Bahrain is losing ground to Dubai as a regional hub for financial services and must adopt new technology to stay relevant, a new report revealed on Thursday.
"The United Arab Emirates has been a more enthusiastic adopter and promoter of fintech, with Dubai having emerged as a leading digital services hub for the region in the last two years. Bahrain still has a long way to go before it can catch up, but recent efforts show that momentum is building and more developments can be expected in the months ahead," according to a report by BMI Research on Bahrain's fintech sector.
A new mobile wallet, made available to Bahrain Telecommunications Company's (Batelco) 1.4 million mobile customers in conjunction with Arab Financial Services (AFS), offers features such as peer-to-peer (P2P) money transfers and loyalty points linked to major brands; it will work on a range of smart devices.
The development follows the initial roll out of the Easy Pay mobile payment service in January, which allowed customers to upload credit from a prepaid card to their handsets to enable payments.
"The latest deal with AFS envisages a more streamlined payments process, one we believe will meet with good user engagement rates," the report said, adding that rival operators Viva and Zain already offer mobile payment services.
While basic mobile financial services are widely used across Sub-Saharan Africa and Asia, adoption rates in the Middle East are low due to easy access to banks and a high penetration of credit and debit cards.
"Many active payment cards already support near field communication (NFC) 'contactless' technology, but mobile payment adds an extra layer of security and convenience," said BMI Reserach.
According to a report released in March called the State of Fintech in Mena by Payfort and Wamda, the fintech ecosystem doubled from 46 companies to 105 in the three years between 2013 and 2015.
In May Fintech Hive at DIFC, the region's first fintech accelerator launched by Dubai International Financial Centre, revealed it had received over 100 applications from 32 countries for its inaugural programme for concepts such as Blockchain, payments and robo advisers.
According to BMI Research, the central bank of Bahrain spent last year developing new mobile-optimised payment and settlement mechanisms for both its own and third parties' use, while the National Bank of Bahrain enhanced its mobile banking services development strategy.
"Both banks acknowledge that Bahrain has moved relatively slowly in digitalising key payment processes and commercialising new fintech products that would augment local businesses' financial service toolkits and enable them to diversify into new markets," BMI Research said.
The region could be home to 250 fintech start-ups by 2020, according to the State of Fintech in Mena report.