The global narrative around Covid-19 is shifting. Across the world, business, government, media and public discourse is gradually refocusing from how to combat the virus towards how to reopen and rebuild economies – and what those economies will look like going forwards.
As governments to varying degrees begin to tentatively loosen lockdown restrictions, it is becoming clear that the world can never return completely to life as we knew it before. This crisis will leave a legacy – one characterised by a near-unprecedented uptake of financial technologies.
The Middle East is ahead of the curve
Across the Middle East and North Africa (MENA) region, the rapid surge in digital banking and FinTech predates and will outlast the pandemic. Online payments penetration across MENA has reached 76%, which is expected to increase.
The region contains over 400 million people predominately united by a common language and similar consumption habits. E-commerce is expected to grow exponentially from US$8.3 billion in 2017 to US$ 28.5 billion in 2022.
The region’s mobile penetration exceeds 65% and boasts a number of countries that lead the world in mobile Average Revenue per User (ARPU). Saudi Arabia and the United Arab Emirates alone have more internet users than Russia, and more mobiles shipped to the region than to the UK and France combined.
And yet the pandemic has undeniably served as a catalyst for consumer uptake, with the Gulf Cooperation Council (GCC) in particular set to experience a surge in the use of FinTech platforms as consumers turn away from physical offerings – a surge that has already begun.
According to data from Bahrain’s investment promotion agency, the Bahrain Economic Development Board, online banking and cryptocurrencies are among the products with the biggest increase in transactions.
The Kingdom’s national electronic wallet, BenefitPay, for example, has already announced a 1257% increase in the number of remittances through its Fawri+ service in March alone – worth some BHD103 million (USD273 million).
And in a region where trust has been an issue for consumers; where when it comes to banking people often don’t trust technology and prefer paper cash, this kind of once-in-a-lifetime paradigm shift matters.
Countries across the region have been racing to diversify their hitherto hydrocarbon-reliant economies in line with the changing needs of the digital era.
Great progress has been made; considerable sums have been invested in building thriving startup and technology ecosystems complete with world-class digital infrastructure, accelerators and even a burgeoning, international VC community. But it might have taken a global crisis to make that necessary final push.
Bahrain’s FinTech leadership
The island Kingdom of Bahrain is a case in point. The first GCC member to begin diversifications efforts, the Kingdom is developing an increasingly dynamic digital economy and a maturing tech community based on developments such as nationwide 5G coverage and its public sector cloud-first policy.
Home to the oldest and most established financial centre in the Gulf region, Bahrain has also capitalised on its banking expertise to grow a FinTech ecosystem.
This ecosystem is home to the region’s first and largest FinTech hub, the region’s first onshore FinTech Regulatory Sandbox and over 350 financial institutions.
Moreover, the Kingdom’s financial regulator, the Central Bank of Bahrain, has earned a reputation as a regional pioneer in the regulation of emerging technologies, from cryptocurrencies to open banking. And yet the widespread use of paper cash has clung stubbornly on. Until now.
Digital diversification
Those countries like Bahrain, already so focused on digitalising their economies, are those that have been able to react quickest to contain the pandemic, and that have been able to adapt most seamlessly to the widespread disruption.
Bahrain was one of the first countries in the world to close all its educational institutions, for example, while allowing students to continue their studies uninterrupted thanks to their cloud-focused government’s online learning platform.
In this way, the last few decades of economic diversification have seen the necessary frameworks put in place across the region to allow for digitalisation of economies. The pandemic has merely catalysed the uptake of what was already available, shifting consumer behaviour. And when the dust of this pandemic begins to settle, that new behaviour will remain.
