Evaluation of Fintech Regulatory Limitations in GCC Countries


The implementation of Fintech in GCC countries has grown over time. The region through mentorship of global technological changes has found itself on the verge of increasing changes in informational and technological infrastructure. However, the region still faces challenges in realizing financial technology transformation. The study emphasizes on the regulatory impact on Fintech development in GCC. Fintech is being driven by changing consumer demands and preferences in the region. the larger part of the GCC market is still loyal to traditional Islamic banking, which contradicts the uprising regional and global market shift that drifting the industry in the GCC members to acknowledge the need to implement proper Fintech regulations that can promote its development. The study uses qualitative secondary data method to analyze the introduction and transformation of Fintech contrary to regulatory limitations and loyalty to the traditional financial system and the assertive regulations. Saudi Arabia, Kuwait, UAE, Oman, Qatar, and Bahrain exhibit the significant role of Fintech in their development. The nations have low entry barriers and insubordination through their traditional practices and regulations for new financial technologies. The GCC laws restrict the entry of new Fintech firms by preserving certain operations to the Islamic institution but while also prioritizing the Islamic institutions for the implementation of the modern financial models. The Fintech innovations target financial services such as payments, deposits, credits, insurances, wealth management, and raising capital. Thus, the focus of the study is on regulatory limitations to Fintech development in GCC that undermines the potentiality of the industry.


1.1            Introduction

Since the advent of information technology as a form of communication and data storage, its utility has evolved significantly. One aspect of the aforementioned usage is the use of new technology to automate and enhance the delivery of financial services to consumers in the globe and specifically in GCC countries. The integration of information technology in the financial systems has significantly boosted the performance of the industry by improving the quality of services available to customers, enhancing consumer interaction, and improving the internal management of banks. Equally important, this has enhanced the efficiency of the financial sector through better cooperation, engagement, and ability to respond to urgent issues. Some of the inventions that have significantly transformed the banking industry include cryptocurrency, peer-to-peer lending, artificial intelligence, block-chain, mobile payment systems, and new digital trading and advisory systems. Nonetheless, the increased use of information technology has exposed the financial sector to various risks, including financial crimes, money laundering, and cyber-attacks. This has increased the need for increased regulation of FinTechn across the globe to protect the financial sector from such risks. Modern researchers have primarily focused on the negative implication of FinTech on financial institutions but have neglected the limitations of the regulatory framework governing the operation of FinTech. For such concerns, it is imperative to conduct an investigation of the FinTech regulatory limitations with a particular focus on GCC countries.

The lack of a uniform regulatory system in the global financial sector has significantly exposed financial institutions to risks such as money laundering, cybercrime, and other financial crimes. Although numerous global bodies are tasked with the development of financial standards for GCC member states, the implementation of such recommendations has been very poor. In this regard, the proposed dissertation seeks to evaluate the cross-country regulatory gaps of FinTech in the region and its implication on innovation, investments, and consumer welfare. Notably, the need for this evaluation arises from the fact that the information technology revolution has expanded the scope of access to efficient and cost-effective financial services in the six GCC-member countries. On the decadent side, it opens consumer data and money to cyber-crime, scams, service provider non-consensual data usages, monopoly practices, and money laundering. While government intervention is necessary to mitigate such, excessive regulatory intervention limits market innovation as it is in some GCC countries.

The numerous challenges facing FinTech has created an apocalyptic hype from the media whereby it has been viewed as disruptive especially amid the recent scandals pertaining illegal access to customer information. Although traditional players have invested significantly in enhancing the security of the technology employed in their systems, questions about the ability of new entrants to cope in the disruptive time have been raised by scholars and the media. However, the introduction of stringent regulations has helped improve the performance of the financial sector by enhancing its transparency, efficiency, and effectiveness. However, the regulation of FinTech and big data has proven to be challenging for law enforcers due to the complexity of the operation, the skill required and resources needed to regulate the sector.  Scholars argue that regulators require state-of-the-art reporting and analytics infrastructure. Consequently, this has created a challenge for regulators to adequately control and regulate the sector especially nations with limited resources.

1.2            Background to the study

The GCC are heavily capitalizing on the fintech’s potential in a limitedly regulated market. The fragmented application used by the GCC countries has consistently derailed inter-technological sharing, experience-driven financial system, compliance with international fintech regulations, and system review. The GCC members have also failed to collectively capitalize on the national and regional legal market environment that can improve and reshape their client’s experience. The region has portrayed the image of substantial fintech implementer but is yet to have full control of the entire value chain. The system continues to face sophisticated threats ranging from traditional banking to modern cybercrime. Thus, the regions current position is a showroom of uncontrolled external forces that grooms a bad relationship between fintech innovators and customers.

Nonetheless, the introduction and use of fintech in the GCC region has catapulted the region’s financial opportunity by enlarging the financial market and the fintech ecosystem. The United Arabs Emirates (UAE) and Saudi Arab lead the region’s fintech use that comes at the expense of threats exerted by regulatory limitations in the markets. The region has the world’s highest technological and mobile phone censorship that contributes to the regulatory limitation. Coupled with the conservative cosmopolitan business practices in the region, the nations are emphasizing necessary support to realize an efficient fintech system for their clients. The decision has enabled enhanced capital and financial expertise. Therefore, GCC is well placed to enjoy to fintech technology if proper regulations are set in the market.

Dubai is driving the ambition of the region’s fintech systems, which are less developed than western countries. Forums like this year’s Dubai International Financial Centre’s Fintech exonerates the region’s focus on fintech. The nations’ focus on the system alludes their entrepreneurial empowerment, innovativeness, and market expansion. Other market forces like the declaration of GCC free zone have also influenced mobilize implementation of unique regulation regulations that would oversee a uniform region’s regulation. Dubai has put in place incubatory regulations for the fintech system. The Central Bank of Bahrain has also made recent claims and promised to ensure that it puts in place regulations to guide its use of the fintech particularly in the banking system. Such moves by the nations attest the loophole in their fintech regulations by either under-utilization of legal measures or over-control of fintech system. Therefore, the GCC possess contradictory regulatory limitations that undermine a successful and safe use of fintech in the region.

1.3            Rationale

My interest to pursue this area of study arises from the fact that I am an employee of the Central Bank of Kuwait, which is a GCC member country and a graduate of Bachelor’s degree in international business. Even though my stint has been majorly in the human resources department of the bank, my knowledge in the areas of accounting and finance also form the basis of my keen interest in this subject. The aforementioned arises from my ambition to work in the supervisory and financial department of the bank that requires an in-depth understanding of the area of interest. In this regard, my skills in critical thinking and communication provides a foundation and competence for pursuing these skills.

1.4            Aims and Objectives of the Study

The research looks up to examining the regulatory gap between the GCC members and how the regulation choices undermine maximization of fintech in the region. The study also aims to understand the regulatory disparity between the nations and the technological asymmetry adopted out of their collective membership trends. The aims are segmented into distinct objectives that guides the study as listed below.

1.5            Research Question

The research sought to answer the following main research question:

What are the gaps in FinTech regulatory frameworks in the six GCC countries that limit the growth of this novel industry in the region?

1.6            The Relevance of the Study

The GCC members have become the Middle East’s financial hub with a substantial stake in the global financial technology. The region has embarked on their money transaction efficiency as a way of improving their customers’ experience. However, the region seem to lag behind in setting appropriate regulations that would keep their Fintech at par with the global Fintech leaders. Hence, the study aims to explore the missing point in the region’s Fintech investments to pursue and safeguard the interest of its customers. In addition, as a bank employee, the study gives me the opportunity to understand and expand my knowledge on Fintech as a new segment of the banking industry. Thus, the study offers the opportunity to have a better knowledge of my work and career.

1.7            Structure of the Dissertation

The dissertation takes an analytical research structure. The structure introduces the study through background information on the problem of study to understand its origin and current position in the field. The position is followed by a literature review of previous studies on the same topic to give a broader understanding of the topic and understand the gap in the previous studies that are includable in the current study. The literature review opens up the dissertation to a methodology section that looks at the most appropriate methods of collecting, analyzing and interpreting data. The research methodology is followed by a meta-analysis section that looks at the analytical relevance of the research questions and objectives to the data collected. The review is reinvented in the evaluation of the findings section that builds on the interpretation of the data collected from the study. The study then makes conclusion remarks under the conclusion section as the true findings of the study.


Literature Review

2.1.          Introduction

A.   FinTech

According to Schueffel (2016, p. 2) there lacks a widely accepted definition of the word. As such, he carried out a review of over 200 articles written over 40 years on the subject in order to build a consensus therefrom. In order to achieve this, he sought to develop a working definition that takes into context the scope of its applicability as well as clarity of communication. For this reason, Schueffel (2016, p.17) draws from academic and non-academic sources to identify the significant commonalities. The three include; a) FinTech as a novel financial industry, b) that applies technology, and c) Enhances financial services provision. From the aforementioned, he defines it as “a new financial industry that applies technology to improve financial activities” (Schueffel 2016, p.15). Despite this attempt, there are many similar definitions that are based on this consensus view.

With reference to the preceding, Arner, Barberis, and Buckley (2015, p. 3), defined financial technology (FinTech) as “the use of technology to deliver financial solutions.” Similarly, Kim, Park, and Choi (2016, p. 1058) defined it as “a service sector which uses mobile-centred IT technology to enhance the efficiency of the financial system.” Further attempts have been made at ensuring succinct communication of the definition of the term. Particularly, Micu and Micu (2016, p. 380) define it as “a new sector in the finance industry that incorporates the whole plethora of technology that is used in finance to facilitate trades, corporate business, or interaction and services provided to the retail consumer.” Last but not least is Varga (2017, p. 22) who describes the term as “a disruptive challenge to the financial sector of the introduction of faster, cheaper and human-centred financial services”. Therefore, the definition may vary depending on the inclinations of the writer, but the three elements of novelty, application, and financial services enhancement factor are captured in the definitions considered so far.

Gimpel, Rau, and Röglinger, (2018) undertakes a domain background on the origin of financial technology. The authors initially refer to Fintech as the connotation of financial technology that brings together financial services and information technology. The authors trace the origin of the term “FinTech” to a 1990 project by the Citigroup that sort to create a technological collaboration in the organization (Gimpel, Rau, and Röglinger, 2018). The termed gained more use beginning 2014 where it was used to refer to models of business innovation. The authors took advantage of the lean theoretical insights on the term to refer to existing scholarly literatures that incorporated the academic perspective of the term to explain its inclusion in commercial technology (Gimpel, Rau, and Röglinger, 2018). The position allowed the authors to craft their working definition of the term through references studies and observations on the utility of the term with references to online or soft money transfer services evident in the current financial situations across the globe (Gimpel, Rau, and Röglinger, 2018). Thus, the authors define Fintech as the innovative and personalized financial services and products offered to the customers at their convenience.

