From a digital currency project, to a fintech innovation challenge, here’s what’s transpired for fintech in Bahrain during the year so far.
Bahrain’s focus on the fintech sector is putting the country on the map as a hub for fintech both in the Middle East and worldwide. The island country is in a position to become a key fintech hub worldwide, according to a recent report. The report noted that fintech in Bahrain has seen a steep growth curve in the last two years. This is so particularly in the space of public-private collaboration.
Further, it is home to over 80 fintech startups, and 85% of GCC-based fintech incubators located in the GCC region, the report pointed out. While there are many moving pieces in the fintech landscape across the Middle East, Bahrain is asserting itself as a frontrunner. Here are five key developments in fintech in Bahrain that have taken place so far in 2021.
1. The Central Bank of Bahrain to pilot its digital currency this year.
The Central Bank of Bahrain (CBB) announced in May this year that it would be introducing a digital currency settlement pilot. The pilot was launched in partnership with JP Morgan and Bank ABC. The initiative aims to promote real time cross border payments via digital currency. It also looks to develop a “next generation payment and settlement infrastructure” for fintech in Bahrain.
JP Morgan and Bank ABC banks will undertake the corporate transfer of US$ funds in and out of Bahrain. Meanwhile, the initiative taps into a blockchain payments infrastructure platform Onyx by JP Morgan.
In the same vein, Bahrain’s parliament members are pushing for the kingdom to go completely cashless in a decade. Consumer and government transactions are increasingly going online, services committee chairperson Ahmed Al Ansari noted. Al Ansari added that cashless payments would be quicker, easier, more hygienic, and safer.
Elsewhere, the country’s electronic wallet payment system BenefitPay saw an increase of 785% increase in total number of remittances in 2020. The growth represented over transactions of over US$5 million.
2. Bahrain launched its first fintech innovation challenge, Bahrain Supernova
The CBB launched a series of innovation challenges across the country this year, called the Bahrain Supernova Fintech Challenge. FinHub 973, the CBB’s digital lab, and the FinX22, an open API innovation platform by the UAE’s Fintech Galaxy, are hosting the challenge. It aims to boost fintech in Bahrain, and connect Bahraini financial institutions and fintech startups.
Applicants will be able to access a sandbox featuring 330 APIs and simulated banking data sets. The data has been collected from both local and regional banks. The sandbox aims to developing innovations across regtech, insurtech and fintech in Bahrain.
More recently, the CBB concluded a number of Supernova challenges in June this year. Bahrain-based fintech software solutions company Rsquare Technologies won its regtech challenge. Its winning solution was an automating account blocking and unblocking solution. Meanwhile, Mindgate Solutions won the National Bank of Bahrain Innovation Challenge. Further, Fidesmo and Ayekart took home the Benefit Bahrain Fintech Award.
3. VC funding activity indicates some investor enthusiasm for fintech in Bahrain
Startup Genome noted in a 2020 review that fintech was one of the country’s strongest sub-sectors within its startup ecosystem. The country ranked first in the MENA region and second worldwide for its standards on Islamic finance. Moreover, it was also home to 90+ active fintech companies, a growth of 35% from 2018.
Recent deals in the space of fintech in Bahrain include open banking platform Tarabut Gateway’s US$13 million seed funding round. The round was led by Berlin-based Target Global. Coinbase-backed crypto startup Rain Financial also raised a funding of US$6 million in its Series A. GCC-based Middle East Venture Partners led the round.
4. Batelco lands Bahrain’s Open Banking License
Batelco became the first GCC-based telecoms company to secure Bahrain’s Open Banking License from the CBB this month, according to an announcement by the Bahraini telecoms company.
The company will be providing digital wallets, cards issuance services, bank accounts aggregation and payments initiation services. The services will be available to both consumers and SME clients. The services will be offered under a new entity Batelco Financial Services.
For Batelco, the move is a step towards diversifying its investments. It will also allow the company to step into fintech in Bahrain, Chairperson Shaikh Abdulla bin Khalifa Al Khalifa said. “The team has partnered with a number of international players, bringing high reliability and scalability to our proposition,” Al Khalifa added.
Earlier in the year, the CBB had also published a note on the progress of retail banks in building Open Banking Framework (OBF) infrastructure. Under the OBF, the CBB issued a series of operational and technical guidelines to improve the digital offerings of retail banks in the country and provide a boost to fintech in Bahrain. These include APIs, customer experience guidelines, and cyber security standards.
5. Bahrain Fintech Bay launches partnership with Fintech Aviv in Israel.
Bahrain FinTech Bay (BFB) kicked the year off with an announcement that it would be partnering with Fintech Aviv. The partnership looked to promote collaboration within fintech in Bahrain and Israel. Moreover, the announcement was also in line with the Abraham Accords Peace agreement.
The signing of the accords marked the normalisation of ties between Israel and some MENA countries. These countries, including Bahrain and the UAE, signed the agreement with Israel late last year.
The agreement with Fintech Aviv involves joint projects, community events, and networking opportunities with VC investors. Further, it would also “pave the way for future partnerships and collectively strengthen our ecosystems,” CEO of BFB, Khalid Dannish, said in a statement.
Nicknamed Startup Nation, Israel’s startup space has been making much progress, especially in the fintech space. According to the Findexable Global Fintech Rankings Report 2021, Tel Aviv is the top city for fintech in the MENA region, and #5 worldwide. The country has over 500 active fintech companies. Many of these have brought in billions of investor dollars into the country’s startup space.
These developments show that the CBB continues to have a keenness for the development of fintech in Bahrain. As the year progresses, the kingdom is likely look forward to more robust policy, and corporate and startup-level initiatives, giving the country’s fintech landscape a competitive edge.Featured images courtesy: Charles-Adrien Fournier.