Views from Entrepreneurs: Mark Chahwan & Nadine Mezher @ Sarwa

Accelerating the rise of Fintech in MENA

Propelled by entrepreneurial momentum, a population that is often ultra-connected and a regulatory tailwind, the Fintech industry in MENA is experiencing incredible growth.

I recently caught up with Co-Founders Mark Chahwan, CEO and Nadine Mezher, CMO at Sarwa, one of the many exciting and innovative Fintechs in the region. They shared their views on how Fintech is evolving in MENA and the opportunities that are evolving following the Coronavirus pandemic.

Founded in December 2017 by Mark Chahwan, Jad Sayegh, and Nadine Mezher, Sarwa’s is a Dubai-based advisory platform that uses a combination of technology and human advice to allow users to invest their savings at a low fee. Cutting-edge technology is used to simplify the entire investing experience and provide the best possible return. The startup officially launched its platform in February 2018 and reached over 10,000 registered users since then. Sarwa grew by 10x in 2019.

Supporting customers through Covid-19

 â€œCovid-19 has accelerated the opportunity for Fintechs to lead the way” said Nadine. “While traditional financial institutions experienced reduced hours, closed branches and struggled to digitalize, at Sarwa, it was business as usual, if not better. We were built for remote working and remote customer support.”

Mark adds “For example, when traditional banking hours became even more restricted and people still need us to stamp their forms, at Sarwa we extended our support from 9am to 11pm to increase our first response time. We also held 2 webinars a week with hundreds of attendees that needed answers to manage their money. “

Nadine goes on to say “The narrative of the pandemic brought with it two major characteristics that validated the hybrid model we offer.

The first is that in spite of the fact that there was a sharp decline in the market, our portfolios held up very well. This speaks to the proper global diversification we have in place, the choices of Exchange Traded Funds, and the correlation between them. Passive investing does not involve impulsive decisions based on market movement. It is built around research and data on what works for our clients over the long term. We did not change our sound advice with new tactical target allocations.

The second is that the lockdown across the region did not adversely impact us. Because we are a financial technology service with full online support for our clients, we are built for remote work. Our clients are fully on-boarded online, and that pure practicality is a big part of our growth. We were born as a digital service with human advice available when needed. Nothing changed for us.”

The power of the youth market

When it comes to the Fintech market more generally, Mark and Nadine agree that they are excited by the growing population in the region.

According to Nadine “The expanding young MENA generation offers many opportunities for entrepreneurs: there is a growing scope to simplify and disrupt existing services. The younger market is known to have higher adoption rates for digital products - with extremely high internet/mobile penetration - and are more likely to take risks. With about half the population under the age of 25, there’s a massive potential market of early adopters, but we need to keep in mind that they need to be targeted, educated and serviced differently.”

Overcoming the challenges

But it’s not all plain sailing, and Fintechs in the region face different challenges when it comes to growth. Nadine goes on to outline some of these:

·      â€œAccess to capital or strategic financing.

·      Access to talent: especially bi-lingual (Arabic/English).

·      Access to market: the size of the market is segmented, with cultural differences and market affinities that need to be taken into consideration. The region is similar to Latin America: people assume that it is easy to go and operate cross borders but only 19% of Fintechs do. At the same, subculture affinities can exist within the same country such as in the UAE. Special attention needs to be given to the company’s messaging and communication strategies in each market.

·      Siloed regulations: Some countries have been at the forefront of innovation, launching regulatory sandboxes and bringing together different stakeholders: from investors, to government entities. But there is still the reality of needing to go through each regulator, with different capital requirements and accounting for additional operational costs.”

“There is a lot to think about to be successful”, adds Nadine. â€œWhen competing with huge financial brands, cost-effective marketing to acquire customers is critical – you have a small budget and need to be creative. It’s also important to tap into early adopters and avoid slow sales cycles.” 

The broader Fintech Market

When it comes to other Fintechs in the region, Mark is excited about DAPI “who is finally addressing the payment issue in the Gulf Cooperation Council beyond payment gateways.” 

Based in the UAE, DAPI is the first financial API in MENA that lets fintech apps leverage open banking by initiating payments and accessing real-time banking data. 

He is also watching Transferwise, one of the first massive Fintechs to come to the region (based in Abu Dhabi). â€œIt will be interesting to see how they compete with local startups and learn from their approach of launching in new markets.”

There is also a lot of opportunity to learn from Fintech experiences outside of MENA. According to Nadine “We know that consumer adoption in the region lags behind more developed regions such as Europe, the US or China when it comes to Fintech. There is still a lot of education to be done here to build trust.

“The trajectory of Fintechs in other regions is interesting:

·      They begin with a focus on a niche product offering and slowly broaden their services to becoming more like a traditional financial institution while being fully digital.

·      They focus on scaling beyond growth, with increasing capital requirements for product.

·      Their financial model is at the center of their planning.

At the same time, if we look into why financial services in Europe are thriving - with the likes of Monzo, Revolut, and many others growing exponentially – there are two main takeaways:

1.    A supportive ecosystem:

·      Regulations: In Europe, support from regulators has triggered significant innovation, including digital banking.

·      Proximity and timing: Start-ups have access to all they need to launch in a timely manner when the ecosystem comes together. It’s critical for investors to be available and exposed to the ideas and the teams.

2.    The size of the market:

·      A level-playing field where Fintechs don’t need to go through each district/country’s regulator, and where you don’t need to account for massive overheads and operational costs to expand.

Nadine adds, “My takeaway from this is that MENA needs to have one centralized center where the ecosystem comes together. Currently the landscape is extremely siloed, with accelerators, different initiatives and regulators competing.

At the moment, to encourage growth in the region, governments are acting as a catalyzer, with a top-down approach to support the industry, while letting the bottom up ecosystem flourish.

The most important step now is to start an in-depth dialogue between the different partners in our ecosystem, including Governments, the private sector and entrepreneurs. The aim is to achieve the level of coordination needed, which could form a centralized dedicated body for Fintech with adaptable leadership.

Find out more

The Fintech ecosystem continues to rapidly unfold across MENA, disrupting economies and digital payment systems along the way. The latest Global Ventures Fintech Industry Report explores this topic in much more detail. Make sure you download your copy here: https://docsend.com/view/ktzqb9f