Gimpel, Rau, and Röglinger, (2018) base their definition of Fintech on the business model approach. The model views technological growth of the business sector as a new emergence of services, products, and process that enhance customer satisfaction and business operations. The model’s definition focuses on the customer and operational centricity of Fintech (Gimpel, Rau, and Röglinger, 2018). The view agrees with previous studies that portrayed technological advancement in finance as a leverage to institutions’ operations and customer service. The leverage includes increased data analysis and artificial intelligence applied in Fintech that marks the vast difference between its application and the traditional financial operations (Gimpel, Rau, and Röglinger, 2018). Noticeable among start-ups, Fintech seeks enlarges banks’ ability to serve customers effectively and efficiently. The move blends with the increased developmental growth realized in GCC over the past decades. The developers and entrepreneurs need financial systems that support their need through indoor money services (Gimpel, Rau, and Röglinger, 2018). Therefore, the authors’ definition of Fintech emphasizes on the service delivery and operation leverage experienced from introduction of Fintech.

Ferdiana, and Darma, (2019) confers their definition of Fintech to an element of the Go-pay system. The definition is guided by various sectorial advancements caused by information and communication technology. The authors’ view looks at technological sophistication that makes life easier including monetary transactions (Ferdiana, and Darma, 2019). The changes follow the new millennial era reviews focused on improved service delivery. Some of the changes witnessed include global trends that forces institutions to apply changes as a competitive approach in the industry. The changes referred to have raised technological advancement in payments transactions. According to the authors, the realized Fintech can be defined in terms of the inclusive technological transactions that are based on electronic-notification and non-cash payments (Ferdiana, and Darma, 2019). The authors look at technological infrastructures that support non-cash transactions. The view creates the perspective of electronic money transactions in the form of an electronic data capture system. The system replicates the existing systems like the Go-Pay referred to by the authors (Ferdiana, and Darma, 2019). The view of the Go-pay is based on the assistance and collateral implication of the EDC system on the functionality of the Fintech (Ferdiana, and Darma, 2019). The system prove to be sufficient in timely transactions hence tend to serve more customers per time and perform large transactions. Nonetheless, the authors’ clarification of Fintech looks at the negative implication attainable at the process of transaction (Ryu, 2018). Ferdiana, and Darma, (2019) considers data loss and mistrust as part of the negative experimental clarification of Fintech. Therefore, the authors understanding of Fintech is guided by efficiency in transaction and the progressive growth in technological thereby differentiating it from traditional money transaction applied in the system.

B.    Development and Application of FinTech Globally and in the GCC

I.                Global Evolution and Trends

Arner et al (2015) point out that the traditional FinTech can be traced back to laying of the first transatlantic cable in the late 19th Century that facilitated globalized financial settlement systems. On the other hand, the contemporary FinTech came into being in 1967 when Barclays Bank introduced the automated teller machine (ATM). Subsequently, Zavolokina, Dolata, and Schwabe (2016) assert that the earlier developments concentrated in the mainstream financial sector comprising of banks and insurance companies. However, the revolutions in the industry have seen a gradual increase in FinTech applications by the non-banking sector through innovative financing solutions to consumers. Kalmykova and Ryabova (2016) identify some of these applications that include “P2P crediting, E-wallets, Bitcoins, mPOS-acquiring, T-commerce, and mobile banks among others.” Notably, the new forms of financial technology operate independently of trusted third party intermediaries like banks and insurance companies.

Kalmykova and Ryabova (2016) argue that FinTech emerged from Silicon Valley where most disruptive technological advancements have their roots before being replicated across the globe. As it is, they point out that London has become the FinTech capital of the world due to the comparatively high number of innovations and investments thereon.  They also argue that the resource-based perspective validates the evolution of new technology in finance because of the value addition on innovation rather than the history behind it.  Moreover, Gulamhuseinwala, Bull, and Lewis (2015 p. 18) surveyed 10, 131 active consumers of FinTech products and services in Australia, Hong Kong, U.K. U.S, Singapore and Canada. They found that non-banking FinTechs “operate in savings and investments, money transfers and payments, borrowing, and insurance.” In addition, they found that young and high-income consumers tended to be early adopters of the technology.

Novel financial technologies are competing for and outmoding the traditional financial sector players. In support of this view, Dapp, Slomka, and Hoffman (2015) claim that Fintechs are piling pressure on traditional banks in the provision of financial services solutions and options. They operate in a deregulated environment and their understanding of the digital language customized the consumer needs. Consequently, they are positioned to offer efficient, accessible, and cost-effective services based on trust as opposed to stringent security requirements in the mainstream financial sector.

Ng, and Kwok, (2017) takes a regulator’s front to study the emerging trends of cyber security associated with Fintech in the global financial industry. The study focuses on exploring how the regulators of global financial trends operating under the influence of the international trends cope up with constantly emerging technologies on financial services and products (Ng, and Kwok, 2017). The trends simultaneously expose Fintech to opportunities as well as risks. The study makes reference to the trends of financial innovation of Hong Kong as the regulator of the global financial centre (GFC). The authors review the trending global effect of the formation and implementation of the Fintech (Ng, and Kwok, 2017). The same influential trends shape various policy documents enacted by regulators to implement and manage Fintech. The study finds remarkable regulatory role of the regulators in ensuring that the global financial innovation trends complies with its policy enactments (Ng, and Kwok, 2017). The move requires adopting a sizeable strategy that associates Fintech with opportunities. However, the authors also acknowledge the vast risks in terms of cybersecurity that implementation of Fintech exposes companies to (Ng, and Kwok, 2017). The regulator’s role is meant to counteract the risk-based mechanism thereby embracing the promotional control of such risks. The study embraces the consideration of ethical and technical assessment of Fintech that emerges from a trend-based implementation of Fintech. As such, the authors propose exploration of efficient regulations of Fintech to avoid frauds and risks that arise from the swift spread of Fintech across the globe. The authors argue for institutionalization of risk management as a way of keeping up with the trending implementation of the Fintech (Ng, and Kwok, 2017). The institutionalization follows the innovative pathway that regards inclusion of both professionalism and ethics. Therefore, the authors propose the use of efficiency and regulatory relevance to control the impact of the trending implementation of Fintech.

Chuang, Liu, and Kao, (2016) argue for the untamable spread of financial innovation realized through the globe. The authors’ perceive scientific and technological advancement of Fintech service as an undisputable situation that have immense impact on the financial market. The study has indispensable teaching on the focus on new technology as a contributor to the unlimited financial market potential (Chuang, Liu, and Kao, 2016). Fintech has managed to subvert that oppressive traditional financial methods that previously dominated the industry. The same position applies with the customer services that have realized great technological advancement through improved customer and interaction platforms that gear to improve efficiency and satisfaction while reducing on time and cost of service (Chuang, Liu, and Kao, 2016). The authors acknowledge the development of financial technology as the element of advanced service productivity and satisfaction. The authors’ view follows a market pattern that cut across the global market as influenced by the vast technological acquisition (Chuang, Liu, and Kao, 2016). The increased technological application is influenced from the supply and demand positions of the market. The increasing need across the globe creates the push and pull towards accessing Fintech and its application in easing service delivery and protection across the globe (Chuang, Liu, and Kao, 2016). The difference in application and result is attained through inclusion of factors like regulations. Therefore, the study views Fintech as an indispensable flow of use and benefits of service productivity through digitalized service and product system.

C.    FinTech in the GCC

Gackstatter, Kotzemir, and Meissner (2014, p. 295) argue that the GCC countries have homogeneous aspirations as far as becoming knowledge-based economies is concerned. Thus far, they identify two major goals in this regard including; to become advanced knowledge-based economies through the creation of a competitive innovation ecosystem, national empowerment, economic transformation, and inspiring their respective populations. Another goal is to invest in science, technology, and innovation (STI) to solve prevailing economic challenges through job creation. Despite these lofty goals, Zalan and Toufaily (2017, p. 415) have established that FinTech in the GCC is yet to achieve the disruptive status against mainstream banking, investment, and insurance intermediaries. They attribute this to the nascent nature of the industry whose adoption in the region is constrained by regulatory, structural, and cultural bottlenecks. As such, regulation falls behind innovation instead of inviting it, the financial system is structurally bank-based with limited presence of non-banking FinTech Start-ups, and the absence of a tech culture among managers of financial institutions.

In the current predicament, the option for GCC countries is to entrench financial technology to increase its adoption and contribution to their national economic aspirations. Accordingly, Zalan and Toufaily (2017), point out that liberalization of the financial sector is important in unlocking the FinTech potential in the six countries through the removal of entry barriers. Against the position, they propose that fast racking GCC countries to digital economies require collaboration between mainstream financial institutions and FinTech corporations. Moreover, there is a need to attract investments in the sector for purposes of upscaling the growth and adoption of the same.

Lee and Shin (2018) recognize Fintech as the most important financial innovation that has rapidly grown in the recent time. According to the authors, Fintech’s growth is catapulted by the factors of shared economies, favorable regulations, and enhanced information technology. The authors hold that Fintech has managed to reshape the GCC’s financial industry by reducing transactions costs, quality of service delivered, and diversifying financial systems. Unlike the traditional transaction methods previously used in the region, the Fintech has expanded the informational and technological infrastructure that enables bid data analysis and mobile wallet transactions (Lee, and Shin, 2018). The approach is incorporated among the various start-ups and money transfer services. The difference is the traditional financial system that is characterized by unique niche and personalized services. The authors also make reference to a study by PwC (2016) that reviewed the various aspects of Fintech with a focus on the risks associated with Fintech start-ups. The risks assessments undertaken influences the financial needs and ability to leveraged its implementers from weakened operations and remain competitive in the market. The authors view the inclusion of the system in GCC as an innovative tool for start-ups and ventures and its competitive advantage. Thus, they view the introduction of Fintech in the region as an incorporated effort to advance financial transactions and data analysis.

