According to an intelligence report by Business Insider (BI Intelligence), Fintech could be bigger than ATMs, PayPal, and Bitcoin combined.
“The fintech industry no longer stands clearly apart from financial services proper, and is increasingly growing embedded in mainstream finance,” said BI.
It said fintech segments from a year back are on the rise and innovative branches are already making an impact, such as digital identity verification fintechs, regtechs, insurtechs, and payments fintechs.
Over 80% of large financial institutions fear their business is at risk from new fintech players, according to a PwC survey.
Traditional banking services find it increasingly hard not to adopt or adapt to the rise of fintech transforming the financial services environment, and are faced with either partnering with them or acquiring these startups entirely, to remain relevant.
Islamic banks are also enthusiastic about the prospects and are investing in digital initiatives, according to a recent Ernest and Young report.
How is the region dealing with Fintech?
Fintech full speed ahead
In the Middle East and North Africa (MENA), fintech, is coming of age with acceptance from regulators and governments, said Forbes recently.
“Over the past decade, fintech startups in the region have raised over $100 million in funding, and investment is predicted to double by 2020,” according to the State of Fintech report. “Disclosed investment in fintech had jumped 100% to over $35 million by October 2017 — Paytabs ($20million), Souqalmal ($10 million) and Beehive ($5 million) — compared to $18 million in 2016,” reported Forbes.
The number of fintech startups in the region will reach 250 by 2020, according to the report.
AT Kearny said that e-commerce in the region is set to quadruple until the end of this decade.
The World Bank said that widespread smartphone ownership and internet connectivity did not prevent 86% of adult population to remain unbanked, coupled with an Ernest and Young report that said 3 in 4 GCC bank customers are ready to switch banks for a better digital experience.
“Fintech is a huge sector that is ripe for disruption, and could become as great a force in the Middle East as oil,” according to Abdulaziz Fahad Al Jouf, founder and CEO of PayTabs, a Saudi-based payment processing startup, as reported by Forbes.
Forbes said Dubai is home to the largest fintech sector in the region, and is the world’s 18th largest financial sector in the world.
The city has witnessed a surge of interest from fintech startups and banking assets.
In November2017, Dubai International Financial Centre (DIFC) launched a $100 million fintech-focused fund and signed an agreement with the Monetary Authority of Singapore to undertake joint fintech projects.
In August, Hong Kong’s Securities and Futures Commission entered into a cooperation agreement with the Dubai Financial Services Authority (DFSA) to establish a fintech framework for the two regulators.
Other cities in the region are catching up fast as well.
“Last year, Cairo launched two accelerators schools to nurture startups and Abu Dhabi Global Market created the region’s first “regulatory sandbox”, allowing new products to be tested without full regulatory compliance,” said Forbes.
“Disruption is here – the question is, are we ready for it or not? And if we aren’t ready for it, then we have a problem at an individual, institutional, and collective ecosystem level,” Khalid Saad, CEO of the newly-instated Fintech Bay in Manama Bahrain, was quoted as saying.
Fintech Bay is working on evolving a fintech ecosystem that would help the startups build and develop new products, and expand their footprint to the larger global market.
Bahrain’s appetite for lending, payments, digital wallets and crypt solutions is growing, in an already finance sector that contributes 16% of the country’s GDP, second only to oil and gas.
The Central Bank of Bahrain has implemented a fintech and innovation unit, working as a regulatory sandbox.
A sandbox is a tool that allows developers to test a tech proof-of-concept and provide a feedback mechanism that allows startups to amend and improve a product.
Bahrain, population 1.3 million, posts a GDP of $32.2bn, according to the Oxford Business Group.
As of September 2016, the country was home to 404 financial institutions.