Both the government and the private sector are continuing efforts to develop the financial technology (fintech) industry in Bahrain, providing a platform for new financial services growth.
In early June Bahrain Islamic Bank inaugurated its Innovation Lab, an in-house fintech space designed to test new banking products and services before they go to market.
Equipped with a range of new technologies, including robotics, digital banking services, instant chequebook- and card-printing services, the lab aims to drive further innovation in the fintech field and forms part of the bank’s efforts to improve its digital offerings.
The development followed the announcement in late May that local firm Bridge Insurance and Reinsurance Brokers had received regulatory approval from the Central Bank of Bahrain (CBB) to launch the country’s first online insurance comparison portal.
The website, due to come on-line in the third quarter, will provide a platform to compare different policy packages, with the overall aim of boosting insurance coverage.
With an internet penetration rate of 98%, according to Internet World Stats, and a demonstrated appetite for online commerce, company officials expect that up to 80% of Bahrain’s insurance products could be sold electronically in the future.
Several mobile payment and digital banking solutions have also been released this year: local telecoms company Batelco teamed up with Arab Financial Services to launch the bwallet digital mobile payment system in January, allowing users to make purchases and payments from their mobile phones; and in April Gulf International Bank established meem, the region’s first sharia-compliant digital banking service.
Government efforts, international players creating fertile environment
These developments come amid sustained government efforts to improve the kingdom’s fintech environment. Central to this has been the CBB, which in June last year created a regulatory fintech sandbox: a secure, virtual space that allows companies to trial and develop digital banking products.
In addition, the February launch of the Fintech Bay project, the kingdom’s first co-working incubation and development hub, has put Bahrain in a strong position to drive regional innovation in the segment.
Speaking to OBG, Khalid Saad, CEO of Bahrain Fintech Bay, highlighted the diverse financing options available to start-ups as one of the forces that should attract new players. “Crowdfunding regulations are here, with Bahrain being the first globally to issue dedicated regulations for sharia-compliant crowdfunding, alongside conventional ones,” he said.
Bahrain’s strong technical infrastructure is also an enabling factor: the kingdom was ranked first in the MENA region and 31st globally for ICT development by the UN’s International Telecommunications Union in its most recent index, released in December.
Indeed, the existing tech ecosystem has resulted in broader developments that are likely to have a positive impact on the fintech segment. For example, US online giant Amazon Web Services announced in September last year that it would base its Middle Eastern cloud data centre in Bahrain.
The base, which will include upgraded infrastructure that will allow for data storage with lower latency, is expected to open early next year. One of the early adopters, Bahrain's sovereign wealth fund Mumtalakat, announced it would be migrating its tech infrastructure to the cloud when it launches.
The continued development of the fintech segment provides an opportunity to strengthen Bahrain’s wider financial services industry. Indeed, in its latest Article IV consultation, released in May, the IMF highlighted the segment’s potential to capitalise on banking industry’s solid foundations.
“The banking system remains well capitalised and liquid,” the report stated. “Fintech presents opportunities for Bahrain, where global experience can be brought to bear in addressing possible risks.”