The authors also recognize the growth of GCC in the GCC region from hype to a major player in the financial industry (Lee, and Shin, 2018). The authors emphasize their study by exploring the professional and developmental interruption of innovation in the region. The study introduces the history of Fintech and compares it with current ecosystem as a way understanding the system’s spread in the regional market (Lee, and Shin, 2018). The study also incorporates business models into the technological integration to understand issues of cybersecurity data, data privacy and risks associated with Fintech. The position adopted by the authors is backed by financial technologies like banking systems, online stock trading, electronic money, and inclusion mobile wallets (Lee, and Shin, 2018). The Financial institutions focus on enhancing customer satisfaction through such Fintech elements. Therefore, the authors’ approach is a collective review of the Fintech implication on customer satisfaction and improved financial transactions.

D.   Regulation of Financial Technology (“RegTech”)

Traditionally, banks have been targeted for regulation for monitoring and compliance with minimum market standards. As a result, Arner, Barberis, and Buckley (2017) argue that the classical regulatory approach to systemic risks mitigation, innovation, and competition hardly meets the requirements for a technologically advanced system. As a consequence, Colaert (2017) develops the concept of “RegTech” in the context of the 2008 global financial crisis and rapid technological developments that bear significant risk on the economy, data protection, intellectual property, and criminal activity. Subsequently, Arner et al (2017) posit that appropriate regulatory response involves the digitization of monitoring and compliance of institutions in the financial services sector. In light of this, Colaert (2017) explains the benefits of such an approach to include efficiency, cost-effectiveness, and settlements of liability. In addition, Packin (2018) asserts that regulation should be in tandem with technological advancements to limit the risks associated with a technologically advanced financial solution that operate outside the mainstream financial, investment, and insurance service sector.

Vives (2017) looks at the impact of Fintech in banking with a consideration of the regulatory progress set in the industry across various regions of the world. The author argues that the legal impact of Fintech is undeniably felt in the banking and capital market industries (Vives, 2017). The impacts are visible in service efficiency, banking structure, incumbents and entrants strategies, and financial stability in the nations. The author associates the system with welfare-enhancing disruption which can only be rectified through regulations of the adverse effect of the new technology (Vives, 2017). The study portrays regulation as the performance guide that direct Fintech to endorse beneficial practice with regard to laws of the host nation. The regulations vary from one nation or region to another (Vives, 2017). Some regions like GCC are yet to unilateral incorporate laws that safeguard the application of the system and its customers from compromise and sanctions.

Vives (2017) argues that the regulation difference between nations with regard to Fintech depends on the difference in understanding and view of Fintech. Vives (2017) views Fintech as an innovative information and automation technology in financial services. The new system provides more efficient services that are mostly self-service tailored. The services range from lending, asset management, portfolio control, and payment systems. The vast use of such system comes with stiff competition that is dependent on the ability to perform effectively than regional peers. The competition has often involved undue influence and taking advantage of circumstances and people at the benefit of developers. According to Vives (2017), such competition can be unhealthy and accrue more damages than benefit to the sector. Thus, the author acknowledges the need for regulations to control conduct of Fintech players in the interest of the customers and market efficacy control.

According to Vives (2017), Fintech regulations lag across different financial regions. For instance, in the author’s views, Europe lags behind China and USA in the adoption of Fintech. However, China lags behind USA and Europe in setting up authentic regulations to safeguard its expansion of Fintech in the regions. In the European Union, UK leads in the development of Fintech and regulations that guide their inclusion and conduct in the nation’s financial industry. UK has managed to guide its Fintech growth through regulations that foster acceptable conduct, which remains averse to the world’s largest Fintech market, China. The same argument is supported by Philippon (2016) that argues that the system across the globe fights regulatory marginalization geared by other intermediary financial institutions. In addition, majority of the regions experience domestic limitation of Fintech due to lack of interregional collaborations (Philippon, 2016). The China and Europe lead in the domestically restricted Fintech that submerges their ability to operate in the regions and beyond. The financial technologies also adopt a replicated model which contradicts laws of patent and property rights. Vives (2017) acknowledges that China faces the highest accusations on patent theft that limits their operations beyond its jurisdictional boarders. Thus, according to Vives (2017), the realization of effective Fintech’s success across the globe is dependent on the existing on proper regulations that advice and protect their operations locally and internationally.

E.    Regulation of FinTech: Western World vs. GCC

According to Laama, Diemers, Raphael, Steffens, and Bohsali (2015), the Western world (particularly the U.S and Europe) have a developed FinTech ecosystem. In this regard, they have created an environment for innovation, efficient financial markets, and enhanced consumer experience generally. On the other hand, GCC countries lack a solid background for FinTech regulation because the culture is yet to be deeply ingrained in the market. In this perspective, Chance (2017), the diverse application of Sharia law between states limit the development of the sector because of the uncertainty in terms of rights and obligations. For instance, Sharia is considered as a source of law in UAE while it forms the law in Saudi Arabia. In addition, some GCC countries lack specific legislation for the sector while others have excessive barriers to entry of foreign investment in their domestic markets. All these discourage innovation in a market where penetration in the use of FinTech is still in its infancy.

Ferrarini (2017) looks at regulation challenges posed by Fintech in Europe. The region experiences concurring challenges in regulating Fintech as it is with other financially innovative regions like USA. At the top of the challenges is the control over the pop up of financial innovations that make it difficult to control or set proper legal instruments of authenticating the originality, application, and impact of the innovations on the existing market patterns (Ferrarini, 2017). The region also seems undecided on the application of its regulations due to expansive scope of the financial technology and innovation. Most countries across Europe cannot determine whether their regulations should be incrementally adopted or radical reforms considering the various types of Fintech and their use (Ferrarini, 2017). The European Union has also failed to set up legal cross-jurisdictional exemptions on the various types of Fintech as it does with other financial institutions. For instance, countries like UK seek to set different legal approach to loan-based crowdfunding Fintech from the investment-based Fintech systems (Ferrarini, 2017). By nature of their operations, such system should enjoy different legal protections and exemptions depending on their use and impact in the market. Setting up such regulations has been a nightmare for the region leading to some nations adopting hoc regulations to give a blanket legal cover instead of specified regulations. Therefore, the region is disintegrated in Fintech regulations with no specific pattern of regulations shared among the western nations.

Ferrarini (2017) limits his discussion to the regulatory treatment of the west to European jurisdiction. The European laws are split alongside various functions of the Fintech like banking, payments, security, and ad hoc (Ferrarini, 2017). The countries are also at liability to adopt own business models that best guide their regulations of the Fintech. European Union nations like UK have adopted functional laws that split their supervision of Fintech into equity-based and loan-based regulations (Ferrarini, 2017). The functional regulations are also extended to include security model, which is currently picking up in the region particularly in UK (Ferrarini, 2017). As such, the author guides his study under the principle of holistic attitude towards Fintech that experienced in the radical legislative reforms in Europe caused by security concerns on the safety of clients’ data shared during transactions (Ferrarini, 2017). Therefore, the author agrees that majority of European nations are currently adopting Fintech regulations basically on the premise of security of electronic payments and associated mobile payments.                                                        Amuna, Abu-Naser, Al Shobaki, and Mostafa, (2019) makes reserved comments on the regulated development of Fintech sector in Kuwait. The authors acknowledge the impact of Fintech on entrepreneurship in the GCC and vast Arabic regions based on the crowdfunding opportunities (Amuna, Abu-Naser, Al Shobaki, and Mostafa, 2019). The authors segment their crowdfunding platform into individuals, entrepreneurs, investors, and employees, which help set regulations based on each segment’s involvement in the financial industry. However, the authors recognize the legislative obstacle that undermines the implementation of Fintech in the regions. The business culture adopted by region’s nations undermines the free concept and ability of innovators to operate freely and sufficiently in the financial market (Amuna, Abu-Naser, Al Shobaki, and Mostafa, 2019). The region reserves it technological advancement and innovation due to unpromising cyber laws. Therefore, the authors suggest creation of amicable regulations that would protect and promote operations of Fintech in the region.

On the other hand, Almajdoub (2018) explores Bahrain’s innovative dream that is focused on promotion of technological innovation including Fintech using appropriate legal reforms. Through the slogan “Business friendly Bahrain”, the author sees into the government’s objective to change the traditional Islamic banking sector into a hub of modern financial system (Almajdoub, 2018). The author considers the central placement of the financial industry in the economic growth of the nation, which depicts the changes as assets in the realization of financial technology in the region. As such, the author recommends increased investment in information technology infrastructure and cybersecurity as key elements to safeguarding the nation’s innovation. The launch of the Bahrain Fintech Bay in 2018 marked the regulatory approach towards Fintech development in in the nation (Almajdoub, 2018). The government has since facilitated the development of regulations to oversee the digital financial services and the regulation sandbox. The regulations allow startups and Fintech companies to develop and experiment their ideas within controlled environments in the interest of developers as wells as potential customers (Almajdoub, 2018). The moves adopted by the Bahrain government are replicated in the region where nations are seeking to support their internal innovations while the same time protecting them against foreign competition. Therefore, the author’s description of the Bahrain’s regulatory development shows the Fintech’s development pattern in the region as undermined by the traditional Islamic banking and financial laws.

F.    Theoretical Framework

For purposes of this study, complexity theory shall apply. Against this background, the effectiveness and limitations of the regulatory framework depend on the complexities afforded by the prevailing regulatory environment and how it adapts to the market realities.

I.                Complexity Theory

It is an offshoot and more advanced than systems theory and is useful in explaining public sector management. Accordingly, El-Ghalyani (2017) suggests that the theory extends beyond the pre-set and single dimension analysis of phenomena to include a comprehensive consideration of unforeseen and uncontrollable factors. Notably, there are three major concepts of this theory as shall be subsequently considered.

Foremost, it focuses on the current dynamics of public management while at the same time looking at its development process. In this regard, El-Ghalyani (2017) posits that change is a non-linear activity that is a product of multiple external forces. The second postulate is that change occurs within a specific context and landscape whether social, behavioural, or political. Third is the fact that entities conduct themselves subject to existing laws, principles, as well as their self-organizing capacities. With reference to the latter, the theory asserts that entities have complex adaptive systems in which agents act freely in unpredictable ways that influence the contexts of other agents.

Grobman (2005) also asserts that complexity theory is premised on the fact that there ought to be an organization and an environment as a precursor to the application of general systems theory. He also adds that the theory provides a novel approach for looking at “how complex structures form, adapt, and change” (p. 377). Therefore, this is suitable for studying how the regulatory frameworks in the GCC have adapted to the technological advancements in the financial services sector.

