Egypt’s Paymob begins global expansion with Pakistan

Egypt’s Paymob, a digital payments service provider for businesses, is expanding to Pakistan as its first international market.

The Cairo-based FinTech also plans to enter Oman, Saudi Arabia and the UAE this year, Omar El Gammal, Paymob’s vice president of global business development, told The National.

“We believe we can become the Menap [Middle East, North Africa and Pakistan] key player,” Mr El Gammal said.

“From Morocco to Pakistan, this is the area that we want to claim. We want to deliver on our promise to serve SMEs across this region.”

The Covid-19 pandemic accelerated a reduction in cash payment creating new digital revenue opportunities with the Asia-Pacific region recording the largest and fastest-growing payments revenue region for the past several years, McKinsey & Company has said.

The global payments industry is set to return to its long-term growth trajectory after posting its first contraction in 11 years in 2020 amid the Covid-19 pandemic, the global consultancy said. The sector's revenue fell 5 per cent on the year to $1.9 trillion in 2020, but McKinsey projects a return to historical mid-single-digit growth rates, generating 2025 global payments revenue of roughly $2.5tn.

Founded in 2015 by Islam Shawky, Alain El Hajj and Mostafa Menessy, Paymob enables online and offline merchants to accept electronic payments from their customers using various products and solutions.

The start-up is one of several Egyptian FinTech players accelerating the transformation to a digital economy and cashless society, in line with the country’s 2030 national agenda and supported by new central bank regulations.

Funding of Mena FinTech start-ups grew a record 183 per cent in 2021, figures compiled by data platform Magnitt show. Egypt was second in the region in the number of venture capital deals and FinTech represented 17 per cent of total deals closed in the country, Magnitt said.

Paymob’s international expansion follows an $18.5 million series A funding round in April of last year raised in two tranches. The round was led by Dubai’s Global Ventures with participation from Egyptian early-stage venture capital firm A15 and Dutch entrepreneurial development bank FMO.

It also was one of four companies that secured an undisclosed investment last month from NClude, the new $85m FinTech fund managed by Global Ventures and financed by Egypt’s three largest banks.

“We’re very excited about being in the first cohort of investments,” Paymob chief executive Islam Shawky told The National. “It’s a testament that big banks and big financial institutions are walking the talk.”

Paymob is currently closing a series B round that will be announced soon and includes existing investors, such as Global Ventures, as well as new investors, Mr Shawky said.

“Paymob’s team and technology, as well as their ability to innovate and adapt to market opportunities have allowed them to grow incredibly quickly and capture market share in an important market, becoming regional leaders,” Global Ventures general partner Noor Sweid told The National.

Co-founders Mr Shawky, chief operating officer Mr El Hajj and chief technology officer Mr Menessy were recently listed in the Forbes Middle East 30-under-30 2021.

The former classmates at the American University of Cairo had set out to build an e-commerce start-up only to discover challenges with payment infrastructure. That led them to pivot and start Paymob to solve those problems.

The Covid-19 pandemic helped drive growth as lockdowns pushed consumers to rely on digital payments over cash and forced small and medium enterprises to adapt.

Cash accounted for more than 70 per cent of point-of-sale (POS) transaction value across the Middle East and Africa in 2019, but fell to 51 per cent in 2020 and below 44 per cent in 2021, said the 2022 Global Payments Report from American corporation FIS. Cash use in the MEA region is projected to decrease to 31 per cent of POS value in 2025.

That is still high compared to global levels. Physical cash accounted for approximately 18 per cent of worldwide POS value in 2022 and is projected to fall slightly below 10 per cent by 2025.

Paymob started 2020 with around 1,000 merchants and closed 2021 with more than 75,000 merchants. In terms of revenue, which is earned by charging a commission on transactions, the business more than tripled over the same period. The company now employs about 500 people.

“It was a huge couple of years for us,” Mr Shawky said.

Businesses that use Paymob’s solutions, such as POS devices and digital wallets, include Uber, Swvl, Alex Bank, Banque du Caire, Vodafone Egypt, Tradeline, Homzmart, AUC, El Gouna, Gourmet and Metro market.

In November, Paymob partnered with MasterCard to launch the tap-on-phone digital payment acceptance service in Egypt to meet the needs of small merchants. It allows smartphones and tablets to be transformed into safe payment acceptance devices for contactless cards and mobile wallets.

Earlier this month, Paymob signed an agreement with the UAE’s GrubTech to help thousands of restaurants, cafes and cloud kitchens in Egypt manage operations and payments from a single platform.

Through partners such as Swvl, Paymob has a presence in Kenya, Pakistan and Palestine.

However, this marks the first time Paymob has opened an office outside Egypt. The plan is to hire at least 350 employees in Pakistan by the end of this year and grow to 500 in the second year, Mr El Gammal said.

With a population of more than 220 million and a similar market environment to Egypt in terms of its reliance on cash, Paymob felt it was the right country to start its international expansion.

“Pakistan has more than four million SMEs and it is only served by 80,000 POS machines, so there’s a huge gap between the number of acceptance points and the number of businesses that are out there,” Mr El Gammal said.

Despite the perception that countries like the UAE and Saudi Arabia are well-served in digital payment solutions, he said this is the case only in the major cities.

“If you look at the UAE, you find that 50 per cent of the POS machines in the market are in Abu Dhabi and Dubai, and in Saudi Arabia, it’s in Riyadh and Jeddah,” Mr El Gammal said. “If you go outside these markets, you find that they’re very underserved.”

While there are many FinTech players in Egypt and the region trying to solve issues, such as a lack of access to financial services or the credit gap, Mr Shawky said Paymob is focused on building the infrastructure to enable consumers and businesses to pay digitally.

As others strive to become a “super-app”, Mr Shawky said that is not in the cards for Paymob.

“If I want to become a super-app, this means I want to become an island. For us, we want to build bridges,” he said.

By working with consumer finance companies, Paymob can help SMEs grow their businesses and offer convenience to customers while facilitating access to financial services.

“We’re seeing the gold rush — and we decided to sell shovels,” he said.