Fintech in the GCC is rapidly evolving, offering innovative solutions that drive financial inclusion and enhance digital banking services across the region.
Technological innovations have made remarkable changes in The financial services sector over the past few decades. The rise of technology in finance has created the term “FinTech,” which represents the combination of finance and technology. Financial services have been revolutionized by this innovation. It makes them faster, more efficient, and more customer-focused.
Around the world, the fintech industry is growing at an incredible pace. Technological advances, shifts in consumer expectations, and new government regulations fuel this growth. In line with global trends, the fintech sector in the GCC and the wider MENA region has experienced rapid expansion in recent years.
For example, fintech investments in the MENA region grew by 650% between 2020 and 2023. The GCC fintech market grew by 27.8% annually from 2016 to 2023, reaching $169.92 billion. Saudi Arabia, in particular, has seen significant growth in this sector. The number of fintech companies in the country increased from just 10 in 2018 to 224 by the second quarter of 2024.
This remarkable progress highlights how technology is reshaping financial services in the region, creating opportunities for innovation and economic growth. Fintech is changing the way financial services are delivered and setting the stage for a more accessible and efficient financial system in the GCC.
Fintech includes many innovations that are changing the way financial services work. Some examples are:
Digital Payments & E-Wallets: The rapid growth of online payments and e-wallets is due to positive customer attitudes. It also support regulations. Mobile banking apps have made contactless payments easier, simplifying transactions for individuals and businesses. Major platforms like Apple Pay and Google Pay have supported these changes, and Samsung Pay has also contributed to these changes. In the GCC, services like PayBy, Careem Pay, and Tarabut have gained popularity, reflecting a shift towards digital payment solutions in the region.
Blockchain & Cryptocurrencies: Blockchain technology has various applications in fintech, including cryptocurrencies, payment infrastructure, and investment management. Prominent cryptocurrencies like Bitcoin, Ethereum, and Dogecoin are setting new benchmarks in digital finance. As of August 2024, the global cryptocurrency market is valued at approximately $2.15 trillion. The UAE and Bahrain have emerged as key crypto hubs in the GCC, supported by progressive regulatory frameworks and government initiatives fostering the growth of the digital asset ecosystem.
Neobanks: The growing use of technology in finance is reducing the need for traditional bank branches, with Neobanks leading this change by providing all banking services entirely online. Globally, Nubank is a leader in the neobank sector, valued at $45 billion as of July 2024. In the GCC region, neobanks like STC Pay, Emirates NBD’s Liv., E20, and YAP are at the forefront, showcasing the region’s move towards more efficient, accessible, and affordable financial services.
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Pillars of Fintech in the GCC
| Opportunities | Challenges |
|---|---|
| Government Support for Economic Diversification | Diverse Regulatory Frameworks |
| Rapid Digitalization | Access to Capital |
| Youthful, Tech-Savvy Population | Talent Development |
In the GCC region, the growth of fintech is primarily driven by supportive regulations aimed at reducing reliance on oil-based economies. This progress is further boosted by positive consumer attitudes, widespread smartphone use, strong infrastructure, and a young, educated population, making it a perfect environment for fintech innovation.
Fintech played a crucial role in strengthening economic resilience during the global pandemic by enabling digital transactions and expanding access to financial services, making it easier for people to get essential goods and reducing the need for cash. UAE-based Tabby is an excellent example of this change, offering its Buy-Now-Pay-Later (BNPL) service in the UAE and KSA. This service lets customers access instant credit, which is smoothly integrated with payment options and is regulated by the Dubai International Financial Centre (DIFC) and the Saudi Central Bank (SAMA).
Artificial Intelligence (AI) is also transforming the fintech industry in the GCC. AI-powered tools like algorithmic trading and robo-advisors are changing investment approaches by offering advanced methods to analyze large amounts of data and market trends, improving decision-making and portfolio management.
For example, UAE-based Sarwa provides robo-advisors that help clients manage their investments more efficiently, cutting costs and reducing risks with data-driven solutions. ADSS in the UAE offers AI-based algorithmic trading through ADSS Insights, delivering high-quality institutional trading strategies to retail investors.
