Fintech and online banking are developing unevenly from one country to another in the MENA region. Nevertheless, it is witnessing an increase in investments, particularly in the Arab Gulf countries, amidst the increasing interest of governments in this sector. So, what is this technology, and how are Arab countries embracing it?
Fintech, or financial technology, is the term used to describe any technology that delivers financial services through software, such as online banking, mobile payment apps, or even cryptocurrency, as Shirine Mroueh, product manager at MyMonty, explained to TRENDS.
She added: “Fintech provides a new twist on financial concepts, allowing various consumers to have more influence on their financial outcomes.”
Simply put, fintech automates and improves the delivery of financial services.
Saudi fintech scene
The Covid-19 pandemic has contributed to an increased focus on fintech in Saudi Arabia, with 74 percent of Saudis using at least one financial technology product or service in the previous 12 months, according to a poll published by Fintech Saudi Arabia.
In addition, fintech firms increased by 37 percent across various sectors, including payments, money markets, insurance, and business solutions for small and medium-sized enterprises.
Between January and August 2021, Saudi Arabia witnessed 16 investments totaling $157.2 million in fintech, a significant increase from seven investments totaling $7.8 million in 2020 and six investments totaling $18 million in 2019.
Additionally, the Saudi Council of Ministers approved the licensing of two local digital banks.
Leading Arab banks and countries
Leading Arab countries in fintech are those that provide adaptive regulations that govern fintech activities, in addition to the licensing and compliance requirements which speed the development of fintech.
While countries with few or no laws and compliance requirements fall behind in this digital race, Mroueh explained to TRENDS: “Lebanon is a good example with a high adoption of online banking due to the diversity of its banking system, but a low adoption of fintech.”
The advantages of fintech systems are numerous, as it can be looked at simply for better customer servicing, reduced costs, greater convenience, speed of service, efficiency, and most importantly the inclusion of the unbanked and underbanked population.
For that reason, Mroueh stated four needs for Arab countries to develop their fintech systems:
- An ecosystem conductive to new financial alternatives, supporting a larger customer base and transactional volume.
- A sustained investment at the angel stage to fuel the next generation of innovators.
- An adaptive set of regulations that hasten and ease the development of fintech.
- Higher-quality education programs to foster new talent and improve employability.
It should be noted that the Arab Regional Fintech Working Group issued in July 2021 the second edition of the Arab fintech guide focusing on 10 pilot Arab countries including Jordan, the UAE, Bahrain, Saudi Arabia, Sudan, Iraq, Oman, Kuwait, Lebanon, and Egypt.
The UAE is the leader in Fintech innovation with 24 percent of the Arab region’s share, as Morocco and Egypt follow with 12 percent each.
Regarding the leading Arab banks in Fintech systems, Mroueh named the Arab Bank and the National Bank of Kuwait.
Fintech needs in Arab countries
Karim Wahby, Strategy Officer at Diaspora Digital bank, spoke to TRENDS about financial technology in the Arab countries, pointing out that most governments are still far from this concept as they do not know its positive economic results.
For example, only 44 percent of Egyptians have bank accounts, while more than 50 percent of the consumers use cash, which negatively affects the country’s GDP.
Egypt is currently working on building an advanced infrastructure, which is considered the most advanced in the region and costs billions of dollars amid the widespread spread of startups and entrepreneurs in recent years.
Wahby added that fintech in Kuwait and Bahrain was remarkable, amid exceptional progress in this sector in the UAE and Saudi Arabia.
So, what do Arab countries need to do to take advantage of fintech?
Wahby pointed to the need for capital to build infrastructure and develop laws and legislation for this sector.
He also stressed on the importance of introducing technology into educational curricula and bringing this concept closer to the Arab citizen.