Trends related to financial services sector for the Middle East

Predictions for the trends that will shape the Middle East's financial sector in 2022

FREMONT, CA: Payments have stimulated the interest of banking incumbents, Fintech disruptors, and central banks alike. This is due to a number of causes, the first of which being the superior economics and Return on Capital Employed of Payments (ROCE). Second, payments are a route to full banking relationships that Disruptors aim to utilize as an anchor to attack Incumbents, while Incumbents want to deflect. STC Pay and UrPay (by Al Rajhi Bank) in Saudi Arabia are good instances of how this competition is playing out. Third, payments are a critical component of improved government services and regulatory oversight. For example, through project Aber, the UAE and Saudi Arabia are collaborating on crypto-currency and distributed ledger technology, which has the potential to change interbank transactions and reserve management.

A rise in cryptocurrency utilization can also be noticed, as well as a greater focus on Central Bank Digital Currencies (CBDCs) and broader blockchain applications. Binance, a worldwide cryptocurrency exchange, and Dubai World Trade Center signed a Memorandum of Understanding in December 2021 to expand the UAE's broader virtual asset ecosystem; Binance was also granted in-principle clearance as a Crypto-Asset Provider in Bahrain. The financial services business is undergoing a rapid transformation. Further digitalization of financial services across banking, insurance, and asset management can be seen along with assisting major banks and insurers on their path to BAAS (Banking As a Service) and ecosystem building.

Multiple alliances are forming financial ecosystems, such as Stripe's entry into the UAE market in 2021, when 13,000 merchants expressed interest in joining their platform for payments and related services. In most markets, they are also seeing consolidation through large mergers such as Samba-NCB, ADCB-UNB-Hilal, SABB-Al Awal, and so on and restructuring in most markets. Rapid financial service modularization has been disrupted by new entrant FinTechs, such as Tamara, a Buy Now Pay Later (BNPL) start-up that recently raised a record USD 110 million in funding. In the Kingdom of Saudi Arabia, a Series A round demonstrates the need for incumbents to integrate and co-exist with existing FinTechs.