Bahrain has emerged as a regional financial hub in the Gulf Cooperation Council (GCC) region, propelled by a burgeoning fintech ecosystem, government support and pioneering initiatives such as the regulatory sandbox, cryptocurrency regulations and open banking rules.

A new report produced by Bahrain Fintech Bay, supported by the Bahrain Economic Development Board (Bahrain EDB) and the Central Bank of Bahrain (CBB), highlights how these key drivers have cemented the country’s reputation as a leading financial innovation center. It also explores the remarkable development of Bahrain’s fintech ecosystem and offers insights into emerging trends and the future outlook of the landscape.

According to the report, the Bahraini fintech sector has grown tremendously since 2022, an expansion that’s been fueled by increasing adoption of technological advancements, and integration of fintech solutions across various sectors, including telecommunications.

Bahraini banks embrace digitalization

Leading Bahraini financial institutions are embracing cutting-edge technologies to enhance customer experience and streamline operations.

Bank ABC, for example, launched in 2019 ila, its digital, mobile-only banking offering in Bahrain which offers completely digital onboarding, instant virtual cards, physical debit cards, a multi-currency account as well as a interest-bearing current account without minimum balance requirements.

The initiative aligns with Bank ABC’s strategy to build a future-ready financial institution, combining advanced technology with customer-focused design to redefine the banking experience.

Similarly, the National Bank of Bahrain (NBB), partnered in 2021 with Backbase to launch a digital banking platform. The collaboration has enabled the bank to provide a seamless and personalized banking experiences, with features such as rapid digital onboarding, real-time account management, and access to different financial services.

Telcos enter the fintech space

Telco companies in Bahrain are also making their mark in the fintech space. Currently, the three largest telco operators in Bahrain, namely Bahrain Telecommunication Company (Batelco), Zain Bahrain and STC Bahrain, are all licensed by the CBB to provide financial services, providing services such as lending, payments and remittances.

Batelco, which ventured into fintech in 2021, operates several fintech brands in the country, including Beyon Money, a money management app, as well as Fawateer, a payment method for businesses.

Zain Bahrain provides the Zain Mobile Wallet, a mobile financial transactions service, Bede, a Shariah compliant fintech mobile app offering consumer micro-finance, as well as Foo, which specializes in fintech solutions for businesses.

And STC Bahrain, a subsidiary of the Saudi Telecom Company (STC), launched the STC Pay mobile wallet in Bahrain in 2023 as part of an effort to expand digital financial services in the region. Key features of the app include peer-to-peer (P2P) money transfers, bill payments, QR code payments at participating merchants, as well as international money transactions.

STC Pay claims more than 300,000 downloads in Bahrain, and more than 15 million transactions worth over BHD 500 million (US$1.3 billion) processed in 2023.

Bahrain’s fintech sector and emerging trends

Bahrain is home to about 115 active fintech companies, with payments and remittances remaining the largest vertical this year with a share of 27%, data from the report show.

However, the cryptocurrency and blockchain vertical is quickly gaining traction, now making up 7% of the market. The growth of the vertical is exemplified by startups such as ATME, an innovative fintech company licensed by the CBB that uses fractionalization and tokenization of real-world assets to enhance accessibility and liquidity to private capital markets.

Another emerging fintech trend in Bahrain is the rise of embedded finance and the API economy. This trend is gaining traction due to the widespread adoption of APIs in the financial services industry, and Bahrain’s pioneering open banking framework.

Platforms like BenefitPay are leveraging embedded finance and APIs to deliver innovative and convenient financial services. The platform offers a range of features that integrate seamlessly with various financial services and applications, enabling functionalities such as instant transfers, bill payments, and QR code-based transactions.

Most recently, BenefitPay teamed up with Zphin, the technology arm of PB Fintech, to launch an online platform integrated into the BenefitPay app that would offer consumer lending, car insurance, credit cards and travel insurance.

BenefitPay, an electronic wallet and payment platform, is operated by the Benefit Company, a leading finance firm in Bahrain that’s owned by a consortium of local banks.

Government support and progressive legislation

According to the report, government support and progressive legislation have been instrumental in the success of fintech in Bahrain. In particular, Bahrain was among the first jurisdictions in the Middle East to launch a fintech regulatory sandbox back in 2017, allowing startups and firms to test and experiment their banking ideas and solutions.

Bahrain was also the first in the region to implement open banking back in 2020, following the example of global financial hubs such as the UK. The framework allows third-party providers to access financial data and initiate payments on behalf of customers, provided they have the customer’s consent.

The CBB has also been a pioneer in crypto regulation, issuing in 2019 the Crypto-Assets Module, which regulates crypto activities such as trading, advisory services, and portfolio management. The module was amended in 2023 to address changes in the crypto market, enhance investor protection, and include digital token offerings in its regulatory framework.

These efforts have set the stage for the emergence of regional fintech superstars such as Tarabut Gateway, an open banking leaders, and Rain, a cryptocurrency brokerage and custodian and the first crypto company to receive a regulatory license in the Middle East in 2019. Both companies were participants in the CBB regulatory sandbox.

Yasmeen Al Sharaf, Director of the Fintech and Innovation Unit at the CBB, highlighted the central bank’s commitment to fostering “a dynamic and resilient financial ecosystem” and establishing Bahrain as “a leading hub for financial innovation, where emerging technologies and forward-thinking policies converge to unlock new opportunities for growth.”

Featured image credit: edited from Unsplash