30 UNDER 30
THIS GAME-CHANGING GROUP OF YOUNG LEADERS, INNOVATORS, AND ARTISTS HAVE BEEN MAKING THEIR MARK ON THE MIDDLE EAST AND BEYOND.
TThe global pandemic has devastated swathes of the economy, hitting small businesses particularly hard. But for Islam Shawky, Alain El Hajj, and Mostafa Menessy—co-founders of Cairo-based Fintech, Paymob—the pandemic has been their time to shine. Providing SMEs with a digital gateway was the right idea at the right time.
The friends established Paymob back in 2015 with just $10,000 in startup capital. Now, the Fintech company has processed more than 200 million financial transactions and its revenue reportedly grew by 600% between July 2020 and July 2021—not bad for three entrepreneurs yet to hit the age of 30.
By all accounts, the investment community agrees. In April 2021, Paymob closed $18.5 million in a Series A round led by U.A.E.-based Global Ventures, with participation from Egyptian investment fund A15 and Dutch development bank FMO. The round included $15 million in new capital and followed a first tranche of $3.5 million raised in July 2020. It wasn't just a big deal for Paymob; it was the largest-ever Series A raised by an Egyptian Fintech. For Basil Moftah, General Partner at Global Ventures, it was a no-brainer. “Paymob has a perfect combination of a high-quality technology, a product that customers increasingly cannot do without, and an outstanding management team,” says the investor.
From Paymob's Cairo office, COO Alain Hajj and CTO Mostafa Menessy explain that the sizeable funding reflects the rapid growth of the Fintech industry. “We were quite fortunate to get the investment to be honest. The upward trajectory and the increase in demand have pushed the investors, and pushed us as well, to really go beyond our limits,” says El Hajj.
But even with willing investors, there's no escaping the fact that Paymob's stellar performance has been given a helping hand by an unprecedented crisis. In addition to revenue growth, the company's customer base grew from 1,000 merchants before the first lockdown to 25,000 a year later. Today, that number exceeds 50,000. And the Paymob team has ballooned too, with the number of employees increasing from six at the end of 2019 to 600 as of August 2021.
Rapid growth on multiple fronts points to one thing: the demise of cash and the rise of a digital society. In fact, lockdowns and a growing aversion to handling cash have accelerated a global shift towards digital payment methods in every area of consumer spending.
According to the annual Global Payments Report by Worldpay from FIS, there are now more people using mobile wallets than cash for in-store payments for the first time, with digital wallets accounting for around 8% of payments in the Middle East and Africa. Meanwhile, cash usage fell 10 percentage points in 2020, accounting for just one-fifth of face-to-face payments worldwide. According to Moftah, the opportunity for digital payments is huge, and “Egypt's transformation to a cashless society is being enabled by the unique products Paymob has built.”
Mustafa Alani, senior advisor and Research Program Director at the Gulf Research Center, is equally bullish. “The next few years will witness a technology revolution in Egypt, given the huge potential of the sector in the country,” says Alani. “You have to think that 70% of the adult population in Egypt does not have a bank account, which means there is a huge market gap that Fintech companies can target.”
That's not to say that the industry will sweep the Egyptian market unchallenged. According to Mohamed Emam, Fintech expert and Senior Managing Partner at Emam & Partners law firm, Fintech's most significant hurdle is lack of trust among the populous. “Egyptians live by the statement ‘Cash is King',” says Emam. “Many Egyptians so far do not trust Fintech startups [but] that could easily be changed if Fintech companies strengthen their security by adding new features such as two-factor and biometric authentication.”
El Hajj is open about the challenges and also about the impact of the pandemic. “We can definitely all agree that Covid was an unfortunate event for the whole globe, but it has helped accelerate our growth in the market,” he says. As people were forced to start buying things online, retailers and merchants took
the opportunity to go digital, for survival as much as growth. But for the COO, it's far from a short-term phenomenon. As far as he is concerned, the pandemic has changed mentalities and increased awareness of how digital payments can work.
Paymob CEO, Islam Shawky, echoes his fellow co-founder's sentiments via video link from his car. “What's happened will never be undone,” he insists. But Shawky's confidence belies Paymob's humble and somewhat different beginnings. “We were actually building an e-commerce startup,” he laughs. “We didn't think about starting a payments startup. Life just ended up taking us there.”
