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Why the Middle East is ripe for its Digital Banking Wave?

Nadia Benaissa Dec 20, 2022 8:17:39 AM

The rise of digital banks (also known as neo banks or challenger banks) is a global phenomenon, with over 500 digital banks currently operating worldwide. The number is rising, and there is still plenty of opportunities for new players to enter the market – particularly in certain regions.   

One of those regions is the Middle East, and in this article, the first in a series about Middle Eastern digital banking, we’re sharing an overview of the current market.

Middle Eastern demographics

Spanning from Asia to Africa, the exact definition of countries within the Middle East is fairly loose. When we refer to the Middle East for the purposes of these articles, we’re mainly focussing on the six nations of the Gulf Cooperation Council (GCC) (Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain, and Oman).

The region is diverse in terms of the nationalities that live there, with data suggesting that expats from around the world make up most of the population in some of the GCC countries. Digital-savvy young people make up a large proportion of that population, so it’s no wonder that digital services are popular and, for some, essential options.  

The economy and digital transformation

Countries like the Kingdom of Saudi Arabia and the UAE are wealthy, industry-leading nations, with oil and gas revenues an important part of the economy. But with an increasing demand for renewable energies, Middle Eastern governments are looking for strategies to diversify.

While the GCC countries have their own approaches, from Bahrain’s Economic Vision 2030 to the Kuwait Vision 2035, they all point towards similar goals – promoting innovation, growing the economy, and, ultimately, digital transformation to become digital-first economies.  

According to the official Saudi Vision 2030 website, the program “aims to develop a diversified and effective financial sector to support the development of the national economy, diversify its sources of income, and stimulate savings, finances and investments.”

A rapidly developing banking market

Even with the impacts of the pandemic, the GCC’s banking sector is one of the fastest developing in the world. The banking infrastructure in the region is varied, and with fairly strict regulatory requirements. Banking mergers are a common occurrence, for example the 2021 $220 billion merger in Saudi Arabia between the country’s principal retail lender National Commercial Bank (NCB) and its competitor Samba Financial Group.

The strong banking market and high levels of digital intelligence means a majority of the Middle Eastern population is banked, with as little as 12% (in the UAE) unbanked. With the speed of digital transformation happening in the region, using financial technology to offer the digital services that consumers expect is key to successful financial services.

As you can see, the opportunity is there to capture some of this fast-moving market. In the next in the series we’ll be looking at the current digital banking landscape, including the opportunities for new players to enter the market.

Download our new report, Digital Banking in The Middle East, for an in-depth analysis. Check out our digital banking platform, learn from neobank stories including Tymebank, Tonik, and contact our team should you want to know more.

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