Post-Covid-19 world brings new risks for FinTechs in UAE

29 March 2021 3 min. read

FinTech’s in the UAE are still grappling with pandemic-related risks, and are adapting their business models accordingly. A new survey by Dubai-based Várri Consultancy sheds light on how financial technology businesses are coping. 

Varri Consultancy – a boutique management consulting firm specialised in economic, social and environmental risk strategy – surveyed more than 100 FinTech professionals and investors for an overview of the industry’s risk landscape. 

The survey was centred in the UAE – positioned by the Várri as leader of MENA’s soon to be $2.5 billion FinTech market. Despite strong economic fundamentals and a healthy investor appetite, the industry is approaching 2021 with a tentative mindset.

Uncertainty persists for FinTech one year into the pandemic

“The survey results reflect the uncertain times, globally,” said Várri founder and managing director Johnny Kollin. 60% of respondents identify higher uncertainty in the market today than there was a year ago, although few are worried about macro-economic factors such as country risk or inflation. 

Instead, FinTechs are consumed by more immediate threats such as earnings uncertainty – cited by 50% as a risk – while nearly half expect 2021 to bring more liquidity and operational risks. Other pandemic-induced threats to supply chains and cash flow are also furrowing many an executive brow. 

Cyber attacks have threatened various parts of business

That said, occupying pride of place on the risk agenda this year is cyber security. More than half of Várri’s respondents claim to have faced a cyber attack in the last year – largely at a direct detriment to financial liability and revenues. Cyber threats brought with them fines, loss of banking data and a host of other business issues.

So FinTechs will enter the post-pandemic market amid a multifaceted risk landscape. Some have been caught unprepared – with roughly a fifth of respondents lacking a systematic risk assessment and management set up. Risk registers, formalised risk policies, board involvement and positions for chief risk officers are all missing at these organisations.

There is much work to be done to survive in a crisis-stricken economy, and even those with advanced risk management systems will be looking to adapt. “Companies are responding to the current uncertainty by reassessing their business models and strategies,” said Kollin. 

Risk management practices fall short at some FinTechs

Provided they can shore up against new vulnerabilities, the economic possibilities for FinTech in the new normal are endless. “The FinTech sector has the potential to disrupt existing business models of financial services companies, and it is clear that the professional community recognises that it comes with risks.” 

Indeed, a Deloitte survey from last year revealed that one in five bank holders in the Middle East now use FinTech solutions – a figure that will only grow as digital becomes the bedrock of future commercial activity. For now, the goal is to manage risks. 

“The survey reveals an opportunity for UAE-based FinTech companies to take the lead in developing innovative solutions and, with the help from relevant subject matter experts, improving and spearheading risk management in the sector,” concluded Kollin.