Freakonomics Of Middle East. Decimal Factor paves the road to UAE, Bahrain.


Khalid Al Rumaihi CE, Bahrain EDB, spoke very eloquently at the AFS Fin-tech Event in Bahrain. In general, he spoke about GCC’s readiness for Fin-tech, but also about the direct GCC relationship between spend and oil prices. In 2008 when oil prices dropped, the spending crashed. However, in 2014 when oil prices recovered, the spending went back up by 400 %. The prices dropped again after 2015 and so did the spend. It is simple and very clear, spend is directly proportional to oil prices in GCC i.e. aggressive when the oil prices are up and regressive when they are low. Now, with the cost of technology for oil extraction at its lowest, the chances of seeing oil prices at the $80-$100 mark, is highly unlikely. Therefore, all GCC are rethinking their strategy to revenue. To add to their oil price problem, the world has not helped either – Brexit, China slowdown and the US Presidential election, have kept the sentiments for a recovery of oil prices very low. On a separate note, 86% in MENA do not have bank accounts. Ecommerce will be 20 billion by 2020 in the Arab world. GCC nations have no choice but to open up banking, even if government owned institutions will be affected. Also, kingdoms and countries will have to rethink subsidies as they will most likely start to disappear. We will see tax as a more regular source of income in GCC. VAT is already being implemented later this year, income tax and others will be next to follow. I believe that it is not a case of if but when, governments start looking at taxation as a regular source of income for their administrations. I would not be surprised if that is sooner than we think. But of course, not all is bad in GCC. With the excellent infrastructure these countries have built during their good times and having a bold vision for the Middle East, their governments have been able to build real and vibrant economies. They have the best of roads, hotels, restaurants and in general, a robust infrastructure that many living in East and North Africa would like to call home. They have also created an environment which attracts talent from the west, who want to stay and work in the Middle East. There is no fear that these countries will fail. They will not, even if there is a further crisis in oil prices. However, they will now have to get used to living in the real world and no longer expect their rich old grandfather “Oil,” to keep paying and funding growth.

Dr. Mario Thaten, Digital Banking Practice Leader, McKinsey & Company, had a suggestion for banks in Bahrain. He said all banks in the world and especially in ME, have no choice but to follow the three R’s:

  1. Resilience (lean and mean operation)
  2. Renewal (10 to 100 times closer to the customer )
  3. Re-invent (look at Fintech to reduce cost)

Regulators are keen to make change, the Governor of Bahrain said he will launch directives to help and make it easy for crowd funding and alternative Fin-tech to be in Bahrain.

I was representing Decimal Factor in Bahrain through an invitation from Sunil Madtha, Sr Clients Relationship at Arab Financial Services Compnay. I was also delighted to meet with B Chandrasekhar, AFS’s Chief Executive Officer (in pic top left) and Hassan Mayassi,  AFS Processing Services  CEO UAE & Group Director. Decimal Factor is currently in talks with AFS, Accenture & DIFC (Fin-tech Hive) in UAE, to launch in Dubai (UAE) and Bahrain by June this year and we believe, the Middle East will be our next big market place after success in the US and UK Markets.

Freakonomics is the new economics and if there is anything one must read in the above article, it is the opportunity for banks and alternative finance players to disrupt the Middle East in a positive way.

The Middle East will come out stronger and more successfully from the oil crisis.


Manoj Karkhanis.

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