The Central Bank of Bahrain (CBB) launched today FinHub 973, the first of its kind virtual fintech platform in the region, in collaboration the Economic Development Board, Bank ABC, ila Bank, Benefit, National Bank of Bahrain and Bahrain Islamic Bank.
The platform is powered by FinX22, an open, cloud-based financial services platform developed by Fintech Galaxy, the digital crowdsourcing fintech company.
FinHub 973 provides a virtual environment that includes an open application programming interface (API) for banking services and paves the way for fintech companies to collaborate with new partners. It is set to create a collaborative environment for fintech in the Middle East and North Africa (Mena) and create a gateway to financial services markets in the region
The platform will encourage innovation opportunities in the sector, link regulators and financial institutions in the region with emerging fintech companies and boost Bahrain as a regional financial centre for innovation.
We spoke with Mirna Sleiman, founder and CEO of Fintech Galaxy, about the launch of the new platform.
Why do you think it is important to launch a digital fintech lab in the region?
This is the first regional innovation lab that brings the regulators to the core of innovation, which is usually not the case.
The traditional model of innovation is markets operating in their own in silos. Regulators are operating separately from banks, who also operate separately from fintechs. On a regional level, the countries themselves are operating in different streams. There has been a lot of MoU signings that indicate very strong bilateral relationships, however, this has not developed beyond MoUs, which do not move the needle on economic growth nor financial inclusion.
What was lacking was a common platform, and what we are building here will hopefully enable better collaboration between different jurisdictions.
We are creating a universal platform, FinHub 973, for regulators, financial institutions and innovators from the different markets across the region to connect and scale, given that scalability is a challenge due to regulations, security, connectivity and other factors.
So when you are testing the same prototype, app or solutions in Bahrain on a universal API sandbox, and Egypt or KSA has a similar connectivity, you will be able to do passporting of licensing, experience and knowledge between jurisdictions through the new platform.
Since FinX22 is powering FinHub 973, we might create another platform in Egypt, Saudi, Jordan or Tunisia also powered by FinX22, meaning that we have a unified API sandbox and a unified process for regulatory sandboxing.
In addition, we will have the same marketplace, where fintechs are listed and get the same AI-powered scoring, and the same qualification process before entering commercial agreements with banks or fundraising with investors. All of that will be unified and localised through the same platform and underlying technology, hopefully solving the problem of scalability that we face in Mena.
Why is FinHub 973 anchored in Bahrain?
Bahrain is very special as it has one single regulator for its onshore and offshore companies, in addition to insurance and exchanges, which is the Central Bank of Bahrain (CBB). Working with Bahrain as a regulator is like a testbed for a regional innovation initiative, you start in Bahrain and you expand regionally.
In Bahrain, the market has a small size, the stakeholders are known and there is an amazing sync between the regulators, the innovation ecosystem partners, the financial institutions and the economic development board. The whole internal ecosystem is so nicely connected that it makes it much easier for you to start in Bahrain and launch something that connects to the whole world.
The country already has open banking standards, for banks and fintechs to collaborate and for the latter to grow and really deliver on the promise of financial inclusion, economic growth, digital banking and customer experience, all of which need regulatory support. Having this partnership with CBB enables the true collaboration between banks and fintechs, as well as the commercialisation of partnerships.
How has Covid-19 affected your launch plans?
We have been planning this for some time and Covid-19 became our business case. It was very important to deliver this platform at this time, because of social distancing and people not able to travel and do face-to-face meetings.
With Covid-19, it was crucial that we deliver the platform quickly, as the pandemic served as a catalyst for digital transformation for not only financial services, but for the whole economy. We wanted to turn the challenges presented by Covid-19 into the biggest opportunity the region can ever find since the financial crisis in 2008.
Such a platform allows institutions to run hackathons and challenges virtually, it allows you to connect to a sandbox and do prototyping, you can consume and publish API, and also use localised data sets without having to sit with banks.
Banks and fintechs can turn from prototyping to production on the platform without having to do all the hardcore API connectivity. Most importantly is that regulatory sandboxing can also happen on this virtual platform.
How do you think FinHub 973 will impact the ecosystem in Mena?
The number of fintechs in our region is still very little. We are at 450 fintechs regionally compared to 20,000 globally. We hope to see the number of fintechs at least double by the end of 2022.
We have partners like ABC bank, BISB and Benefit, and we have other partners outside Bahrain, like Saudi French Bank, EG Bank, Al Ahli Bank in Jordan, all of which when they connect and publish their APIs, they are providing an opportunity for fintechs to commercialise and grow.
The platform will also have an impact on job creation. Startups are the main source of new jobs going forward, banks, companies and governments are not hiring. Some amazing talent is jumping from large institutions to fintechs.
Furthermore, we hope to have a positive impact on the level of investment into the market. We do not blame investors for having cold feet, there is a lot of ambiguity in the market so they do not know what they are putting their money into, and they also do not understand the sector very well.
Through the platform, they will have a pipeline coming their way with an amazing flow of fintechs that are actually testing, getting qualified, loved by the regulators, accepted by the institutional partners. So instead of spending six months going through documents and pitches, they will just plug and play. This is a platform that will produce a pipe of fintech startups that are hungry for funding, and you know there is a business potential for them.
Lastly, we hope to help progress financial inclusion. We are at 70 per cent of unbanked bankable adults in the region, which is a shame to have such a high level. This still presents an opportunity, and I think fintech startups can play a major role in this area.