3 Key Digital Banking Trends in the Middle East

In our last article looking at digital banking in the Middle East, we shared how low financial inclusion rates and difficulties accessing financial services for some segments of the market is driving demand for fintech innovation and digital banking.

Now we’re turning our gaze to the trends that are crucial to any players looking to deliver fintech and digital banking solutions in the region.

Delivering outstanding customer experience

As consumers are driving the transition towards digital financial services, it’s crucial that any propositions are designed to deliver maximum benefits to them. With impressive digital transaction growth rates in the Middle East, it’s apparent that the local population is very open to innovative financial offerings.

The three trends that we consider the most influential in the current Middle Eastern fintech ecosystem are regulatory reforms across the market, the growth of digital financial innovation in existing banking strategies, and new entrants emerging that are ready to challenge and/or partner with incumbent banks.

1. Regulatory reforms

Digital transformation was a key goal for most countries in the Middle East even before the pandemic, with governments and regulators not only supportive of digital banking initiatives, but actively pushing for more.

The regulatory environment in the region is conducive to developing digital financial services in a number of ways. Many countries in the Middle East have fintech innovation formalised in their vision statements, such as Qatar Vision 2030 and its ‘National FinTech Strategy’. Because of this, regulators are taking steps to expedite financial institution licences, and making the regulatory landscape a more welcoming one to new and existing players.  

There are also a number of initiatives, such as the Saudi Central Bank’s open banking policy, that are designed to speed up the adoption of open banking.

2. Financial innovation

Consumer behaviour and expectations have changed, in part thanks to the pandemic, with digital services a necessity when it comes to pretty much every industry. Banking and finance is no different, and in an area where there is a limited pool of digital talent, competition is fierce.

To attract and nurture new talent in the innovation space, any organisation offering digital financial services will have to offer the most attractive environment. That means effective talent acquisition and retention tactics, a culture that nurtures and encourages innovation, and a commitment to digital transformation.

Attracting talent in digital banking and technology is fostered by government leadership, nations that lead by example in digital transformation. In the UAE, the Ministry of Economy has launched an initiative called NextGenFDI with the aim of attracting digitally enabled businesses from all over the world, providing them with the necessary market entry fundamentals needed to launch and scale from within the UAE. This would not be possible without the attraction of talents who flock to the UAE to grow their career and demonstrate their expertise to the world.

3. New entrants

As well as incumbent banks starting to launch independent entities delivering digital banking solutions, there are many new entrants into the Middle East market. The rising demand for digital and regulatory acceptance means it’s an attractive prospect for new players.

One of the benefits for new entrants is their ability to keep costs low while remaining agile and efficient, something that gives them somewhat of an advantage over the existing traditional banks. Neobanks are able to achieve consistent and seamless customer experience with the flexibility to adapt and add to their initial propositions, thanks to the technology available to them.

The opportunities are rife in the market for fintechs and neobanks. To find out more, download our report, Digital Banking in the Middle East, and don’t miss the next article in the series where we’ll cover the opportunities and success factors for penetrating this exciting market.

To read more about the current situation and future potential you can download our new report, Digital Banking in The Middle East. Check out our digital banking platform, learn from neobank stories including Tymebank, Tonik, and contact our team should you want to know more.