Rising consumer spending, large capital pools and close financial ties with the rest of the world are turning Middle Eastern countries such as the UAE, Qatar and Saudi Arabia into attractive markets for fintech firms with global ambitions.
The Middle East offers the same opportunities that markets like Singapore did about eight years ago, says Michael Ferrario, founder of Singapore-headquartered robo-advisory firm StashAway. good lucks Fintech Innovators Asia. In countries like the UAE, he says, there is a large pool of people with money, but not many investment options other than “not very friendly” banks.
“[There’s] Less competition and a regulator that is future-friendly,” Ferrari said of the UAE.
StashAway expanded its high-value offerings in the Middle Eastern country earlier this year, offering consulting services and low fees to customers between $2 million and $10 million.
And after building its UAE business, Ferrario says StashAway is eyeing further expansion in the Middle East.
Fintech Center
StashAway is not alone, as the Middle East is becoming a fintech hub in its own right. McKinsey predicts that fintech funding in the Middle East, Pakistan and North Africa region could grow to $4.5 billion by 2025.
In July, the Tunis, Singapore-headquartered global payments infrastructure provider, which already serves markets in the Middle East and North Africa, highlighted the attractiveness of Saudi Arabia as the kingdom builds its digital infrastructure. Under the plan to reduce the desire to develop The economy’s dependence on oil is also helped by the fact that 97% of the country’s population is on smartphones.
In addition to StashAway and Thunes, several other Asian fintech startups have also expanded their services in the Middle East, hoping to tap financial flows from tourists and overseas workers. Payment services such as Airwallex and Philippines’ GCash offer services in Middle Eastern countries such as Israel and Qatar. Even big players like Ant International are not ignoring this region. The Alibaba affiliate is working closely with Saudi Arabia’s investment ministry as it seeks to use the kingdom as a gateway to the wider Middle East market.
It is part of a larger drive by Asian financial centers such as Hong Kong and Singapore to deepen ties with the Middle East. The former is forging new ties with Saudi Arabia in particular, including setting up a new mutual investment fund and listing a Hong Kong ETF on the country’s stock market.
Currently, Singapore is StashAway’s largest market, followed by Malaysia. Ferrario notes that while the wealth tech firm is not yet profitable, it is profitable in its home market.
What is StashAway?
StashAway is a digital wealth management platform, offering investment products to people in the middle income bracket and above who want to use institutions other than banks to grow their spare cash. Ferrario, then CEO of Zalora, a Southeast Asian apparel e-commerce platform, founded StashAway in 2016. The firm is backed by investors like Sequoia Capital and Fidelity.
Asian banks don’t want to run low-cost ETFs, Ferrario explained. Banks face a “massive masculinity problem”, as established financial institutions stick to existing products that generate huge amounts of money in fees. Thus, banks avoid ETFs because they make less money from these products.
Ferrario says this opens up a “huge opportunity” for startups targeting new middle- and upper-class urban clients in Southeast Asia. The company targets people with $100,000 to $10 million in cash.
And Southeast Asia’s young, growing and increasingly affluent population could be an asset to fintech startups like StashAway. “Wealth is young,” says Ferrario. “In cities like Singapore and Kuala Lumpur in Malaysia, people in their thirties are likely to be wealthier than their parents, meaning more money to invest.”
Ferrario also sees himself as an example of the type of customer StashAway wants to attract. He remembers that, during his time as CEO of Zalora, he struggled to find a place to invest his extra money.
“I went to my banks to ask for help working out my money, and I told them I wanted to invest monthly in a set of ETFs,” Ferrario said.
Instead, banks tried to sell him mutual funds with a 2.5% entry fee. Ferrari said he was “shocked by how bad the experience was.” Ferrari said it looked for a replacement in Singapore, to no avail. It was this difference that pushed him from e-commerce to wealth management.
“Maybe instead of selling T-shirts, that’s what I should be doing,” he said.