Gimpel, Rau, and Röglinger (2018) reviews applicable theories that conform to experienced technological innovation in the banking technology. The study looks at the transformational innovation in technology and network levels based on the logics of informational and technological infrastructure. The study used grounded theories that define the typology of technological innovation. The theories explain the growing innovativeness experienced in regions that were previously less innovative. According to Gimpel, Rau, and Röglinger (2018), the Middle East like other technologically developing nations are pushing hard to catch up with the developed west in terms of innovations and financial inclusion. The study focuses on random application of developmental transformation assumptions include a resource-based theory that looks at the dispersal of skills and technology across regions (Gimpel, Rau, and Röglinger, 2018). Thus, the theories looked at explain the dispersal of transformational capabilities and how they influence innovation across different regions.

Gimpel, Rau, and Röglinger (2018) also contributes to the review of financial technologies’ role in the banking ecosystem. The analysis include explanations of credit institutions’ technologically advancement in under service analysis and ability to capture more financial functions in the markets. The authors have based their assessed market behavior on theoretical assumptions that expand their models in the interest of the transformational banking technology. For instance, the authors use theories to define their financial technology patterns and role in the industry. The study particularly relies on three theories to explain innovative capabilities in the mobile payment ecosystem. The authors use the prospect theory to define the premise of performance loss in innovation (Gimpel, Rau, and Röglinger, 2018). The theory permits inclusion and understanding of the performance loss in the banking and financial institution. The theory is followed by the dependency theory that explains the premise of “customer facing IT capability” (Gimpel, Rau, and Röglinger, 2018). The authors used the theory to explore customers’ intricacy factors that craft innovation towards meeting certain satisfactory demands of the clients. The third theory discussed by the study is the institutional theory that defines the market environment that surrounds technological innovation (Gimpel, Rau, and Röglinger, 2018). The theory explains the operational and institutional interactions that creates and manages competitive pressure in the banking ecosystem. Gimpel, Rau, and Röglinger, (2018) argues that the competitive pressure is experienced in terms of creativity, performance and regulations. As such, the competitive pressure can either work to the advantage of technological advancement or undermine technological transformation particularly in the banking sector. Therefore, the study contributes to understanding of bank technology by emphasizing on the theories that impact the banking ecosystem.

2.2.          Laws and regulations governing the Fintech industry in the UK

The United Kingdom boast of the most expedite regulatory structure for the development and sustainability of Fintech among its western peers (Amone, and Pareglio, 2018). The nation has managed to set an approachable technological innovation climate that sustains it financial industry. Unlike other nations that focus on the legal mitigation and control measures only, UK has opted for a sustainability approach to its financial industry (Amone, and Pareglio, 2018). The approach allows the nation to formulate laws that not only focus on the short-term innovations but also promote long-term innovations alongside an environmentally friendly approach. Amone and Pareglio (2018) acknowledge UK as the leading innovative nation whose technological advancement prioritizes sustainability over other incentives. The authors’ argument is supported by the nation’s set regulations that promote green technology. The idea was realized through the government’s policy enacted that saw the creation of the Green Fintech Centre (GFC) that advocates for the innovations of environmentally friendly financial technologies. The center issues required knowledge on growth of green fintech to both public and private sectors across different jurisdictional spectrums (Amone, and Pareglio, 2018). For example, GFC supports satellite and remote data sensing, computation of big data, analysis, algorithms creations, and block-chain technologies. The center is also task with the responsibility of asset-level database creation and information sharing that ensures that necessary informational requirement is met by all players in the industry. The function gives the center the legal authority to monitor transfer and storage of data across the industry (Bektenova, 2018). The function is supported by the customer-based and data security laws that prevent Fintech developers from using electronic data as a contrary purpose, which regulates the industry.

The Taskforce on Climate-Related Risk Financial Disclosure (TCFD) has also found great relevance in UK’s Fintech regulation. The regulatory institution chaired by Michael Bloomberg and Mark Carney of the Bank of England are tasked with overseeing useful disclosure of risks and opportunities that affect the performance in the financial environment (Amone, and Pareglio, 2018). The institution aims at disclosure and transparency of industry players in realizing capital reallocation, incentives to technological investment and promotion of green technology investments. The TFCD is supported by the institutionalized Green Finance Taskforce (GFT) and the Green Finance Initiative (GFI) that were put in place by the national government and City of London Corporation respectively (Amone, and Pareglio, 2018). The conjoined public and private-led institutions are tasked with the responsibility of creating frameworks that incorporate mandates of the TCFD into the government regulatory structures. The position is further supported by the Sustainable Development Goals (SDG). UK has also put in place legislative measures to ensure that investors comply with other regional regulatory agreements like the Paris Agreement to account for and comply with climate-related risks. The decisions are legislatively supported by financial regulators that ensure compliance with the requirements before investing in Fintech (Bektenova, 2018). Therefore, the TCFD policy together with other regulations ensures that British financial innovators meet the requirements of the green fintech developments.

2.3.          The Spectrum of Dispute Resolution Techniques

The legal scope of Fintech is vast considering its diversified association in the industry. Fintech is legally covered from innovation to implementation owing to right to ownership, ethics of practices, and service or product liability (Stipanowich, and Fraser, 2016). The view concurs with the vast inclusion of regulatory threshold in the industry. Fintech’s resolution threshold includes financial, technical, labor, customer protection, service charter and other spectrums (Stipanowich, and Fraser, 2016). Thus, fintech disputes are often classified distinctively depending on the cause of action, claimants, regulatory institutions, and the application laws.

However, Case (2016), the vice President, Customer Segments and Strategy at Thomson Reuters, argues for an otherwise spectrum of the dispute resolution for the Fintech industry. Case (2016) argues for the role of financial technology in supporting the Online Dispute Resolution (ODR). The author believes that Fintech as an arm of technology has the potential of transforming the world’s dispute resolution system. Fintech companies like eBay and PayPal have set self-dissolution techniques that allows the firms to solve internal disputes with their customers (Case, 2016). The fintech companies have employed the peer-to-peer resolution system that automatically solves disputes with and between their customers. The public institutions also use technology to solve their disputes. The most rampant application is the analytic transaction system offered by fintech that allows public institutions to solve their transactional disputes (Case, 2016). Through online systems, technology helps raise claims, track transactions, make reimbursement, and provide transaction statements that are applicable in courts of law as evidences. Therefore, financial technology offers reliable platform for dispute resolution.

2.4.          The Mediation Process

Bromberg, Godwin, and Ramsay (2017) reports that most common mediation process used in financial technology in Europe is ombudsman office. Designated into technology, communication and finance, the ombudsman offices are attached to the countries’ legal system and the region’s watch offices. The UK for example has mediation offices attached to the communication, financial, and technology sectors. The ombudsman is tasked with the responsibility of ensuring favorable conditions for all players. The communication ombudsman helps solve claims raised by telecommunication customers regarding charges, tariffs and other transactional claims that rise from the provision of services by the communication firms. The same position is taken by the financial and technology ombudsman. According to Bromberg, Godwin and Ramsay (2017), UK is among the western nations with most developed ombudsman offices that ensure neutral resolution of disputes between fintech firms and their customers. The ombudsman offices help customers and firms that experience problems in technology, communication, licenses, patents, finance, and other conflicting areas (Bromberg, L., Godwin, A. and Ramsay, I., 2017). The UK ombudsman serves as the neutral third party in raised disputes. The ombudsmen crosscheck raised claims for their diverse perspectives to best understand the context of the disagreement (Bromberg, L., Godwin, A. and Ramsay, I., 2017). The move allows the mediator to explore various options available to solve the dispute. Thus, ombudsman mediation is a crucial mediation process that would successfully apply with the fintech disputes in the GCC regions has it is in the west.

The World Intellectual Property Organization (WIPO) also offers a mediation opportunity for the fintech disputes (Birkbeck, 2016). The global institution is tasked with responsibility of formulating IP regulations, services, and guiding innovations’ right to use. The institution has worked in conjunction with various governments and research and development organizations to protect innovations, trademarks and fintech designs across the globe (Birkbeck, 2016). The mediation process is accessible to individuals and firms that sign up with the institution’s Arbitration and Mediation Centre or membership registration that gives the institutional authority to act as a mediator when dispute arises (Birkbeck, 2016). Like other global organizations, the institution allows innovators to sort for amicable dispute resolutions thereby mitigating chances of IP loss.

Birkbeck (2016) portrays WIPO as the alternative cross boarder mediation process. The process has authentically been used as alternative litigation to settle disputes between parties in a non-contractual standoff (Birkbeck, 2016). The jurisdictional model adopted by the WIPO mediation process creates a consensual process that is aligned to the WIPO mediation pledge (Birkbeck, 2016). The pledge requires aggrieved parties to exhibit some level of willingness to undergo the mediation process unconditionally. Therefore, the process mainly covers non-contractual.

2.5.          Dispute Resolution Techniques in the Fintech Industry

The spectrum of financial dispute resolution techniques in many countries and regions that have developed Fintech have institutionalized legal frameworks to solve disputes. The west have installed financial Ombudsman to monitor and oversee financial technological innovations (Merricks, 2007). The UK financial Ombudsman is statutorily mandated to offer dispute resolution services to innovators and their customers. According to Merricks (2007) the body operates on a different legal model from the civil court operations but under the legal frameworks provided by individual constitution of each country. With a focus on claims made, Ombudsman works to steer clients’ and firm’s claim by representing them in legalized dispute resolutions forum (Merricks, 2007). The technique is applauded for its easy accessibility and full disclosure of victims’ cases in the full light of the law. Thus, the financial ombudsman is a reputable dispute resolution techniques used by most countries to offer alternative legal solution to fintech clients and investors.

Kaivanto and Prince (2017) review a technological and systemic dispute resolution technique that runs internal system operations against the orchestrated programming tools as a reconciliation mechanism to financial systems. The reconciliation system runs on an informational asymmetry between system programmers and the non-programmers thereby exerting type one informational impacts (Kaivanto, and Prince, 2017). The authors refer to the technique as an inbuilt system correction program that sets concurrent backup for the system to ensure solution of dispute between the fintech and its clients. The program raises the unambiguity of implicit claim to set legal obligations for solving the system-run dispute. According to the authors, the identified claims are run on a software-only contract to trigger a type two information impacts (Kaivanto, and Prince, 2017). The obligation types apply either an implicit or explicit software code to solve disputes within the infinity of the claims made. The dispute resolution techniques allows clients and firms to enter into a transaction knowing that system disputes that may arise from their transactions are solvable within their triggered parameters (Kaivanto, and Prince, 2017). Such an approach is very beneficial to large fintech firms that rely on system ability to solve basic operational disputes with its clients. Therefore, in the authors’ perspective, the systemic dispute resolution technique should be given priority in solving operational disputes.

