The Fintech’s of Arabia: Why European investors are looking to invest in the Gulf

The nations of the Arabian Gulf have long been recognized as a source of capital, with vast oil wealth making the region home to some of the richest states per capita in the world. But with countries around the world shifting gear to greener policies as concerns over climate change gather pace, fossil fuels are being rendered a thing of the past. Now, in the post-oil world, the Gulf is reinventing itself, transforming itself from an oil dependent and ultra-conservative region to becoming an exciting fintech hub, attracting capital from abroad.

And the region has never been more alluring to investors, especially from Europe: economies have matured, the populations have become younger and more innovative, and the rule of law has improved. With a more stable operational environment, opportunities are presenting themselves with greater regularity, and with a promise of greater rewards.

The absence of local players in the regions also presents an opportunity for European firms to make real inroads into innovative and novel sectors. Many Gulf-based private equity firms have consolidated or shut up shop due to the difficulties of raising new capital. Where previously there were over 100 private equity firms in the region, now the numbers have plummeted.

Swiss-based Prism Group AG is one such firm looking to take advantage of the new opportunities in the Gulf. Partnering with the UAE’s Royal Strategic Partners and led by Amir Nagammy, an entrepreneur and investor with a background in technology start-ups and financial services, Prism is targeting the acquisition of Finablr, the established fintech and digital payments provider that is listed on the London Stock Exchange (LSE) and in 2018 had revenues of over $1 billion.

Finablr is a shining example of how the Gulf has become a global leader in the market, with the company widely regarded as an established player in the competitive and innovative fintech space. Its roots are deep in the region, but Finablr has rapidly expanded with operations now in 170 countries and consolidating international brands like Travelex.

The once-thriving firm has been navigating a difficult working environment, buoyed by its industry-leading portfolio of fintech holdings and working capital provided by Prism as it awaits regulatory approval from the LSE and the Financial Conduct Authority (FCA), the UK’s regulator, for the $1 acquisition to complete.

And it is vital that this regulatory approval is given, for the thousands of workers whose livelihoods depend on Finablr, the shareholders who would be left with nothing if the firm went insolvent and the customers who depend on its technology to send money around the world. Indeed, Finablr processed 150 million transactions worth over £82 billion in its latest year of operation - its collapse would leave a gaping hole for those who rely on the service.

Nagammy has hired an expert team to support the revitalisation and reinvigoration of Finablr and take advantage of the fintech firm’s underlying value. Alvarez & Marsal, the world’s leading restructuring advisor, and Moelis & Co are helping Prism restructure Finablr and re-position it to take advantage of the technology-driven changes sweeping the payments industry. Merger discussions have been had with the Bahrain-based BFC Group Holdings, a move that will consolidate several leading Gulf brands under one roof and form a real technology and innovation powerhouse.

This proactive approach to revitalising one of the region’s primary fintech leaders has the potential to boost not only Finablr itself, but the sector as a whole. The suite of technological holdings has real value for boosting regional trade between SMEs and others, with trade encouraged and supported by the swift and secure payment technology in Finablr’s platform.

Prism is just one of a number of investment firms looking with renewed interest at the Gulf. London-based investor New World Group is also looking to expand into the GCC, with others expected to follow as the region opens up following the pandemic.

But Prism’s move on Finablr especially, has the potential to really set the ball rolling on private equity again and put the Gulf on the map for fintech investment. Along with new sectors given a boost by entrepreneurship schemes and national programmes to bolster the private sector, there will be even more opportunities for private equity to add significant value to the region as it faces the green new world.

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