BFB leads the way in region says S&P

MANAMA: Bahrain Fintech Bay (BFB) and DIFC Fintech Hive are two of the most advanced financial technology (fintech) ecosystems in the Middle East and Africa (MEA) region, according to an assessment by S&P Global Ratings.

In the ratings agency’s view, the key factors contributing to a successful fintech ecosystem are: human capital, regulation, financial capital and Physical infrastructure.

S&P however says the creation of a fintech ecosystem is still a work in progress in most other regional countries and cities.

According to it, money transfer, payment services, and compliance with regulations are the main sectors that are bound to be disrupted by fintech in the next few years.

Fintech in the MEA will continue to slowly expand and therefore constitute a limited threat to the region’s well-established financial institutions in the foreseeable future, said the agency, foreseeing more co-operation between fintech firms and banks, and strong regulatory protection, given the significant role of banks in financing regional economies.

Even as partnerships between banks and fintech firms grow and strengthen, S&P sees more and more banks embracing opportunities to onboard convenient solutions from external providers to enhance their value chain.

“Banks in the region generally enjoy a relatively strong entrenchment in their local markets in the absence of other more viable sources of financing,” the report said.

“Given the importance of this role, we expect regulators in most of these countries to continue protecting the financial stability of their banking system from disruption that may reduce the quality of banking services or result in weaker, more vulnerable, banking systems.”

However, at the same time, S&P expects fintech innovation to be promoted through regulatory easing, such as sandbox approaches.

Fintech offers opportunities for the region’s banks such as the use of blockchain for capital market issuance of conventional and Islamic securities.

“We do not expect fintech alone to have a significant bearing on our ratings on Middle Eastern and African banks in the next two years.”



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