Qatar Raises Fintech Stake in the Gulf Region

Qatar is set to play a significant role in the development of fintech among Gulf countries. The efforts of the Qatari government to create a more favorable business climate have taken effect. In June 2024, the pace of opening new businesses in the country was the highest since last fall. Overall business optimism has risen to the maximum in more than the last one and a half years.

Currently, the average sum of expenses to kick off a startup in Qatar is about 75,000 QAR. Another option is buying an existing Qatari fintech startup, which can be advisable in some cases since it reduces the cost to enter the local market. Anyway, for foreign entrepreneurs, experience in a similar fintech niche would make things easier.

In the past, it was mandatory for any company in Qatar with foreign owners to have a Qatari partner. However, there have been recent developments in Qatar indicating that non-Qatari investors may be allowed to own up to 100% of the capital in some companies, depending on specific circumstances and approvals.

Among Qatari fintech startups, one can mention Karty, Qcash, and Dibsy, which provide payment solutions. Spendwisor works in the niche of Buy Now Pay Later (BNPL). Beema and Seib Insurance operate in the field of InsurTech.

Qatar Fintech Hub

The financial services providers have taken the lead in Qatar's economic innovative development, showing the best results for the last seven years. Over the last year, new fintech companies attracted about $700,000 in total each day. The fintech landscape features over 200 companies, and half of them came into existence through support from the Qatar Fintech Hub (QFTH).

QFTH is a hotspot for fintech entrepreneurial ideas and has been performing its mission for the last eight years. QFTH's Incubation and Acceleration Program has proven its apparent dedication to fostering innovation. This is evident through their pre-seed investments surpassing $9 million, supporting 70 fintech startups hailing from 28 various countries. In the coming five years, QFTH is going to support at least 10 new fintech startups each year via participation in pre-seed investment rounds.

On August 17, QFTH finished accepting applications for this Program, wave №6. This wave number is evident proof that the Program is successful and creates a proper buzz among fintech startups in the country. QFTH supports fintech initiatives that focus not only on development inside Qatar but also those that try to do their best in both Qatar and external markets.

The Qatari market is not very large. So, it is important to make a fintech product international. In this case, the average period for a fintech startup to break even is about 15 months, with a far shorter period for online trading solutions (six months). This is logical since online trade is booming in Qatar, and the digitization of the payments sphere has become a key catalyst. Therefore, this year the revenue of Qatari digital commerce providers will exceed $8.5 billion.

QFTH also cooperates with the VISA Everywhere Initiative (VEI). This year, QFTH was proud to announce TESS Payments as the winner of the VEI, Qatar & Kuwait 2024. TESS Payments, a Qatari FinTech success story, has secured the Payment Service Provider license from the QCB. Since 2017, TESS Payments has been a provider of payment processing services in Qatar.

The Government and Private Support of Innovations

The Qatari government has set national goals to develop AI, Blockchain, and AgriTech. For the AI sector's development, Doha allocates $2.4 billion in investments, the same amount of funding for AI development that the Canadian government allocates in its country. Qatar is keen to increase the government’s support in the digital sphere by almost 3.5 times by 2026 compared with 2022.

The robust budget situation facilitates this. From April to June, the coffers received a budget surplus of $710 million in dollar terms. Currently, 68.8% of all budget income comes from the Qatari oil sector, but this share is diminishing. Doha is keen to develop fintech as the breeding ground for innovations, bearing in mind the need to widen the budget income streams coming from the non-oil part of its economy.

The key government agency that communicates with startups is the Ministry of Communications and Information Technology (MCIT). The Doha office of the Ministry is open to applications from foreign entrepreneurs to launch their operations locally. The Ministry deals with registration issues, providing the necessary contacts in the government and business circles, in particular.

The Qatar Business Incubation Center (QBIC) is a structure that coaches entrepreneurs on how they can establish their business in the country. One of their leading programs is named the “Lean Startup Program.” It lasts 11 weeks, during which entrepreneurs can deeply learn all the details of how to open a company in Qatar. This program is very popular, and the 18th wave of its implementation has been scheduled for October this year.

Through various government initiatives, a fintech startup, under some circumstances, can get access to free office space and apply for financial support in the sum of 100,000 Qatari Riyals (QAR).

Many fintech startups are advised to be registered in the Qatar Financial Centre (QFC), functioning under the auspices of the Qatari government and whose rules are the same as those in economic zones.

Under the framework of QFC, there is a hotspot for fintech startups, such as the QFC Digital Assets Lab, fully regulated by the local central bank. Many entrepreneurs willing to deal with digital assets and cryptocurrencies, in particular, feel comfortable developing their business in this Lab. For example, on July 10, one more company, DMZ Finance, arrived at this Lab.

On the business side, some private funds specialize in financing startups and fintech companies, in particular. In 2024, these will include Dlala Holding and MBK Holding. On the venture side, Doha Tech Angels and Rasmal Ventures play an active role. In August, Rasmal Ventures launched a $100 million fund with a goal to support about 25 local startups driving innovation implementation.

DLT in Qatar: The View of the Qatar Central Bank

The Qatar Central Bank (QCB) and all regulators in the country saw the pros and cons of crypto through the activities of various fintech startups in the Lab. From the start of this observation, the regulators took a very conservative stance and banned all Bitcoin contracts to buy and sell in the country.

But in 2023, they started to seriously think about how to use blockchain and crypto innovations for the sake of economic development. So, they worked out a draft for the regulation of investment digital assets with backing in the form of real assets. This year, QFC revealed that the Center joined the local central bank in its efforts to create comprehensive regulation rules for all digital assets. This work is currently underway and is slated to be finalized in the coming months.

The QCB has already completed a large part of its job and introduced its Distributed Ledger Technology (DLT) manual on July 22. The regulator asks business structures to inform it about their application of DLT and is ready to give a “green light” to permissioned DLT networks.

This refers to a network where updates or validations are exclusively performed by authorized users adhering to predefined governance rules. In essence, special permissions are required to read, access, or modify information within the network.

As the QCB states, “Currently, QCB would not permit Permissionless DLT networks.” But it’s important to see that the word “currently” points to the possibility of a change in the regulator’s stance in the future.

When a startup considers using DLT, it must check whether such a distributed ledger supports regulated financial products or processes. The company needs to evaluate all risks associated with the use of DLT. For example, when an organization outsources any activity related to the development, provision, use, or implementation of a DLT system, it must conduct regular due diligence on the outsourcing service provider. This due diligence should cover aspects like identity, legal status, activities, and financial position. Furthermore, prior consent from the QCB must be obtained before engaging in such outsourcing arrangements.

Qatar and India: Fintech Brings Countries Closer

The cooperation between Qatar and India is a clear case of how fintech brings countries closer. On July 11, the National Payments Corporation of India International entered into an agreement with Qatar National Bank regarding the functioning of the Indian Unified Payments Interface (UPI) QR-based system of payments in Qatar. Half a year earlier, Qatar signaled that it would explore investing in Indian startups. Both events are connected. The UPI localization in Qatar will unleash not only the potential of Indian tourism into this Gulf country but will also foster cooperation between Indian and Qatari fintech teams.

Over half of the Indian tourists intending to visit Gulf countries are expected to choose the UAE this year. However, the introduction of the UPI system in Qatar is set to heighten the rivalry among these Gulf nations, particularly with the UPI system's expansion to the UAE in July.