Saeed Patel, Group Director at Eastnets, spoke to Payment Expert about the thriving role of fintech in the Middle East payments ecosystem.
Payment Expert: Firstly, are you able to tell us more about your role and how you began in the fintech sector?
Saeed Patel: Eastnets is the compliance, payment, and fraud protection specialist. It helps financial institutions update the way they operate to stay secure, ensure compliance, and provide faster transactions.
This helps them keep pace with the surge in banking and e-commerce technologies, tighter regulatory standards and increasing financial crime. It was founded by the CEO, Hazem Mulheim, in 1984. It has grown organically and through strategic acquisitions. Today, Eastnets has over 750 customers, with 11 of the top global banks using our solution.
My role is Group Director of Product Development Management. I am responsible for the vision and investment strategy behind Eastnets’ product portfolio, including R&D investment in artificial intelligence driven solutions.
My team comprises product subject matter experts who know the compliance and payments space very well, combining in-depth domain and technology knowledge together with experience in banking. I lead a global team, but my role is based in London, helping the business pivot towards a larger local presence close to our growing European customer base and being part of the exciting fintech hub that London has become.
Prior to Eastnets, I spent 25 years in the capital markets, fintech, and regtech industries. I was CTO of EDF Trading and built its energy trading and risk management platform from a start-up to be a global tier 1 energy trading house. I also ran the regulation and compliance technology team and compliance advisory services before moving into the regtech and fintech start-up and scale-up world. I have been privileged to work with exceptional people during a period of transformational digital change.
PE: What role can fintech play in boosting the Middle Eastern payment ecosystem?
SP: For over 35 years, Eastnets focused on giving financial institutions the tools to connect with each other and to participate in the global economy. We helped banks in the Middle East and emerging markets connect to the SWIFT payments network in the 90s. Since then, our solid track record and reputation allowed us to grow to be one of the biggest players in the global market, providing payment hub solutions, incorporating multiple payment networks.
But just being connected isn’t enough. Regulations change, technologies emerge, and data streams grow. Conversely, financial crime has become more sophisticated with cybercrime and institutional payment fraud on a prolific rise. Financial institutions need a suite of payment and fraud detection solutions for an ever-evolving market. We can provide those.
In doing so, we also ensure financial institutions are compliant with an ever-growing regulatory landscape in AML and CFT. Banks in all regions need to be fully up-to-date with the ever-shifting global financial and regulatory environment. This reduces money laundering, ensures compliance with sanctions regimes, and limits the ability of criminals or terrorists to operate. It also boosts the reputation and integrity of the financial system, safeguarding consumer interest and keeping the financial ecosystem safe.
PE: How has fintech grown in the region and has it been embraced by regulatory bodies?
SP: The fintech sector in recent years has seen explosive growth in the Middle East and this trend looks to continue. While fintech is starting at a lower base compared to Europe, North America and APAC regions, regulators in the Middle East are embracing it and see it as an important enabler for financial inclusivity and economic growth. The COVID-19 pandemic has accelerated the adoption of fintech in the region.
Regulatory standardisation is still work in progress in the region, and as a result there is significant variation in regulation from one country to another. However, there is growing regional co-operation on fintech policy particularly through the Gulf Cooperation Council. This process needs to be accelerated and broadened across the whole Middle East to catch up with other global regions and to realize the benefits of standardization and interoperability.
Overall, fintech is largely concentrated in a small number of Middle Eastern jurisdictions. As much as 75% of fintech companies are based in the UAE, Egypt, Morocco, Bahrain, Tunisia, Jordan, and Lebanon (CGAP, 2020). Among these, the UAE hosts the largest number of fintech firms, with estimates of circa 46% of the regional total market. The development of fintech supportive ecosystems in the economic free zones of the UAE, particularly Abu Dhabi Global Market (ADGM) and Dubai International Financial Centre (DIFC), has facilitated the development of the sector and contributed to economic growth.
Emergent trends in the Middle Eastern market include digital banking, digital payments and remittances, digital lending (peer-to-peer lending), and digital capital raising (crowdfunding). We have seen the rise in digital payments, including e-money and mobile payments, largely driven by the increase in e-commerce and trade finance in the region.
New regulatory frameworks have been implemented in several Middle Eastern countries, including the UAE, Saudi Arabia, Kuwait, and Bahrain, affecting the financial sector such as data protection, cybersecurity, anti-money laundering, consumer protection, open banking, and electronic Know Your Customer (e-KYC).
The move into open banking in the region has provided customers and third parties with easy digital access to their financial data. Through this shift, fintech has enabled banks to develop their infrastructure to allow for Application Programming Interfaces (API’s).
Several Middle Eastern countries such as the UAE have invested in fintech innovation hubs, developing regulatory sandboxes and adopting RegTech / SupTech solutions. This is a welcome development, and is enabling the UAE to be a regional financial centre for the Middle East.
Overall, the Middle East is embracing fintech, and although there are country variations in adoption, the general trend from regulators and financial institutions is in the right direction to keep up with Europe, North America and APAC regions.
PE: Can the fintech sector boost financial inclusion in the Middle East?
SP: Undoubtedly, yes. The first step towards financial inclusion is having access to a transaction account. We offer payment hub technology to clients around the world, including those in the Middle East. This boosts the opportunity for participation in the economy.
But trust and security must underpin this. There’s no point in having a transaction account if it increases the likelihood of financial crime and fraud. Again, fintech firms can help by building in powerful anti-fraud and money laundering technology into the services on offer.
With a safe, secure, and easy-to-use transaction account, populations can become part of the global economy and thrive.
PE: Will the growth of the fintech sector lead to increased financial inclusion in the Middle East?
SP: There’s been a strong focus on improving financial inclusion across the Middle East and Africa since 2016, when the Council of Arab Central Banks declared April 27 as the Arab Day of Financial Inclusion.
Initiatives like this are vital, as they create political and business pressure to improve financial inclusion. The fintech sector can support this by offering innovative products and solutions to financial institutions. This allows them to offer consumers more choice and flexibility when it comes to becoming part of the financial system.