Better get used to paying for groceries in Bitcoin in 2018, GCC
The digitally connected world has made the consumer the real king and the demand for Bitcoin and cryptocurrencies will only increase in the coming days.
The GCC coin, the region’s first green cryptocurrency, is being promoted to become a daily mode of payment, even for a cup of coffee.
Exchange houses in the GCC are viewing Bitcoin as an important development.
UAE Exchange invested in two blockchain-based companies, Loyyal and Bankchain, in 2017 and is in talks with others – a firm statement of its confidence in the nascent technology.
With rapid technological advancement in the field of cryptocurrency, the entire focus has shifted toward delivering services to consumers online in a secured way.
The financial service industry is witnessing an upheaval with fintech startups gaining stronghold and challenging the traditional business models of established players like banks, stock exchanges and money transfer businesses.
The pace of fintech innovation in the Middle East and North Africa (MENA), especially in the Gulf Cooperation Council (CCC), has been rapid over the past couple of years, primarily on the back of investors’ unmoving confidence in startups.
The Middle East has amassed over $100 million in fintech startup funding in the past ten years. As many as 105 fintech startups were launched in 2016 and at least $50 million of funding was expected to them by the end of 2017-18, up from $18 million in 2016-17, according to a report by Wamda Research Lab and Payfort.
Moving away from oil
With governments moving way from oil toward creating a knowledge-based digital economy, fintech is making inroads into the region at the pace comparable to the West and emerging as one of the world’s most innovative markets.
Players such as peer-to-peer lending platform Beehive, challenger bank NOW Money, payments processor PayFort are disrupting the financial services industry with particular focus on consumer-centric payments, ecommerce, banking, insurance and wealth management.
Most of them operate through blockchain, a secure platform which ensures privacy, gives data access to select entities in a network and removes the risk of cyber thefts.
“As technology is evolving, customers don’t want to visit bank branches, they expect to conduct their financial transactions on their computer or mobile. And processes are constantly evolving to capture that feedback and the expectations of customers,” says Mohsin Aikal, Head (consumer finance), Noor Bank.
Cryptocurrency is one disruption that promises money remitters in the Middle East with reduced service costs and is likely to impact the profitability of banks by slashing money transfer fees and commissions, which currently constitutes one-quarter of their revenues.
Bitcoin’s crazy run in December 2017 took the cryptocurrency market by storm.
The world’s highest-valued cryptoasset started in 2017 with $1,000 market value and ended the year at over $15,000, not before a mad rally saw it close to $20,000-mark in a matter of days.
Since GCC accounts for a substantial proportion of global remittances, foreign exchange houses are excited about incorporating Bitcoin-enabling technology to cut costs.
Bringing down remittance cost
According to the World Bank, remittances to the MENA are expected to grow by 4.6% to $51 billion in 2017 and by 2.9% to $53 billion in 2018. Nearly $102 billion in outward remittances is made by the GCC expatriate population.
The global average transfer cost was estimated at a hefty 7.2% in the third quarter of 2017 for a transfer of $200.
And that’s where fintech could bring costs down.
Bitcoin’s value lies in the fact that it removes middle men that heap extra costs on facilitators and customers.
“Fees payable on Bitcoin transactions are around 1-3%. Our customers see it as a cheaper and easier alternative to traditional channels as they don’t have to pay fees at both ends,” says Ola Doudin, CEO, BitOasis, a Dubai-based startup which facilitates Bitcoin transactions across the MENA.