A wave of technological advancements is propelling the growth of GCC fintech. From emerging trends like blockchain and AI to the expansion of digital payments and financial services, technology is playing a pivotal role in shaping the region’s financial sector. To a degree, the GCC fintech environment mirrors global progress in financial technology – but in many cases GCC fintech’s cutting edge reflects local needs. This article explores the key trends and technologies that are driving innovation and growth in GCC fintech.
Payments
Payments remain a big sector for fintechs in GCC, with an estimated 30 percent of regional fintechs operating in this domain, according to SixthFactor Consulting. UAE card and payments market alone is projected to cross $150 billion by the end of 2024. In fact, 58 percent of fintechs surveyed by SixthFactor identified payments as the most prominent emerging space.
A primary sector is payment wallets, where a mixture of fintechs and telcos battle for the payments landscape. Essentially anyone with a large database attempts to compete with payments wallets. It goes for cross-border payments too: international payments are one of the most active fintech areas, with a huge increase in mobile-initiated payments as fintechs offer lower rates/fees and instant fulfilment.
BNPL and instalments continues to surge
Buy now, pay later (BNPL) and instalments have emerged as major trends in the GCC fintech landscape. Many large fintechs in GCC are in the BNPL space, with three BNPL unicorns in MENA. Over 50 fintechs are estimated to be operating in BNPL, according to SixthFactor, and over a billion US dollars are expected to be invested in BNPL in the next 12 to 24 months.
BNPL solutions sees a significant uptake among the younger demographic in the UAE, particularly those who are tech-savvy, prefer a simple user experience, flexible payment options and early access to credit, which may not be accessed through traditional channels.
While banks have traditionally offered instalment schemes, they often require higher minimum purchases and are typically restricted to customers with higher credit scores. Furthermore, converting to instalments usually requires an additional call or action from the purchaser – while BNPL offers instant decisions.
A recent study by SixthFactor Consulting revealed that one in three banked consumers in the GCC have either tried or plan to try BNPL in the next six months, which points to a huge untapped market potential for BNPL solutions.
Furthermore, a recent Visa financial literacy study in the UAE showed 64 percent of consumers are interested in instalment solutions and 52 percent believe that instalments can help them manage their finances more effectively. In fact, BNPL gross merchandise value in the region is projected to grow from $12.6 billion in 2023 to $32.6 billion by 2029.
Blockchain and cryptocurrency
The MENA region is experiencing strong growth in the cryptocurrency market. Between July 2022 and June 2023, the region had the sixth largest crypto economy with an estimated $389.8 billion in transactions, accounting for 7.2 percent of the global transaction volume.
The UAE is leading the way in blockchain adoption, with notable use cases in physical asset ownership such as Dubai Land Department (read about Dubai Blockchain Policy here).
There are also hints of stablecoins across GCC states. As of October 2023, the IMF reported that 130 countries, accounting for 98 percent of global GDP, were exploring the potential implementation of Central Bank Digital Currencies (CBDCs). Closer to home, a survey of IMF country teams covering 31 Middle East and Central Asia (ME&CA) economies revealed that 19 countries are either considering or actively exploring CBDCs. Most ME&CA countries are in the research phase, while a select few, including Bahrain, Georgia, Saudi Arabia, and the United Arab Emirates, have progressed to the proof-of-concept stage. Kazakhstan is leading the region in CBDC development, having conducted two pilots of the digital tenge.
UAE leads crypto regulation
UAE regulators were early in the crypto currency regulation by launching the blockchain strategy in 2016. In February 2023, the Central Bank of the UAE launched its Financial Infrastructure Transformation (FIT) Programme to accelerate the digital transformation of its financial services sector. One of nine initiatives making up the programme was its ‘Central Bank Digital Currency Strategy’, which looks to address ‘obstructions’ of domestic and cross-border payments, enhance financial inclusion and drive progress towards a cashless society. Dubai also established its own virtual asset regulatory authority (VARA).
It is worth noting that the Central Bank of Bahrain oversees all regulations, providing a unified platform for both banks and cryptocurrency firms. This facilitates increased connections between traditional finance and decentralized finance ecosystems.
In Qatar, the Qatar Financial Centre established the Digital Assets Lab in 2023, and various Qatar regulatory authorities including QDB, QFC and QCB are collaborating on the 2024 innovation hackathon with digital assets as a key theme.
Open finance, open banking, embedded finance
Bahrain, Saudi Arabia and the UAE are all making significant progress in open banking. Regulations are already in place across these countries, allowing fintechs to utilize bank data for improved products and credit solutions.
Opportunities lie in using data for product development, credit offerings and the ability to drive better personalization (this involves creating a comprehensive profile of an individual’s financial situation and tailoring products and services to meet their specific needs). Openness leads to diversified financial services integration and empowers non-financial institutions.
The embedded fintech market in the GCC is expected to grow from $250 million in 2022 to $2 billion by 2030, reflecting an annual growth rate of around 30 percent. This means retailers could offer point-of-sale financing on their e-commerce platforms, or healthcare providers could include tailored insurance products. Such integrations enhance customer experience, drive higher engagement, and open new revenue streams.
Non-FIs can embed financial services into their offerings, creating new business models and revenue streams. For example, telecom companies can offer microloans and insurance products to their subscribers, leveraging their customer data for personalized services.
Telecom companies such as STC have successfully integrated financial services into their platforms, allowing the company to tap into new markets and enhance customer loyalty. STC Pay is now a fully-fledged bank in its own right, and enables users to make payments, send money, and access various financial services through their mobile devices.
Artificial intelligence
AI also plays a growing role. In our survey, 73 percent of the fintechs surveyed in the SixthFactor research found that AI will play a pivotal role in their company’s future growth.
According to a SixthFactor projection, over 50 fintechs in the GCC are leveraging AI to enhance customer experience, from interactive chatbots to AI-powered investment strategies. AI is being applied across the entire customer journey, supporting tasks such as identity verification, customer onboarding, and fraud detection and mitigation.
The convergence of open banking with AI has the potential to revolutionize the financial sector by enabling highly personalized financial products and services. AI’s ability to analyze vast amounts of data to provide insights into customer behavior and preferences can lead to tailored solutions that meet individual needs more effectively.
In the GCC, the combination of AI and embedded fintech is expected to disrupt sectors such as consumer finance, corporate lending, and wealth management. For instance, AI-driven investment platforms can offer personalized investment advice based on financial goals and risk appetite, while educational institutions can provide tailored student loan products. Dubai’s DIFC is also investing in a new AI and Web 3 campus to foster innovation in these areas.
As the GCC region continues to embrace technological advancements, the fintech sector is poised for significant growth and innovation. From the rise of digital payments and the adoption of emerging technologies like AI and blockchain to the potential of open banking, the future of GCC fintech looks promising. By leveraging technology and adapting to evolving trends, GCC fintechs can continue to deliver innovative solutions that meet the evolving needs of consumers and businesses.
Hasan Kazmi is head of strategic partnerships for Visa Central and Eastern Europe, Middle East and Africa.
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