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Middle East fintech sector to accelerate this year with UAE leading the way

The financial technology industry could be at the start of a period of rapid growth in the Middle East

Investment in financial technology (fintech) in the Middle East is set to grow by 270% this year as the region looks to finally gain momentum in the rapidly growing global sector.

The region is still in the early stages of fintech compared with more advanced economies, but the foundations are being laid.

A report from Wamda Research Lab (WRL) and Payfort found that fintech companies in the region expect to raise $50m this year, compared with $18m last year. According to the report, the region’s fintech firms have raised only $100m over the past 10 years.

Fintech investment in the Middle East is on nothing like the scale it is in countries such as China, the UK and the US. For example, figures from Innovate Finance, a UK fintech trade body, show that $1.156bn was invested in UK fintech in 2016, $7.7bn in China and $6.2bn in  the US.

Alternative financial platforms – such as crowdfunding sites and peer-to-peer lending – have become the norm in these hotspots, but according to experts, the global trend has yet to infiltrate the Middle East. A report from FinTech Week last year said less than 0.1% of global fintech investment originated in the Middle East.

But the WRL and Payfort report State of fintech expects more to come from the region, including the number of fintech companies more than doubling from 105 at the start of 2016 to 250 by 2020. Half of these would be payment services, and one-third would be money lending and capital raising platforms, the report said.

Khaled Talhouni, partner at Wamda Capital, said the rate of change in the region from a cash economy to a cashless one would be exponential.

Read more about financial services technology in the Middle East

The UAE, Lebanon, Jordan and Egypt account for about 75% of all startups in the Middle East, according to the report.

The UAE leads the way with the most support and is attracting the most promising enterprises. For example, German challenger bank Fidor has opened up an operation in Dubai to gain access to the Middle East market. The bank, which launched in 2007 and gained a banking licence in the UK in 2015, has opened an office in the Dubai Silicon Oasis park.

Also in the UAE, telco Etisalat launched a mobile wallet to enable its customers to make payments and money transfers on their smartphones. The company is using a platform from Oberthur Technologies. As well as account management, the mobile wallet provides automatic reports and notifications on transactions.

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