Discover the top fintech trends set to streamline payments, financing, and operations for GCC businesses in 2024.

Over the past few years, the Gulf Cooperation Council region has become an emergent hub of financial innovation, with several fintech trends now set to shake up the industry as we move into 2024.

Fintech startups have proliferated across the GCC, upsetting the financial system and providing novel digital banking solutions to a region eager to trade traditional banks for digital banking.

In a post-pandemic study done by fintech analysis firm IBS Intelligence, 89% of GCC consumers preferred to conduct their banking online rather than visiting a branch, with 77% of respondents accessing digital services at least once a week, and 88% willing to open an account in a digital-only bank.

These consumer preferences create space for all sorts of innovative fintech solutions to gain market share and reshape the financial industry.

Funding for fintech startups in Kuwait and the GCC region has more than quadrupled from 2017 to 2022, reaching a whopping $885 million in 2022, according to business media Magnitt. Not only did the amount invested in the fintech industry quadruple but so did the number of deals, a McKinsey report shows.

Source: McKinsey

The same report shows that the fintech market is moving beyond basic financial services, like consumer-oriented mobile apps and payments solutions.

Fintechs now offer a range of banking services across the whole financial services value chain, including digital investment platforms, regulatory technology (or regtech), and cryptocurrency exchanges.

More importantly for entrepreneurs, fintech startups and neobanks are moving beyond customer experience and into B2B services, including finance solutions for small businesses. As the GCC fintech industry matures, leading incumbents are partnering with startups to bring more innovations to market.

With the diversification of the fintech ecosystem and the increasing role of fintech innovators in transforming daily transactions and wealth-building in the region, the GCC fintech market is projected to grow at a 19.50% CAGR during 2023-2028, according to consulting firm IMARC Group.

This shift has been facilitated by a strongly supportive and even proactive environment, with regulators and policymakers taking the lead – particularly in the UAE and Saudi Arabia, concludes Thinktank The Conference Board.

With this promising scenario, 2024 is shaping up to be a year of explosive growth for fintech in the region, as these startups scale to meet booming demand while maturing regulatory frameworks encourage further growth.

So what kind of financial services will fintech companies offer to entrepreneurs and startups in Kuwait and the Middle East in the coming year? These are the top 6 fintech trends that are moving the GCC in 2024.

Trend 1: Banking as a Service (BaaS) infrastructure grows

Trend 2: Buy now, pay later (BNPL) payments skyrocket

Trend 3: Fintech loyalty programs change customer relations

Trend 4: Digital remittance services gain market share

Trend 5: Open banking development continues

Trend 6: Crypto flourishes in the GCC region

Read on for a deep analysis of 2024’s top trends in the GCC’s fintech market.

Ride the fintech wave and unlock seamless digital payments for your Kuwaiti business. Download the Kem app for easy P2P payments for consumers and businesses.

Trend 1: Banking-as-a-Service (BaaS) infrastructure grows

Banking as a Service (BaaS) is a key fintech trend that is reshaping the traditional banking system worldwide. BaaS allows third-party developers and businesses to access and offer financial services through APIs.

"With the BaaS model, chartered banks partner up with fintech or non-financial businesses so that the partner can offer great financial products to their customers,” Seth Sadeq, co-founder and CEO of Kem explains. “It’s a win-win for both players: fintechs don’t need a banking license, and banks reach a wider customer base at a fraction of the cost."

‍

Financial products offered through BaaS platforms include white-label credit cards and debit cards, digital wallets, and new digital payment solutions like BNPL.

The BaaS market is steadily growing. In 2023, the Middle East and African BaaS market was valued at $61.6 billion. By 2029, that market is projected to increase by a compound annual growth rate (CAGR) of 7.4% and reach a value of $101.5 billion, projects research firm Stellar Market Research.

Innovative companies are already partnering with BaaS providers to build deeper connections with their customers, reports Arabian Business. These partnerships are bringing some successful BaaS initiatives to market, like Arab National Bank providing BaaS services to its customers and Emirates Airline’s consumer-oriented BNPL solution “fly now, pay down the line”.

High-profile implementations of BaaS technology like those show how the GCC region is witnessing a race to adopt banking as a service.

Fueled by a growing demand for fintech solutions from a young population who prefer digital wallets and innovative financial services over traditional banks, BaaS is a fintech trend that promises to show many more market launches of BaaS-powered initiatives in Kuwait and the region in 2024.

