Global Finance: Financial technology will promote mergers and acquisitions in the Gulf

– More than 100 “fintech” deals witnessed in the Middle East in 2021, most of them Gulf
– It is changing…the monopoly of banks to establish digital banks

Global Finance expects financial technology (fintech) to boost merger and acquisition activity in the Arab Gulf region, attributing this to lenders being under increasing pressure to keep pace with innovation and reduce operating costs.

The magazine stated in a report that the Middle East and North Africa region witnessed more than 100 fintech deals last year, most of them in the Gulf region.

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The report stated that with expatriate workers making up the vast majority of the GCC population and fintech clients, emerging payment and remittance companies are leading the industry, noting that the UAE and Saudi Arabia constitute the second and third largest remittance corridors in the world, with the value of remittances exceeding 80 billion dollars in 2021.

He added, “These customers prefer digital tools, which pushes traditional players to step up their game,” explaining that “banks across the region are collaborating with financial technology companies to offer fast, low-fee transfer options, and even exchange offices are looking to innovate, as Alfardan Exchange signed The UAE last year had deals with US-based company RebelNet and Singaporean firm Thunes to facilitate instant blockchain-powered cross-border transfers.

local companies

Global Finance indicated that this also opens opportunities for local technology companies, including CWallet in Kuwait, stressing that financial services that are adapted to online shopping constitute another fast-growing sector, as the e-commerce market is expected to jump in the GCC countries. Gulf cooperation from $5 billion in 2015 to $50 billion in 2025.

The magazine quoted the Vice President of «Tap Payments» Faisal Al-Haroun as saying that “customers in the region are getting smarter online.”

Fintech companies in the GCC can rely on ample local liquidity, while local investors and private institutions are eager to support technology projects as a way to diversify their financial portfolios away from oil and gas.

“However, ease of access to capital and wealthy investors is a double-edged sword, as industry experts question the true value of some local startups,” Global Finance said.

upper hand

So far, banks have maintained the upper hand on financial innovation by investing in their own research and development, partnering with or acquiring start-ups, but customer loyalty is eroding.

According to a study conducted by international consultancy Arthur D. Little and German M2P, 45 percent of customers of conventional banks in the UAE are ready to transfer their dealings to competing banks in the next six months.

The report stated that “low rates, regulatory changes, and many new players entering the financial services space – including fintech companies, retailers, and telecom service providers – are behind this trend”.

break the monopoly

Global Finance reported that traditional lenders were almost monopolistic in establishing digital banks, but the matter is changing, noting that in Saudi Arabia, the three digital banks currently licensed are not linked to actors in the financial industry, and similarly, in the UAE, the founder of Emaar-Akbar announced A real estate company in the country – Mohamed Al-Abbar, announced that he will launch his rival bank.

Fintech is at the heart of diversification strategies

Global Finance confirmed that financial technology “fintech” is at the heart of the economic diversification strategies of the Gulf countries, explaining that according to a recent study conducted by the Cambridge Center for Alternative Finance, 85 percent of regulators in the Middle East and North Africa see financial technology as favorable to their goals compared to 61 only percent globally.

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