Governing authorities in the Middle East did not lose time in 2017, setting up innovation labs, Sandboxes, and establishing strategic partnerships with international institutions in order to turn the region into a nexus of FinTech innovation. Given that the emerging markets are expected to adopt innovation at a more accelerated pace than the developed world in 2018 and beyond, FinTech may become the new oil in the Middle East and North Africa.
Pick #1. FinTech Is The New Oil in The Middle East and North Africa
“In the Middle East, FinTech will emerge as one of the strongest sectors of the economy. Saudi Arabia’s 2030 vision, which aims to reduce the dependency on oil revenues and diversify the economy by empowering small and medium enterprises, has opened up more opportunities for FinTech.” – Al Jouf, Founder & CEO of PayTabs, a Saudi-based payment processing startup.
“FinTech’s penetration into Islamic finance is still in its nascent stage, however, it could help Islamic banks become more efficient and scale up their operations,” says Al Jouf. “Traditional banking as it is known today will disappear in few years’ time,” he adds.
“There’s a unanimous agreement that blockchain is going to have a massive impact on the FinTech space. The technology is trustworthy and allows transactions without any risk to either party,” says Yazin Alirhayim, Co-founder of Verify.
Pick #2. Mastercard Assemble kicks off with a product geared toward the money management needs of millennials
“Prepaid is much more than just a way to safely store and use funds. It is a foundation to create new possibilities for consumers. This technology enables our partners to deliver best-in-class digital experiences today, as we work to address additional segments such as gig economy workers and underserved consumers and micro businesses.” – Tom Cronin, senior vice president, Global Prepaid Product Development and Innovation, Mastercard
Mastercard Assemble not only bundles assets and services together but also enables these digital prepaid solutions to promote innovation, increase the speed to market, and provide customers with seamless and secure usage. Issuers and partners can choose to deploy a white-label version of the solution or to integrate specific functions into their current user interfaces through APIs.
While Mastercard Assemble for Millennials will be the first launch, the company is currently developing additional use cases to support prepaid programs for additional segments such as underserved consumers and micro-businesses, and the gig economy. Mastercard Assemble for Millennials is available now in the United States with other markets being targeted within the next year.
Pick #3. Vanguard Taps Symbiont’s Private Blockchain for Index Fund Data
Vanguard will begin using smart contract technology developed by blockchain startup Symbiont in some of its actual business processes starting early next year.
The companies have been testing the technology to simplify the way Vanguard takes in data from the Center for Research in Security Prices (CRSP) at the University of Chicago’s Booth School of Business. This information is used to determine the composition of certain index funds managed by Vanguard, and includes things like company names, share counts, index weighting and corporate actions such as mergers or stock splits.
The three partners found the private blockchain speeds up delivery of the data from CRSP to Vanguard, removes the need for manual intervention and lowers risk. The project will go into full production in early 2018.
The partnership will involve 17 index funds totaling $1.15 trillion in assets, including Vanguard’s largest, the $650 billion Total Stock Market Index fund.
Pick #4. Deutsche Bank debuts robo-advisor for retail market
After a soft launch last month, Deutsche Bank is now planning to make its robo-advisor Robin available through its branch network – a first in the German market. Commerzbank introduced a robo-advisor earlier this year through its online bank, Comdirect. Deutsche has more than 1,500 branches in Germany and is in the process of integrating the retail branch network of its Postbank subsidiary into the parent bank.
Pick #5. Survival of the fittest: RegTechs face a year of consolidation
“Many advisers expect a surge in M&A activity in 2018. They say banks, asset managers, stock exchanges and technology providers are all eyeing acquisitions. Regulation is top of mind for most financial institutions following the global financial crisis, and many City firms are now actively approaching RegTechs to acquire the tech and expertise. A lot of institutions have been in the firefighting mode but some banks will think more strategically and try to embed RegTech in their organizations.” – John Meehan, Partner at advisory boutique Arma Partners
For banks, these acquisitions could be a way of reducing their compliance bill (Citi, for example, has 40,000 people working in the compliance department).
“Banks are going to be focused on reducing that number. Technology is the only solution,” he said.
Large corporates are queuing up to buy RegTech companies. They often move earlier than they normally would, as having the most updated technology is also becoming a real competitive advantage for them.
“If you see that consolidation is happening, there’s obviously a need to win because of the large number of RegTech solution providers out there. Only so many of those will be successful as the market shakes out. As people start to work with a number of suppliers you have to think strategically where your best bet lies in terms of scaling your business.” – Richard Maton, member of the founding team at Sybenetix (acquired by Nasdaq). This could be growing organically or as part of a larger organization that has a bigger reach.