Gulf finance sector catching up with the fintech revolution

August 13, 2017
Elevating experiences. Men walk past the head office of Emirates NBD in Dubai.(Reuters)

Dubai - With new financial technology (fintech) start-ups promising cheaper and faster options for financial institutions and private customers, the Gulf region is trying to catch up with the trend, with the UAE and Bahrain in the lead.

Suvo Sarkar of Dubai-based Emir­ates NBD said the fintech move­ment, which comes with “a perfect storm of rising customer expecta­tions, expanding venture capital funding and an increased pace of technological evolution,” is going to affect traditional banking and fi­nance players.

“Fintechs usually focus on either the first or last mile of the bank-cli­ent interaction and provide digital alternatives that are more efficient, less expensive or offering a better user experience,” he said.

“However, most struggle with gaining traction on growing their customer base as well as scaling up their business model quickly. On the other hand, banks continue to own strong customer relationships and lead on factors like security, trust and transparency.”

Sarkar said banks and fintechs are “increasingly getting the best of both worlds by developing a para­digm of collaborating with each other and jointly providing supe­rior solutions to customers.”

He explained that Emirates NBD, with a connect, collaborate and cre­ate philosophy that is central to its innovation process, engages with entrepreneurs and disruptors in search of ideas that will elevate the banking experience for their cus­tomers.

“Last year, we launched the Emirates NBD Fintech Challenge and invited fintech experts, start-ups and individual developers and innovators from across the world to present their ideas and prototypes,” Sarkar said. “We also launched the Emirates NBD Future LabTM, an incubator with a start-up ethos that engages with teams internally and externally to enhance services.”

Financial regulators in the Gulf Cooperation Council are taking the lead in establishing fintech leader­ship and financial services hubs in the region, creating an eco-system for start-ups and supporting bud­ding entrepreneurs in the sector.

Abu Dhabi Global Market (ADGM) was the first in the MENA region to have a live fintech regulatory re­gime and first regulatory laboratory (Reglab) in 2016. In the first half of 2017, Dubai International Financial Centre (DIFC) launched its acceler­ator FinTech Hive to help facilitate collaboration between cutting-edge technology companies and the leading regional and international financial institutions. In June, the Central Bank of Bahrain (CBB) an­nounced new regulations to create a regulatory sandbox that would allow start-ups and fintech firms to test and experiment their banking ideas and solutions.

Chris Kiew-Smith, head of fintech strategy at ADGM, remarked that “regional cooperation among regu­lators across the Gulf and the Mid­dle East will be crucial to establish­ing a vibrant fintech ecosystem.”

“We are already seeing large es­tablished banks [work together] with digital offerings, such as the Abu Dhabi Investment Bank-Fidor partnership. Financial institutions are beginning to see the massive benefits to increasing market share, reducing costs and helping make the Gulf and the Middle East a lead­ing global centre of cutting-edge fi­nancial services,” Kiew-Smith said.

He said ADGM established a streamlined venture capital frame­work to ensure sustainable fund­ing for entrepreneurs and “make it easier for venture capital firms to set up in ADGM.”

David Parker, executive director-financial services at the Bahrain Economic Development Board (EDB), said venture capital funding and support is getting better “but there’s much more we can do.”

Bahrain has introduced several reforms, such as the new invest­ment limited partnership law, that would help make it easier to estab­lish venture capital funds in the country and is looking to introduce a central fund to help support en­trepreneurs.

“The regulatory sandbox in Bah­rain makes it easier for entrepre­neurs and established businesses to innovate and Fintech Bay, the physical space that we expect to launch later this year, will help to boost the emerging fintech com­munity here, bringing together people from different areas,” Park­er said.

“Of course, one of the things that make this space so exciting is that you can’t predict exactly how the sector will evolve in a few years. However, I think the general direc­tion is that fintech innovation — whether driven by entrepreneurs or existing players in the sector — is going to create new products and services that can meet the chang­ing needs of consumers.”

In Bahrain, the fintech front is growing and looking to expand to serve the region. Some of the more promising start-ups include Paytabs, which offers payment solutions for business to business operations; Eazy Financial Ser­vices, offering technologies and in­novative solutions to the financial sector; and Sadad, which provides online express payment solutions.

“I think it’s fair to say that the re­gion has been a bit of a late starter in fintech but we’re catching up very quickly and learning from the experience of others around the world,” Parker said.