Developing a Fintech ecosystem in Kuwait

Over the past few years, the Fintech sector has gained tremendous momentum in the GCC, rapidly transforming the global financial sector services from digital payments, lending, insurance, asset & wealth management, capital markets to supervision.

Fintech has proven to increase efficiency in the financial services sector by allowing accessibility of products and services, reduced costs, convenience, and speed of delivery. Like several regulators around the world, the Central Bank of Kuwait (“the CBK”); has sought to balance the importance of harnessing and encouraging the growth of technology in the financial services space, while remaining true to its mandate to protect the Kuwait financial and banking sector by implementing appropriate policies and regulations. 

Although Kuwait is establishing fintech adoption and growth in the field, it still requires sustained attention and a regulatory push. While Kuwait has not been as quick as some of its GCC counterparts in adapting to the fintech landscape, the CBK has implemented several initiatives and policies that fosters the growth of fintech in Kuwait. In 2018, the CBK established a fintech unit which supports the government’s fintech regulatory sandbox framework designed to encourage fintech growth and enable banking systems to test new technologies.

More recently, the CBK held a ‘stability and enablement’ event where a raft of measures was discussed including the new digital banking licence application process which opened in February 2022 and closed its first applications on 30th June 2022. It is evident that neobanks will progress market competition, drive innovation and result in better consumer products and customer experience.

Fintech evolution is typically correlated to financial inclusion in emerging economies. We have seen both public and private entities in Kuwait being behind the drive to digital adoption. Recently, we have seen Kuwaiti banks becoming more active in the fintech space. For example, Kuwait Finance House and National Bank of Kuwait (NBK) both partnered with blockchain specialist Ripple and Gulf Bank using biometric facial recognition on its mobile app. Kuwaiti fintech companies such as secure payments brands Tap Payments and MyFatoorah as well as real estate-focused Ajar Online demonstrate the significant potential of the local landscape.

In order for Kuwait to advance its fintech industry, we need to consider demographics and fintech usage. Kuwait ranks among the countries with the fastest average mobile internet speed worldwide. This coupled with a young demographic where 40% of Kuwait's population is under 24 years old and 25 percent of the total population are under the age of 15 years old – presents a massive potential for the industry to boom. 

Furthermore research shows peer-to-peer (P2P) money transfer had the highest adoption in Kuwait at under 50 per cent (44 per cent). In second place it was accounts aggregation at 17 per cent. Despite its success, more can be done to grow the industry even further. However, despite a lower adoption of fintech compared to its other GCC neighbours, research shows that 83 per cent of Kuwaitis are willing to adopt fintech solutions. 

The competitive fintech scene emerging across the GCC means that Kuwait will have to find innovative ways to differentiate within the landscape. For instance, Kuwait has a well-developed Islamic finance sector, including being home to the GCC’s second-largest Islamic bank, Kuwait Finance House. By focusing on the intersection of Islamic finance and fintech, Kuwait could distinguish itself in the current ecosystem. 

While the fintech field is still young and despite stiff competition, Kuwait has the opportunity to become a serious player in the GCC by investing in its local talent and creating a supportive ecosystem backed by clear-cut regulations. The Kuwait fintech ecosystem is beginning to flourish with a supportive public sector and innovative private stakeholders driving towards Vision 2035. Furthermore, Kuwait consumers are not only embracing digital finance, but it appears they are welcoming it with open arms.
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