Cash-Back Credit Cards Increase Financial Flexibility, Spending Power of MENA Consumers

Like other emerging markets, the Middle East and North Africa (MENA) has one of the largest underbanked populations in the world, with more than 90% of the population transacting solely in cash and without access to credit or formal savings accounts.

According to Momtaz Moussa, co-founder and CEO of Egypt FinTech rewards app Lucky, addressing this problem and bringing the masses into the financial fold has required taking slow steps in the last few years to make the transition to financial and digital services as seamless as possible for the millions of “credit invisible” consumers across the region.

“Going to the underbanked population with a proposition similar to Revolut, for example, wasn’t really going to make a dent in the market where most of the supply side is not even integrated within the financial system,” Moussa told PYMNTS in an interview. “You couldn’t just distribute banking cards back then and expect that people or transactions would suddenly become cashless.”

He said that was the premise on which Lucky was built back in 2019 as part of a wider goal to develop a strong network of merchants who accept digital transactions and in turn give consumers an avenue to use digital transactions.

Since then, the Cairo-based firm has grown significantly, becoming one of the leading FinTech apps in Egypt for consumer credit products, helped by competitive cash-back rewards and bill payment programs for its 8 million users.

Read more: Egypt FinTech Rewards App Lucky Grabs $25M in Series A Funding Round

With Lucky, customers also get access to a strong merchant network of more than 30,000 stores including Jumia, Nike, Amazon, Booking.com, KFC and Burger King, through which they get exclusive offers and savings on items like clothing, food and electronics.

Read also: Egyptian FinTech Lucky Eyes MENA Following $25M Funding Round

And to further tap into opportunities created by the region’s highly unbanked, young population and cash-centric economies, the company recently announced the completion of a $25 million Series A raise, claimed as the largest Series A funding round for a FinTech in the North African country.

Boosting Consumers’ Creditworthiness

According to Moussa, the fresh capital will be used to build out Lucky’s credit capabilities and better financial products as customers gain experience using credit, which can be “tricky” in a country where less than 5% of the population has access to a credit card or credit history.

One of the reasons for this gap, he explained, is because the banking system doesn’t have the ability to extend credit at lower risk due to a lack of infrastructure, as banks in developed regions are able to.

Solving that significant lack of formal data by becoming the commerce network for young, underbanked Egyptians has been key to growth, Moussa added, giving the company “an unparalleled access to data” that has enabled them to work hand in hand with banking partners to boost consumers’ creditworthiness.

The government also launched iScore (Egyptian Credit bureau) — the equivalent of Equifax or TransUnion in the U.S. — back in 2008 to increase financial literacy and credit awareness in the country. And even though the initiative is still at the very early stages, Moussa said it has paved the way for companies like Lucky to access more data to pursue its mission of extending credit to consumers.

Banking Licenses Pave The Way

Last December, the company announced the launch of its first credit card to deliver industry-best cash-back rewards to consumers, and with the recent approval of its prepaid card license, Moussa said those two products are going to be hugely significant “in providing our underbanked users with the banking experience that they never had before.”

The company is also planning to launch a prepaid product that will extend the reach of its merchant network as users add the card network to the existing QR code it has built over the years.

“It also provides an even more seamless experience in terms of approval and in terms of transaction than what already exists,” he said, adding that “we are very optimistic about what’s coming next now that we have these digital banking licenses.”

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