Fintech in GCC

19/02/2017 | by Murtaza Pattherwala


Fintech is yet to find its feet in the GCC, despite several digital transformation drives initiated by the regional governments. In the west, the governments play the role of a facilitator in terms of policy and regulation, and in providing the right environment for innovation to flourish, leaving it to the private sector to come up with modernized solutions. However, in the GCC, with the regulations lagging behind in most sectors and private sector wary of joining in, the governments play a more central role in fostering innovation.

Despite this, Fintech has permeated across the region, in peer-to-peer lending (Beehive), crowdfunding (Eureeca, Aflamnah, and Durise), payment solutions (CashU, Payfort, Telr, PayTabs), insurance (compareit4me, Democrance) and online/mobile banking and online trading.

PayPal MENA is now spread across the Middle East, focusing on growing e-commerce markets, such as the UAE, Qatar, and Saudi Arabia. PayFort tailored its payment system to take into consideration the lack of credit card ownership in various markets, while Telr has modelled itself as a payment gateway that is not only multi-lingual, but also multi-currency, offering online payments solutions for merchants across social media channels and other websites. Funded by Saudi Aramco’s Wa’ed program, PayTabs has also entered the payment solution race in the region, and has an e-Commerce API plugin that can easily be integrated on any website.

Fintech could potentially increase the reach of Islamic financial services, and provide more choices that suit individual needs at competitive cost

GCC’s first crowdfunding platform, UAE-based Aflamnah, allows individuals from the Middle East region to raise funds for fresh ideas in films, games, television, art, music, etc. Another UAE platform, Eureeca calls itself a crowd-investing arena, as it allows interested investors to view profiles of available projects to invest. In return, the investors will gain shares in the businesses, in which they make their investments.

Compareit4me.com launched an endto-end car insurance comparison platform that allows users to compare instant car insurance quote and buy online; a first in the MENA region. The new product has already generated more than 20,000 quotes, and sold more than 600 car insurance policies. Democrance plans to disrupt the insurance market by collaborating with insurance companies and mobile operators, to make insurance affordable and accessible to the people who need it the most. It distributes, administers and services insurance policies only through the mobile phone, which results in considerable cost savings. Finerd, an automated investment and wealth management company, is expected to unveil their much-awaited Sharia- compliant products sometime in 2016.

According to Marmore’s report on ‘Fintech in GCC’, one of the biggest potential impacts of Fintech will be on Islamic finance. Fintech could potentially increase the reach of Islamic financial services, and provide more choices that suit individual needs at competitive cost. SMEs that find it hard to obtain sharia-compliant bank funding from Islamic Financial Institutions (IFIs) could look to Fintech firms to fill that gap. Beehive is a Dubai-based sharia compliant P2P lender, and is the UAE’s first online marketplace for lenders and borrowers. It caters low cost finance to SMEs, while providing investors a direct access to alternative asset classes that can generate higher returns in an environment, where risks are shared.

The GCC has a large, youthful retail customer base that is receptive to new and disruptive financial technologies, as evidenced by the increasing penetration of e-commerce and online payment systems. The region already has a strong foundation in the financial services sector, and a quicker adoption of Fintech would solidify its position as a financial hub.

This article is published in "Engage Q4, 2016" - click to view the publication