Major Investors in Fintechs in the Middle East
The Middle East is an excellent place to follow trends and developments in banking. Middle Eastern banks have the highest number of customers per bank branch than any other region globally, while the region has fallen behind in e- and mobile transactions. These developments, along with government initiatives, have created a favorable environment for fintech to launch their services gradually adopted by banks themselves. Fintechs benefit from an educated labor force that can integrate new technology into their business models, and start-up costs (which are low compared to Silicon Valley) will enable them to be more innovative.
The emergence of fintech in the region is being supported by government initiatives such as the Bahrain FinTech Bay, which offers help with start-up costs and provides a place for start-ups to connect and funding opportunities from banks and venture capital. In addition, the Bahrain FinTech Bay facilitates discussions between traditional banking and fintech.
The Middle East hubs described below are helping to launch successful start-ups in the region through government initiatives and raise funds for these ventures from global investors. The results achieved by these countries show that there is a bright future for Middle Eastern fintech.
The following are some of the major investors in fintech in the region:
- Dubai Investments and Development (DID)
Founded by Sheikh Mohammed bin Rashid Al Maktoum, the ruler of Dubai, this firm leads a group of UAE investors. DID focus on financial technology and was the lead investor in BitOasis, a Dubai-based bitcoin platform. Saudi Arabia’s Al Rajhi Bank was also an investor in this company. DID plans to invest in financial technology companies that can benefit from the expertise of banks and regulators, given their experience in these fields. DID has invested over $850 million in more than 30 start-ups through a venture capital arm, Dubai Venture Capital Association (DVCA).
One such company is Payfort which provides payment gateways for fintech and banks. This payment processor also offers an e-commerce platform to enable businesses to accept global and regional payments.
Souqalmal, a start-up under the DID umbrella, is a digital financial services company that provides technology solutions for banks and fintech through its Cash4you brand, which allows individuals to deposit cash at a partner location in return for an immediate cash-out option on Souqalmal’s digital wallet. This service benefits customers and fintech by increasing conversion rates while offering banks the opportunity to increase deposits.
- The Public Investment Fund (PIF) of Saudi Arabia
This fund has committed to invest up to $3 billion annually by 2020 in technology companies across Silicon Valley and other key technology hubs. It was a lead investor in Magic Leap, a Florida firm whose augmented reality platform is being used by the US Pentagon’s research arm and Here Technologies, a mapping company developed by Volkswagen.
The Public Investment Fund (PIF) of Saudi Arabia has also invested in a Dubai-based start-up, Evercred. This platform allows users to share credit scores through mobile applications, and it was backed by the Saudi Arabian Monetary Authority (AMA) and US-based venture capital groups.
Founded in 2010 by Mohammed Alsehli, this company is a Dubai-based e-payment service provider with partnerships with the UAE Exchange, 7-Eleven, and the Government of Dubai. It was awarded the Best FinTech Company in MENA award by Financial Innovation Lab (FINTLAB) last year for its technology which allows users to make payments at any retailer without using a credit card or entering PINs.
It has also developed payment gateways for eCommerce platforms in the Middle East and North Africa (MENA) region.
The National Bank of Bahrain (NBB) invested in this company. Evercred users can cancel transactions from their phones, which reduces cases where financial institutions are forced to reimburse customers who have made mistakes when entering PINs at merchants’ counters. The system also provides a platform for real-time returns and refunds.
- RAK Bank of Ras Al Khaimah, UAE
Led by Sheikh Saud bin Saqr Al Qasimi, RAK bank is a regional banking group that provides financial services in the Middle East and Asia. It has invested in several fintech ventures, including Fatcom, which offers payment solutions for eCommerce platforms. Its other investments include Paymentswall, which has developed payment gateways for mobile wallets, eCommerce, and robot advisory platforms.
RAKBANK was the first bank in the Middle East to launch a customer loyalty program using blockchain technology. It also provides liquidity management solutions for digital currency exchanges across MENA, including BitOasis, Bitcoin Arabia, and others in India, Indonesia, and Thailand. It is also a partner of Ripple, a San Francisco-based company that aims to enable instant cross-border payments using blockchain technology.
- Al Rajhi Bank
The Saudi Arabian bank has invested in the Jeddah-based Effortel, which provides payment services for telecoms operators and their subscribers. It also partners with telecoms firms in the MENA region to provide payment services for their subscribers and merchants, including MTC Touch; Mobily, a leading mobile services provider in Saudi Arabia; Ooredoo Qatar; Zain Bahrain and Wataniya Telecom as well as others across the Middle East, North Africa and South Asia (MENA).
Launched in 2010, this anti-money laundering compliance platform uses multi-factor authentication to manage customer profiles and comply with regulations, including the US Treasury’s rules on identifying and reporting suspicious transactions. This helps financial institutions comply with laws while offering customers a smooth experience. For example, it can be integrated into mobile banking platforms to allow users to log in to their accounts through fingerprint readers and iris scanners.
It also offers remittances, virtual banking, wallets, prepaid products, and other financial services. The Dubai office was the first to use blockchain technology to settle payments between a firm and its customer over its mobile application. Last year, it partnered with Ripple to facilitate real-time cross-border payments between companies in the United Arab Emirates and Saudi Arabia. It also uses Current), Ripple’s enterprise blockchain platform, which offers solutions for cross-border transactions, including messaging, clearing, settlement, and payment initiation between banks.
We have seen how the banking institutions are investing in fintech start-ups, technology is changing the way we bank, and more of these investments should be made as they can be a good way to tackle other business areas. However, these investments should be focused on the long term and not as a short-term investments.
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