Sustaining Innovation: Oman's Approach to Fintech, Banking and Power Supply

In recent years, Oman has made a significant leap forward in its movement to adopt innovations. From the regulatory side, in February 2023, the Personal Data Protection Law became effective, aiming to establish a legal framework for fintech startups on how to handle data.

From this point forward, companies must onboard a person on their staff who will be responsible for data protection and handle necessary communications with Omani regulatory bodies. Breaking this law can result in a fine of up to $1.3 million.

Regulatory Framework Overhaul

The Personal Data Protection Law enhances the power of the Electronic Transactions Law, which underwent an overhaul in 2021 to increase the effectiveness of protecting digital banking operations. More changes are to come. Four years after the Central Bank of Oman (CBO) introduced the Cyber Security Framework for local banks, the regulator streamlined its approach to cybersecurity this year. This move aligns with modern changes in the digitization of the financial sphere and strengthens its capability to be receptive to complaints from participants 24/7.

The CBO is undertaking this initiative in conjunction with the Information Technology Authority (ITA), a special body established by the Omani government to raise awareness about cybersecurity issues among participants in the financial sphere and regulate the Information and Communication Technology sector. All regulations will appear in the near future on the National Data Governance Framework, which will serve as a one-stop source for all such information.

The 2024 annual report of the Ministry of Transport, Communications, and Information Technology provides evidence that digitization is highly welcomed at the highest level. In 2024, the Ministry completed the first stage of deploying a National Open Data Platform. Officials reached the fourth stage in developing Manjam Labs, a project aimed at simplifying access to government services. The Ministry is rapidly moving toward launching an online digital hub for all state electronic services.

Financial Transactions

One of the key areas for future fintech development is financial transactions. In the second half of 2023, the number of transactions signed electronically in Oman rose by 12%, and the number of transactions processed via the digital identification procedure jumped by 25% in annual terms. Digital transactions are on the rise in Oman, mostly due to the local National Electronic Payment System (NEPS).

Almost 90 out of 100 people working in Oman are foreigners, and they need comfortable means to provide their families in their homeland with a financial lifeline. The volume of outbound money flows from this social group is about $500 million each month, and only a third of them have an account in local banks.

The gap is being filled by various fintech startups not only from Oman but also from other Gulf countries. This year, Qatari Ooredoo Fintech, with more than 156 million subscribers, is going to extend its activities to Oman with a chat-like wallet app aimed at handling all hassles with payments and money transfers in more than 200 countries worldwide.

Meanwhile, CBO is also making efforts in this area. In June 2024, CBO joined the real-time AFAQ Payments System after the central banks of the UAE, Saudi Arabia, Bahrain, and Kuwait took the same step. This system allows transactions in the Gulf region using the currencies of the regional countries.

Bank Muscat, Oman's largest bank, and BankDhofar are among the first Omani banks to start actively using the capabilities of this system. With these banks, the total entities operating within the framework of the AFAQ Payments System will rise to 67, and this figure is slated to increase further.

Finance and Banking for Fintech

The understanding of fintech's important role as a linchpin for further development of the financial sphere is visible in the Omani banking sector. Banks are adopting new financial innovations with eagerness. Moreover, Bank Muscat allocated $390 million to a special investment vehicle to support the introduction of fintech throughout the Omani banking sector.

Competition among Omani banks is intense. Sohar International significantly expanded the possibilities of its banking app in 2023-2024. Users now have access to services beyond the financial market, such as booking hotels, airline tickets, and purchasing gift vouchers.

This year, Sohar International's high progress in implementing fintech in its customer interactions was highly appreciated when the bank won the award for the best mobile banking application in the country. This award was given by World Business Outlook Annual Awards, and the ceremony was held in Singapore. Last year, The Global Economics (UK) underscored Sohar International's outstanding development on its path to becoming a digital bank. The bank is eager to prove this status and this year streamlined its digital voice communications with clients.

BankDhofar is another bank that has heavily invested in its efforts to become a digital bank. Its Entertainer Mobile Application is also a hub for various services that can be easily booked and paid for digitally. BankDhofar has also introduced a women-exclusive credit card in Oman, offering tailored perks and benefits. Customers can earn rewards on both local and international purchases.

In June 2024, Oman Arab Bank (OAB) launched Direct Debit, a new automated payment service. Customers can set up direct debits via the OAB mobile app or internet banking, avoiding branch visits and manual payment management. The service processes payments automatically from authorized accounts on scheduled dates, replacing the need for checks. OAB's commitment to innovation includes 24/7 access to banking solutions through digital channels.

The case of the Zumr fintech startup is also symbolic. Zumr operates in the field of Rotating Savings and Credit Associations (ROSCAs). The development of this startup was fostered through participation in the accelerator program run by the CBO with assistance from Omantel. In April 2024, Zumr reached another milestone when it partnered with the National Bank of Oman (NBO) to provide custodial services.

Meanwhile, NBO runs its own accelerator program for fintech startups. One of the regular features of this program is the Fintech Accelerator Hackathon. The last one was scheduled for August 30 to September 1, 2024, at the NBO headquarters.

Fintech and Energy in the Focus

Oman's trajectory of economic development shows how it's possible and reasonable to combine the strategy to secure energy exploration and propel fintech.

So, on one side, we see how, in accordance with Oman Vision 2040, in May, a number of Omani companies, including the leading telecommunications company Omantel, Iqaa Group, Oman Data Park, and energy giant OQ, struck partnership deals worth a little less than $100 million with prominent tech companies such as Amazon, Microsoft, and Google. These negotiations touched a vast landscape of innovations, including artificial intelligence (AI), cloud tech, and the issue of data center development.

In August 2024, Omantel announced it was close to opening a new data center in Salalah. This data center will also offer its services to prominent US tech companies.

Oman also became one of the key countries in the region hosting Bitcoin mining facilities. Last year, Exahertz, a Muscat-based startup, and Oman's Authority for Public Services Regulations announced a joint investment initiative to bring in about $1.1 billion to develop Bitcoin mining activities in the country.

From the other side, the development of data centers and crypto mining activities in Oman demands more energy. This stipulates that Oman has to invest in the core of its economy, energy-related activities, to fulfill its goal of being more innovative.

In the coming three years, the rise in demand for energy will exceed 1,600 MW. For example, the new cloud data center (an initiative of United Projects Achievements), Exahertz crypto mining activities in Sohar Freezone, and the Green Data City crypto-mining project in Salalah would account for 400 MW of the forecasted rise in power demand.

Oman is making a significant effort to boost investment into the energy sector since it is equivalent to supporting the development of digital innovations, particularly fintech. In August 2024, investment funds Hodler Investments and Gewan Holding committed to bringing in $500 million to fulfill an initiative dedicated to the development of energy infrastructure necessary to drive further digital innovations.

Meanwhile, OQ initiated at the same time a project to build a strategic fuel reserve facility in Dhofar with an investment of $124 million. Oman is busy constructing such reserve facilities, and one new location for the construction of relevant facilities is situated in the Musandam Governorate.

As Oman navigates the delicate balance between energy exploration and technological advancement, its commitment to innovation shines through. The nation's strategic investments in both sectors, exemplified by partnerships with global tech giants and the construction of critical infrastructure, outline the course Oman has taken in its development.