Financial inclusion through digital financial services and alternative business models and players has so far not developed in Palestine – now major financial sector players led by the PMA have kicked off a movement towards “Fintech” by developing a strategy
It does not need banks to do banking. Following this principle most of the international capital raised for start-ups today pours into the “Fintech” sector, leading to better convenience, less costs and higher financial inclusion. Through a series of meetings with Palestinian stakeholders from various angles of the market including regulators, government, financial institutions, start-ups, academia and funders, GIZ FIMENA and Sanad Fund for MSME TA Facility are supporting the PMA to assess the situation of the Fintech sector in Palestine and develop a comprehensive strategy to exploit its potentials.
Technology in the Palestinian financial system is nothing new: Be it a modern credit bureau, an electronic cheque clearing system, a real time gross settlement payment system or a completely new licensing regime for payment service providers allowing for E-Money in the close future. However: The next technological wave with for example platform economies and big data, automization through artificial intelligence, “open banking” data sharing, or distributed ledger technology has so far not spun off yet in Palestine despite their enormous potentials. While “tech”-nology is a part of “Fintech”, it is rather the “Fin-“ that plays the by far bigger role: Most start-ups, incumbents and even established firms aiming to provide solutions for concrete problems of access, quality, security or costs are struggling to understand the legal and regulatory compliance implications of their ideas. Within the scope of this assessment, the role of the regulator is to be defined: A right balance is to be found between the supervisory mandate and how their competencies could be of benefit to the market, directly or through for example incubators/accelerators?
Preconditions for Fintech in Palestine are promising: A young and tech-savvy society, high penetration of mobile phones, low financial inclusion rates, separated territories and workers’ remittances are potential driving forces. Nevertheless, the new technology and business models also pose threats, therefore the regulator(s) have key roles to play and need to find compromises between allowing innovation and protecting the financial system and consumers alike.
Time to strategize. Following policy recommendations shared on the level of FIARI’s Arab #Fintex Symposium in December 2018 and other occasions, the GIZ FIMENA programme and the Sanad Fund for MSME Technical Assistance Facility are supporting the PMA identifying priorities, myths, dangers and potentials in this action field. A strategy that substantially promotes the nascent Fintech sector in Palestine will need to cover various essential perspectives such as the regulatory, government, entrepreneur/start-up, incumbent, infrastructure and talent development. After further consultations within the Fintech Working Group under the National Financial Inclusion Strategy implementation structure that the PMA facilitates, a Fintech strategy can be expected to be agreed upon by end of 2019.
By Thomas Rahn
and Atilla Kaiser-Yuecel