Technological innovations such as blockchain have the potential to change the financial architecture in MEASA, particularly in banking
New business models are being developed to reach the “missing middle” of retail investors and medium-sized businesses
Governments and regulators have a crucial mandate to drive financial innovation.
With a combined population of over 3bn, deepening mobile connectivity, and growing prominence as a trade and investment hub, the Middle East, Africa and South Asia (MEASA) will be a source of both demand and supply for more and better financial services. In a new report, The Next Frontier: The future of finance in the Middle East, Africa and South Asia, sponsored by Dubai International Financial Centre, The Economist Intelligence Unit (EIU) explores the forces shaping the future of financial services, focusing on market, technology and policy enablers.
A growing young population across MEASA is increasing demand for digitally delivered financial services. This untapped potential presents an attractive opportunity for companies providing financial services—both traditional and non-traditional players. As trade and investment increase in the region, there will also be a growing market for wholesale banking and capital markets.
For companies that move quickly, this is a multi-billion-dollar opportunity to bank on the future of a diverse region. Some firms are at the vanguard of financial innovation, using smarter business models and the latest technologies. The rise of “challenger” providers—often from different industries, such as telecommunications and e-commerce—is bringing even more varied financial services offerings to a far larger community of individuals and businesses.
The future of finance in MEASA will not be determined solely by technology. The rise in equity crowdfunding platforms and lower-cost portfolio investment products is unleashing new capital for entrepreneurs and businesses, and is giving middle and lower-middle-income citizens the ability to become investors. Growth in the provision of credit, increasing interest in private equity and a rise in venture capital are also helping to drive growth in the middle market.
Melanie Noronha, editor of the report, said: “Governments and regulators have a vital role to play. They can prime the market by using better services and technologies themselves, or they can set it back by using outdated systems and approaches. They must balance innovation with prudence, protecting consumers and stability while encouraging promising new ideas to help increase the efficiency of the financial system.”