Other articles
17 Dec 2018, Stella Zlatareva, EMIS M&A Team

Spearheaded by the UAE, GCC fintech investments make slow but steady headway

Investment in the fintech sector in GCC member states is slowly mounting but still lags behind some emerging regions such as Africa and Latin America. EMIS data shows that in the past five years less than USD 120mn were poured in fintech firms in GCC states but according to a recent study by MENA Research Partners (MRP) fintech startups are set to raise some USD 2bn in private funding in the coming ten years. The study also suggests there is a much greater shortage of private funding in the sector compared to the emerging markets average.

Though all functions of traditional banking could be prone to disruption at some point, the payments processing segment is at the most risk due to being very tech dependent. Meanwhile, the more regulated and capital intensive lending and saving operations seem safer for now. In fact, the Institute of International Finance has found that 93% of GCC banks do not believe that their business will be disrupted by fintech in the near future. There could be two sides of the story however; unlike traditional banking, fintech opens the door to financial services for millions of unbanked people in addition to lowering costs and also filling the gap in market funding for SMEs – all considered significant untapped opportunities.

According to our data, the United Arab Emirates is the top-ranking GCC country in terms of fintech investments, and for a good reason - the country is the second most prone to smartphone adoption in the world, as found by GSMA Intelligence. Another major factor is the government providing adequate regulatory environment for fintech initiatives. Lastly, the UAE has the advantage of breeding the right talent, having dedicated a fifth of its 2017 budget to the education sector and enjoying strong enrollment rates in university programmes in science, technology, engineering, mathematics, and business.

GCC is off to a good start with the UAE as a prime example to follow. Thanks to the GCC countries’ fintech accelerators and hubs, the sector is expected to keep growing. Some even see at least one regional fintech unicorn emerging in the next five years. On the other hand, regulatory challenges at some states still remain, and the start-up ecosystem is relatively young. Another setback could be unclear exit opportunities for investors. Original source: EMIS - DealWatch

RELATED ARTICLES