Technology is intricately intertwined with banking and finance, particularly in the Middle East, where a myriad of innovations is propelling the sector forward. These advancements are bolstering an industry fueled by a burgeoning young population, high mobile penetration rates and governments dedicated to economic diversification.
According to a McKinsey report, the Middle East, North Africa, and Pakistan are experiencing robust growth in financial technology. The consulting firm anticipates fintech revenue to soar to $3.5 to $4.5 billion by 2025, a significant leap from $1.5 billion in 2022, underscoring the region’s fintech potential.
Moreover, numerous startups in the sector are approaching valuations of $150 million, with several exceeding $250 million. With this rapid growth trajectory, the emergence of fintech unicorns (valued at over $1 billion) by 2025 seems highly plausible.
Beyond these trends, the region has witnessed a notable surge in non-cash payments, largely catalyzed by the COVID-19 pandemic. According to the International Monetary Fund, non-cash payments in the United Arab Emirates surged from 39 percent in 2018 to an impressive 73 percent in 2023.
Despite this progress, the adoption of digital banking services still lags behind global levels, with only 17 percent of Middle Eastern consumers currently utilizing such services, compared to nearly 60 percent in the United States.
Gulf adopts digital banking services
Nevertheless, the region is keen to address this gap. Many UAE-based banks have introduced digital banking services, and standalone digital banking platforms have emerged.
In 2023, Saudi Arabia’s Ministry of Investment forged agreements with key banks to enhance services for customers, building on earlier initiatives such as streamlining digital banking access for foreign companies establishing headquarters in the kingdom.
Regional connectivity is also a priority, with AFAQ, a real-time payment system from Gulf Payments Company, playing a pivotal role. Designed for low-fee money transfers in Gulf Cooperation Council currencies, AFAQ aims to create a secure, stable ecosystem for financial transactions across the Gulf region.
Read: From banks to finfluencers: Navigating the new investment landscape in MENA
A report from PwC further underscores how digital opportunities enhance banking operations in the Middle East. This pivotal shift toward digitalization necessitates more than just operational optimization. In an era driven by digital technology, banking and financial institutions must harness customer data and leverage artificial intelligence tools to anticipate client needs, ultimately enhancing both traditional and digital banking experiences.
These transformative changes position the banking and finance sector for innovative, inclusive growth and are deserving of recognition.
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