MEA’s Digital Financial Services Focus on Neobanking
The digital banking sector in the Middle East and Africa (MEA) is evolving rapidly, with neobanks and challenger banks playing a pivotal role in reshaping digital financial services across the region.
These digital-first banks are bridging gaps left by traditional banking systems, providing digital banking solutions that cater to a wide range of underserved customers, from individuals to small and medium-sized enterprises (SMEs).
Neobanks operate exclusively online without any physical branches, while challenger banks may have some physical presence but are predominantly digital. Both types are redefining the banking experience by leveraging technology to offer seamless, user-friendly services. In the MEA region, these digital banking Middle East players are emerging in two keyways: traditional banks launching their own neobanks, and independent neobanks partnering with established banks.
Traditional Banks Launch Their Own Digital Platforms
Unlike in Europe and the US where neobanks normally operate on their own, it is the traditional banks in the MEA area that are leading in the development of neobanks’ digital financial services. They do this either by developing in-house neobank platforms or acquiring existing technology. This trend is also present in the Middle East with Liv from Emirates NBD, Mashreq Bank’s Mashreq Neo, and ADCB’s ADCB Hayyak being a few of them. Pepper, a brand-new service from Leumi Bank, is now on the market. George is currently working with ABC Bank of Bahrain, which recently launched ila Bank, and the Gulf International Bank, which built meem. In Turkey, the subsidiary of Akbank called AkOde produced a Tosla.
These steps have enabled conventional lenders to tap into the digital banking niche by using their existing customer base. Banks and government are going digital because they have to, with many traditional banks opening digital divisions to stay competitive and offer modern banking services.
Independent Neobanks Partner with Traditional Banks
Independent neobanks are also gaining ground in the MEA region by partnering with traditional banks for licensing. For instance, Now Money collaborates with Commercial Bank of Dubai, Rise works with United Arab Bank, and Dopay partners with Barclays and Visa in Egypt. These partnerships allow them to deliver digital financial services while leveraging the infrastructure of established banks. In Turkey, Papara operates as a leading electronic money institution, issuing prepaid cards under the Mastercard logo.
Government Support and the Future of Digital Banking in MEA
Government policies and regulations have supported the growth of digital financial services in the MEA region. In Saudi Arabia, the Saudi Arabian Monetary Authority (SAMA) has spearheaded the approval process for STC Bank, Saudi Digital Bank, and D360. This government backing highlights why banks and government are going digital.
The digital banking business in Africa is on the rise, with 21 having been engaged and 18 million customers reported as of the year 2022. The market is largely focused on Nigeria and South Africa but there is a trend in other countries as well. Bad debts remain a common struggle around that region and in most of the developing countries. Nonetheless, there are some optimistic developments such as the turning of TymeBank in South African into profit for the very first time.
With ongoing technological advancements, strategic partnerships, and government support, the growth of digital banking solutions in the MEA region will continue to reshape the financial landscape, offering better and more efficient services, including digital onboarding solutions for banks, to billions.
Inside telecom provides you with an extensive list of content covering all aspects of the tech industry. Keep an eye on our Fintech sections to stay informed and up-to-date with our daily articles.