Interview

MENA: the new frontier for global brand expansion

Tuesday 24 September 2024 08:50 CET | Editor: Diana Lupuleac | Interview

George Davis, founder and CEO of Fuse, discusses MENA’s payment evolution, regulatory challenges, and opportunities for innovation.

What are the main challenges that global companies face when entering and adapting to the MENA region?

The Middle East and North Africa (MENA) region is on the expansion roadmap for most international payment companies. We see MENA as one of the last untapped markets for payment innovation. Having built payment companies across the globe, we’ve recognised that, whilst MENA is one of the most exciting markets in the world, it remains one of the most financially isolated. Many global brands are excited to expand to the region but are daunted by the many barriers to entry that make this market more challenging than others we see today. 

Each market in the region is unique, with its own regulatory complexities, banking systems, processes, and cultural nuances, making adapting a global product to the Middle East not a simple task. To operate in MENA, payment companies are required to make a significant local investment, hire local teams, and obtain local licences, all before they can even begin the lengthy process of opening a bank account, which can take more than nine months. Often, these companies also have to deal with local banks that have no understanding of how to work with a payment company, or how to adapt existing products to facilitate cross-border transactions. 

Before founding Fuse, we experienced the challenges associated with the limited local financial infrastructure in the region when scaling global payment companies. Fuse is built to solve this problem. We offer multi-currency virtual IBANs, a unique local product in the region, to enable payments and stored value across the Middle East, without the need to localise to each country. Before Fuse, local payment providers were solely geared to process payments for local companies. For larger cross-border payment companies, MENA is simply a small addition to their current geographies.

Earlier this year, we launched Fuse to simplify expansion into the MENA region for global companies, without any local presence requirements. We’ve built a tailored solution for global payment companies to overcome regional intricacies at speed. Our clients can focus on their go-to-market strategy, while we manage currency complexities, compliance, and banking relations.



How can payment service providers interested in accessing the region overcome the hurdles of obtaining local licences?

At a glance, the regulations in MENA appear to be akin to those in the UK or Europe, sometimes even sharing a name or terminology. However, in reality, local regulations and their implementation differ from regimes elsewhere. The challenge is to understand the nuances of local regulations against the backdrop of regulatory trends. Building a compliance team with local regulatory insight is critical in order to obtain payment licences in the region. Moreover, showing a dedicated local presence in the country where you are applying for a licence is a non-negotiable for regulators. Compliance risks in these markets are unique, and regulators are particularly concerned about each company’s understanding of the space, especially given the region’s tight dependency on the US financial system.

Part of our approach was putting compliance at the heart of Fuse’s core business model. This was reflected in our decision to hire our Chief Compliance Officer, Kathryn Willis, as a founding team member. Kate's experience in enforcement at The Financial Conduct Authority (FCA), and later in international compliance for regulated companies such as Facebook and TrueLayer, has been pivotal for Fuse’s regulatory strategy.

For global payment companies looking to expand quickly in the Middle East without acquiring a local licence, Fuse offers access to the region through a single access point.

MENA has traditionally been linked to the energy market, with oil and gas at the forefront. With the rise of micropayments, are there any emerging verticals, such as the gig economy, expected to see a boost in the region?

In recent years, Middle Eastern economies have shifted away from their historical dependence on oil and gas. Whilst these markets remain the largest suppliers of oil and gas globally, with significant untapped reserves remaining, they have focused time and energy on securing their future through diversification. This drive has provided a platform for sweeping transformation, especially in the payments and finance space. These generally inflation-resistant economies continue to grow steadily, despite the global economic downturn. This stability, driven by the oil and gas market, makes the region even more attractive for global businesses and gives each country the security to innovate at any cost.

In terms of regional payment trends, we’re tracking the growing population of gig workers and expats in the region. Both of these customer segments need tailored payment options which shape the modern industry landscape. As one of the few markets globally where gig economy company economics are sustainable and profitable, the expatriate population has a direct effect on the number of gig economy-based transactions. Dubai’s Urban Plan anticipates doubling its current expat population by 2040. This will lead to a huge influx of gig economy workers required to support their needs for instant travel, food, and delivery. These workers sending money home directly contribute to the country’s position as the second-largest outbound remittance market globally. In addition to this, local youth-driven populations are shifting away from traditional ways of work and looking towards freelancing. Between 2020 and 2023, Saudi saw a staggering 157% increase in registered freelancers. We’ve recently partnered with a number of global Employers of Record (EORs) and remittance companies to support these growing verticals.

The Middle East is considered the fastest-growing real-time payments market globally. What are the key trends in merchant acceptance of real-time payments in the region?

At this early stage in the market, we’re seeing high adoption of real-time payments. The regional market is forecasted to be valued at USD 2.6 billion by 2027.

The Middle East has capitalised on its late entry into the instant payment world by taking what works in other markets and learning from their mistakes, creating far more efficient systems than those we’ve seen in Europe.

The UAE took a dual approach to implementing real-time payments, designing an ecosystem inspired by successful global models. Within the banking framework, real-time processing is automatic for transactions which fall within the schemes’ limits. For example, bank transfers under AED 50,000 are processed automatically via the IPP (Instant Payment Platform). Like in the UK, this means consumers do not need to change the way they pay to benefit from instant payments. This is complemented by an alternative instant payment option, Aani, built on top of the IPP and marketed directly to consumers – which is similar to the mobile-based Unified Payments Interface (UPI) in India.

What is the long-term growth potential of the MENA market for global companies?

Currently, the region is early on in its growth story. Yet, it is growing at a rapid pace. The Middle East is positioning itself as the new centre of global commerce and for many businesses, it’s the last untapped market for innovation and significant expansion opportunities.

About George Davis

George Davis is a serial founder. After starting his first business at the age of 18, George has gone on to lead payments at TrueLayer – launching payments for global fintechs such as Revolut, Freetrade and Trading 212 – and Paymentsense, where George led a payments division serving over 100,000 customers. Later, he co-founded global cross-border payments business BVNK as Chief Product Officer. Whilst building payments across the world, George saw the opportunity to develop a payment solution in the Middle East. This led him to found Fuse, a financial infrastructure company focused on supporting global businesses to access the Middle East.

 

About Fuse

Fuse is a financial infrastructure company focused on supporting global businesses expanding into the Middle East by enabling money movement in, around, and out of the region without the need for local entities, compliance, and currency management. Powered by a first-of-its-kind virtual IBAN solution in the Middle East, Fuse makes payments in your customer's name across the region without changing account details or sacrificing speed and liquidity.


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Keywords: expansion, PSP, gig economy, Virtual IBAN, cross-border payments, real-time payments, regulation
Categories: Payments & Commerce
Companies: Fuse
Countries: Middle East
This article is part of category

Payments & Commerce

Fuse

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