Kuwait: Home of the next Islamic digital bank?

While neighboring UAE, Bahrain and Saudi Arabia are jostling for fintech supremacy in the GCC, unassuming Kuwait is quietly making its move and could very well be welcoming its first digital bank, and a Shariah compliant one at that.

Kuwait’s first digital bank could soon see daylight as the country’s leading telco provider has partnered with one of the six Islamic banks in the State to introduce a digital platform for Shariah compliant banking services. This engagement between an Islamic bank, whose major shareholder is the National Bank of Kuwait, with a regional telecommunications company serving over 50 million active users across the Middle East would give the Islamic digital banking initiative a strong competitive edge.

“It is expected that this digital partnership – after the approval of the Central Bank of Kuwait (CBK) – will contribute to creating a comprehensive tech community and build the first digital bank, due to the huge potential both parties hold within the ICT (information and communications technology) and digital banking services sectors,” Zain noted.

Granular details such as timeline have not been revealed, however, it is understood that the upcoming platform would target the corporate segment including start-ups and emerging enterprises. Zain, which began to seriously invest in fintech – as many telco companies in other parts of the world are doing – in 2016, is already in the payment and lending space with its mobile money app Zain Cash and micro-lending platform Tamam.

“Zain was looking for the best method for enriching its digital and fintech services and was faced by two options: either invest in or acquire a bank, or enter a strategic partnership with one of the banks. After conducting thorough studies, management found that the second option better suited our business direction, and thus the decision to enter a strategic partnership with Boubyan Bank was made,” explained Bader Al Kharafi, the vice-chairman and group CEO of Zain. “With the spread of smartphones, and the advancement of mobile telecom networks’ speeds, fintech contributed in the variety of digital transactions. This foreshadows the emergence of more investment opportunities int this area, and more marriage between banking institutions and telecom operators that seek to make use of fintech applications.”

The intersection between ICT and financial services is one that the banking regulator is paying close attention to. In the last two years, CBK has issued regulatory guidelines for electronic payments, established a regulatory sandbox framework and is preparing a national infrastructure for digital currencies. Analysts expect CBK’s active focus on the digital agenda would push Kuwait banks to continue to invest in digital banking channels and solutions.

“This will involve investments in new age technologies such as intelligent automation, blockchain and artificial intelligence,” noted KPMG.

If and when it materializes, the Zain-Boubyan digital bank would be joining only a handful with a fully digital and Islamic proposition in the GCC such as meem by Gulf International Bank.


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