The advancement of FinTech in the Middle East

7 min readMay 23, 2020

Technological innovation and great infrastructure are now peculiar aspects of an emerging region like the Middle East. Big tech companies’ expansion and the correlated increasing need of the population for mobile banking services are making the pursuit of modernization unstoppable.

Moreover, the FinTech advancement in all the countries has been different, creating a various and fragmented landscape. The common target of the majority is to reduce cash transactions, in favor of digital payments. In any case, mediation by authorities is necessary for a payment ecosystem where a relevant portion of the population is unbanked.

Regulation
The development of fintech startups in the Gulf Cooperation Council (a regional intergovernmental political and economic union consisting of all Arab states of the Persian Gulf except Iraq) has been implemented thanks to the contributions of technological breakthroughs, the widespread of smartphone usage and Governments and Central Banks support.

Local authorities intervened in several fields through legislation to find solutions to some issues related to the Middle East framework and to cut down risks. The main aim is to guarantee cybersecurity, protection of data and confidence in transactions.

UAE
Among the different countries, the United Arab Emirates stands out as the one with the highest level of regulatory activity. Specifically, as regards the legal system, according to the Shari’a laws, all the businesses required a trade license, which was available only with 49% of foreign ownership. To contrast this restriction, financial free zones were created. These are free trade areas that grant licenses with 100% of foreign ownership so that investors can set up firms and trade without taxation and limitations on properties.

FinTech regulators such as the Dubai Financial Service Authority (DFSA) and the Financial Service Regulatory Authority (FRSA) launched different solutions to promote business initiatives and support the growth in UAE.

In 2017, DFSA created an Innovation Testing License that is a sandbox where FinTech startups can test their concepts. In particular, a lot of firms applied to the initiatives and offered a wide range of products: green financing, robo-advisors, SME funding platforms, tokenization of equity and debt issuance.

In a similar way, FSRA offers the RegLab sandbox: a transparent and reliable environment where banks and financial services providers can test their innovative solutions without being subjected to all the traditional regulatory requirements. Then, they are graduated as licensed ones in Abu Dhabi Global Market (ADGM).

FRSA also elaborated on a regulatory environment for crypto-assets to increase market confidence and attract more intermediate: in particular the electronic KYC (e-KYC) plan was created to help financial institutions to satisfy regulatory requirements through the usage of technology, such as blockchain and Artificial Intelligence.

A common problem for SMEs is to be rejected from conventional banks when they need sources of financing. Thus, DFSA proposes alternative lending solutions to support them. The authority launched a regulatory framework for loan and investment-based crowdfunding. This way the certainty of the protection of rights and obligation of all the parties is guaranteed during every crowdfunding activity. The regulation has been extended also on P2P-lending platforms.

QATAR
The regulatory and supervisory activities from local authorities are ready to be implemented in 2020. Qatar Development Bank, in collaboration with Ernst & Young and Medici announced last April an articulated plan to boost fintech growth in the region.

The program deals with the launching of an incubator for early-stage startups and an accelerator for mature FinTech firms. These initiatives consist of 12-week incubation or acceleration journey where enterprises will be provided of the support necessary for the establishment of their business both locally and internationally.

The crucial areas involved in the measure will be payment solutions, SMEs support and regulatory technology: key aspects for the building of an appropriate FinTech Hub. Qatar will achieve its goals thanks also to the support from different actors. A team of international mentors will give its assistance on the financial and regulatory levels. Strategic stakeholders belonging to the most developed foreign hubs (UK, Singapore, Sweden…), such as financial institutions, technology providers, payment networks, academia and regulators, will collaborate with Qatar.

Saudi Arabia
Due to its economic and demographic features, Saudi Arabia has the potential to become a relevant Hub in the global FinTech ecosystem. In fact, the young and smartphone-endowed population is inclined to changes.

Furthermore, the Saudi Arabian Monetary Agency, conscious of the necessity of development has started looking for ambitious initiatives. The investments in the fintech field will be carried out by the usage of the Public Investment Fund, which has been a vehicle for important past investments in Softbank, SoFi and PayTM.

The ambitious project is mainly addressed to small and medium businesses so that the SMEs Authority will undertake business-friendly regulations, easier access to funding, international partnerships and a greater share of national procurement and government bids.
Lastly, the completion of the King Abdullah Financial District and the expected creation of regulatory sandboxes will promote evolution.

Startups
Inhomogeneities in fintech expansion and the difference in Governments’ policies have created consequently diversity in innovation opportunities. In some countries, fertile soil has been already built in the past years to stimulate growth and several firms have taken advantage of this. Other nations are engaging to take over the primate. In any case, here are three of the 20 top fintech companies according to Forbes Middle East.

PayTabs
It was born in 2014 in Saudi Arabia and it operates in the online payment sector. It has revolutionized the e-commerce world and private transactions by furnishing a secure, fast and international payment method. Indeed, the platform brings together 168 different currencies and ensures transparency in pricing and anti-fraud protection through the 3D secure protocol and in-house service. Moreover, it offers safeguard of sensitive data and flexibility through tokenization and automated systems.

Bayzat
It was established in 2014 in the UAE and it provides online Health Insurance and HR solutions. About the first activity, the firm takes care of its clients furnishing online medical claim services and employing the OCR (Optical Character Recognition) technology to extract information from users’ documents and elaborate insurance certificates. As regards human resourcing activity, Bayzat designed an online platform where SMEs can manage the HR administration through Artificial Intelligence.

Beehive
Since 2014, the startup acts in UAE and it is regulated by DFSA. The platform furnishes P2P lending solutions focusing on SMEs. It connects new businesses and crowds of investors eliminating costs and streamlining the funding process to guarantee more efficiency. This way, loans are more affordable for small-sized companies.

Qpay
It is Qatar’s largest financial technology services network, created to support SMEs. It brings customizable fintech tools to entrepreneurs, ensuring high quality and low cost. Particularly, the firm offers POS solutions that track cash payments, reporting sales anytime. Also, the WPS Compliant Payroll allows the transfer of salaries in 60 seconds and it is perfectly compatible with an IBAN Salary card for employees. Finally, Qpay supports e-commerce companies, providing payment gateway to clients and daily sales reports.

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