The Dynamic Rise of Fintech in the GCC

Financial services sector has undergone a significant transformation in the past few decades, supported by technological innovations. The disruptive power of technology in finance has given birth to the portmanteau ‘FinTech’. This innovation has reshaped the financial sector, making it more efficient and client friendly. 

The global fintech landscape is undergoing rapid and transformative growth, driven by technological advancements, changing consumer behaviors, and evolving regulatory environments. In line with global trends, fintech landscape in GCC and broader MENA region has seen steep growth in recent years. For example, fintech funding in MENA has increased by 650% between 2020 and 2023 [1]  and the Fintech market size in the GCC region rose to USD 169.92 billion in 2023 with a year-on-year growth rate of 27.8%[2].  The number of Fintech firms in Saudi Arabia has increased from 10 in 2018 to 224 as of Q2 2024.[3] 

Source: Fintech Saudi

Fintech encompasses a wide range of innovations that are redefining financial services. Some of them are,

• Digital Payments & E-Wallets: Positive consumer attitude and favorable regulatory environment have accelerated the adoption of digital payments and e-wallets. Technologies such as contactless payments and mobile banking applications have significantly enhanced transaction methods for both consumers and businesses, offering unprecedented convenience. Leading global players in this space include Apple Pay, Google Pay, and Samsung Pay. In the GCC, platforms like Careem Pay, PayBy, Telr are gaining traction, reflecting the region's embrace of digital payment solutions.
• Blockchain & Cryptocurrencies: Blockchain technology has multiple use cases in fintech spanning cryptocurrencies, payment infrastructure, investment management etc. Prominent cryptocurrencies such as Bitcoin, Ethereum, and Dogecoin are setting new standards in digital finance. As of August 2024, the global cryptocurrency market is valued at approximately USD 2.15 trillion [4]. The UAE and Bahrain have emerged as leading crypto hubs in the GCC, with progressive regulatory environments and government support fostering the digital asset ecosystem.
• Neobanks: The rise of technology in finance is reducing the reliance on traditional physical bank branches, with neobanks exemplifying this shift by offering all banking services exclusively online. Globally, Nubank leads the neobank segment with a valuation of USD 45 billion as of July 2024. In the GCC region, neobanks such as STC pay, Emirates NBD's Liv., E20 and YAP leading the way, reflecting the broader regional shift towards more efficient, accessible, and cost-effective financial solutions. 

Pillars of Fintech in the GCC

In the GCC region, growth of fintech has been driven by supportive regulation, as part of a strategic push to diversify economies away from oil dependency. This shift is further supported by favourable consumer attitude, increased smartphone penetration, robust infrastructure, and a young, educated population, creating an ideal environment for fintech innovation.

Fintech has proven vital in enhancing economic resilience during the global pandemic by facilitating digital transactions and broadening financial accessibility, which has streamlined access to essential goods and minimized cash reliance. UAE-based Tabby exemplifies this transformation with its Buy-Now-Pay-Later (BNPL) service in UAE and KSA, allowing customers to access immediate credit seamlessly integrated with payment facilities, all under the regulation of the Dubai International Financial Centre (DIFC) and Saudi Central Bank (SAMA).

Artificial Intelligence (AI) is also revolutionizing the fintech landscape in the GCC. AI-driven solutions, such as algorithmic trading and robo-advisors, are reshaping investment strategies by providing advanced tools for analyzing extensive datasets and market trends, enhancing decision-making and portfolio management. For instance, UAE-based Sarwa offers robo-advisors that help clients operate efficiently by reducing costs and minimizing risks through data-driven solutions. ADSS in the UAE provides AI-driven algorithmic trading with ADSS Insights, offering high-quality institutional trading strategies to retail investors.

In Qatar, Cwallet facilitates cross-border money transfers, allowing users to make and receive international payments smoothly, regulated by the Qatar Central Bank. Meanwhile, Beehive, also in the UAE, employs AI-driven risk assessments for peer-to-peer (P2P) lending, enabling SMEs to secure loans effectively under the Dubai Financial Services Authority (DFSA). Each of these companies highlights the diverse applications of fintech across the GCC, supported by a robust regulatory framework.

In Kuwait, the fintech landscape is marked by innovative solutions like Kiva, which focuses on facilitating microloans to underserved entrepreneurs. This platform leverages digital technology to connect borrowers with global lenders, promoting financial inclusion and supporting small businesses. Kiva operates under the oversight of the Central Bank of Kuwait, ensuring regulatory compliance and safeguarding financial transactions.

Fintech companies in the insurance industry are modernizing this sector by incorporating advanced analytics, digital tools and online platforms to offer services in an accessible and efficient manner. Beema, a digital insurance provider built by Emirates National Oil Company (ENOC) in partnership with AXA group, is the first company in the region to offer all-online and usage-based insurance provider, using technology to assess risk in a comprehensive way and to reward their customers.

Fasset, a platform specializing in digital asset trading and investment, is an example from Bahrain's fintech scene. Fasset provides a secure, compliant environment for trading cryptocurrencies and other digital assets, using advanced blockchain technology. The platform is regulated by the Central Bank of Bahrain, which oversees its operations to ensure market integrity and protect investors.
Regulatory Landscape and Market Dynamics

With favorable regulatory environment, sandboxes and fintech hubs such as DIFC Fintech Hive, ADGM Fintech Program, Fintech Saudi, Bahrain Fintech Bay (BRB) and Qatar Fintech Hub, GCC region is offering an attractive ground for fintech players.

*- Banks are banned from trading in the cryptocurrencies, but no legal penalties

** - Except for digital asset services related to token securities

Source: Various

While the Central Banks of the UAE and Bahrain have adopted a highly supportive approach towards the fintech ecosystem by allowing trading in cryptocurrencies and digital assets, the Central Bank of Oman and the Saudi Central Bank (SAMA) have taken a more cautious stance. Although they did not outright ban these assets, they restrict banks from engaging in cryptocurrency and digital asset trading. Conversely, the Central Bank of Kuwait and the Qatar Central Bank have taken a guarded approach towards cryptocurrencies due to their inherent risks, with Qatar permitting only the trading of tokenized securities under specific conditions.

In conclusion, the fintech ecosystem in the GCC presents a highly promising outlook, supported by government targets, regulatory initiatives and adoption by consumers. Saudi Arabia targets to host 525 fintech companies by 2030 and targets 70% of payments being non-cash by 2025. Investments in UAE’s fintech sector is expected to reach USD 80 billion by 2030. Measures such as regulatory standardization across GCC, broadening of investor base, facilitating skill development would accelerate growth of fintech in the region. As the GCC pursue their diversification efforts, fintech stands poised to play a crucial role in shaping its economic future, offering transformative opportunities for both investors and consumers alike.

  [1] AL Monitor/Magnitt

  [2] Data Cube Research – GCC Fintech Market Size

  [3] Fintech Saudi

  [4] Forbes https