Home GCC The growth of the fintech sector in the Middle East Moving towards more homogenised regional frameworks can catalyse a wave of new fintechs to scale globally, opines Oliver Obitayo, CEO of IDnow Middle East by Gulf Business March 3, 2022 How do you see the growth of the fintech sector in the Middle East region? The growth of the fintech sector is driven by both regulation and innovation. Regulators have traditionally operated on a state or national remit rather than the regional focus. Moving towards more homogenised regional frameworks and applying international standards can catalyse a wave of new fintechs to scale across not just their home territory but regionally and even globally. State-run sandbox programmes are also essential for pre-startup, helping to incubate ideas and provide camaraderie among fellow innovators to support growth. When it comes to innovation of financial services, this is also occurring at the enterprise level, where brick-and-mortar banks and institutions are moving into digitalised models. They are even forming their own fintechs, often operated under a different brand. So far, competition has driven attitudes rather than collaboration – the ambition of big banks to not fall behind agile startups has spurred incumbent organisations to level up their digital processes. There is a mobilisation towards more efficient operating methods, including faster and more convenient ways of identity verification to speed up onboarding and conversion, prevent fraud and, of course, be compliant to changing/new regulatory requirements. When it comes to fintechs, they are learning from the existing banks and using those lessons to shape the future and do things differently. While big banks have the strength of scale and large customer databases, startups benefit from being able to create digital-first infrastructure without overhanging legacy systems. Fintechs are also taking advantage of an appetite for investment in the region. The recent example of Rain Financial’s $110m Series B round underlines this point. What are the regulatory risks every fintech company should have on their radar? Every GCC state has different regulatory requirements, so fintechs need to balance their growth plans with the rules of operating in each jurisdiction. To achieve sustainable growth, they must take on the right amount of regulatory risk and balance their expansion with compliance.Having the right technology in place that can be deployed seamlessly in any country is vital for the fintech scale. With secure, compliant and seamless identity verification steps, robust onboarding processes help reduce the risk of fraud and protect businesses from money laundering activities. Data residency laws and data privacy are fundamental for all businesses to follow. For fintechs, it’s crucial to ensure the right kind of licencing for specific activities, which might include proving business maturity, auditing and hitting milestones/targets, before graduating to more comprehensive licencing and advanced activities. Government regulations must keep up with them to stimulate ecosystem growth. With the cryptocurrency industry expanding, regulations are becoming a challenge. So, how can customers stay ahead of a fast-changing industry regulation? It’s essential for cryptocurrency organisations to select the right partner so that there isn’t any disruption or lag time in reacting to changes in regulation. Our technology and experience help support fi rms through growth and can identify investors. The big challenge for cryptocurrency and NFTs is trust. Customers are wary because of online scams – take the recent example of Logan Paul and the purchase of fake Pokémon cards.Scammers can take the upper hand without proper digital identity verifi cation and flagging of fraudulent activity. In the same way for cryptocurrencies, being able to identify fraudulent operators before transactions take place is essential in moving crypto from trending to being trusted, mainstream and full of opportunities.Compliance and verification are a big part of this. While each jurisdiction decides regulation, businesses can use more robust processes of verifi cation to their advantage to build trust in their communities and differentiate from challengers. Taken from GB Invest February 2022 edition Tags Fintech 0 Comments Share Tweet Share Share You might also like Crypto exchange Coinbase weighs UAE as potential international hub DIFC Innovation Hub, AECB to empower fintech startups in the UAE Dubai is bolstering its global fintech hub status. Here’s how Should regional banks buy or build their innovations?