November 15, 2017
The Middle East Fintech Boom
Fintech is the next entrepreneurial gold rush. As capital begins to dwindle away from older industries such as oil and gas, investors will look for nascent opportunities. The Embassy of United Arab Emirates (UAE) established itself as an economic powerhouse through oil exports. While oil exports still account for 30% of the Arab nation’s GDP, its business-friendly policies and openness to trade give rise to innovation and a burgeoning Fintech industry.
What is Fintech?
Financial technology, or the industry colloquially known as Fintech, applies current technologies to create efficiencies and opportunities in financial services. Some of the technologies companies in the Fintech space leverage include blockchain, artificial intelligence, cryptocurrencies and chatbots. Just how big is Fintech? Entrepreneur reports over 19 startups in the Fintech space are currently valued at over $1 billion each. Companies of this stature are also known as unicorn startups.
The main drivers behind Fintech are transparency, opportunity and efficiency. In turn, the industry is lowering barriers to entry for new investors globally. Wall Street is no longer reserved for Harvard Business School graduates and Silicon Valley doesn’t solely cater to VC firms. Fintech consequently also opens opportunity for ground-level entrepreneurs seeking capital at all levels.
Fintech in the Middle East
Entrepreneur reports that the UAE, Jordan and other Arab nations look to Fintech as one of the primary industries leading the region into the knowledge economy. Middle East Fintech startups are taking over four major arenas: Crowdfunding, wealth management, payment solutions and retail financial services.
Crowdfunding allows for businesses and individuals to raise capital in non-traditional, but compliant methods. The Middle East is still heavily regulated and peer to peer lending is still in its infancy. Jordan-based startup, Liwwa closed $2.3 million in funding this year to help small and mid-sized businesses access credit through technological assessment rather than traditional loan processes. Greater potential for knowledge-based economic growth in the region will be fueled by investment access created by companies like Liwwa.
Payment solutions currently shows the greatest potential for Middle Eastern Fintech companies. Payfort, a Dubai-based electronic payment company owned by Amazon, opened up an accelerator devoted to Fintech known as the Fintech Factory. The accelerator kick-started five regional Fintech startups this year. Several of these companies provide centralized platforms for consumers to pay their bills through their bank accounts in one location.
The next major forefront for Fintech in the Middle East is ecommerce. As ecommerce soars in other markets, Middle Eastern regulatory bodies must modernize to enable this sector to thrive and allow entrepreneurs to break into the space.