Investment in Gulf fintech firms is poised for recovery in 2025, driven by an improving global economic outlook that is expected to restore investor confidence, according to a report released on Wednesday by S&P Global Market Intelligence.
The report highlights a sharp decline in funding for Gulf Cooperation Council (GCC) fintech and payments companies in 2024, with total investments dropping 77% to $129.7 million from $572.6 million in 2023. The number of funding rounds also hit a four-year low, with only 20 transactions recorded.
“Rising interest rates and tighter liquidity have made investors more cautious, especially with riskier asset classes like startups,” said Shane Shin, founding partner at Shorooq Partners. Venture capitalists have adopted a more selective approach toward emerging markets, reflecting a global trend.
Factors Behind the Decline
The 2024 downturn was attributed to various factors, including heightened competition following rapid sector growth in previous years and a shift in investor priorities toward sustainable business models over aggressive expansion. Geopolitical uncertainty and a lack of large-scale deals also contributed to the slump, according to Ambarish Srivastava of Acuity Knowledge Partners.
While deal volumes remained stable, the absence of mega-deals dampened total funding. Notable transactions in 2024 included a $50 million capital injection for Bahrain-based Arab Financial Services Co., $22 million raised by Dubai-based Ziina FZ-LLC, and $21 million secured by Saudi Arabia’s Moyasar Financial Co.
Foreign investors participated in only eight funding rounds in 2024, raising $40.8 million, a sharp decline from the 14 rounds that netted $446.1 million in 2023.
Optimistic Outlook for 2025
As global macroeconomic conditions stabilize, the report anticipates renewed investor confidence, particularly in fintech startups demonstrating strong unit economics and scalability. The sector’s recovery is expected to be fueled by a digitally savvy population and supportive government initiatives, such as Saudi Arabia’s Vision 2030 and Dubai’s cashless transaction goals.
Regulatory advancements across the region are also playing a pivotal role. Recent developments include frameworks for digital assets and open banking in Qatar, a second open banking framework in Saudi Arabia, and Oman’s approval of an open banking regulatory framework. These changes are expected to enhance resilience and foster long-term growth, despite posing short-term challenges to smaller firms.
Digital Assets and Cryptocurrencies
Digital assets continue to grow in popularity in the Gulf, particularly in markets aligned with Islamic finance principles. However, countries like Kuwait and Qatar maintain a cautious approach, restricting or regulating cryptocurrency trading due to its inherent risks.
The UAE leads the GCC in fintech activity, hosting 184 companies, followed by Saudi Arabia with 34. As the region recalibrates, experts believe firms that adapt to regulatory changes and prioritize sustainable growth will thrive in the evolving fintech ecosystem.
