry’s strength with small and micro businesses. The commerce space in particular will move a lot closer to Fintech – and vice-versa – in the next few years. 

On the other hand, EFG Hermes is also carefully planning for its future in Fintech – with ValU at the heart of this strategy. EFG has made three strategic investments and partnerships that are worth highlighting: Dayra, data-driven Fintech founded by former EFG Hermes banker, Kiwe, payments platform, and Klick-it, payments and collection platform. EFG has also invested in several other very promising start-ups, through EFG EV Fintech in partnership with Falak Startups such as: Raseedi, Mozare3, Zvendo and Fatura. These investments and partnerships will allow both Fawry and EFG to remain relevant in Fintech and ahead of the game. 

Egyptian FinTechs are finally growing beyond our local borders

Regional expansion has taken off in the last couple of years – not just for Egyptian Fintechs but for ventures of all sorts, following the footsteps of the likes of Swvl, Vezeeta and others. Regional expansion provides ventures with scale and an early-mover advantage in countries with similarities to Egypt – but is also hard to get right. The regional ecosystem is still relatively nascent and unmatured, with opportunities for start-ups to take leadership positions if they move early. We have, however, seen an influx of funding to regional competitors and an increasing focus on regional growth as a competitive advantage.

This has meant that Egyptian start-ups have had to move quickly if they wanted to capture this narrowing window of opportunity – and many have. Fawry signalled its intent to grow beyond Egypt with AlSoug’s investment. MNT-Halan is planning on putting its newly raised funding to good use. ValU is expanding to Saudi Arabia and North Africa. PayMob has applied to be licensed in Saudi, Dopay is eyeing MENA expansion after raising its Series A round while Lucky has already expanded to Morocco. 

Fintechs are increasingly partnering with other ventures and traditional Financial Institutions to scale

It is a trend that intensified in 2020 and accelerated even further in 2021. Examples include, Uber and PayMob and Uber, Opay and NBE, ValU and Check me health and Jumia, Money Fellows with Waffarha, Banque Misr and Master Card, PayNass and e3lany, Khazna with Masria Digital and ADIB, Lucky with FAB, Visa, Aman and contact and El Gam3eya and AlexBank. There are many more but you get the picture.  

Is Insurtech finally happening? 

In my review of 2020, I expressed my disappointment with the slow pace of development in the Insurtech space. 2021 was a bit better but far from where we have to be. Amenli, Y-Combinator graduate, raised a $2.3m seed fund in October that will hopefully help it grow its footprint in the traditionally conservative space. Bringy has partnered with insurance giant AXA on car insurance. 

Looking back on 2021

Looking back it has been a very busy year for Egyptian Fintechs, with all aspects of the ecosystem growing and maturing. Yet, activity has been highly concentrated on payments and lending spaces. In order to have a strong, diversified and well balanced ecosystem, we need to see more activity in other spaces, including open banking, digital banking, wealth and investment, crypto Insurtech – among others. 

2022 has started well so far – with the ratification of the Fintech law and Thndr, digital investment app, raising $20m. M&A in the Egyptian venture space has also accelerated in 2021, with signs that it might spill-over to Fintechs in 2022. Exits – whether through M&A, IPOs or SPACs – will help create a domino effect of entrepreneurs with capital looking to start new ventures and attractive success stories for investors who are looking to reap a return on their investments through exits. 

Growth journeys are usually defined by specific eras. The post-financial-crisis era will be remembered as the true propellor of the growth of Fintech – as we know it. Similarly, the last couple of years and next few ones will be remembered as the web3/ crypto/decentralised finance era.

I believe that the next 4-5 years will be remembered as very pivotal years for Egyptian Fintechs. An era that would have taken the ecosystem from a collation of several promising initiatives – that can be covered in an article or two – to a more mature, interconnected and innovative ecosystem that is well integrated in the economy. Despite the complex challenges, the future remains as exciting and promising as ever. 

Also read: Egyptian FinTech Sector Review 2021: Accelerated growth but still early days