The UK is a beacon in the financial services industry and has for a long time led the way in innovation and progress. The country regards the sector as a crucial part of its economic future.
Dalal Buhejji is the Executive Director of Investment Origination at the Bahrain Economic Development Board (EDB), heading the responsibility of sourcing and attracting high value investments into the Kingdom of bBahrain from Europe and the Americas. Here she shares her thoughts on UK fintech, and the benefits of a potential partnership with Bahrains’ Sandbox.
Chancellor Rishi Sunak described the financial services sector as a “crown jewel” on a call with major UK banks recently. On the call, Sunak pledged that the City will remain “competitive and dynamic” amid any post-Brexit pressure on the UK’s financial services sector. If the UK is to consolidate its strong position it makes sense for firms to try and learn from the extraordinary developments taking place outside of Europe.
Fintech is obviously an integral part of the UK economy, and analysis by KPMG found that the industry represents 10% of global market share and £11bn in revenue. The current UK model is certainly well established and has for a long time been a blueprint for other markets. However, a recent article published by a UK national newspaper highlighted that the country also has challenges because of a lack of start-up finance, limited access to scale-up finance accelerated by COVID-19, and slower regulation, so there are other areas, particularly around regulatory innovation in next-generation technologies, that are ripe for synergy. In short, fintech hotspots outside of Europe and other traditional markets simply need to be on the radar for UK firms.
One financial services hotbed for UK fintechs to watch closely is the Gulf region. Here, countries that were once minnows compared to the UK are increasingly becoming credible competitors. The latest Global Opportunity Index (GOI) report from the Milken Institute, which assesses countries’ attractiveness to international investors, shows that countries in the Gulf are quickly ascending the world rankings. While Dubai and Abu Dhabi have become fixtures, nimble financially-focused innovation hubs like Bahrain, which rose seven places in the Global Financial Services category, are coming up on the rails. In fact, the Institute for Chartered Accountants in England and Wales in June found that Bahrain is set to be the fastest growing economy in the Middle East this year. Regional GDP is expected to grow by 2.4% in 2021, compared to the regional average of 2.1%. Here, a more flexible regulatory infrastructure allows multinational businesses to be nimble while a sandbox environment facilitates the upscaling of experimental solutions and strategies.
Bahrain has for decades been known for its financial services sector and is known among its GCC (Gulf Cooperation Council) peers as a hub for innovation. The first formal banking branch in the region opened in Bahrain in 1920, and today, nearly 400 financial institutions call the island home. The country’s success in the financial services sector is partly down to its pro-innovation single financial regulator, the Central Bank of Bahrain (CBB), which even set up a specialist Fintech and Innovation Unit tasked with enhancing the local ecosystem. Key developments include the Unit launching the region’s first onshore fintech regulatory sandbox, just one of several initiatives aimed at providing fintechs from around the world with a pro-innovation regulatory framework where companies can test their solutions before rollout to global markets.
When you consider that the UK has one of the world’s leading fintechs scenes and Bahrain has one of the best fintechs sandboxes, there are potentially very powerful and profitable partnerships to be made. A suitable testbed could be the key for UK fintechs looking to expand on a global scale and ultimately compete on the world stage during these uncertain times. In line with ambitious, region-wide economic diversification efforts, Bahrain has made itself an attractive hub for strategically important industries like fintech, resulting in a supportive and accessible government and a highly trained, tech-savvy population. The Kingdom has long held a reputation as the regional leader in financial services but has increasingly come to be known as the regional hub for innovation too.
At a time when UK fintechs are looking to reaffirm their position in an uncertain post-pandemic, post-Brexit world, it is vital that firms look beyond Europe for strong international collaborations. An obvious starting point for British businesses is partnerships with countries like Bahrain, which offer a testbed and unique opportunity to get ahead of the game – and ultimately, protect and polish one of UK’s ‘crown jewels’. As long-term partners of the UK, the sands of the Gulf region promise particularly robust foundations for the next generation of UK fintechs.