“It’s between Silicon Valley, London, Hong and Singapore – those are the four major cities in the fintech world that are leading the way – and the only question in my mind is that whether due to the UK government’s mishandling of the pandemic they might fall behind Hong Kong and Singapore.”
Without solutions, failure to adapt to these challenges will have long-term implications for London. London’s key advantage has been its world-leading fintech policy environment.
The challenge from Bahrain
This stems from the supportiveness of regulatory initiatives, tax incentives, and government programmes designed to promote competition and innovation. However, once an outpost, the Middle East, and in particular Bahrain, the largest fintech hub in the Middle East, is also threatening to usurp London’s position in these key areas.
The World Bank has recognised that Bahrain has implemented the highest number of regulatory reforms designed to ease business operations. This includes the new regulatory sandbox, conventional and Sharia compliant crowdfunding; and the first-of-its-kind data jurisdiction law, where foreign governments maintain their jurisdiction over data stored in Bahrain-based data centres.
The regulator, the Central Bank of Bahrain, has been instrumental in this process, educating banks about the regulatory sandbox, while London has been accused of not properly monitoring sandbox companies.
In other digital infrastructure developments, Amazon Web Services a year ago opened three data centres in Bahrain – its first in the Middle East – to offer cloud storage to regional organisations amid growing demand. The legislation needed to make this happen was completed in a matter of months, and the cloud-first policy has been extended across the banking sector and in government.
‘The Middle East can show its muscle’
This, says Abdullah Almoayed, CEO of Tarabut Gateway, MENA’s first and largest Open Banking platform, and the first company accepted in the CBB sandbox, has been instrumental in the growth of the fintech sector.
“You need a legislator that moves as fast as technology does, which is very fast,” he said, “The Middle East can show its muscle in legislating as fast as European or Asian jurisdictions. The key point is the cloud first policy which creates an unbelievable opportunity for innovation as it opens up the digital infrastructure.”
Funding is still the key to successful start-ups and scale ups, and Covid-19 has exacerbated the downturn in funding available. A recent survey of 100 UK fintech founders by Innovate Finance, the body that represents the UK’s FinTech industry, states there is a £15bn funding gap.