Chao, Durso, Farrell, and Robertson (2018) acknowledges the commercial and civil court petitions as reliable techniques for solving disputes related to Fintech. The authors holds the positive value of judicial system solving disputes between users and fintech developments. The Fourth Amendments of the USA law requires search warrants to access or seize people and their personal information. Nonetheless, the Act has failed to protect users against infringement of personal data by fintech developers and investors (Chao, Durso, Farrell, and Robertson, 2018). Such disputes are solvable in legal courts that focus on the interest of both parties in reference to the actions petitioned. Therefore, the judicial system is the primary dispute solution technique commonly utilized across regional markets.

2.6.          Conclusion

The literature review section provided the background literature for the study. Through analysis of previous studies and books, in relation to the study topic, the section gave necessary base information about fintech. The review explored the origin of fintech, its presence in other regions particularly in the west and the regulatory inclination of fintech. Therefore, by studying such issues in the literatures, the base information collected provides a good foundation for examining the regulatory limitation of fintech in GCC, in comparison to the west.



Research Methodology

3.1            Introduction

For purposes of this research, the paper utilized secondary sources that included scholarly articles on the subject, institutional publications, and online journals from professional firms in the area of technology, communication, and finance. In light of this, the paper looked at how the said sources have interpreted the regulation of FinTech in the GCC intending to identify existing provisions and their limitations (Walliman 2016, p. 69). To guarantee the reliability of secondary sources, data was reviewed for its authenticity and compared with other sources to single out biased, inaccurate, and purely imaginative data for purposes of excluding them the research analysis (Walliman, 2016, p. 71). Thus, the research approach ensured that the ethical concerns that arose from the choice of data selected were adequately addressed.

A meta-analytical approach was employed to analyze a collection of secondary data analyzed and interpreted from previous studies. In this regard, the research considered the advancement of FinTech and their regulatory responses to point out the existing gaps and limitations (Cooper, Patall, and Lindsay, 2013 p. 6). Studies that focused on the regulation of FinTech in the GCC were collected depending on their results in addressing the research question to determine common measurement methods (Walliman, 2016, p. 71). The two variables were tracked in the existing studies to determine their vitality (Cooper et al., 2016, p. 10). Thus, the meta-analysis gave room for continued evaluation of the research outcomes in the interest of current and future research studies.

In light of the preceding, this study was based on certain assumptions. First, the spectrum of development in the FinTech in the GCC is still in its nascent stages that imply the adoption of RegTech. Second, there is a potential for growth in the sector if the state adopts laws that enhance innovation and investment in the FinTech sector. Therefore, the study methodology was coined to respond to the two assumptions of the study.

3.2            Research Purpose

The research sort to examine the role of regulatory impact on the development and implementation of Fintech in the GCC region. With a reference to the developed regions, particularly the west, the research was able to make admirable decisions by acknowledging their difference as tools for examining GCC’s position in the global Fintech industry (Ying, C.C. and Yanchuk, A.D., 2006). However, since the majority of the GCC nations are just picking up Fintech, there is less literature on GCC’s regulatory limitation that can be used as the vast sources of information alone for discussing the region’s position in Fintech. The study sort to use the limited resources in terms of commentary reports, banks reports, and institutional views and compared them with system sources available for the sources. Besides, the study reviewed documented observations from academic institutions on the development of Fintech in GCC (Levac, D., Colquhoun, H. and O’Brien, K.K., 2010). Therefore, the methodological purpose for the study was to use as many available sources as possible to gather information on the development of Fintech in the GCC region and its arising legal impact.

3.3            Research Approach

The study aimed at examining the regulatory limitation on the development of Fintech in GCC. The study adopts a relational conclusive research design to determine the objective of the study. As such, the research’s core interest was vested in the participatory role of GCC nations in formulating laws that can promote Fintech as it is competitive regions like Europe, China, and the USA. The design gives an interpretive view of the research due to the cross-regional secondary data analysis that explores the relationship between the research variables (Saunders, Lewis, & Thornhill, 2009). Therefore, the researchers assumed a non-biased secondary data collection that gave a true representation of the study topic.

The study design also adopts a qualitative design in an exhibition of the positivism literature to facilitate collection analytical format based on comparable information available. The design assumed information asymmetry owing to the growing technological age that allows the fastest flow and sharing of information across regions (Saunders, Lewis, & Thornhill, 2009). Thus, the technique uses the analytical significance of objective gauze to generalize the outcome of the project and rely on the same to prove the existence of the value concept but makes discreet assumptive conclusions on Fintech position of Kuwait as the case study. According to Saunders, Lewis, & Thomhill (2009), research positivism is the research philosophy of information acquisition that acknowledges the dominance of research knowledge within the know-how capability of studies. The assumption defends this research’s approach to create and defend the study objectives through collaborative reviews of accessed studies on similar topics and observatory case study. Thus, the research approach adopts a defendable analytical approach to the study variables as guided by its questions and objectives.

3.4            Qualitative vs. Quantitative Study

Qualitative and quantitative research concepts explain the analytical choices adopted in research studies. However, this research preferred the application of only one technique considering the relational consistency of the study variables and vast application of the topic (Saunders, Sim, Kingstone, Baker, Waterfield, Bartlam, Burroughs, and Jinks, 2018). The study preferred the qualitative study method over the quantitative study method. The qualitative method helped build the research by deducing qualitative information collected from secondary sources to a simple interpretable concept that explains the relationship of the study variables. The definition differs from the quantitative method that considers the analysis of numerical data to explain the relationship between the study variables (Saunders, Sim, Kingstone, Baker, Waterfield, Bartlam, Burroughs, and Jinks, 2018). The quantitative method goes after definitive answers which assert the method’s confidentiality while qualitative method explores the general research opinion without definite clarification on the overall research question (Saunders, Sim, Kingstone, Baker, Waterfield, Bartlam, Burroughs, and Jinks, 2018). Based on the methodological assumption, the qualitative study described the conceptual relationship between the region’s regulatory limitation and the development of Fintech. The qualitative approach is supported by secondary data obtained through review of other sources and documented observations (Saunders, Lewis, & Thornhill, 2009).  The two data design methods give a different but conforming approach in data analysis that fits the analysis of the study based on analytical choice. Thus, this study chose a qualitative data method based on its ability to exponentially examine the secondary information and make affirmative reference to the case study.

3.5            Research Methods – Case Study and Secondary Methods

The research employed qualitative secondary data to examine the regulatory limitation exerted by the GCC members on the development of financial technology. The choice of secondary data was made under various reasons that confirmed its relevance and conformity in actualizing the objectives of the research in substantiated results (Heaton, 2008). Secondary data method best suited the limited time available for the research. The method also provided sufficient information due to the availability of diverse information sources ranging from multiple journals, researches papers, books, documented observations, and statutory reports from various governments’ institutions. The vast information source provided by secondary data method gave the best opportunity for comparison of Fintech progress in the GCC region (Heaton, 2008). Besides, the method mitigated data inconsistencies and biases thereby authenticating information source.

The study also used an in-depth up-close analysis of Kuwait’s Fintech as the case study. The case study helped narrow down the concepts of the study to examine the nation’s regulatory progress in promoting Fintech development (Heaton, 2008). The case study method also helped experiment some of the findings of the study by realigning the findings in a real-time occurrence. The method gave a deeper understanding of the research with a detailed examination of the study subject and redefinition of the research objectives (Heaton, 2008). Thus, the study referred to Kuwait as the preferential case study for the GCC region in exemplifying the objectives of the dissertation.

3.6            Data analysis

The data analysis followed the transcription of the observatory and literature review as sources of data. The analysis followed the qualitative research approach where each information or expression are analyzed and counterchecked to verify the sources’ perspective of the study objective (Grbich, 2012). The analysis included a comparative review of the secondary data to assert the similarities and differences as components of research’s analysis (Grbich, 2012). The data analysis method offered a pattern of continuity for the objective as redefined in the views of various sources referred to. Therefore, the data analysis method provided a waiving narrative of the regulatory limit of RCC region to Fintech and the intervention preferred by the Kuwait government in realizing maximum attainment of financial technology.

The dissertation also acquired other analysis tools to explain the concept of the research topic as presented by various sources. The study made a substantial connection to the objective using a case study a tool of emphasizing the study objective (Grbich, 2012). Used as a tool, the case study gives a reinstatement of the study objectives in the findings of the research. The strategy allowed the researcher to verify the conformity of the study finding the case frameworks. The outcome of the analysis helped identify the similarities and difference in study findings between various GCC members and assessment against developed systems in the west particularly UK (Grbich, 2012). Thus, the case study provided an alternative analytical framework for the study with more focus on the experienced position of the region.

3.7            Validity and Reliability- Triangulation

The dissertation was coiled on the premise of triangulation as a means of authenticating the validity and reliability of results from the source used in the study (Healy, and Perry, 2000). The study referred to 50 different sources that range from authored journals, books, documented observations, articles, previous researches, and government reports. The large scope of data sources helped boost the credibility of the information used because the sources’ authors relied on different approaches, theoretical backgrounds, and primary sources to undertake their study.  The dissertation used fintech data triangulation, theoretical triangulation, methodological triangulation, and analytical triangulation. The position implied that each section of the dissertation used more than one data source and analysis tools hence increasing the credibility of sources used in the study.

The data triangulation was exhibited consistently throughout the paper with the inclusion of various sources as a reference to information used in the study. The comparison between western Fintech development and the GCC fintech development strengthened the credibility of the results obtained. The theoretical triangulation saw the dissertation employ several theories to explain the concept of Fintech across different markets. Besides, the methodological triangulation helped increase the credibility of the study method by using both secondary data method and a case study to validate the results of the study. Thus, the study results exhibited high credibility validity due to the comparability of sources.

3.8            Limitations and Delimitations of the Study

The research solely relied on secondary as the source of information. The decision undermined perspectival originality that would have been achieved if the study chose primary data method. Use of primary observation that would have backed up the secondary data method information (Johnston, 2017). The data referenced were also directly quoted without questioning their primary collection. Therefore, such decision risk undermining the authenticity results obtained from the study.

