Financial technologies will play a key role in the GCC's economic diversification efforts
Despite being a relatively recent phenomenon, financial technology – more popularly known as fintech – is changing the face of the modern financial landscape, whether through cryptocurrencies, smartphone applications, “smart” investing services or other activities. As these technologies continue to develop, one region in particular stands to benefit: the Gulf. This isn’t a revolution that is far off – it is happening today.
For the countries of the GCC, fintech couldn’t arrive on the scene at a better time. The countries of the Gulf are all working to diversify their economies away from a dependence on fossil fuels, a task in which technology – and in particular fintech – have a potentially very significant role to play.
To see the importance of fintech in the Gulf’s future one need look no further than Bahrain, which in February of this year launched FinTech Bay, which has the mission of accelerating local early-stage fintech companies, as well as wooing growth-stage foreign companies to establish regional offices in Bahrain. By performing these functions, Bahraini officials hope that the country can further bolster the financial sector, which stands only second to petrochemicals in terms of contribution to GDP.
“We want FinTech Bay to be a catalyst to move the country towards digitisation and an innovation and knowledge driven economy,” Fintech Bay CEO Khalid Saad says in this week’s issue. “This could help propel the country.”
There remains much work to be done, of course. As Abdulaziz Al Jouf, CEO of Paytabs – a successful Saudi fintech start-up – says in this week’s cover story, there needs to be more backing and funding for regional SMEs.
This, he says, remains a struggle. “We are not expecting governments to change. We are expecting the layers after the government – the private sector, the banking industry – to change,” he notes. “That is hard because they always think that SMEs are competing with them.”
Fortunately, various players in the region making sure the ecosystem flourishes. In September this year, for example, DIFC’s FinTech Hive will launch the second edition of its accelerator programme for fintech innovators – part of a partnership with the likes of Emirates NBD and AIG. The 2018 edition has also been expanded to include “insurtech”, as well as Islamic finance and regulatory technology (“regtech”) solutions. Another good sign.
For those ahead in the fintech space, the possibilities are endless. According to statistics presented at the Finovate Middle East event in December, the number of fintech start-ups in the region is expected to go up from approximately 100 in 2016 to about 250 by 2020.
The number of fintech start-ups in the region is expected to go up from around 100 in 2016 to about 250 by 2020”
Among the best examples of these I’ve seen in the region are Democrance, a UAE-based firm that works with insurance companies and mobile operators to reach neglected micro-insurance markets, and Ajar Online, a Kuwaiti start-up that helps tenants pay their rent online and allows landlords to get live updates on payments and collection reports.
Unlike the problems with cryptocurrencies highlighted by Sabeer Bhatia in his interview – namely, that they are mostly theoretical white papers rather than tangible businesses – it seems as though every day innovators across the GCC are finding ways to use fintech to solve real-world, everyday issues.
And that’s where further developments will stem from: a key customer expectation from a young and tech-savvy GCC customer base. Those at the forefront of this tech revolution are well poised to be the big winners of the inevitable fintech surge.
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