The Middle East currently has a minor share of investments in financial technology worldwide, but recent developments in several regional centres and cross-border collaboration will significantly boost the industry’s growth, according to the chief executive of Bahrain Fintech Bay.
“If you look at total global investments in fintech, this region shares a maximum of 1 percent (of total investment), but there are fast developments happening here at a relatively smaller base and the underlying fundamentals are being built right now,” Khalid Saad told Zawya on the sidelines of a conference in Abu Dhabi.
“As other jurisdictions in the region develop their fintech ecosystems, that Middle Eastern share is going to increase significantly,” he said. “That will happen through a mixture of companies coming from outside, viewing the region as a great testing bed and an expanding region, and through creating a local and indigenous base,” he added.
According to Saad, changing people’s mindset is the biggest hurdle to developing the fintech industry in the MENA region.
“The culture of believing that investing in fintech is a strategic imperative is still missing,” he said.
“The moment the mindset changes at an institutional and ecosystem level, things will start taking off,” he said, noting that he expects a five-year time horizon for the region to catch up with the pace of global development in the fintech industry.
“I think five years is probably the time needed for other jurisdictions in the region to catch up, and the jurisdictions that have taken the lead to start building up. Then we’ll start to see some sort of convergence and visible results,” he said.
Bahrain, Saudi collaboration
Last month, Saudi Arabian Monetary Authority launched a regulatory ‘sandbox’ that allows local and international financial technology firms to test new digital solutions. The regulatory authority granted seven companies looking to provide digital payment services the permission to work in the sandbox environment, along with 11 local and international banks. (Read more here).
“We’re developing deeper links with Saudi Arabia, and the relationship has been built on transparency in terms of sharing with Saudi Arabia and other jurisdictions the experiences that we’ve had whether in the regulatory sandbox or the fintech ecosystem,” Saad told Zawya.
“We’ll be looking at areas where Bahrain can be supportive of Saudi Arabia in this development and vice versa, given that at this stage our sandbox (is) relatively more developed,” he said.
“There can be a lot of alignment between Bahrain and Saudi in terms of bridging those two sandboxes,” Saad said, adding that further cross-border collaboration could be facilitated through the Global Financial Innovation Network (GFIN), of which ADGM (Abu Dhabi Global Market), DFSA (Dubai Financial Services Authority) and Bahrain are all members.
Last week, Bahrain-based cryptocurrency exchange ‘Rain’ became the first cryptocurrency exchange to graduate from the Central Bank of Bahrain’s (CBB) Regulatory Sandbox and is now in the process of applying for the relevant license. (Read more here).
“In Bahrain, the fact that there’s a single regulator gives investors an extra level of clarity when dealing with one entity, with the rules and regulations being very clear within a single jurisdiction. We need to encourage having a single regulator that governs all aspects of financial services,” Saad noted.
(Reporting by Nada Al Rifai; Editing by Michael Fahy)
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