Saxo Markets: UAE poised to be the Gulf fintech capital
Saxo Markets has urged regional banks and finance institutions to collaborate in order to unlock the vast potential of the GCC’s burgeoning fintech industry.
The rise of the digital economy has catapulted the GCC into a position of significant market opportunity that serves as an emerging market advantage for the development of a flourishing fintech ecosystem. With the UAE and Saudi Arabia leading the way, the region has some of the world’s highest rates of mobile and internet penetration, with a large proportion of the total population aged between 15 and 25. Together with the region’s cosmopolitan business environment, government support and access to global capital and financial expertise, the region is well-placed to embrace fintech solutions and service adoption across the marketplace.
“The Gulf’s myriad of finance sector players must work together to capitalise on the region’s optimum market conditions and reshape and improve client experience. Globally we are in the second wave of fintech and people have realised that you cannot own the whole value chain. Today there is a more sophisticated understanding that traditional financial organisations need to combine their significant regulatory expertise, capital and relationships with fintech innovators and partners,” said Jennifer Hansen, Global Head of Sales, Strategy & Execution at Saxo Markets, the institutional division of Saxo Bank Group.
Every ambitious GCC financial centre has started banging the fintech drum. However, the GCC fintech ecosystem remains less developed than in other international markets. This year saw the launch of Dubai International Financial Centre’s (DIFC) 'FinTech Hive at DIFC’–the region’s first fintech accelerator designed to empower entrepreneurs to innovate and meet market needs. The initiative follows the Abu Dhabi Global Market (ADGM) international financial centre free zone declaring its intention to be the fintech capital of the Gulf region and putting in place a special regulatory regime to allow it to become the Gulf’s incubator for fintech businesses. Other ambitious regional initiatives include The Central Bank of Bahrain’s recent announcement that it is considering introducing regulations on fintech and Saudi Arabia’s promise to put fintech at the heart of the King Abdullah Financial District currently under construction in Riyadh.
Speaking at the 2017 Annual Investment Meeting in Dubai, Hansen commented on the GCC’s fintech climate, "While GCC countries are making moves towards capitalising on fintech potential, the fragmented approach of the GCC financial markets could delay the way to a sharing, experience–based economy in the financial eco-system in the region. The Gulf needs to have the same ease of doing business across borders as firms in other geographies enjoy while owning fewer of the assets that deliver the value.”
Hansen also said that becoming open to new forms of collaboration is an important part of banks re-evaluating their production processes, supply chains and skill sets in the interests of enhancing the user experience while owning less of the assets that deliver value.
In the current climate of struggling oil prices, economic growth slowdown, reduced government spending, liquidity pressures and low interest rates affecting profits, banks will need to reduce costs and better position themselves in their respective markets – and this direction towards consolidation could be the ideal solution, according to Hansen.
“At Saxo we believe that collaboration amongst fin and tech is the most effective way to gain competitive edge in providing financial services solutions,” she added. “Banks’ strategies will be led by their perception of future value creation as the consumers of their services become more digitally savvy. If they have the metrics in place to identify growth in revenues, transaction volumes and client interactions through new channels versus traditional branches or networks, they will look to partner with firms that can further help them refine their digital transformation programmes.”
At present, and increasingly in the future, those financial services organisations that embrace collaboration will succeed, those which do not will dwindle and be left behind. Therefore, the challenge is to achieve the necessary level of coordination to make the financial ecosystem work. If the region can rise to this challenge, the rewards for the financial and fintech industries, and broader regional economy could be significant.