ACI Worldwide: The payments landscape in the Middle East
Craig Ramsey is the Head of Real-Time Payments, and Thomas Reda is the Director, Middle East, ACI Worldwide. ACI Worldwide is a global payments software company. Here Ramsey and Reda discuss how the payments landscape in the Middle East is evolving.
The Middle East is developing quickly and considerably. The population has surpassed 410mn and a number of nations, such as Saudi Arabia and the United Arab Emirates (UAE), are being touted as some of the world’s most up and coming economies. The region has become synonymous with the rise of large infrastructure developments and technological innovation, while tourism continues to grow - 1.4 bn people visited in 2018 alone.
This push for innovation, coupled with an influx in foreign visitors, is driving changes to the region’s payments ecosystem. Visitors from abroad are not only using less cash; but many have also become accustomed to new ways of paying, such as via contactless cards. At the same time, businesses in the region are increasingly operating cross-border, and as a result require smoother, cheaper and quicker payment processes.
The state of play
Currently, the payments landscape in the Middle East is fragmented. In some countries, such as Egypt, the majority of the population is unbanked; and cash remains king. This reliance on cash also exists in places like Turkey and Saudi Arabia, but the influence of card payments and the growing role of smartphones is creating a strong demand for digital payment options there. In the UAE, on the other hand, consumers increasingly trust digital payment alternatives over cash.
Despite these differences, there’s a growing consensus that the region needs to focus on embracing digital payments and reducing the number of cash transactions. To this end, organisations in Saudi Arabia and The UAE (such as the Abu Dhabi Global Market) have launched digital sandbox initiatives; creating an environment where banks, regulators and financial service providers can come together to collaborate on the development, testing and creation of products which support new ways to pay. At the same time, momentum is building in some countries around mobile and app-based payments. The Emirates NBD, for example, has opened up WhatsApp banking; enabling 24/7 access to banking on the go.
Getting real-time ready
As digital payment options continue to grow in popularity, an increasing number of businesses and consumers will expect to be able to adopt them. It will therefore be crucial that the region has the underlying real-time infrastructure in place to enable these payments to be made quickly and effectively. Access to a provider who can help offer participating banks faster and lower-risk onboarding to the new real-time payment services will also be vital.
- Chris Hafner of Grovelands on the Middle Eastern promise for fintechs
- eBay partners with Santander-backed small loans app Asto
- Alterna Savings: digital banking with a social purpose
- Read the latest issue of FinTech Magazine!
The recent launch of real-time payments in Saudi Arabia could serve as a catalyst for the adoption of real-time payments amongst other countries in the region. But in order to live up to this potential, and ensure Saudi Arabia itself reaps the benefits, it’s important that banks in the country truly embrace real-time, and the improvements it will bring to their customer experience.
Far from viewing it as a simple add on, banks need to see real-time for what it is: the new normal when it comes to payments. As such, they should ensure that they are investing in a strategic real-time solution that they will be able to scale up in response to rising demand and new opportunities. Ultimately, being real-time ready shouldn’t be an option as it’s a prerequisite for the future success of banks in the Middle East.
Robinhood faces $35mn fine from New York DFS
The company’s crypto division was issued with a wrist slap in 2020, following the red flagging of several “matters requiring attention”. Robinhood revealed it had reached a settlement with the New York State Department of Financial Services regarding the issues, which related to “alleged violations” of cybersecurity and anti-money laundering rules.
The news follows on from the announcement earlier this week that the trading platform favoured by armchair investors, which almost broke Wall Street earlier this year, has an expected valuation of $35bn following its IPO.
Critics of the platform say Robinhood encourages “risky behaviour” among inexperienced (armchair) investors. The app has also been criticised for not informing customers that much of its profits are generated by routing their trades to Wall Street firms taking the other side, or so-called "payment for order flow."
Robinhood said last month they expected the DFS fine to be at the $15mn mark, adding it would be “the bottom of the range for our probable loss in this matter”. The $35mn penalty is on top of the record $70mn Robinhood incurred from US financial regulator FINRA in June, for “lax vetting and outages.”
However, the settlement indicates the company’s IPO will go ahead as planned, despite initial concerns the investigation could see the float delayed until later this year.
Robinhood floats imminent
Despite the regulatory hiccups, Robinhood priced its IPO between US$38-US$42 per share, giving the platform the US$35bn valuation and analysts predict the firm’s debut on the Nasdaq could occur as early as next week.
Robinhood democratising investment
Launched in 2013 by Tenev and Bhatt, who were Stanford University roommates, Robinhood’s founders will retain most of the voting rights after the IPO. Bhatt reportedly holds 39% of the voting power of outstanding stock, while Tenev holds 26.2%.
The online brokerage, which came under fire for its handling of the GameStop trading debacle, which saw the platform limit stocks to investors, states its mission is to “democratise” investing and is one of the most highly anticipated IPOs of the year.
Robinhood was valued at $11.7bn in autumn 2020 following a private equity funding drive. The new valuation will mean represent a three-fold increase in the company’s market value in less than 12 months.