Eighty-two per cent of the Middle East banking customers are willing to start using FinTech products, but lenders are not yet integrating many of the products on offer into their networks, according to a new survey.
The Middle East FinTech Study by Deloitte found that of the 18 per cent unwilling to use FinTech products, 40 per cent cited security and privacy as their biggest concerns. Moreover, many banks are adopting a 'wait and see' approach to FinTech adoption, as opposed to partnering with start-ups.
“In the Middle East banking sector, FinTechs are considered as legitimate players of an emerging ecosystem. However, to date, they have yet to be deployed by banks as their strategic partners,” said Anthony Yazitzis, a financial services & FinTech partner at Deloitte.
The study gained 1,500 survey and interview responses from banking customers in the region and conducted 50 face-to-face interviews with industry executives in the UAE, Saudi Arabia, Qatar, Kuwait, Bahrain, Oman, Egypt, Lebanon and Jordan.
Only 22 per cent of individuals surveyed are currently using FinTech products, with adoption being driven by consumers in their 20s.
About 25 per cent of those surveyed were aware of FinTech products, and of those 75 per cent felt they would make banking easier.
The FinTech ecosystem in the Middle East is characterised by a degree of “contradiction and dichotomy”, the report said.
“The ecosystem is evolving rapidly when it comes to deploying innovative solutions … however, it is struggling to attract additional financing that will boost its footprint and impact.”
Some banks are keen to engage with technology firms but as yet have been reluctant to integrate FinTechs into their strategy. Some have had "intense discussions" about partnering, including the adoption of 'white label' products where FinTechs could operate bank-branded services in areas such as micro-loans to SMEs, while others have been more proactive, even going as far as launching dedicated funds to invest in local FinTechs.
The study found the Middle East region has so far attracted only 1 per cent of $45bn worth of global financing into FinTechs, but said there is "significant potential" to grow this.
FinTech companies, which focus on lowering transfer fees and reducing transfer times, are gaining substantial funding on a global scale.
According to KPMG's Pulse of FinTech survey, FinTech companies were involved in 2,693 deals last year worth $135.7 billion (Dh498.4bn). The industry in the Middle East and North Africa region is set to attract $2.5bn by 2022, according to a study by Mena Research Partners.
More than 92 per cent of people in the UAE use smartphones, presenting a substantial opportunity for FinTech companies – particularly those in the mobile payments sector, which is set to grow in the UAE at a rate of 30 per cent year-on-year, according to McKinsey.
The way forward for the Middle East FinTech ecosystem to reach its full potential goes through "regulatory harmonisation and development of strategic partnership", said Mr Yazitzis.
Thus far, the technologies customers in the region have been most inclined to use have been “peer-to-peer money transfers, account aggregation and automated investment advice”, Deloitte said.