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With the negative impact of the COVID-19 pandemic spreading the globe, the World Bank expects that the global economy will contract by a staggering 5.2% this year, while Ian Bremmer, President of Eurasia Group, speaks of “the first global economic depression of our lifetimes”. Government rescue measures have already exceeded US$4.5 trillion, and growing by the day, leading to not many people feeling optimistic these days.
However, global headlines make it clear that industries are not being affected equally, that some are finding opportunities, despite the many challenges on the horizon. Among those worst-hit are the airline industry, which is forecasted to incur losses of $250 billion, the hospitality and leisure sector, which in the US alone recorded a 47% loss in jobs, and the brick-and-mortar retail sector, whose losses in the US are estimated to reach $430 billion. There are, however, firms who have been able to use social distancing measures to their advantage. Zoom, for instance, has seen its valuation rise from around $16 billion to $58 billion while sales increased by 169% year-on-year in the three months to April 30, 2020.
Enterprise video communications providers like Zoom are not the only ones who are set to emerge stronger from the status quo. Deloitte found, that with billions worldwide confined to their homes, the financial technology, or fintech, industry is benefiting from increased use of online, especially mobile, channels for viewing and managing finances. Indeed, research Mastercard conducted in the UAE shows that contactless payments in Q1 of this year were 100% higher than during the same quarter in 2019. And it is this ongoing, accelerating shift to cashless payments that makes now the time for fintech investment.
This bodes well for the GCC region, where decades of economic diversification have succeeded in creating a tech-focused ecosystem that enables entrepreneurship. The Kingdom of Bahrain, which has emerged as a fintech hub, is a case in point. With its financial sector generating 17% of non-oil GDP, leveraging almost 380 financial institutions that call it home, and online payments penetration across MENA having reached 76%, Bahrain is embracing fintech as a sustainable growth source.
Related: How Fintech Can Help Ensure The Survival Of SMEs In The Middle East
Through the collaboration our evolving startup ecosystem in Bahrain facilitates, established financial institutions, which Deloitte has found to provide “the benefits of capital, distribution access, and compliance infrastructure”, are working hand-in-hand with disruptive startups that can provide “sought after digital solutions”. Attesting to the effectiveness and potential of the fintech environment we have nourished here in Bahrain, FinX recognized the Central Bank of Bahrain as the “Most Innovative FinTech Regulator” for its key role in creating and maintaining a regulatory framework that fosters innovation.
There is nothing short of a fintech revolution taking place across the Middle East, catalysed by the ongoing pandemic. But something more radical than even the unprecedented consumer uptake of financial technologies is taking place in the GCC fintech space. The recent release of the latest Bahrain FinTech Bay Gender Balance report is testament to changing attitudes across a region traditionally perceived to be more socially and politically conservative than most. The report makes a number of recommendations that are truly groundbreaking for the Middle East, including national targets for female representation on boards and formalized flexible working policies to support working care providers.
The region and particularly Bahrain have already taken great strides towards female empowerment, especially in the fintech sector. Across the MENA region, one in three startups is founded by women. But there is still a long way to go before MENA can claim to meet the global standards of other, more established tech and fintech ecosystems. Without proper representation of women at board, management and founder level, there can be no real fintech revolution. And while the recommendations of the report may be radical, they are achievable. Today, there is already at least one woman sitting on the board of every single S&P 500 company.
Major cultural and social paradigm shifts typically take time, but the pandemic has shown how quickly a major shift can occur given the right conditions. Just look to the surge in e-payments across the Middle East, a region heavily reliant on cash. In Bahrain alone, electronic fund transfer systems such as Fawri and Fawri+ saw unprecedented surges in usage – up 935.7% year-on-year in the month of May. Look to the global shift to remote working, something previously not thought possible. The pandemic is a global tragedy, but it has served as a catalyst for digital transformation across a range of sectors. More than that, it might prove to be a catalyst for social change.
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