The co-founders first met at the American University of Cairo, where Shawky was a mechanical engineering student, and El Hajj and Menessy were studying computer science. On an almost daily basis, they would hear fellow students daydream about starting their own businesses, but these three undergrads were determined to bring their entrepreneurial dreams to life.
Only it wasn't that simple. To get an e-commerce startup off the ground, payment infrastructure would be essential, and after visiting a string of banks, the trio quickly discovered that it was broken. “Every single part of the experience was unsatisfying,” says Shawky. ‘'We were building our business under the assumption that if the infrastructure was out there in the globe, then it must exist here in Egypt too. But it didn't.”
While disappointment and dissatisfaction were the impetus behind Paymob's creation, like most great startups, it was addressing a need. The entrepreneurs saw a gap in the market for a payment solution that would enable businesses to perform transactions, offer proper access to financial services, and cater to the digital requirements of Egypt's community of SMEs and independent merchants.
From the start, however, the co-founders hit a wall. To launch their business, they would need a bank on side, and none would take them seriously. Even getting through to the right person to arrange a meeting was tough. “Imagine, we were going into established banks and saying ‘we've tried your services and we don't like them. Here's a better proposition for you,'” says Shawky. They didn't give up. In fact, the more the banks didn't see the problem, the more they realized there was a role for Paymob to play. The trouble was, no investor would touch them without a bank; it was a classic case of chicken and egg.
After eight months of doors slamming shut in their faces, an opportunity arose. Shawky had been in pursuit of the CEO of a bank who gave lectures at AUC. The window was always tight because he gave classes just once a week, but one day he agreed to hear Shawky's idea. It was the break they were looking for, but it would be another 14 months before the company officially launched.
Six years on, and Paymob is proving to be a hit. In a nutshell, it helps merchants to collect payments digitally. This could be anything from facilitating transactions for online startups to providing point-ofsale terminals to brick-and-mortar stores. As for the business model, it's exclusively pay-as-you-go, with Paymob taking commission on transactions. For the team, it's important to keep things commitment-free for customers. “We want to eliminate any friction; we want to be as inclusive as we possibly can to help unlock the potential and to really show what value access to finance can bring,” says El Hajj.
So far, their approach appears to be paying dividends when it comes to customer loyalty.
According to the COO, Paymob has impressive retention figures, with many merchants having been with the company since the start. “Once you get involved in a merchant's day-to-day activities, it's highly unlikely that they'll switch unless they get a better proposition, and we're working to make sure that doesn't happen,” explains Shawky.
Whether for a new merchant or a long-standing customer, Paymob's co-founders say they process over 85% of mobile wallet payments in Egypt, and now their sights are firmly set on international expansion. Through partnerships, the company is already present in Pakistan, Kenya, and Palestine, and the co-founders plan to open an office in the GCC in the coming months, with talks underway that could see Paymob enter the Saudi market later this year.
When scouting for new markets, the Paymob co-founders lean on a set of criteria: conducive regulatory environments, supportive government initiatives and, most importantly, a large segment of underserved SMEs with characteristics in common with those in Egypt. “We are impactdriven,” says Menessy. “We have seen the impact of financial inclusion on the underserved communities, and that's really what gets us up in the morning.”
And as far as impact goes, they believe there's a lot more to come. Not satisfied with the 50,000 merchants they have today, the co-founders are determined to hit one million. It's a lofty goal, but it's hard not to be swayed by their logic. “We've seen the growth momentum,” explains Menessy. “We've seen how we've grown from 10 merchants to 30, and then from the thousands up to the tens of thousands. So, there's no reason why we can't reach that goal.”
Beyond that, the entrepreneurs say they are not thinking too far ahead. The reason is part strategy, part youth. “We're still under 30,” reflects El Hajj, “It's about the thrill of the journey.” In a way that's how they've always worked. Since their college days, Islam Shawky, Alain El Hajj, and Mostafa Menessy have followed a “get things done” policy. To the team, it makes perfect sense. “Back in the day, we saw a lot of people discussing and sharing ideas, but very few actually doing,” says Shawky. “We jumped right in.”
“We have seen the impact of financial inclusion on the underserved communities, and that’s really what gets us up in the morning.”