Fintech in the Gulf and MENA region has experienced significant changes in recent years. And when combined with the rapid development of information technology, an increased focus by Gulf states’ governments on creating so-called ‘smart cities’, and the rise of e-commerce, the region looks set to undergo a radical transformation in years to come. This comes at a time when Gulf and MENA states try and decrease their economic dependency on their traditional sources of wealth.
Of the Gulf states, the United Arab Emirates (UAE), Bahrain and Saudi Arabia have assumed a central role in moving the fintech revolution forward. This has seen regional governments encouraging massive private sector investments in the region. And while these growth strategies are not without potential obstacles, the future of the fintech sector in the Gulf States still looks bright.
To accelerate growth in this sector, the six member states of the Gulf Cooperation Council – which includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE – have developed high-level strategies for fintech ecosystems, as well as creating a progressive regulatory environment in areas such as cryptocurrencies, open banking, robo-advisory services and regtech.
With this general background in mind, let’s take a closer look at the rise of the Gulf states as a hub for fintech development.
Who is leading the charge?
As you might expect, the UAE and Bahrain have been leading the fintech charge in the MENA region so far, which is in line with their broader strategy of becoming a regional hub for doing business in the Middle East.
Dubai is performing particularly strongly, and is currently one of the leading cities in the MENA region for fintech. According to the Findexable Global Fintech Index, it is among the top 50 cities for fintech worldwide. Also important have been the Abu Dhabi Global Market, as well as the Dubai International Financial Centre.
Similar programs have been launched in Saudi Arabia – via the fintech Saudi Program within the Financial Services Development Program – and Bahrain, with their fintech Bay innovation hub.
These programs have been supported both by local governments as well as local regulators, which includes offering support and guidance in areas such as open banking, cryptocurrencies and robo-advisory services.
However, with so much support present in so many different centres in the region, this has led to concerns that not all schemes can be viable. And with each centre or hub trying to incentivise firms to do business there, there is a risk that they are simply all competing for the same slice of the pie. This is a particularly pressing risk, given the growth of other fintech hubs such as London, Dublin, Luxembourg, Berlin, Amsterdam and Paris.
Local specialities: developing a niche for the Gulf region
Although the Gulf states face stiff competition from other financial hubs around the world, this does not mean that they cannot develop their own competitive advantages in a crowded marketplace. What the financial hubs in the Gulf states need to do, then, is to develop their own specialities that are uniquely catered for in the region and which will naturally attract investment.
This might be either by creating a unique environment in which to do business that is not present elsewhere – such as, for example, the creation of a safe regulatory environment in which to develop new financial products and services. Or it might be by developing expertise in a particular area, such as Islamic finance.
Islamic finance has understandably proved to be a particularly strong area of development for the Gulf states. And as we can see with the Islamic forex account at AvaTrade, there are lots of new and exciting services on offer in the region.
The future of fintech in MENA: what’s in store?
With all that said, the future of fintech in the MENA region looks incredibly strong. The sector has experienced extraordinary growth in the region over the last two years.
Central to this has been a real desire shared by the governing powers in countries such as the UAE, Saudi Arabia and Bahrain to not only radically transform their economies but also to change the business environment as a whole. And it is this combination of economic and cultural shifts that will help to drive growth in the region.
When combined with the broader shift away from oil production and the rapid growth of tourism across the region, the future looks very bright for the Gulf states.