Dubai, UAE – Following the release of their much anticipated global State of the Financial Services Report – which finds a shift in value towards new players, but also a set of market conditions ripe for smart incumbents to regain market share – global management consultancy Oliver Wyman looks at what these findings mean for the Middle East.

According to Mathieu Vasseux, Partner – Head of IMEA Financial Services, and KSA Market Leader at Oliver Wyman, “The financial services sector in the region is undergoing a once-in-a-generation value shift, as new fintech entrants and incumbents jostle for position in a market rapidly expanding into new services”.

Notwithstanding this shift, there is significant opportunity for established players though, according to Vasseux: “In light of specific market conditions at present (high interest rates boosting bank earnings, regulators championing change, and fintechs under pressure from investors to demonstrate real ROI) , there is a real opening for established players to get back in front – if they make their move wisely” .

The impact of new players in the sector can certainly not be ignored: in 2019 – 2021, MENA’s fintech sector captured the largest portion of venture capital investments across all tech sectors, at USD 720 million+, with deal volume growing 60% YoY, and deal values more than tripling.

Key current trends in the Middle East include:

Buoyed by a new generation of users actively seeking different experiences, both new players and incumbents are diversifying, digitising and releasing new innovative products: digital wallets from incumbents, like Al Rajhi Bank’s URPay, and other sectors such STC Pay (7.8m+ users) provide the cashless, user-centric experience the next generation of consumers crave. Entry-level investment platforms like Sarwa (more than 50,000 users) are drawing in a growing pool of novice investors. Two of more than 10 BNPL offers in the Middle East Tamara and Tabby raised $50m and $110m in Series B and A funding respectively, catering to credit anti-interest, card-shy younger users, while FAB’s Magnati and Mashreq’s Neopay signify a strong reaction from incumbents to restore dominance in payments.

Regulators add their muscle behind sustainability and innovation:

Dubai's Virtual Assets Regulatory Authority becomes world's first regulator to make its debut in the Metaverse, with Dubai also issuing the first law regulating virtual assets. Bahraini Rain Financial raised USD 110m investment earlier this year, a record for the crypto industry in region, while CoinMENA became the first licenced crypto exchange in Qatar. Cryptocurrencies have entered the mainstream, with Damac and Emirates now accepting it as payment, and the Kingdom’s futuristic NEOM will get a metaverse city, incorporating crypto and non-fungible tokens. Digital banking is also on the rise with incumbents venturing into this space (Emirates NBD actively growing its Liv platform), and newcomers at the gate: KSA awarded the first digital banking licence to STC Pay just last year.

“The winners in this battle for dominance will be those who deploy their capital strategically and pivot decisively toward new sources of value. For proactive incumbents, there are significant opportunities to be had in the current environment – they just have to identify and seize them” commented Vasseux.

The full report on The State of the Financial Services Industry 2022 can be found at: https://www.oliverwyman.com/our-expertise/journals/state-of-financial-services.html

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About Oliver Wyman

Oliver Wyman is a global leader in management consulting. With offices in more than 70 cities across 30 countries, Oliver Wyman combines deep industry knowledge with specialized expertise in strategy, operations, risk management, and organization transformation. The firm has more than 5,700 professionals around the world who work with clients to optimize their business, improve their operations and risk profile, and accelerate their organizational performance to seize the most attractive opportunities. Oliver Wyman is a business of Marsh McLennan [NYSE: MMC]. For more information, visit www.oliverwyman.com. Follow Oliver Wyman on Twitter @OliverWyman.

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