Nicholas Wright, Head of Institutional Sales, Saxo Bank
Enabling financial inclusion and accessibility is a cornerstone in empowering individuals and businesses, providing them with the tools to engage in the economy and cultivate wealth actively. This imperative is particularly pronounced in the MENA region, where financial technology, or FinTech, has emerged as a potent and transformative force. In its essence, FinTech leverages technology to transform the delivery of financial services, making them more accessible, efficient, and often more cost-effective. This paradigm shift in financial service delivery is instrumental in reaching demographics historically underserved by traditional banking systems.
In the MENA region, where diverse populations and varied economic landscapes exist, FinTech catalyses bridging gaps in financial inclusivity. Through innovative digital solutions, FinTech not only breaks down geographical barriers but also addresses the challenges faced by individuals and businesses that might be excluded from mainstream financial services. The goal is to create a financial ecosystem that transcends conventional limitations, ensuring that a broader society can participate actively and equitably in economic activities.
Fintech Landscape in MENA:
Firstly, the MENA region has a very high adoption of digital technology. The mobile phone penetration as a percentage of the population is amongst the highest in the world. Secondly, it has quite a high level of exclusion in the financial system, especially for investment and wealth services. Whether you were looking to trade products, invest in products, or get advice on your portfolio, these were only available to the market’s ultra-high net worth and high net worth sectors. Generally, it is middle-aged to older, so the boomers and possibly the Gen Zs.
Fintech, being more accessible, acts as an enabler providing services at low cost, thereby promoting financial inclusion and accessibility. It has taken various forms, from mobile banking and digital wallets to peer-to-peer lending platforms, trading and investment platforms and blockchain-based services. These solutions are making a significant impact by enabling access to financial services for a larger population segment, streamlining payment processes, enhancing financial literacy, and offering more personalised financial products.
Partnerships between established banks and fintech startups have been vital to bridging the gap between traditional banking and innovative financial solutions. These collaborations are crucial in ensuring that the reliability and trust in conventional banking blend with the efficiency and innovation of modern Fintech, providing a comprehensive financial ecosystem that caters to diverse needs.
Overcoming Challenges:
Despite its rapid growth, Fintech in the MENA region faces several challenges. Regulatory hurdles, technological infrastructure, and varying degrees of financial literacy are significant barriers. Moreover, there’s a need to build trust among users around new financial technologies.
Addressing these challenges requires a collaborative approach involving governments, financial institutions, and fintech firms. Regulatory frameworks are evolving to accommodate new technologies better while ensuring consumer protection. MENA regulator’s focus is on leapfrogging past Old Western Financial Centres to be the financial centre of the future.
Education has been a challenge for financial inclusion. However, it may not be a challenge but an opportunity for Fintech to make a big difference. So, Fintech is taking off and can take off in the MENA region.
Success Stories:
Government initiatives in the GCC want to encourage innovation to emerge as progressive financial centres that will drive their economies in the future. For example, the UAE and Saudi Arabia aim to challenge other financial centres to be Fintech hubs. They have created hubs for Fintech. Sandboxes, where they’ve offered monetary incentives to numerous fintechs to come and set up, get sponsorship, and hopefully thrive.
The MENA region has witnessed several success stories where Fintech has significantly influenced financial empowerment. For example, payment and remittance services have revolutionised how individuals and businesses transact, fostering greater economic participation. Fintech initiatives focusing on microfinancing and small and medium-sized enterprises’ (SMEs’) financing have enabled many to access credit and grow. Additionally, we have seen a surge in start-up digital wealth firms providing services for the mass affluent.
These success stories demonstrate Fintech’s transformative potential and serve as models for other regions looking to enhance financial inclusion through technology.
Outlook:
The future of Fintech in the MENA region is promising, with continuous innovation poised to enhance financial inclusion further. The region expects emerging technologies like artificial intelligence, blockchain, and the Internet of Things (IoT) to play a pivotal role in this evolution. As these technologies mature, they promise to make financial services more personalised, secure, and inclusive.
The ongoing collaboration between governments, financial institutions, and fintech firms will foster an environment conducive to innovation and growth. By continuing to focus on customer needs and leveraging technology, Fintech can significantly contribute to economic empowerment and development across the MENA region.
Conclusion:
Fintech has already made considerable strides in advancing financial inclusion and empowerment in the MENA region. Offering innovative solutions to traditional financial challenges represents a significant opportunity for economic growth and personal financial empowerment. These financial innovations open doors for individuals to move from conventional systems, such as Fixed Deposits and mutual funds, to take matters into their own hands with Forex platforms, commodity trading, stock and bonds, and more, as these apps help them grasp more information than ever.
As the region continues to embrace these technologies, the full potential of Fintech in fostering an inclusive and accessible financial ecosystem is immense. The ongoing journey of financial technology is reshaping economies and transforming lives, enabling a future where economic empowerment is accessible to all.
