The President of the Arab Federation for the Digital Economy sets five recommendations to promote financial technology and digital transformation in the countries of the region
His Excellency Dr. Ali Muhammad Al-Khouri, Advisor to the Council of Arab Economic Unity of the League of Arab States and President of the Arab Union for the Digital Economy, said that global digital payments will grow from $4 trillion at the end of 2019 to $5.5 trillion by the end of 2020, achieving a growth rate of 37.5% during the current year.
He added during his speech that he participated in the “FinTech Americas” conference, which was held on November 18 and 19 in Miami, United States, that there is no doubt that the spread of the Covid 19 pandemic will have a profound impact in pushing the value of digital payments further, Although current values and estimates do not reflect what is actually happening on the ground.
He pointed out that the Middle East, Africa and Latin America are witnessing relatively low investments in the field of digital payments, which also shows the extent of the growth potential that we may expect in the near future, as studies show that the financial technology industry has not yet reached its average balance in the Arab region, especially Governments and financial institutions in the Middle East do not treat fintech as a means of product differentiation and competitiveness, and the same is true of Africa and Latin America.
He explained that the Council and the Federation launched at the end of 2018, a strategic initiative to support digitization and the development of social and economic systems in the Arab region, while working to expand the scope of this project to include other countries in Africa. The initiative consists of 50 strategic programs dealing with financial technology from five different dimensions: : The digital infrastructure, the role of governments from the perspective of the legislator and the beneficiary, the needs of digital business systems for the private sector, citizen services and the development of the innovation system, with a focus on the concepts of digital and financial inclusion.
He continued, “According to our study, the financial technology industry in the Arab region is expected to grow at least 10 times during a period of 5 to 10 years, as there is a very large potential for financial technology to cover the population without bank accounts that exceeds 80% in other countries. Like Egypt, we also believe that prominent countries in the region such as the UAE, which ranks first in the Arab digital economy and ranks among the best global examples in fintech practices, will propel the region into the global race for digital and financial technology adoption.”
Al-Khouri concluded his speech by highlighting some recommendations that must be taken into account by governments in Arab countries and businesses as well, to promote financial technology and digital transformation in the region, namely:
First: Dealing with the concept of financial inclusion as a national priority and a main building block for building digital societies and the fuel that drives growth and prosperity in the economy. This requires understanding the dimensions of the digital system in its holistic form, and how its various components, such as financial technology, match.
Second: Governments are required to shift from current forms and roles that seem too large and complex to more dynamic and flexible operating models. This should be achieved by allowing the private sector to play its role and grow with less government interventions. This sector is a vital artery that needs to be revived and supported to meet the needs of economic diversification. In the region, and also to overcome the repercussions of the current health crisis, and to play its role in creating job opportunities on the one hand and creating new economic opportunities on the other.
Third, it is important for governments to create regulatory frameworks that are responsive to changes
Studies clearly show that FinTech thrives more in countries with less strict banking laws, and what can be seen is that banks in the region are being protected by current legislation which may explain their somewhat lax role, and also explain the low rates of start-ups and SMEs. .
Fourth: There is an urgent need for a collaborative approach and regional investment in innovations. If we look at the size of the market of the United States of America with a population of more than 300 million people and compare it to individual countries in the region, it will be clear that the feasibility and impact will not be the same but with the proposed collaborative approach The market size will be more attractive to regional and international investments and capital, especially through crowdfunding platforms, and in general crowdfunding is still not activated in the region despite its importance in supporting startups and the macro economy in the region.
Fifth: Financial institutions need more effective means to overcome the internal battles that try to preserve the legacy of the old regimes and adopt concepts for radical transformation with a more open mindset. There are tremendous opportunities for banks, whether at the present time or in the near future, but the game of competition will not be calm, in the International players such as Google and other digital platforms have been racing to offer unconventional banking services.