However, the study method used offered great benefits to the study. The use of secondary data eliminates chances of prejudice and misleading information that would have been collected in primary data method (Glatthorn, and Joyner, 2005). The method used allowed for the comparison of information collected from many resources at the same time. The move increased the credibility of results obtained by eliminating self-opinion that would have undermined the conclusive results (Glatthorn, and Joyner, 2005). In addition, the case study used exemplified the results in a more experimental manner that actualized their relevance in the study. Thus, the study exhibited more advantages than disadvantages to the method used.

3.9            Conclusion

The chapter analyzed data collection, analysis, and interpretation using qualitative secondary data methods. The study used over 50 different sources that increased the credibility of study results. Every segment of the methodology was explored to clarify on data collection, analysis, and interpretation. Thus, the chapter explains the results obtained from the qualitative secondary data analysis method.





4.1 Introduction

The meta-analysis method allowed for comparative analysis and interpretation of the case study results derived from several qualitative types of research to get one referential result (Ke, 2011). Based on different research objectives, the meta-analysis differed in literature review and contextual analysis with each group of sources responding to the specific study objective. Nonetheless, the cumulative qualitative results for the case study’s objectives gave an in-depth interpretation of the findings. The results were interpreted in the fullness of realizing a deeper understanding of the phenomena of the research (Ke, F., 2011). All contextual definitions highlighted in the sources underline the theme of the objective. Therefore, the meta-analysis emphasized the relevance of the study objectives in exploring the development of Fintech in Kuwait.

The meta-analysis also helped in crediting the authenticity of the findings on the development of Fintech in Kuwait by encouraging a comparative qualitative research method (Brandtzæg, 2010). Unlike one-source research, the multiple-resource analysis reduced the chances of informational inaccuracy and redundancy. Taking Kuwait as the case study, the meta-analysis reviewed the nation’s transformation from the traditional financial industry to a modern Fintech, the trend of Fintech development, regulatory progress for the nation and how they limit Fintech development, and plan for the nation’s Fintech development (Brandtzæg, 2010). Therefore, the meta-analysis encouraged a collective qualitative analysis of various sources, which helped understand the development of Fintech in Kuwait.

4.2 Case Study Results Based on Specific Objectives

Table 1: Meta-Analysis of Transformation of Fintech in Kuwait

Transformation and Trends of Fintech in Kuwait
Source Period No. of references Qualitative status Key Findings
GALEEVA, 2017. 2015 – 2017 9 YES The 43% of the traditional Kuwait Islamic banking share is rapidly reducing due to slow economic growth and rise of financial technology
Sidlo, 2017. 2017 33 YES The use of Sharia-compliance solutions in Fintech and SME as potential growth opportunities for Islamic banking in Kuwait and other GCC members
Lacasse, Lambert, and Khan, 2017. 2017 10 YES Over 50% of Islamic banks in Kuwait and Saudi Arabia are currently investing in Fintech
Cook, 2017. 2015 – 2017 13 YES Banks in Kuwait like Atom Bank and Gulf Bank in Kuwait are now prioritizing Fintech innovation to digitally transform their old legacy banking system
RegTech and its effectiveness in Limiting Cyber security and Consumer protection, Innovation, and Taming Systemic Risks
El-Gamal, M.A., 2007. 2007 35 YES The growth of financial engineering has resulted to contemporary regulations on both traditional financial system and legal caps on the new financial systems
Al-Shammari, B., 2014. 2012 – 2014 21 YES Risk regulation has resulted to Kuwait setting up domestic disclosure regulations and practice regulations on all financial actions and instruments as a way controlling corporate and technological risks.
Lukonga, M.I., 2018. 2017 – 2018 51 YES Fintech emergence as an innovative financial equality with broader inclusion in the industry across all markets
AlNoumani, D., AlMutairi, F. and Machado, J., 2019. 2019 3 YES The study examined corporate revolution of Kuwait Financial House with regard to revolutionary financial mall and involvement of customer and investment demands.
Abu Amuna, Y.M., Abu-Naser, S.S., Al Shobaki, M.J. and Abu Mostafa, Y.A., 2019. 2019 27 YES Fintech has immense impact on Arabic entrepreneurship by using crowdfunding platforms


Kuwait like other GCC members has experienced financial technology transformation over the last decade. Known for a leading Sharia banking system, the recent economic downfall has resulted in the nation’s financial industry adopting new financial technologies that keep it in place with the global financial industry trends. According to Galeeva (2017), Kuwait host 43% of the region’s traditional Islamic banking system. However, the beginning of 2015, the industry has experienced slow economic growth due to the late 2000 financial crisis. The traditional Islamic banking industry in Kuwait is also facing uprising competition from financial technology innovations. The position is supported by Sidlo (2017) who argues for Sharia compliance solutions in Fintech and SMEs as the alternative growth opportunities for Islamic banking in Kuwait and GCC region. The authors’ point of arguments confirms the nation’s transformation to Fintech innovation that now warrants a review of Sharia to protect the industry’s innovation. Lacasse, Lambert, and Khan (2017) too acknowledge the innovative transformation of Kuwait banking industry. According to Lacasse, Lambert, and Khan (2017), Kuwait and Saudi Arabia are replicating the global Fintech innovation with 50% of Kuwait’s banks investing in the new financial technology. With the review of banking industry reports, Lacasse, Lambert, and Khan (2017) project a trending higher growth for the Fintech industry that may jeopardize the Islamic banking industry if no protective regulations are set against the transformation. Cook (2017) examines the growing prioritization of Fintech and digital banking by the Kuwait banks. Therefore, the authors show the developmental progress of Kuwait in transforming its traditional Islamic banking industry into the new innovative Fintech industry.

Kuwait is also making considerable progress in technological regulation, cybersecurity, consumer protection, innovation, and taming systemic risks. El-Gamal (2007) concludes that the growth of financial engineering has resulted in the formation of contemporary regulation in the interest of the affected industries. Kuwait and other Arabic region’s compliance to Sharia banking regulations implicated the need to protect the Islamic banking as well as legal support financial technology. With a review of 35 scholarly sources, El-Gamal (2007) shows the nation’s developed regulations through legal caps set on traditional and Fintech banking system to protect the diverse interest of each sector. Al-Shammari (2014) discusses Kuwait’s position in financial risk regulations through domestic and practice regulations. The government has institutionalized regulations that bar risk exposure to innovators and investors in corporate and technology exposure. Lukonga (2018) discusses regulatory protection on innovation in the financial industry. According to the author, certain Sharia laws overprotect the Islamic banking and assets thereby limiting successful adoption of Fintech. AlNoumani, AlMutairi, and Machado (2019) shows the overemphasis of the government on the Kuwait Financial House that undermines Fintech innovation and transformation. The view contradicts Abu Amuna, Abu-Naser, Al Shobaki, and Abu Mostafa, (2019)’s view on the immense impact of Fintech on Arabic entrepreneurship. The Fintech crowdfunding platform has revolutionized the financial industry. Therefore, the meta-analysis shows the comparative analysis of the case study which increases the credibility of the study findings.

4.3 Conclusion

The meta-analysis section provided a comparative analysis of Kuwait’s Fintech transformation and regulations. As a perspectival tool, the analysis gave a platform for understanding the case study through analysis of several sources about the study topic. The methodology tool increases credibility of the study findings thereby its importance for inclusion in the dissertation.

















Evaluation of Findings

5.1.          Introduction

The evaluation and finding section discusses the findings of the research in consideration of the sources’ perspectives. Based on secondary data method, the findings of the study are conclusive results from the study sources. The outcomes of the analysis are interpreted with a view to identifying the shortcomings in the Fintech regulatory environment in the GCC

5.2.          Overview

The transformation of financial technology in GCC is represented by Fintech in its financial industry. The region is open to the history of technological development in its financial industry with remarkable changes in regional transactions, cross-border money transfer services, credit cards, Automatic Teller Machines (ATM), and digital payments. Fintech offers a competitive ground to the traditional Islamic financial institutions (Lukonga, 2018). Fintech is being driven by changing consumer demands and preferences in the region. While the larger part of the GCC market is still loyal to traditional Islamic banking, the younger generation and influence of the regional and global market shift is drifting the industry in the GCC members to acknowledge even if not implemented transformation to Fintech. The introduction and transformation to Fintech are contrasted by the loyalty and regulatory limitation from the traditional financial system and the assertive regulations. Saudi Arabia, Kuwait, UAE, Oman, Qatar, and Bahrain exhibit the significant role of Fintech in their development. The nations have low entry barriers and insubordination through their traditional practices and regulations for new financial technologies (Lukonga, 2018). The GCC laws restrict the entry of new Fintech firms by preserving certain operations to the Islamic institution but while also prioritizing the Islamic institutions for the implementation of the modern financial models. The Fintech innovations target financial services such as payments, deposits, credits, insurances, wealth management, and raising capital. As such, the focus on Fintech possesses a potential growth opportunity for the regional GCC market.

Moreover, the technological transformation in GCC is not limited to the financial industry. The new technology created new business models that also came with several risks (Lukonga, 2018). Some of the changes experienced are catalyzed by the radical changes in mobile network operations (MNO). The aggression of such innovations compromises the duties of financial agencies and other associates. Therefore, the involvement of Fintech in the region is undeniable robust in the sectorial impact.

5.3.          Discussion of the specific objectives

A.    Transformation of the financial industry of GCC from a classical to Fintech

The development of Fintech in GCC has progressively changed with more reflection in UAE, which deposits more interaction due to its central placement in the development of the region. The increased post-constructional development in the region has uniformly created interactive and mutual reinforcement factors for the transformation of the financial industry (Lukonga, 2018). The post-revolutionary forces include changes in consumer demand, urge for digital products, high investment in technology, support from the government or GCC, and expansion innovative skills. The creation of the GCC has created inter-governmental support for the native investors in technology (World Bank, 2015). For instance, the collaboration between the nations is the pillar of the rapid financial and e-commerce revolutions. The revolution is realized in the private and public sectors. While the public sectors provide sufficient infrastructure, the private sectors mobilize the skills and technical innovation that drives the transformation (Lukonga, 2018). The region is also host to a diversifying population which is an increasing market for its innovations. The response to the diversification is visible in the nations’ policy reviews that support transformative financial relationship as opposed to the former rigid banking system. Such include the adoption of new techniques and corporation of global banking trends like gender and affirmative investment policies by the governments. Thus, the general transformation in the regions interactive factors encourages Fintech.

