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NEWS ANALYSIS


Saudi-backed Ripple network a big step for Gulf fintech development


Central bank’s blockchain deal could be a game-changer in the ability to settle cross-border payments with end-to-end tracking


Junior Fintech Reporter Henry Vilar


S


audi Arabia’s central bank has signed a partnership with Ripple to build a blockchain network to facilitate payments among banks in the kingdom, as new fintech starts gaining


momentum across the Gulf.


The pilot program could be pioneering when it comes to policies by central banks, according to the company. The program would provide support to KSA banks under the Saudi Arabian Monetary Authority (SAMA) to use xCurrent, Ripple’s enterprise software solution.


Ripple’s solution allows banks to instantly settle cross-border payments sent in or out of the country with end-to-end tracking. This would create a faster, cheaper and more transparent payments ecosystem, according to Ripple. For those banks joining the program, the central bank would provide specialised training.


What’s hot in the gulf


Financial technology innovations have been a focal point for many regulators in the Gulf.In the past decade, fintech start-ups in the region including Beehive, Paytabs or Souqalmal have raised more than $100 million in funding, a number which is predicted to double by 2020, according to the State of Fintech report.


Dubai has become a core centre for fintech applications, not only in the area, but in the world. In August, the Dubai Financial Services Authority (DFSA) partnered with Hong Kong’s Securities and Futures Commission to look into ways to promote fintech through regulation. In November, Dubai International Financial Centre (DIFC) signed an agreement with the Monetary Authority of Singapore, accompanied by a $100 million fund, to undertake joint fintech projects.


Blockchain first


Many investors can’t keep their eyes off blockchain. These ventures into fintech commenced last year, at least officially, when the Abu Dhabi Global Market (ADGM) become the first regulatory body in the MENA region to join the R3 distributed ledger consortium.


This institution is taking big strides in the market overall. Abu Dhabi Islamic Bank (ADIB) signed a deal with Abu Dhabi Global Market (ADGM) with the aim of collaboration and promotion of fintech in the UAE. Under the terms of the agreement, ADIB will partner with the FSRA across a range of Shari’ah-compliant fintech-related initiatives.


Lastly, the research wing of the Islamic Development Bank announced in October that it was looking into the possibility of deploying blockchain in Shari’ah-compliant banking products.


Mobile abundance


When IBS Journal interviewed Mike Cunningham, CEO and founder of Clearly Bank, we were told that in the UAE, the average number of phones per person is somewhere between two and three. This high mobile penetration led him to create a mobile-only bank, to launch later this year. Similarly, Visa has also seen the potential of mobile in the area, and enabled Apple Pay for all UAE bank cardholders.


The crypto drought


Bahrain began exploring the use of digital currencies to boost its role as a regional financial centre last year, which inspired some of the nearby regulators to do the same. The Saudi central bank is working with the United Arab Emirates central bank to issue a digital currency designed for transactions between the two countries, UAE central bank governor Mubarak Rashed al-Mansouri told Reuters in December.


However, that same month, Kuwait’s Ministry of Finance said that it refuses to acknowledge Bitcoin as a currency, and has banned its trading among Kuwaiti financial institutions. Abu Dhabi’s regulators at the international financial centre also said they are looking into coming up with rules around cryptocurrency exchange.


Only recently, the Capital Market Authority (CMA) in Saudi Arabia issued harsh advice against investing in cryptocurrencies due to its risks, highlighting the difficulty of protecting investors as being out of the Kingdom’s scope of control.


www.ibsintelligence.com | © IBS Intelligence 2018


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