This is where the financial technology sectors (Fintech for short) come in. The financial technology sector is comprised of tech startups that exist in the financial services industry. These startups are disrupting the private sector ecosystem in The Middle East. In just the past five years, fintech startups have raised over $100 million.
Fintech and The Middle East
Fintech startups aim to provide a large range of financial solutions using technology. Therefore, financial technology does not aim to replace banking systems; rather, financial technology startups aim to improve the customer experience surrounding banking and other financial services.
Often times, fintech startups address a diverse range of customer needs, whether it be educating them on the process of setting up a bank account or making investing easier to handle. While fintech startups provide differing services, one thing remains the same: fintech is using technology to make financial services more accessible to the general public.
In The Middle East, fintech startups are a new driving force to increase accessibility to the general public. With over fifty startups, fintech companies aim to foster greater financial inclusion. For example, one of the main obstacles for small business owners in The Middle East is gaining financial inclusion.
Startups, such as Ambareen Musa’s Souqalmal.com, address this need by connecting investors with small business owners. This refined database and algorithm allow small business owners to raise capital for a cheaper price while also allowing investors to gain better returns on their deals. Another fintech startup that has raised 20 million dollars in funding is PayTabs, which is an online payment processing solution that allows small businesses to add payment services to their sites.
Funding for Fintech
Funding for fintech startups is done through a combination of crowdsourcing (84 percent), allowing people with startup ideas to get funding from anywhere around the world, and government and industry support. Through crowdsourcing, startup founders can receive money faster than they would be able to from investors; as a result, their businesses can grow faster and have an impact on the public faster.
There is a 380 billion dollar market that is comprised of the world’s financially underserved consumers and businesses. Not only are there economic gains to be made through the rise of fintech but there are also large social gains. Furthermore, governments in The Middle East are contributing to the thriving fintech ecosystem by supporting regulations and initiatives such as accelerator programs.
For instance, The Bahrain Economic Development Board launched Fintech Hive in 2017, a fintech startup accelerator that funds and provides instrumental resources for fintech startups. Banks in The Middle East, particularly the UAE, have also started to adopt some of the digital solutions put forth by fintech startups.
With the public sectors of the government working together with the private sectors in the fintech industry, there is a powerful combination of forces working together to foster greater financial inclusion to those in The Middle East.
– Shefali Kumar