Bahrain has seen a doubling of fintech firms over the last four years, with the sector now boasting large players valued at over $1 billion, reveals a new report.

The second edition of the Bahrain FinTech Ecosystem Report released yesterday by the Bahrain FinTech Bay (BFB) found that the number of fintechs established in Bahrain is now in the hundreds, having increased in number by 100 per cent since 2018.

The expansion of the sector is mainly due to the rise of technological response to traditional financial services limitations, it notes.

Financial institutions are embracing fintech solutions in order to keep up with the growing customer expectations and the associated development requirements from a technology standpoint.

BFB chairman Khalid Humaidan says in the report that corporates embracing innovations and fintechs developing world-class technology have led to notable growth in Bahrain’s financial services sector.

“Emerging technologies such as artificial intelligence and blockchain are changing the face of banking services as we know them today. We have also seen home-grown fintechs thriving over a short period, reflecting the Kingdom’s ongoing efforts to evolve and future-proofing its position as one of the region’s leading fintech hubs,” he adds.

The report ran two parallel surveys targeting corporates/start-ups and investors.

The purpose of the survey was to provide an inclusive understanding of the key growth drivers of Bahrain’s fintech ecosystem from various market players, including startups, corporates, government entities, incubators/ accelerators, investors, and academia.

While key developments such as the implementation of open banking and growing demand for improved customer experience highlighted the need for innovative fintech solutions in Bahrain, the impact of Covid-19 has slowed down the growth of many startups.

The report also highlights four key growth areas: Government support and regulations, Innovation, Talent and Funding and building on the analysis, it identifies four key factors that could contribute to the success of the Bahraini fintech ecosystem.

The path forward would require improving the regulatory environment, encouraging technological readiness and innovation, developing talent by creating more Bahraini-led fintechs and establishing a competitive funding ecosystem, it suggests.

Commenting, Yasmeen Al Sharaf, the director of fintech and innovation unit at the Central Bank of Bahrain (CBB), said the regulator has recently revised its Regulatory Sandbox Framework to allow fintechs to test their ideas and solutions in a more efficient and effective environment.

She added that the CBB has a forward-looking strategy to develop the fintech ecosystem with the addition of revised regulatory frameworks and enhancing services related to open banking, e-KYC and contactless payments.

Summarising the findings, the report notes that the development of the kingdom’s ecosystem is mainly driven by a supportive regulatory framework and the financial services sector’s drive for innovation.

Leveraging the support of academia to introduce fintech-focused curriculum, as well as encouraging funding by facilitating deeper connections will have the most impact in speeding up local fintech adoption, it adds.

The BFB highlights four emerging trends that are shaping the way fintech is impacting businesses across different industries; open banking APIs, artificial intelligence, customer-centric models, and fintech as infrastructure providers.

It also notes that a greater number of big international players are looking to invest in home-grown start-ups that localise the concept of a successful global fintech solution.

This will be accompanied by increasing venture capital activity with a large number of investment exits seen in the next two years.

Real estate presents a big opportunity for investment and fintech adoption in the future as ‘PropTech’ is on the rise with solutions such as tokenisation, it notes.

With a shift in traditional job roles towards fintech and innovation at a broader scale, there will be a focus on roles in growing and established scaling startups, particularly within regulatory compliance.

Moreover, corporates launching new digital/fintech platforms or subsidiary companies in the area of fintech will be looking for fintechspecific talent.

By encouraging greater market collaboration between all stakeholders involved and exchanging knowledge, business opportunities, and experiences, Bahrain can become the ideal testbed for new fintech companies looking to establish or startup in Bahrain, the report concludes.


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