Sandbox, Agility & Trust: The Fintech Disruption in Lebanon

Beirut Digital District
Apr 12 2019
Sandbox, Agility & Trust: The Fintech Disruption in Lebanon
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The article was originally published on Beirut Digital District's website.

There has been a surge in fintech companies in Lebanon that are competing on a global scale. In fact, Lebanon has been ranked as the 3rd most advanced fintech startup ecosystem in the MENA region (according to IDAL’s Fintech Sector in Lebanon 2018 Handbook), and hosts 14% of the region’s fintech startups.

The report also indicates that the country is deemed the 4th most served market by fintech companies, and traditional banks are integrating more advanced systems to streamline customers’ financial transactions.

However, while stakeholders are quickly adapting to innovation in the realm of financial technology, many challenges are hindering growth prospects. To tackle these issues, key stakeholders in the fintech industry came together at the 1st Fintech meet-up event, organized by Beirut Digital District and Visa.

The roundtable discussions gathered professionals from the ICT Ministry, Venture Capital companies, incubators, accelerators, fintech players and banks, in an effort to strengthen the fintech ecosystem, encourage innovation and spur the growth of digital economy.

Experts agreed, without a doubt, that money is changing form, from physical to digital, and we will soon have a cashless society. However, the framework of the Lebanese fintech ecosystem needs improvement, as innovators are either too soon to market, or not getting the support they need to scale.

Around the table, the terms Sandbox, agility and trust dominated the discussion, and participants were keen to define their needs, based on their expertise.  

The Good News for Fintechs

  • Higher startup survival rate: Fintech companies in Lebanon have a higher survival rate, when compared to the overall startup ecosystem. From 2001, less than 30% of the total number of fintech startups have “died”.
  • Unbanked population: There exists a large percentage of unbanked individuals, who pose a lucrative market segment to tap into.
  • Governmental Ventures: The Lebanese ICT Ministry has formed a digital committee and is mapping the structure and governance for this sector.
  • Low adoption of credit cards: There is still a low penetration of credit card and online payment habits in Lebanon, with vast room for growth.

Where Can the Ecosystem & Its Players Improve?

  • Bank-centric: Lebanon and the region are still very bank-centric, with consumers opting for traditional institutions.
  • Partners: The participants called on banks to act as “partners” in fintech ventures, based on a foundation of trust, versus solely providing funding. This approach will also allow banks to prosper, and benefit from the agility of fintech companies.  
  • Lack of awareness: The limited awareness in the market on the importance of Fintech, especially in banks and the Central Bank of Lebanon, has hindered growth opportunities.
  • Too early to market: Many successful companies nowadays were told they were too soon to market when approaching fellow banks. This forced some to pivot to become SaaS providers to survive, until the market was ready to adopt their offerings.
  • Funding: Access to funding is limited for fintechs, with only a few opportunities serving this segment. 14 out of 92 startups in the region are Lebanese. However, they have only attracted only 5% of total investments.
  • Regulations: International and local regulatory restrictions, bank structures, as well as high fees presented by banks and financial companies, limit the growth potential of Fintech companies.
  • Missing Sandbox: Absence of a Fintech Sandbox limits opportunities for Fintech companies to design creative solutions and test them

In an effort to support the Fintech industry and fuel its growth, BDD and Visa signed a Memorandum of Understanding (MOU). Visit the Visa website to read more about Visa’s Fast-Track Fintech Program and discover collaboration opportunities.