The region’s increasing consumer demand for digital products is key to the financial revolution. There is a general increase in technological investment that drives a sectorial competition and facilitates cross-edge interactions in the financial industry (Lukonga, 2018). A reliable example is increased mobile payments and other wireless Fintech transactions that have proven more efficient. GCC is leading in Arabic internet and mobile phone service subscriptions which reflects GCC’s vast investments in digital technologies (World Bank, 2015). The provision of optic and cellular technologies supplements smartphone applications with vast Fintech platforms to support various transactions. UAE, Bahrain, and Qatar are leaders in the mobile application Fintech functions, which is slightly followed by Saudi Arabia. Kuwait lags in mobile phone subscription and innovations which undermines its competitiveness in the region. On internet subscription alone, Bahrain, UAE, and Qatar are leading with over 90% population subscription (Hakmeh, 2017). Kuwait, Oman, and Saudi Arabia come second with 82%, 74.2% and 69.6% respectively (Hakmeh, 2017). The region has an average of 76% of internet users’ subscription (Figure 2). However, in recent time, Kuwait has exhibited great progress in accelerated technological investments that rates (ITU, 2016). World Bank (2015) and GSMA (2016) reports reveals substantial growth in mobile phone subscription of the GCC region. The trend is followed by smartphone penetration in respective countries which is a reflection of Fintech involvement in the nations as indicated (Figure 3).

Figure 2: Internet Subscription for GCC Countries

Country Internet Users (% of population) Mobile Broadband Subscriptions (per 100 inhabitants) Fixed broadband penetrations (per 100 inhabitants) Mobile subscriptions (per 100 inhabitants) Social media penetration (Facebook per 100 inhabitants) International bandwidth per internet user (Bit/s)
Bahrain 93.5 131.8 18.6 185.3 73 47,205
Kuwait 82.0 139.3 1.4 231.8 71 48,619
Oman 74.2 78.3 5.6 159.9 41 59,784
Qatar 92.9 80.0 10.1 153.6 95 71,566
Saudi Arabia 69.6 111.7 12.0 176.6 58 88,669
UAE 91.2 92.0 12.8 187.3 94 107,914
GCC Aggregate 76 115.0 12.8 184.0 66 84,659

Source: Hakmeh, J. 2017 and ITU 2016.

Figure 3: Technological Reflection on Fintech through Internet and Mobile Phone Subscription

Source:  World Bank (2015) and GSMA (2016)

The GCC members also exhibit difference in Fintech development caused by alternating government support. Nations that have investment in technological infrastructure, incubators, and funded technological innovation exhibits higher Fintech transformation (GSMA, 2016). The differential government support influences diverse trade interaction through the trade-free zones. The move has made UAE, Bahrain, Oman, Qatar, and Saudi Arabia prioritize innovation in its development agendas. The result is increased digital Fintech services including introduction of smart payments for government services. Therefore, relevant government support has catapulted development of Fintech in GCC.

Idiosyncratic and individual country practices also influenced development of Fintech across the GCC members. The differences in local banking practices and financial incumbency creates the impartiality in the industry (Hakmeh, 2017). The uncertainty of business practices undermines creativity and implementation of transformative business practices. Such include traditional banking infrastructure that undermines Fintech opportunities thereby limiting expansion of mobile transactions (World Bank, 2015). The practices take advantage of the small or segmented consumer markets. Thus, instead of supporting the regional Fintech approach, the idiosyncratic factors promotes traditional banking incumbency.

B.    RegTech and its effectiveness in Limiting Cyber security and Consumer protection, Innovation, and Taming Systemic Risks

i.                 Regulatory Effectiveness

The legal structure of GCC states is founded on the principle of Sharia law. The nations also make legal compliance a prerequisite for any innovative cation in the nations. The laws are a blend of the regions legal trend, civil laws, and customary laws. Some nations’ legal structure has recently acquired common law. The United Arabs Emirates formed the Dubai International Financial Centre on distinct English common law. The diverse legal structures of the nations’ gives no confirmed regional legal structures that could be used as a referential legal framework for the formation of various practice laws (Ariss, Rezvanian, and Mehdian, 2007). Therefore, lack of single legal structure for the region allows each country to formulate laws based on their funding structures, which overrides the interest for a common regional law hence limiting the development of Fintech in the region.

The region’s legal provisions are mainly predated to Fintech. The provision is uniquely odd to the existing Fintech development thereby creating gaps in the legal framework between the Fintech development and prioritized regulations. The situation is worsened by the undefined application of the civil laws that ought to offer necessary legal backup for the missing regulations. The nations are mainly implementing technological innovations on legacy laws with unclear support for the growing technological progress. Even with the existence of card payments for years, the regional body has no common inter-market card payment regulations that link to Fintech, which reduces the functions of Fintech to legacy laws (Ariss, Rezvanian, and Mehdian, 2007). In addition, the introduction of nonbank financial services through Fintech functions like mobile network operations have no legacy laws that regulate their operations, authorizations, jurisdictional practice pattern, and any other legal clarity that conforms to the new technological application. As such, the nations are left over-dependent on the traditional banking systems, which limits the legal introduction of electronic payments and the use of cryptocurrencies. The position leaves Fintech concepts and functions unspecified under the legacy laws. Therefore, the use of the legacy laws in the region limits the regulatory duty of forming legal certainty for Fintech innovations, implementation, and protection.

The region is also doing very little to reform the legislative gaps already shown in the introduction of Fintech among its member states. The legislative gaps exert an uneven developmental pace between the member states. Nations that are determined to be the region’s giants like UAE and Bahrain have recently invested in transforming its legal frameworks to solve the legislative gap that limits the transformation of Fintech in the nations. The nations together with Saudi Arabia are positioning for changes in their laws and licensing of certain Fintech services that have an unavoidable role in the market. The nations have also exhibited interest to lift limitations on Fintech’s systemic development and other emerging innovations targeting financial transactions in the region and abroad (Ariss, Rezvanian, and Mehdian, 2007). The hike moves include collaboration with global financial institutions like the World Bank to reform their banking system through legal reform and expansion of their domestic financial system to include digital transactions. Therefore, with the status quo, the legislative gaps associated with the emergence of Fintech in the region limits its expansion within and outside the region.

ii.               Inconsistent Licensing Regime

The regulatory system of the GCC issues Fintech firms with individual nation’s license which is not transferable or permanently usable in other GCC states. The practice creates a slow shift in licensing regime which is a considerable factor in Fintech development owing to the growing competition in the industry. The UAE is the flagship of the Abu Dhabi Global Market (ADGM) and Bahrain under its Central Bank has established regulatory sandboxes that issue single licenses for Fintech (Hertog, 2007). Saudi Arabia also followed suit in 2018 under its Capital Market Authority, the Saudi Monetary Authority and the Central Bank of Saudi. The move triggered similar reaction and objective reproach by the Kuwait and Oman Central Bank due to the regional influence. However, the region still lags in common regulatory sandbox models that would see the implementation of a common system for the entire region (Anabi, Nordin, and Abdullah, 2016). The varying licensing regimes only create disparity and inconsistency in regulatory development which limits the potential implementation of Fintech in revolutionizing the financial industry in the region.

Outside the existing regulatory disparity in licensing, the regions lack consistent clarity on the licensing requirements for Fintech development. UAE and Bahrain have adopted preferential digital payment license that targets nonbank payment service providers (Hertog, 2007). The other GCC members have made the least attempt in regularizing mobile lending innovations and setting of new regulations to govern innovation in crowdfunding platforms. The decision leaves the innovative industry at the mercy of the traditional bank lending services, which technically cripples the unregulated side of the industry. The same position applies to the virtual currencies cryptocurrencies that are technically incapacitated in the region (Anabi, Nordin, and Abdullah, 2016). Some Members like UAE have set laws the guide trades in virtual currencies and other associated digital exchange services that cannot be executed without an applicable license. Thus, the regional regulatory framework is flawed by several legal uncertainties that limit the inclusion of Fintech in the financial industry.

iii.             Prudential Regulations on Innovation

The payment sector of the region’s technological development has shown the highest regulatory reforms needs with customary practice tension between the traditional banking system and the innovations that undermine Fintech innovation. Qatar, UAE, and Bahrain have implemented operator-led models of financial technology that permits the non-bank institutions to issue direct e-money services while Oman, Saudi Arabia, and Kuwait still have the bank-led models that have the nonbank financial institutions offer their services through the banks (Reiche, 2010). The countries still use both legacy laws and regulations that create legal uncertainty about the innovative licensing of Fintech. Majority of the nations rely on the bank-led models of Fintech innovation with no clear distinction between the banks’ and the innovators’ involvements. The nations that have allowed the operator-based innovative models have enacted supportive laws but no factual progress made in the realization of regulatory transformations of its payment system (Elian, 2012). The group excludes UAE that has acquired the international model to foster a digital payment system that replicates the world’s technical edge. The other nations have mild follow-ups for the implementation of the licensing requirements as to registration procedures. The nations are marred with traditional transactional models that are backed up by the Islamic banking system (Miniaoui, and Schilirò, 2016). However, Kuwait and Oman prefer the bank-led model as a way of safeguarding the stability of the financial payment system and counteraction to money laundering and other cybercrimes. Thus, the licensing regime still undermines the total implementation of the Fintech in the region.

The virtual currencies e-exchange system is also facing legal constraints from the GCC nations. The currencies flourish in the western free economies with least customary and legal restrictions. However, this is not the case in GCC where the licensing of the virtual currencies faces a suppressive ban from the Arabic nations which influences the decisions of the GCC states. UAE and Bahrain have installed ambiguous licensing regulations for cryptocurrencies that technical limits their operations in the market (Reiche, 2010). Qatar used the global mobilization of the cryptocurrencies regulations that began in 2017 to ban all financial institutions from licensing or trading in virtual currencies. Kuwait issued “Fatwas” in fear of the cyber risks associated with the virtual currencies while Saudi Arabia and Oman banned trading in the virtual currencies. Therefore, the restricted licensing regulations on virtual currencies in the region limit their use and development.

