The ongoing global Covid-19 outbreak has accelerated the digitization of the GCC economy as consumers have turned away from physical offerings and seen the advantages and efficiency of digital alternatives.
The financial sector is no different as the GCC has experienced an increase in the use of financial technology (fintech) platforms, especially banking and cryptocurrencies which have seen the biggest increase in transactions.
Actually, the surge of fintech platforms started emerging in 2017. Since then, governments in the region have pushed policy, economic and innovation initiatives to become a hotbed for fintech activity and regulatory development.
The startup nature of fintech companies has helped them rise quickly in the local market. They adopt a fast-failure approach and need to move fast to create disruption and build deep customer connections, therefore, they will accept mistakes as necessary for innovation and navigating the market accordingly.
Risk management plans are seen as tedious processes
As such, many do not feel constrained by the regulatory requirements and responsibilities that are applicable to banks and other financial institutions, especially as they believe risk management plans are a tedious process restricting innovation and market access.
In addition, the main difference with long-established institutions is that the latter have experience and large teams focused on risk. Fintech companies however start small, with teams prioritizing product engineering and market development.
Therefore they launch operations without understanding complex regulatory requirements and fail to meet compliance standards.
Whilst the future of GCC fintech companies is promising, it will also bring increased scrutiny from the regulators who will make sure they have solid risk management controls in place.
Banks and financial institutions have long had to comply with the many aspects of regulatory requirements such as KYC (Know Your Customer), due diligence or anti-money laundering laws. It has helped enforce consumer protection, reduce fraud and criminal/terrorism financing and ensure a stable financial ecosystem.
Fintech companies will also have to comply to rigorous standards
Fintech Companies will also have to comply with the rigorous standards in this regulated area, or they will be subject to sanctions and legal actions. There are however solutions for fintech companies to manage increasingly complex regulations, especially for businesses operating in multiple countries. Regulatory Technology (regtech) companies, such as Cedar Rose, can support in providing products and services that will help them better manage their compliance programs.
For more information on how we can help your business, give us a call today on +357 25 346630 or email firstname.lastname@example.org.