For years, cash transactions were favored by consumers worldwide, as 75% of them conduct most of their transactions in cash. Physical payments were deemed secure and reliable, and e-payments were deemed as a back-up and last resort. Even though this notion began to shift a few years back, it was the year 2020 that caused a major change of hearts. This year, 71% of consumers in the UAE reported an increase in using digital payments, even when shopping in-store. For good reason, digital transformation has reached the financial industry and a FinTech revolution is surely on its way.
According to MaGNiTT, the UAE emerged as the largest FinTech hub in the Middle East and Northern Africa (MENA) region with a total of $237M invested in 181 deals between the period of 2015-2019.
Today, and as the world defines a new normal, the FinTech industry is preparing to benefit from the virtual lifestyle we have had to adopt. Regionally, the UAE is poised to reach a record-high of USD2.5/- billion by 2022, taking pole position in the Fintech market according Clifford Chance Report.
What is FinTech, exactly?
Financial technology is the umbrella term for products and services that use the internet, software, mobile devices, or cloud capabilities to enable individuals, businesses, governments, and others with anything money related. The technology is being used in crowdfunding platforms, cryptocurrency, mobile payments, insurance, and stocks.
Where are the potential opportunities?
As financial services are transformed, new business models are generating significant growth. Consider, for example, the state of electronic and contactless payments, digital banking, and artificial intelligence (AI)-based insurance solutions. Having a tech-savvy population, the UAE thrives on digital advancements and novel technologies. So it is no surprise that cashless payments are on the rise across the country, and Fintech investments are catching headlines.
According to Dubai International Financial Centre, 50% of the Middle East, Africa and South Asian (MEASA) population have limited or no access to financial services. This provides a promising opportunity to provide these fast-growing markets with an easier and more accessible banking option – such as digital banking and financial technologies. Offering digital banking solutions to markets where physical bank branches are scarce or hard to reach, or banking without a minimum account balance is an opportunity worth exploring.
More FinTech growth and disruption on the way
Digital transformation is a megatrend across the globe that already has disrupted financial services—but even more disruption can be expected. Worldwide, we have been moving away from the status-quo of finance and towards exciting transformation. It would be worth exploring investments in the FinTech industry as growth is certainly on the way.