Regulators in the Arab region need to cooperate more and move faster to catch up with the pace of innovation in the banking sector, the founder and CEO of a Dubai-based fintech crowdsourcing platform said.

“The regulators are still catching up. What is optimistic is that they understood the importance of having regulations for the fintech space and for innovation in the banking sector. And they are now starting to introduce more and more the right regulations that are needed in the market,” Mirna Sleiman, founder and CEO of Fintech Galaxy, told Zawya late last week on the sidelines of the Institute of International Finance’s MENA Financial Summit in Abu Dhabi.

Sleiman said the several different regulatory bodies in one country that oversee the banking sector need to cooperate on the drafting of new regulations. 

In the GCC, Sleiman praised a decision taken by the Central Bank of Bahrain last year to introduce an in-house fintech unit.

Bahrain’s Central Bank said the Fintech Unit announced in October last year would be responsible for “The approval process to participate in the Regulatory Sandbox, supervision of licensed companies’ activities and operations, including cloud computing, payment and settlement systems, and monitoring technical and regulatory developments in the fintech field,” according to a statement posted on the central bank’s website.

Regulatory sandboxes allow fintechs to test software products under regulators’ guidance. Bahrain’s Central Bank announced the launch of its fintech sandbox in March this year, and Abu Dhabi Global Markets launched its sandbox in September.

Also in September, the UAE Minister of Economy and Chairman of the Securities and Commodities Authority (SCA), announced plans to regulate fintechs.

Asked about the biggest challenge facing fintech start-ups in the region, Sleiman said: “The biggest risk of a start-up to fail is actually if it produces a product that does not have a market,” she said. She advised start-ups in the fintech space to understand market needs before developing solutions that cater to those needs.

On scaling challenges, Sleiman said that working with multinational lending institutions and companies will help fintechs scale more easily through those institutions’ offshore branches and affiliates. 

Fintech Galaxy works with banks and other financial institutions on identifying innovation challenges and then posts those on its online platform, inviting start-ups to solve them. The banks and other institutes pay the firm for such services and this is how the company generates income, according to Sleiman.

“They would pay much more if they want to do it in-house,” she added.

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(Reporting by Yasmine Saleh; Editing by Michael Fahy)

(yasmine.saleh@refinitiv.com)

© ZAWYA 2018