The Impact of Government Policies in Middle Eastern Countries on Digital Platform Startups

Abstract

In the last decade, the financial sector has changed significantly. The introduction of new technologies and mobile applications transformed the entire industry, leading to the rise of financial technology (fintech startups). Fintech startups offer a wide range of products/services, such as digital payments, Buy Now, Pay Later (BNPL), crowdfunding, peer-to-peer lending, etc. Middle East and North African (MENA) countries have seen significant growth in the number of fintech startups and the total investment value in these companies. For example, in Egypt, Fawry is the biggest payment service provider; it covers nearly 25% of Egyptian customers and has more than 3 million daily operations. Also, some fintech companies in MENA became unicorns, such as Tabby of Saudi Arabia and MNT-Halan of Egypt. The increased penetration of fintech in MENA countries has consistently raised concerns about data security, consumer protection, and financial stability that these companies can cause. This always raised a couple of questions for the financial sector authorities or regulators: how these authorities can increase the number of these companies to support financial inclusion and growth of financial sectors and, at the same time, alleviate the dangers and concerns that these fintech companies present. This thesis provides a comprehensive analysis of the growth of fintech startups in the MENA region, focusing on four countries: Egypt, Saudi Arabia, UAE, and Jordan. Then, the study investigates the fintech regulations in these countries. This study aims to understand how recent regulations have impacted the growth of fintech startups through qualitative insights and case studies from four countries. The study reveals the following: First, Jordan's fintech regulations are still in their early stages. Despite having some fintech regulations, significant regulations such as data protection and cyber security laws still need to be made available. The absence of some fintech regulations might cause investors and entrepreneurs not to launch or expand their fintech businesses in Jordan. Second, in Egypt, the fintech regulations align with investors' and entrepreneurs' expectations; however, the economic conditions-budget deficit and currency fluctuations might hinder the growth of the fintech sector in Egypt. Third, for Saudi and UAE, the fintech ecosystem and regulations encouraged entrepreneurs to start and grow their businesses and customers to increase the adoption of fintech products and services. The development of regulations, laws, and guidelines in both countries contributed to the growth of the fintech sector and, at the same time, safeguard customers.