Summary

  • UK-based fintech firm Paymentology has forayed into the Middle East by setting up its regional office in Dubai
  • MENA region’s digital payments market has reached $200 billion in 2020
  • UAE has created free economic zones in the country to ease out the business activities

Technology no doubt has made our lives easier and allowed enterprises to flourish across industries with the help of innovations in their business models. Many industries have seen changes in their operational activities, especially when it comes to the fintech sector.

Fintech firms across the world have been thriving by signing new deals, raising funds and launching several digital products. Recently, Payment technology solutions provider Paymentology has recently entered the Middle East’s US$200 billion digital payments market by setting up its regional office in Dubai.

The UK’s fintech sector has boomed over the years with the launch of several firms and many have attracted investments from various venture capitalists. Riding on the positive feedback, Shane O’Hara, chief executive officer at Paymentology, said the Middle East is a huge market and offers bigger prospects for growth in the fintech and digital payments segment.

Middle East’s fintech market at a glance

The fintech market in the Middle East is growing with an increase in the usage of smartphones, the internet and the growth of Islamic banking. According to a 2019 report by consulting firm Penser, the fintech market in the MENA (Middle East and North Africa) region will account for 8 per cent of the Middle East’s financial service sector’s revenue by 2022.

In 2018, the online payment transactions in the MENA amounted to $41.4 billion. Besides, the fintech firms in the Middle East are estimated to top 250 this year. Moreover, the MENA region has nearly 4 million unique digital shoppers, and during the last three years, the e-commerce transactions increased 1,000 per cent from $20 billion in 2017 to $200 billion in 2020, according to multiple reports.

Regulatory ease in Gulf

One of the major reasons for the development and growth of fintech firms across the GCC region, except Iraq, is relaxed regulatory norms by the governments and central banks for supporting digital banking payments.

For instance, the United Arab Emirates has one of the highest levels of regulatory norms. As per the Sharia laws, every business in the UAE needs a trade license, which was available only with 49 per cent of foreign ownership. So, to ease out the business activities, the free economic zones were created in which free trade areas were established with permits and licenses of 100 per cent foreign ownership. This encourages the investors to float companies and trade without tariffs and limitations on properties.

Also, the fintech regulators like the Dubai Financial Service Authority (DFSA) and the Financial Service Regulatory Authority (FRSA) have introduced various solutions to encourage business projects and boost the growth in UAE.

Similarly, the other countries in the region, such as Qatar and Saudi Arabia have also eased their regulatory norms to encourage business activities, especially in the fintech sector. For example, the Saudi Arabian Monetary Agency has started looking for ambitious projects in the field of fintech, while Qatar Development Bank, in partnership with Ernst & Young and Medici, announced a plan to enhance fintech development in the region.

Broader market overview

The digital transactions rose about 14 per cent from 2018 to 2019 to reach 708.5 billion globally, which is the highest in the past decade, according to the report. Global payments proceeds registered 6 per cent growth to a mammoth $1.9 trillion in 2018, as per McKinsey and Company’s Global Payments Report 2019. Europe, Africa and the Middle East represented $300 billion.

Another study conducted by LearnBonds.com indicated that the worldwide non-cash transaction market would rise to a record $4.7 trillion transaction amount this year, with a 15.3 per cent YOY growth rate. Moreover, the trend is going to continue in the coming years with the worldwide market touching $6.7 trillion by 2023.

Road Ahead

Paymentology’s business expansion to the Middle East has come at a time when there is a demand for digital money transactions in the wake of the coronavirus pandemic. The enterprises and many financial firms could be eager to shift towards online and smart payment solutions in the coming days.

It is also worth noting that there are around 300 million people under the age of 24 in the Middle East, which is a lucrative opportunity for UK fintech firms to foray into the region. At present, the MENA region has limited digital banks such as Mashreq’s Neo, Meem by Gulf International Bank, newly launched ila, powered by Bank ABC, and Emirates NBD’s Liv. All these banks run under the license of an established lender.

Taking all these in account, there is a huge growth prospect for new entrants such as Paymentology and many other UK fintech firms to tap the Middle East market. The growing financial technology sector of Britain could take advantage of the nascent market in the Middle East and invest vigorously depending on the pandemic situation.

Though in the past few years, many global fintech firms such as G-Pay, Apple Pay, Alipay and Samsung Pay have entered the Middle East market, there is much scope left for the UK fintech companies to expand their business in the region. Perhaps the government-supported economic schemes for UK fintech could be a great booster in the coming days.

 

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