The GCC states have no prevalent crowdfunding regulations and laws that support extensive credit facilities thereby showing a significant regulatory gap. As of 2017, AUE and Bahrain had put in place crowdfunding regulations. Majority of the crowdfunding platforms in GCC are technically domiciled in cross broader and off-shore markets (Reiche, 2010). The region’s laws give no licensing for most foreign crowdfunding platforms and hence create no legal exemption with other nations on acceptance of their platforms. The nations prefer to protect their local minor creditors over the international creditors for reasons of domestic favoritism and customary practices (Miniaoui, and Schilirò, 2016). The nations overlook the solvency of the systems and affordability of crowdfunding platforms offered by Fintech. Thus, the result of their actions creates a weak credit system for some nations, which is only limited to their domestic operations.

iv.             Cyber Security, Taming Systemic Risks, and Consumer Protection

Cyberattacks form the biggest challenge faced by GCC countries due to increasing frequencies of cybersecurity, unpredictability, great systemic impact, and gaps in market risks managements. The countries are experiencing increased interconnectivity between cybersecurity and the expanded development in Fintech (Hakmeh, 2017). The widespread of the attacks are eroding the region’s confidence in Fintech which slows down innovation and transformation of the region’s financial industry into Fintech. The cyber-related crimes heighten legal constraints instead of diversification to support Fintech. The cybersecurity regulations should provide guidelines used by respective governments to assess and manage cyberattacks. However, space in technological development remains a challenge to many nations. The nations are yet to have impassible investigations, prosecutions, and adjudication to all cyberattacks (Hakmeh, 2017). The cross-border criminalization nature of cyber-attacks requires joint operations its mitigations but the GCC countries employ individual strategies that undermine their cross-border management of cyberattacks. Therefore, GCC nations exhibit different prowess in various levels of cyberattack laws (Figure 4).

Figure 4: Features of GCC Cybercriminal laws

Bahrain Kuwait Oman Qatar Saudi Arabia UAE
Definitions Y Y Y YY Y Y
Criminalization Y Y Y Y Y Y
Procedural Powers Y Y
Electronic Evidence
International Corporation Y Y
Service Provider Liability and Responsibility Y
Additional offences not foreseen in other international instruments Y Y Y Y Y

Source: Hakmeh, J. 2017. Cybercrime and the Digital Economy in the GCC countries. International Security Department. CHATHAM HOUSE

Most of the GCC states have their cybersecurity laws on their earlier stages or merely underdevelopment. Bahrain, UAE, Oman, Qatar, and Saudi Arabia have made a positive step in enacting cybercrime laws and creating a special system to fight cybersecurity risks. The nations target protecting electronic transactions from impeding cyber-attacks (Hakmeh, 2017). However, crucial gaps remain between the hypothetical laws the technical application of the laws. Setting strong laws in a conservative environment gives leeway to cyber risks owing to lack of technical investment in support of the enacted laws. Kuwait mainly lists cyber protection under its financial and criminal law jurisdictions. The lack of segmentation of the cyber regulations from other legal founding derails prioritization of their risks hence exposing the electronic transactions to more risks. Besides, GCC as a corporation has no comprehensive cyber regulation arrangements that can support its members to defend themselves against cyber-attacks. Instead, the situational arrangements discourage its members from Fintech investments as a countermeasure to global cyber-attacks and systemic risks. Therefore, the region’s cybersecurity approach exposes it to more cyber and systemic risks.

The consumer protection mechanism employed by GCC states predates Fintech thereby creating a regulatory gap than protection. All the nations have consumer protection frameworks and mechanism. According to World Bank (2017), the nations work alongside their customary laws to safeguard the interest of their citizens, more so in the expansive Islamic financial system. However, the new Fintech platforms like the e-payment systems possess new protection risks that are yet to be covered in-laws and regulations. The digital system risks are characterized by lack of physical proof of payment, intangible assets of the electronic wallets, lack of dispute resolution techniques, no generic certification and editorial right of the service provider over the consumer. Weak minority shareholding protection for the crowdfunding investors also possesses protection risks to local GCC investors (Hakmeh, 2017). The situation has been worsened by the conflict between technological investments of Fintech platforms and the emerging policies and protection objectives of the nations. The uncertainty of the Fintech innovations and jurisdictional exclusion of their operations makes it difficult for most nations to identify and counteract their risks to consumers. The mode of operations is merely a matter of individual consumer decisions as opposed to regulated transactions of the firms. Therefore, the nations are misguided by technical inclusion to protect consumers against cyber and systemic risks.

The surveillance of financial technology and consumer protection preparedness in the GCC banking system is also patchy. There is no accessible information about licensed Fintech firms in GCC nations and their rated performance based on consumer protection and satisfaction as it is with the banking system (Hakmeh, 2017). Even though the governments can access information on credit facilitation, their consumers can merely find such information that could be important in their decision making before transacting on such platforms. The right to information is still not well defined which gives the Fintech firms leeway to use such sensitive consumers’ information for their interest. In addition, Saudi Arabia and UAE are stressing tests for their risk preparedness while Bahrain includes cyber risks in their financial stability reports as aware of assessing their preparedness. Kuwait has emphasized on its banks to oversee operational risks to necessitate preparedness of IT-related risks (Hakmeh, 2017). However, there is no collective risks assessment and preparedness undertaken by the GCC body in the conduct of regional mandates. Therefore, the existing surveillance system for Fintech by the GCC undermine regulations on consumer protection.

C.    Factors affecting Fintech and Growth in GCC

The current development of Fintech in GCC countries is undermined by other factors associated with failed systemic regulations. The absence of structural regulations in the nations has spread to other factors that derail all efforts put to realize the transformation of the financial system from traditional to Fintech industry (Lee, and Shin, 2018). Thus, the factors act as current inhibitors to faster regional growth and transformation.

The talent gap is a considerable impediment to Fintech transformation brought about by a failed regulatory structure. Despite heavy spending in education and technology, the countries are yet to recognize the need to legislate talent development to encourage technological innovations. The nations’ emphasizes on traditional technical education with only a supplementary approach to technical skill development (Biygautane, and Al Yahya, 2014). Instead of limiting Fintech expansion, the nations should legislate skill development in cloud computing, cybersecurity, mechanics and artificial intelligence. The lack of such skills undermines the nations’ Fintech transformation. The situation lives technological development to private and foreign firms. The public sectors lack digital talent skills which jeopardize a number of their operations and contraction to foreign companies at the expense unskilled but potential local talents (Biygautane, and Al Yahya, 2014). Therefore, a regulatory review to develop technological skills will trigger unprecedented technological growth in the countries.

The underdevelopment of regulations in the financial and capital markets also impede the region’s Fintech development. The private equity and venture capital are traditionally limited to a nontechnical approach due to regulatory limitations (Biygautane, and Al Yahya, 2014). The situation constraints the nations’ investors and ventures to local financial operations as opposed to opening up in the global markets. Thus, Introduction of regulations in the market for the promotion of technological capital and financial markets will open up the countries to greater opportunities locally and abroad.

GCC nations also exhibit gaps in ICT investment. The low ICT investment is caused by contradictory regulations and lack of legal incentives to promote digital payments, e-credit, and information infrastructure (Biygautane, and Al Yahya, 2014). The nations should formulate regulations that protect ICT investors to introduce the modern up-to-age technologies that boost economic growths, particularly the financial industry. Currently, there are limited legal incentives to encourage electronic payments, digital credits, and information technologies which are key elements of Fintech. Therefore, by creating legal incentives for ICT infrastructure, the nations will realize a great boost in their economy.

5.4.          Conclusion

The study findings reveal the impact of existing regulations that undermine the transformation of Fintech in the GCC countries. Though dispersed sparingly across countries, there is a connotative reflection of each challenge in each country. The situation is confirmed by the non-conformity role of the GCC body in actualizing the failures of the individual country’ regulations into achievements. Thus, the section makes conclusions based on the analysis of the findings.


Conclusions and Recommendations

6.1.          Introduction

The section summarizes the findings of the study by making conclusive remarks on the results. In addition, it takes a takes reformist view by recommending changes that would support transformation of Fintech industry in countries. Here the paper provides recommendations for mitigating the RegTech gaps with a view to forming pro-active regulatory responses in the GCC. Thus, the section is summative reports of the study findings.

6.2.          Conclusions

GCC countries pose a considerable growth in financial technology regardless of their regulatory challenges that undermines full realization of the industry’s transformation. The current regulatory system in GCC countries undermines transformation of Fintech by creating an impulsive legal environment. The nations need to employ much effort in formulating relevant laws that would promote local investment in technological infrastructure (Hakmeh, 2017). The study reveals despair in technological development across the countries depending on individual initiatives for the changes. However, a conformity of the differences would be beneficial since foundation of the region’s financial industry is based on the traditional Islamic system which remains transformable by setting good regulatory precedence. Thus, the regional industries should undertake regulatory changes to realize full transformation of its Fintech industry.

6.3.          Implications of the study

The study creates an open edge for examination and focus on the GCC countries’ Fintech industry. By analyzing current regulatory impact on the market, the study does not limit future conclusive reviews to its findings. The study utilized qualitative secondary data method which implies that its findings are based on a meta-analysis of the previous studies. The study remains open to future supportive or alternative reviews considering the sensitivity of the subject matter (Hakmeh, 2017). However, the greatest test of the study is to raise concerns on the impacts of regulations on Fintech development in GCC. The study recommends that some of the suggestion made be consider for a successful transformation of the Fintech industry in GCC nations.

6.4.          Recommendations

  • The GCC nations must work to mitigate the consistent regulatory gaps in the financial industry to encourage entry and skillful performance in their Fintech industry. The regulatory changes should include introduction of affiliate civil laws environment with clarity on the dos and don’ts. The regulatory transformation should target regulations on cybersecurity, crowdfunding, data usage, customer protection, systemic risks, property rights, and regional conformities. The regulations would encourage innovations and investment in Fintech.
  • The countries should abandon legacy laws on Fintech. The populous legacy laws associated with the traditional financial system undermines Fintech development. The current erroneous licensing requirements, and capital requires should be revised to reflect the young innovative capacity of the countries.
  • The countries should also unify their scattered regulatory requirements into a single achievable institutionalized legal landscape. Successful Fintech transformation would require the decentralized domestic watchdog agencies such as financial regulator, supervisors, central banks, financial intelligence unit, security supervisory unit, communication agencies, revenue authorities, and many others be brought together under a single umbrella that would regulate technological innovation in the regional market.
  • There should also be harmonization of the different nation’s technological regulations into a single regulatory unit that oversee cross-border technological investment under the GCC umbrella. The regulatory change would be cheap, convenient, and transformative for the GCC members.
  • The nations should also lift the restrictions on financial market agencies from banks to include upcoming Fintech firms thereby improving on service accessibility and efficiency.


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