Trend 2: Buy now pay later (BNPL) payments skyrocket

One particular financial product from the fintech revolution that is gaining traction in the GCC region is “buy now pay later”, also referred to as BNPL.

This payment option allows consumers to conveniently spread payments in installments, often free of interest, and with added benefits such as fast approval and no credit score requirements.

Commenting on the popularity of BNPL as a payment method, Kem co-founder Zane Sadeq comments how "with the rise of BNPL in the Middle East, people are able to get easy access to credit which previously was not available.”

‍

After the COVID-19 pandemic kickstarted the popularity of online shopping, the continued rise of e-commerce in the GCC region is fueling a growing demand for BNPL services as consumers seek flexible payment options for mostly online purchases.

More precisely, 64% of BNPL payments are made at online retailers and marketplaces for consumer goods – mostly fashion, electronics, and home and furniture, reports consulting firm Precedence Research.

‍

Source: Precedence Research

In their report, the firm forecasts the “buy now pay later” market size to grow at a CAGR of 32.20% and increase over ninefold from the $9 billion in 2022 to reach around $83 billion by 2030.

With such high growth numbers, an expansion frenzy among leading BNPL industry players in the region is set to take place in 2024 and beyond.

As this fintech trend continues to gain momentum, the market is expected to witness partnerships and collaborations with traditional banks to improve BNPL services offered in the region. Another expected development is for the market to be regulated, with providers needing a permit from the central bank.

Trend 3: Fintech loyalty programs change customer relations

As fintech gains a solid foothold in the financial system of the GCC region, fintech innovators play an increasingly significant role in the way consumers and businesses in the Gulf conduct daily transactions and build wealth for the future.

The growth of financial technology, together with the rise of smartphone penetration and the increasing demand for digital financial services, provides a favorable environment for the development of innovative loyalty programs that can rewrite the customer experience of banking.

In a survey held by consultant EY, 81% of Gen Z respondents said personalization could deepen financial services relationships.

Fintech loyalty programs focus on providing dynamic and personalized banking experiences and offering tailor-made incentives and rewards to customers. A key design element in fintech loyalty programs is gamification, which makes the customer experience more enjoyable and rewarding while creating an emotional bond with the user.

Another key element of fintech loyalty programs is day-to-day integration. They are designed to be integrated with customers' daily lives, offering rewards and incentives for various financial activities, such as bill payments, personal loans, and online shopping.

As the fintech ecosystem continues to grow and evolve in the GCC region, fintech loyalty programs will likely become more prevalent and sophisticated as a fintech trend in 2024. Not just to meet rising customer expectations, but also for fintech players to stay ahead in what consultant McKinsey calls a highly competitive market where each firm focuses on winning market share.

Trend 4: Digital remittance services gain market share

One of 2024’s top trends in fintech, remittance services are a big part of banking in the Gulf Cooperation Council (GCC) region.

These services allow individuals to send money across borders and have become a vital part of GCC economies due to the large expatriate population in the region. At 35 million migrants, the GCC region accounts for 10% of global migrants according to non-profit institution Brooks.

Remittance outflow from the GCC region was valued at $134 billion in 2021, concludes the World Bank. As a share of GDP or on a per capita basis, the GCC region is by far the top region for outward remittances worldwide, with South Asia and surrounding MENA countries receiving significant amounts of remittances.

Source: World Bank

Facilitating these cross-border money transfers, the remittance market in the GCC is extensive. Numerous exchange houses and startups offer a variety of remittance products and services, including bank transfers, cash pickups, and mobile money services.

Between these financial services, remittance fees can vary wildly and are generally very expensive. At a global average of 6.2 percent, the average cost of sending $200 in 2022 was a far cry from the Sustainable Development Goal target of 3%, the World Bank reported.

Unsurprisingly, traditional banks are the most expensive channel at an average of 11.8% for remittance fees,  followed by post offices at 6.3% and money transfer operators at 5.4%.

While it is cheapest to send money via mobile apps at 4.5%, digital payment solutions accounted for less than 1% of global transaction volume in 2022. Low fees and adoption rates mean that we will likely see digital remittances grow in transaction volume in 2024.

Worldwide, the digital remittances market is expected to reach around USD 8 billion by 2027, growing at a CAGR of +20% from 2023 onward, consultancy AI Market Research forecasts.

In the GCC region, where cross-border payment developments like blockchain and partnerships between financial institutions and fintech players are transforming the remittance landscape, digital remittances will likely account for even more growth in 2024.

Trend 5: Open banking development continues

With the introduction of BaaS infrastructure having laid the foundation for a new era of banking in the GCC, the region is slowly seeing increased access to financial data through open banking.

