Bahrain’s digital transformation

The FinTech industry in Bahrain has experienced significant growth, with over 120 FinTech companies currently operating in the country. However, the majority of these companies focus on payments and crypto, according to the recently released ‘FinTech Ecosystem 2022’ report by Bahrain FinTech Bay.

The Central Bank of Bahrain has been proactive in introducing new regulatory reforms and policies, including frameworks for crypto-assets, digital financial advice, crowdfunding, open banking, and the e-KYC framework. The report highlights the importance of these efforts in fostering a supportive environment for FinTech innovation in Bahrain.

Bahrain’s FinTech ecosystem has also benefited from the presence of 19 incubators and accelerators, providing resources and support for startups to grow and scale. The government has also demonstrated its commitment to supporting the industry beyond just regulatory reforms, with investments aimed at fostering innovation and entrepreneurship.

Bahrain has been leading the way in the MENA region, implementing a more regulated approach to FinTech, particularly in areas such as open banking. As the FinTech industry continues to thrive in Bahrain, we can expect to see further exciting developments in the Kingdom’s FinTech landscape.

TechPassport speaks to Raheel Iqbal, the Managing Partner of Codebase Technologies and has over fifteen years of experience working with leading financial technology organizations in the US, EU, Middle East, and APAC about how the region is embracing the FinTech industry.

Raheel Iqbal, Managing Partner, Codebase Technologies

Tell us about yourself and your role?

I’ve spent over 15 years in the banking, consulting, technology and software industry across a variety of roles. Currently as the Managing Partner I run our overall operations at Codebase Technologies. My focus is on ensuring we have the best talent at the company, mentoring the team, keeping Codebase Technologies at the forefront of our industry through product development and ensuring we are in the right position to help our clients build the next big thing.

How did you move into FinTech?

FinTech was a natural step for me as I’ve worked at the intersection of finance and technology for many years. I was really intrigued by the convergence of the two fields and how technology enables financial services in a number of ways, be it better customer experiences or increasing financial inclusion.

I realised this was an area where I could make a significant impact by leveraging my experience and passion for banking and innovation. It was also a field where at least from a digital banking perspective I realised there was significant gap, while new FinTechs were popping up all over the world, legacy financial institutions were struggling to adapt because they didn’t have the right platforms, partners or mindset to compete.

How would you describe the FinTech eco-system in the Bahrain?

Bahrain’s FinTech ecosystem is very exciting and growing quickly. In terms of innovation Bahrain has really put itself on the map by being an early adopter of technology. Bahrain had one of the first regulatory sandboxes in the world, is one of the leading markets in terms of open banking regulation and adoption and has a number of innovations labs and accelerators investing and nurturing FinTech start-ups.

“In terms of innovation, Bahrain has really put itself on the map by being an early adopter of technology.”

The government is showing a lot of foresight by pushing for FinTech development and entities such as Bahrain FinTech Bay are helping drive the change through talent development and helping FinTechs get up and running in the country.

What are the key differences / advantages in the region?

A significant portion of the MENA region is still financially excluded, which has been a big driver of FinTech adoption since digital channels help FIs break the barriers of customer access to financial services. People in MENA are also very digitally-savvy so they’re quick to try new services and products launched digitally. High internet penetration rates and mobile phone usage is also helping FinTech spread like wildfire in the region which is why many are choosing to launch or expand to the region.

Ultimately, there is a large untapped market for FinTechs. A lot of the big banks were quite complacent for a long time so customers turned to FinTechs to address their needs, however we’re definitely seeing a lot of the big players come around and partner with FinTechs or build their own digital—first which is helping drive competition and more options for customers.

“High internet penetration rates and mobile phone usage is also helping FinTech spread like wildfire in the region which is why many are choosing to launch or expand to the region.”

How does Bahrain attract international FinTechs and Banks?

Bahrain has a number of initiatives in place to attract international players. One is the number of labs and association that help FinTechs set up in the region, invest in them and help connect them with the right people in the region to grow and scale.

Second is Bahrain’s overall quality of living, the Kingdom has been rated one of the top in terms of quality of living, so naturally founders are enticed to move to the region. The country is also quite strategically placed in terms of East and West so from a logistical perspective that helps in terms of travel, attending FinTech conferences, investor events, etc.

Do you predict more collaboration between Financial Institutions and the FinTech startup community and if so, why do you think that is more prevalent in this region?

Yes, I think collaboration is becoming more and more the winning strategy for FIs. Many of them realise that while they might be great at creating and marketing their products and services, they’re not necessarily the best at the technology side. FIs also realise that to upgrade their tech capabilities requires significant investment and time if it’s done in-house. And why spend all that money and time when there are partners out there with tech stacks ready to go?

“Many of them realise that while they might be great at creating and marketing their products and services, they’re not necessarily the best at the technology side.”

In the past you had issues with different systems not able to integrate with one another, I’m talking about old core banking software, which required cost upgrades. But now with APIs being so commonplace, partnerships are much easier no matter the infrastructure and IT limitations an FIs has. An example is our Digibanc platform, because we built it on a micro services architecture and API-first, we can integrate it with old core banking systems and give FIs the power to launch new products and services quickly as well as integrate with third party APIs to really turbocharge their innovative capabilities. In the past the FI would need to upgrade their core banking for millions and spend a year or two doing it, now we can get them up and running in just a few weeks.

The region has a large number of big FIs who are looking to innovate quickly, we give the tools to that and advise them on how to leverage our technology to re-invent their banking business for the modern age.

The Middle East is often seen as an innovation hub for FinTech – why do you think so much innovation is bred in the region?

Historically, the Middle East has been a very innovative region, several fantastic inventions and break throughs have come from the Arab world – algebra, optics, hospitals, even the cheque. I think the discovery of oil, while very beneficial to the region resulted in a slowdown in innovation, since money was flowing through most of the region.

However, as the Middle East looks towards it’s future beyond oil, FinTech and digital finance have seen a emerged as area of focus. The banking sector has always been strong in the region, so augmenting it with technology innovation is a natural progression for the region.