In Qatar, Cwallet makes sending and receiving international payments easy, ensuring smooth cross-border transfers, all regulated by the Qatar Central Bank. Meanwhile, Beehive, based in the UAE, uses AI-based risk assessments for peer-to-peer (P2P) lending, helping small and medium-sized enterprises (SMEs) secure loans effectively under the supervision of the Dubai Financial Services Authority (DFSA). These companies showcase the various ways fintech is being used across the GCC, all supported by a strong regulatory framework.
In Kuwait, the fintech industry includes innovative solutions like Hewa, which provides microloans to entrepreneurs who don’t have access to traditional banking services. The platform uses digital technology to connect borrowers with lenders globally, promoting financial inclusion and supporting small businesses.
Kiva operates under the oversight of the Central Bank of Kuwait, ensuring it complies with regulations and secures financial transactions.
Fintech companies are transforming the insurance industry by using advanced analytics, digital tools, and online platforms to make services more accessible and efficient. Beema, a digital insurance provider created by Emirates National Oil Company (ENOC) in partnership with AXA group, is the first in the region to offer fully online, usage-based insurance. It uses technology to assess risk thoroughly and rewards customers for safe behavior.
Fasset, a platform focused on digital asset trading and investment, is a key player in Bahrain’s fintech sector. It provides a regulated and secure environment for trading cryptocurrencies and other digital assets using advanced blockchain technology. The Central Bank of Bahrain oversees the platform, ensuring its operations maintain market integrity and protect investors.
Regulatory Landscape and Market Dynamics
With supportive regulations, sandboxes, and fintech hubs like DIFC Fintech Hive, ADGM Fintech Program, Fintech Saudi, Bahrain Fintech Bay (BRB), and Qatar Fintech Hub, the GCC region provides an appealing environment for fintech companies.
Legal Framework for Fintech Ecosystems in the GCC
| Category | UAE | Saudi | Kuwait | Qatar | Oman | Bahrain |
|---|---|---|---|---|---|---|
| Central Bank-backed Digital Currency | Permitted | Permitted | Inactive | Permitted | Permitted | Permitted |
| Cryptocurrencies | Permitted | Restricted | Banned | Banned | Restricted | Permitted |
| Neobanks | Permitted | Permitted | Permitted | Evolving | Evolving | Permitted |
| Digital Insurance | Permitted | Permitted | Permitted | Permitted | Permitted | Permitted |
| Virtual Assets | Permitted | Evolving | Banned | Banned | Evolving | Permitted |
Note:
- Restricted: Limited usage or conditional approval.
- Banned: Strictly prohibited under local regulations.
- All GCC countries have strict rules against ‘Money Laundering’ and ‘Terrorism Financing’.
Banks are prohibited from trading cryptocurrencies, but no legal penalties exist.
This does not apply to digital asset services related to tokenized securities.
While the Central Banks of the UAE and Bahrain have supported the fintech ecosystem by allowing cryptocurrency and digital asset trading, the Central Bank of Oman and the Saudi Central Bank (SAMA) have taken a more cautious approach.
They prevent involvement in cryptocurrency and digital asset trading. On the other hand, the Central Bank of Kuwait and the Qatar Central Bank have adopted a cautious stance towards cryptocurrencies due to their risks. At the same time, Qatar allows only the trading of tokenized securities under specific conditions.
Conclusion
In conclusion, the fintech sector in the GCC shows a very positive future, supported by government goals, regulatory efforts, and consumer adoption. Saudi Arabia plans to host 525 fintech companies by 2030, aiming for 70% of payments to be non-cash by 2025. Investments in the UAE’s fintech sector are expected to reach $80 billion by 2030.
By establishing quality standards, expanding the investor base, and supporting skill development, these measures will accelerate the growth of fintech in the region. As the GCC continues to pursue its ambitious plans, fintech will play a crucial role in shaping the economic future of the region, creating valuable opportunities for both investors and consumers.