The global digital payments race is heating up: Up-and-coming fintech firms in emerging markets are beginning to outpace Western financial companies who for years have controlled payment markets around the world, the Financial Times reported. Payment technologies such as mobile wallets, scannable QR codes, and smartphone software for contactless transactions are proliferating across emerging economies, guided by a new generation of young, tech-savvy entrepreneurs responding to friendlier market dynamics shaped by both the pandemic and state-led pushes for financial inclusion.

Covid has forced a change in the payments landscape around the world, causing the use of cash to fall and an increase in digital payments. This shift, coupled with governments in developing economies taking steps to increase financial inclusion, has stimulated innovation in the fintech space and enabled rapid growth in emerging economies. People who have made the shift to cards and mobile wallets have discovered the convenience of paying through digital methods, said Philip Benton, financial services senior analyst at Omdia, and they have now formed new habits.

Mobile payments exceeded ATM withdrawals for the first time ever in India last year, according to a report by S&P Global Market Intelligence, while Latin America expects a compound annual growth rate of 17.3% in digital payment transactions from 2020 through 2024, according to projections from Statista. Debit and credit cardholders are forecast to rise by 5.8% in the Philippines between 2020 and 2024, according to Omdia, compared with forecast growth of 0.6% in the UK over the same period.

Digital payments in Egypt are booming: Transaction volumes via e-payments platforms climbed more than 40% between 2020 and 2021 to hit USD 11 mn, according to data from Statista. This will continue expanding at an annual compound growth rate of 14% over the next four years, reaching USD 19.4 bn by 2025.

Follow the money: Egypt's fintech space has become one of the most vibrant parts of Egypt’s burgeoning startup scene in recent years, with firms in the sector closing some huge investment rounds this year. MNT-Halan raised USD 120 mn in what could be the region’s largest-ever startup investment by a fintech firm, while Dopay closed a USD 18 mn series A round. With its large unbanked population, the attractiveness of the Egyptian market also has foreign companies like JumiaPay and UK-based Jumo looking to set up shop.

Even before covid, the digital payments market has been growing faster in Africa than in Europe. In Nigeria, the number of digital payment transactions grew from 66 mn in 2008 to 2 bn 2018, while France’s transactions only grew from 33 mn to 61.5 mn during the same period, according to data from Statista.

Payment markets in emerging economies still face many challenges: Many continue to have low rates of financial inclusion, and according to the World Bank around 1.7bn adults in emerging markets remain unbanked and do not use a mobile money provider. However, that figure is falling, with fintech helping make financial services more accessible to more people. Over the last decade, the unbanked population fell by 35%, mainly due to an increase in mobile money accounts, the World Bank reported.

Policymakers in Egypt are trying to make fintech more accessible to all: The central bank has issued a number of rules to facilitate the use of mobile wallets and contactless payments, as well as make it easier to make payments and transfers between different service providers. A greater legislative focus on financial inclusion is also attempting to create a friendlier environment for fintech businesses to establish themselves in Egypt, with new rules for licensing and governance currently being discussed by lawmakers in the House.