From 2017 to 2021, Qatar has been under an economic and diplomatic blockade from its neighbors. However, it seems that the blockade may have backfired and that Qatar has come on top more economically independent than ever.
After the blockade was implemented, Qatar was pushed to quickly develop alternative supply routes, scale up domestic production, and expand its new seaport. Many goods and services that were imported until then now had to be produced domestically; and fast.
However, where Qatar still seems to fall behind is its digital banking sector. Yes, traditional banks started implementing mobile and online banking; however, without any proper competition from fintech companies, the traditional banking offering lacks many features developed countries take for granted.
Qatar’s Smartphone Penetration
It’s no wonder if we know the fact that Qatar has the largest youth population in the world, with more than half of its residents under the age of 25.
Apart from mobile banking offered by traditional banks, Google and Apple Pay are widely used for payments as they are in many other countries.
Digital Banking Licensing
Technology has transformed the investment, financial, and banking sectors in a major way.
New fintech business models have proved to have great potential to increase the efficiency of financial services but also, to bring some complications and more work to the regulators.
The fintech-led digital banks have become a major competitor to the traditional banking sector due to their technical knowledge and flexibility, and that is one of the reasons traditional banks have started investing heavily in technology to improve their operations and provide superior benefits to customers.
In spite of what we just said, Qatar still doesn’t have any digital banks, only online and mobile banking offered by traditional banks already present on the market. If that were to continue, the country would fall even more behind the rest of the world in this regard.
When technology has to wait for regulators to catch up, the sector and the economy as a whole begin to suffer.
The Governor of QCB, Sheikh Abdulla Bin Saud Al-Thani, said that they are “fully aware of the importance of financial technology in the development of the banking and financial sector in the country.”
However, since that statement was said, almost three years have passed with no digital bank licenses being issued.
Apparently, three fintech companies have been in a regulatory sandbox testing their solutions together with the central bank. Other companies are also being considered to join the sandbox.
If you aren’t familiar with the term “regulatory sandbox”, it’s a space where companies, in this case, fintechs, test new business models, products, services, and all other things crucial to deliver the final product, in a real-world environment and getting accelerated authorization and supervisory monitoring.
Benefits of Digital Banking
Digital banks offer many advantages and benefits in contrast to traditional banks. Let’s have a look at some of them.
Qatari banks have many fees that add up very quickly. Not only are bank accounts yet another bill you have to pay, but the benefits simply aren’t there to justify the exorbitant fees.
On the other hand, digital banks typically have low or even no fees for monthly maintenance of the account, for most types of transactions, and for debit cards.
Fees are where digital banks and traditional banks differ the most. While traditional banks are trying to take your last penny with a wide variety of fees, digital banks often don’t even have fees for everyday banking operations.
Easy, fast, and cheap or free money transfers are at the core of digital banks and payment apps. Money transfers between people inside or outside the country can still be slow and expensive.
Luckily, digital banks make sending money across the world a breeze. In the case of Qatar, which has almost 90% of foreigners in its population, international transfers are extremely important.
Making cheap international transfers using traditional Qatari banks is almost impossible, and therefore, greater penetration of digital banks will give them much-needed competition that will improve the service and reduce the prices drastically.
Sign up process
Digital bank accounts are notoriously easy to register for. The whole process takes less than a few minutes and takes no paperwork. Hopefully, once digital banks open in Qatar, the process will be the same, and all you’ll need is an ID, address, email, and phone number.
Budgeting and analytics
Another aspect where digital banks shine is the budgeting and analytics side of their apps. Not only can you see exactly when and where your money is going in real-time, but you can also allocate your cash into sub-accounts to make budgeting a breeze.
You can allocate funds into separate pots labeled rent, bills, groceries, restaurants, car, or whatever else you want. Enable real-time notifications to get alerts when you’re spending too much and closing in on the limit you chose.
Savings interest rates
Traditional banks have hopelessly low savings interest rates. And the worst thing about these savings accounts isn’t even the interest rate but the fact that your funds are locked for a set period of time.
Having your money stashed away for a couple of years for an interest rate that’s lower than 1% isn’t smart money management, and the money won’t be working for you.
The reason why traditional banks don’t offer higher interest rates is that they don’t really need your money. They’re flush with cash and see your deposits more as a nuisance because they can get a lot of money for basically free at the moment.
Digital banks, on the other side, do need your money and your deposits as they can share these figures with their investors as a sign of confidence in themselves and their business model.
Qatar’s Concerns With Digital Banking
There are many advantages to digital banks, but also some disadvantages. What worries the Qatar Central Bank the most are “concerns about privacy, competition, and market monopoly, which may create threats that affect the financial system.”
This has led the regulators and the supervisory authorities to rethink the regulation. But not only that.
They are rethinking their supervision and oversight strategy because, as they see it, the solutions offered by fintech companies may increase operating and cybersecurity risks because of their interconnected operations with information technology.
Knowing that Qatar has some tough neighbors, these concerns may be valid.
The Qatar Central Bank emphasized that the future of the banking sector may raise concerns about:
- Protecting and managing data,
- Protecting privacy,
- Protecting the confidentiality of transactions,
- Protecting cyber security
For those reasons, the regulatory and supervisory bodies need to:
- Acquire specialized skills and people to deal with tremendous tech innovation and evolution in digital finance
- Issue judgments and regulatory and supervisory instructions considering financial technology and compliance provisions
- Monitor their implementation
The economy of Qatar is one of the richest in the world and among the top ten richest countries. The country’s economy has grown in the face of sanctions by Saudi Arabia, Bahrain, the United Arab Emirates (UAE), and Egypt.
Petroleum and natural gas are still the bedrock of Qatar’s economy. More than 70% of total government revenue, more than 60% of gross domestic product, and roughly 85% of export earnings come from these two natural resources.
Unlike Dubai, Qatar still didn’t diversify its economy to a greater degree. This might prove as problematic in the not-so-distant future.
Qatar National Vision 2030 is a development plan launched in October 2008 by the Qatari government.
Its goal is to “transform Qatar into an advanced society capable of achieving sustainable development”. The plan’s objectives have four central pillars:
- Human, and
- Environmental development
It is within this plan’s framework that the QCB is preparing to announce the financial technology strategy, including issuing digital bank licenses and even investigating the possibility of launching a digital currency.
The sooner this happens, the better for the country, the economy, and the people of Qatar.