Govts key to developing FinTech sector, says study
GCC financial technology ecosystem still requires attention, according to Strategy&
Although many of the necessary design elements exist in the GCC to develop a vibrant FinTech (financial technology) ecosystem, relatively little investment has been made in this sector to date, according to a study by management consultancy Strategy& (formerly Booz & Co.).
The study estimates that the global investment in FinTech sector has jumped three-fold between 2008 and 2014, reaching $3 billion, and is expected to double again by 2018, and may even hit $8 billion.
To establish and nurture a healthy FinTech ecosystem in the GCC, a sustained collaboration is necessary between three key players which include governments, financial institutions and entrepreneurs - with each participant clearly understanding its role as well as the benefits it stands to gain from involvement, Strategy& said.
"In the GCC, FinTech ecosystems are yet to take effect, and therefore, the role of governments is more critical than it is in established markets. GCC governments must enforce policies and regulatory environment that will ease the development of the FinTech ecosystem," said Daniel Diemers, partner with Strategy& in Dubai.
"This will eventually lead the economy to attract great talent, boost entrepreneurial and business activities, and most importantly improve the country's overall competitiveness."
The study identifies four critical elements that support the development of a FinTech ecosystem: Firstly, a conducive business environment and access to markets is essential. This means the availability and affordability of skilled labour, quality infrastructure, facilities, equipment, technologies and utilities is important. Also, a high degree of integration and synergies among key players is vital for the smooth functioning of a FinTech ecosystem, said Strategy&.
The second element is the involvement of the government and the regulatory support offered. Governments can influence many aspects of the ecosystem, including easing business regulations and keeping the taxes and fees low.
The third element that is important in the development of a FinTech ecosystem is access to capital. Ecosystems are usually funded through four main sources which include governments, venture capital funds and private equity shops, incubators and accelerators.
The last key element is the involvement of financial experts who can be instrumental in structuring the ownership of the ecosystem, providing advisory services to entrepreneurs, and offering counsel on legal and regulatory measures. These experts can support entrepreneurs and financial services players and enhance the overall attractiveness of the ecosystem.