Open banking makes the MENA region an oasis of financial opportunities for investors

Although the growing influence of the MENA region is widely known, it is not necessarily talked about to facilitate financial progress in particular. However, that is about to change. Over the past decade, the region has carefully cultivated fertile soil ready to bloom. And it’s beginning to flourish with the advances in technology fueling concepts like open banking that have the power to forever transform our financial future.

The UK’s long-standing relationship with the MENA region

It’s safe to say that the many opportunities have not gone unnoticed in Britain. For several decades, the UK has maintained strong trade ties and maintained stable relations with countries in the MENA region. For example, the UK has always been one of the biggest investors in the global hub city of Dubai. So, with such a strong history, why is now a particularly good time to notice Middle Eastern fintechs?

The transformation of financial ecosystems in the region is certainly clear. The finTech sector in the MENA region is growing rapidly, with a compound annual growth rate of 30%, paving the way for it to become a top destination for digital financial business in the very near future.

However, there is still plenty of room to maximize the full financial potential of the MENA region. The great open banking disruptor (not to mention the even more progressive world of open finance) will be a driving force in attracting UK investors to the region.

The MENA region as an emerging hotspot for investment

Before discussing the fintech opportunity, let’s take a step back. Why is there an opportunity in the first place?

The demographics of the region should excite any investor looking for innovation. The population of the MENA region is one of the youngest in the world, with estimated at 60% of the population under the age of 30. Much of the region’s young people are also motivated to embrace new ways of thinking and leverage digital technologies to improve both their own lives and those of their communities. Internet penetration in the MENA region is one of the highest in the world.

Moreover, the local population has shown willingness to adopt digital solutions for their financial needs. According to research by Deloitte in 2020, 82% of customers in the Middle East are eager to start using fintech solutions, coinciding with the rise of a cashless economy.

Savvy entrepreneurs are already stepping in everywhere to capitalize on this market demand. Backed by the financially progressive infrastructure – which provides fintechs with regulatory support and government incentives – the region’s fintech sector has a very high growth rate. The UAE has become a hive of fintech activity – 465 fintechs are expected to generate over $$2 billion in private equity funding in the coming year, up from just $80 million five years ago.

Open banking is a game-changer

The MENA region is primed for disruptive innovations, which open banking can provide in abundance. Fintechs’ regulated access to use financial data to provide solutions to a hungry public will drive significant and sustainable economic growth. Consumers want more freedom to manage their finances and there is a need for better banking solutions, such as instant access to money and fully digitized payments.

Open bank makes all of this possible and more when banks, fintechs, and even telcos work together to improve their products and put the customer in control. In this context, everyone can benefit if we act quickly to meet the demand.

The emergence of a solid regulatory framework

We see the MENA region following in the footsteps of the UK when it comes to open banking regulation. The PSD2 directive, which pioneered the concept in the UK, informs much of the recent developments in the MENA region in terms of the financial ecosystem. In Europe, the regulatory framework has proven to be effective in standardizing access to the financial services market and promoting the role of non-traditional financial institutions. As a result, the framework has enhanced competition among financial service providers and provided consumers with better financial tools.

Similar regulations shape the changing financial landscape in the MENA region, providing security for investors while remaining flexible enough to stay relevant in the face of ever-changing technology. While regulations differ across jurisdictions, making it potentially difficult to scale fintechs across the region, any hurdle is worth overcoming.

How to navigate your fintech journey in MENA

Overall, the MENA region should catch your eye as a rising star on the global financial scene. It’s easy to see how being part of an emerging, yet promising, ecosystem brings tangible benefits to investors.

To comply with regional frameworks and regulations, interested parties should seek out local experts who know which paths to take and how to navigate them. The rise of open banking is already a fundamental factor in the evolution of the financial environment in the MENA region, and its growth will only accelerate. When the opportunity arises, it is better to be at the front of the line than at the end.

justin henry is egeneral manager at KMMRCE Pay.