Before writing this article on fintech and its relevance in the Omani financial market, I delved into various articles and academic research papers. The essence of academia often pushes one to explore deeper into research to propose effective solutions for institutions or to pose thought-provoking questions akin to Socrates, encouraging stakeholders to find their own solutions.
According to Feyen et al. (2021) and Cheng and Qu (2020), fintech entails the application of technological innovations in the financial sector, potentially transforming financial services by developing new business models or modifying existing ones. These innovations include artificial intelligence, blockchain, cloud computing, big data, and internet technologies.
In today's technological age, understanding fintech isn't akin to rocket science. If anything, the Omani financial market should actively promote and encourage its adoption.
Is fintech cost-effective for financial markets, particularly for bank operations? Utilising fintech , such as cloud computing, in bank operations proves cost-effective and flexible, especially in consumer payments and customer relationship management (Begenau et al., 2018; Fuster et al., 2019). Given its cost-effectiveness, the technological leaders of Oman's financial market should seriously consider embracing this trend.
Embracing fintech is likely to foster healthy competition in Oman's financial market, where consumers currently lack options. Research indicates that fintech's development could potentially spur competition and increased participation in emerging markets (Feyen et al., 2021; Pazarbasioglu et al., 2020; Frost et al., 2021).
Several fintech companies have already established a presence in Oman. Websites like f6s.com provide a list of such companies, including Wadiaa, an Omani fintech company focused on crowdfunding and crowd-investing for small to medium enterprises. Other companies listed include TameenX, BidBid, and BNPL.
How effective are these fintech companies in Oman? What progress have they made since inception, and what obstacles have they encountered? Furthermore, what developments can they spearhead for Oman's future?
Reports on the fintech industry, such as the Global FinTech Market Analysis, indicate significant growth potential. The market size is estimated to reach $397.24 billion by 2029, growing at a CAGR of 11.72% during the forecast period (2024-2029).
As per a report from Fintech Market News, in May 2022, Mastercard has recently announced a collaboration with Synctera, a well-known fintech banking service. The two companies have joined forces to provide account validation solutions for fintech powered by Synctera, leveraging Mastercard's open banking platform.
When discussing the implications of fintech, a nuanced examination reveals a blend of opportunities and challenges. Digital innovators are injecting heightened competition and efficiency into the traditional financial sector, as noted by Philippon (2015, 2016).
A clear benefit is evident in the increased volume of remittance transactions coupled with reduced costs, as highlighted in research by Juan J. Cortina and Sergio L. Schmukler (2018), citing World Bank (2016) data estimating global remittance flows surpassing $601 billion in 2015, with developing nations receiving $441 billion of that sum.
A shift in perspective is observable among banks, as noted by the Economist Intelligence Unit (2015), moving towards considering fintech firms as collaborators and facilitators rather than solely as disruptors and competitors. Moreover, established players are recognising the imperative of harnessing fintech capabilities to expand their market share, retain existing clientele, and attract new segments, including the previously unbanked.
However, alongside these opportunities, there exist attendant risks, as cautioned by Cortina and Schmukler (2018). Despite the potential benefits, FinTech services introduce novel vulnerabilities, such as insecure business models, misuse of personal data, challenges in customer identification, and electronic fraud.
Regulatory concerns, particularly in the United States, encompass issues such as lending discrimination, disclosure obligations for small and medium-sized enterprises (SMEs), and the sharing of customer information, as reported by Politico (2016). These threats extend beyond the US market, echoing concerns in other global markets as well.
Let me conclude by saying that, there's a need for further academic research in Oman's financial market to leverage the fintech trend effectively. Additionally, technological leaders should refer to academic research and organise forums, seminars, lectures, and debates to foster discussions on fintech's integration.
Mohammed Anwar Al Balushi
Academic Lecturer and Advisor,
Oman College of Management and Technoloy
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