The GCC fintech landscape is poised for significant growth, driven by various factors. With favourable regulations, a talent pool and ample financial resources, the region offers an ideal environment for fintech innovation. However, to sustain and accelerate this growth, it is essential to identify and harness the key drivers that will propel the sector forward. This article explores three core factors that can drive the continued expansion of fintech in the GCC: collaboration with banks, partnerships with other technology sectors and strategic international expansion.
Working with banks
Historically, there existed a competitive dynamic between banks and fintechs within the GCC region. Banks often sought to replicate the innovative solutions that fintechs were developing internally. However, in recent times, the relationship between these two sectors has evolved into a more symbiotic collaboration.
Fintechs are increasingly recognised by banks as agile solution providers capable of addressing the specific needs of millennials and the underbanked population. They demonstrate particular expertise in areas such as customer experience, and banks can benefit from partnering with fintechs to leverage their innovations.
Partnerships between banks and fintech have become increasingly prevalent, with white labelling emerging as a more widely accepted solution by banks. They recognise that working with fintech offers a faster and more efficient route to launching new products and services. While both fintechs and banks have historically had the potential to flourish independently, they now increasingly acknowledge the merit of symbiotic relationships in fostering mutual growth.
Partnership with other ‘techs’
Globally, there is a growing trend among millennial consumers to adopt Wealthtech and Insurtech solutions for savings, investments, budgeting, and insurance needs. These digital wealth and savings solutions are experiencing significant uptake and rapid adoption, which presents significant opportunities for fintechs, from payment facilitation to beyond. In the GCC, for example, companies like Najm, Al Rajhi Takaful, Rasan, Yallacompare, Souqalmal and Bayzat are some of the companies leading the way in the Insurtech sector.
India is a good example of this trend, with platforms such as Groww, Zerodha, Angelone and Upstox outperforming traditional bank-led securities firms. With the increasing prevalence of smartphones, a new generation of traders is leveraging these tech-driven platforms to execute their trades on exchanges. 17
In addition, fintechs are leveraging AI to enhance Wealthtech risk assessment and investment strategies. Our research indicates that approximately 20% of fintechs operating in the GGC are in the Wealthtech space. In the UAE, Lunate, an Abu Dhabi-based independent global alternative investment management firm, along with BNY Mellon, invested over $50 billion in Alpheya, a new wealth technology company based in ADGM. Alpheya provides a comprehensive suite of cloud-native, AI-powered wealth tech solutions to simplify wealth management and deliver unique experiences, insights, and new business opportunities for wealth and asset managers in the Middle East and North Africa.
GCC wealth platforms such as Baraka, Sarwa, Thndr 19 are also some of the most recognised Wealthtech companies. They offer low costs (nil or low broker fees), low unit investments, fractional share ownership, Robo-advisory services and access to crypto and Sharia-compliant savings solutions. These platforms offer a convenient user experience like digital onboarding and digital know your customer (KYC)– all targeting millennials.
GCC banks are increasingly either white-labelling or buying into pure-play fintechs, e.g., Beehive (Ahlibank Oman) and Saxo Bank (ENBD), for Savings and Wealthtech solutions, which addresses the anticipated shift in wealth management preference from Gen X to millennials.
Additionally, Regtechs are developing predictive models to raise potential red flags for anti-money laundering (AML) compliance. Regtechs are also partners for growth, as we expect these companies to be key contributors to fintech’s operational success by reducing friction, including by supporting AML and KYC processes.
International expansion
One of the challenges facing fintechs in the GCC is the relatively compact size of local markets. Our research indicates that fintechs are actively collaborating cross-border, and internation expansion remains a key growth priority. Although the addressable market in a single country may be small, the aggregate GDP is substantial.
Within the GCC region, Saudi Arabia (KSA) and the UAE have emerged as the major target markets for fintech expansion. This can be attributed to their advanced regulatory frameworks, tax incentives, and funding support for fintech from other GCC and Levant countries. Saudi Arabia’s substantial market size further enhances its attractiveness. Our survey found that 90% of fintechs in the region (excluding the UAE and KSA) are exploring both UAE and KSA as their next expansion markets in the next two years.
However, the pursuit of cross-border operations exposes fintechs to a complex landscape of varying regulations and requirements across different countries, which could potentially hinder success due to differences in areas such as licensing, bank relationship and compliance management across countries.
Despite the allure of larger markets, many startups initially test their products in smaller markets due to their familiarity with these regions and founder origins. Founders from the GCC, in particular, often prefer to initially expand within the GCC, driven by the shared language and culture and similar consumer preferences and behaviours, which allows for scalable growth without additional complexity.
The GCC fintech sector is at a pivotal juncture with significant potential for growth. By fostering collaboration with banks, partnering with other technology sectors and expanding internationally, fintechs can capitalise on the region’s unique advantages. As the industry continues to evolve, these three engines will play a crucial role in driving innovation, enhancing financial inclusion, and solidifying the GCC’s position as a global fintech hub.