Like BaaS, open banking also involves connecting banks to fintechs and non-banks via APIs.

But, while in BaaS models, banks and nonbank businesses integrate complete banking services into their ecosystem, open banking allows fintech companies to specifically access an individual's or an institution’s financial data to offer customized and enhanced financial products or services.

The potential benefits of open banking are many to financial systems, businesses, and consumers alike.

By enabling data-sharing and improving financial transparency, open banking has the potential to create an integrated financial ecosystem. It fosters financial inclusion, and seamless movement of funds through integrated payment solutions, and promotes collaboration between the different players in the financial industry.

When interviewed by the news outlet Economy Middle East, Godfrey Sullivan, Senior Vice President and Head of Strategy for the Middle East at Visa, commented that “the opportunities are immense – customer data remains siloed across not only banks but many other organizations.”

He went on to note that, “done effectively, it will improve credit risk scoring for banks, consumers, and SMEs, easing access to financing. Open banking’s personal financial management may take time but promises to revolutionize finance tracking across institutions, benefiting many.”

‍

However, open banking has had one major hurdle to overcome in the GCC region – regulation.

Bahrain has been leading regional efforts to introduce open banking and foster greater financial inclusion, having launched regulations in 2020 (giving rise to the growth of Tarabut Gateway, a leading open banking API). The UAE followed suit, with its Central Bank working on a Financial Infrastructure Transformation Programme, set to be implemented by 2026, fintech platform Fintech Galaxy reports.

In 2022, Saudi Arabia revised its banking regulations to become the third country in the GCC to implement an open banking framework that includes legislation, regulatory guidelines, and technical standards to enable banks and fintechs to provide open banking services in the country, payment publisher PYMTS reports.

As for Kuwait, the need for an open banking framework has been noted by its financial institutions. While no formalized framework has been put in place yet, steps are being made to introduce open banking in the country.

In 2022, the Central Bank of Kuwait launched an open-banking framework within its regulatory test environment. Commenting on the new product, His Excellency the CBK Governor, Basel Al-Haroon, stated that “the CBK spares no effort to support the advanced fintech”.

With governmental push and fintech companies eagerly awaiting broader open banking frameworks, 2024 will likely show promising new developments in the sector.

Trend 6: Crypto flourishes in the GCC region

The final fintech trend for 2024, cryptocurrency presents a unique and promising opportunity in the GCC region.

Governments in the region are providing support for blockchain adoption, with initiatives such as tax incentives and low barriers to entry for startups and investors, reports publisher Finextra.

Crypto adoption as a digital asset is especially high in the UAE, ranking 3rd globally in residence investment advisor Henley & Partners’ Crypto Wealth Report.

Alongside the UAE, Bahrain has also been warm towards the adoption of crypto and blockchain technology, going above and beyond to work with crypto companies and to build regulatory frameworks for blockchain technology.

Today, the countries host offices of several cryptocurrency exchanges and decentralized finance companies and are widely hailed as crypto havens.

Meanwhile, Kuwait is taking a different stance. In July 2023, the country’s Capital Markets Authority prohibited crypto payments, investment, and mining, in what it said is an effort to prevent money laundering via crypto.

However, Kuwait isn’t blind to the potential of blockchain technology. In 2023, the Central Bank of Kuwait approved two local banks to launch their own blockchain-based KYC verification, reports blockchain news outlet Cryptopolitan.

With its many potential benefits, like the possibility to facilitate instant, cross-border payments, or deliver heightened financial privacy, crypto is likely to stay at the center stage of fintech in 2024.

With crypto adoption high in the region and several countries extremely inviting to blockchain technology, this fintech trend cannot but remain a relevant topic.

Leveraging 2024’s fintech trends

The fintech trends highlighted for 2024 signal an exciting shift for finance across the GCC. From BaaS infrastructure expansion to the crypto explosion, novel innovations will empower entrepreneurs and consumers alike with improved banking and payment solutions.

As these trends shake up traditional finance, new opportunities abound for Kuwaiti businesses to leverage emerging fintech for operational efficiency and customer growth.

By integrating the latest payment systems and financial services into your startup or business, forward-thinking entrepreneurs can gain a competitive edge unrestrained by old-school banking limitations.

The future of payments is here. Unlock your company’s full potential today with Kem – the digital payment platform purpose-built for bold Middle Eastern founders and consumers ready to ride the fintech wave of the future. Download the Kem app for free on Google Play and Apple.