Hassan Zebdeh, Financial Crime Advisor at Eastnets
A decade ago, paying for coffee at a small café in Riyadh meant fumbling with cash – or, at best, handing over a plastic card. Today, locals casually wave smartphones over terminals, instantly settling the bill, splitting it among friends, and even transferring money abroad before their drink cools.
This seemingly trivial scene illustrates a profound truth: while the West debates incremental upgrades to ageing payment systems, the Arabian Gulf has leapfrogged straight into the future. As of late 2024, Saudi Arabia achieved a remarkable 98% adoption rate for contactless payments in face-to-face transactions, a significant leap from just 4% in 2017.
Align financial transformation with a bold national vision
One milestone that exemplifies the Gulf’s approach is Saudi Arabia’s launch of its first Swift Service Bureau. While not the first SSB worldwide, its presence in the Kingdom underscores a broader theme: rather than rely on piecemeal upgrades to older infrastructure, Saudi Arabia chose a proven yet modern route, aligned to Vision 2030, to unify international payment standards, enhance security, and reduce operational overhead.
And it matters, because in a region heavily reliant on expatriate workers whose steady stream of remittances powers whole economies. The stakes for frictionless cross-border transactions are unusually high. Rather than tinkering around the edges of an ageing system, Saudi Arabia opted for a bold and coherent solution, deliberately aligning national pride and purpose with practical financial innovation. It’s a reminder that infrastructure, at its best, doesn’t merely enable transactions; it reshapes how people imagine the future.
Make regulation a launchpad, not a bottleneck
Regulation often carries the reputation of an overprotective parent – necessary, perhaps, but tiresome, cautious to a fault, and prone to slowing progress rather than enabling it. It’s the bureaucratic equivalent of wrapping every new idea in bubble wrap and paperwork. Yet Bahrain has managed something rare: flipping the narrative entirely. Instead of acting solely as gatekeepers, Bahraini regulators decided to become collaborators. Their fintech sandbox isn’t merely a regulatory innovation; it’s psychological brilliance, transforming a potentially adversarial relationship into a partnership
Within this curated environment, fintech firms have launched practical experiments with striking results. Take Tarabut Gateway, which pioneered open banking APIs, reshaping how banks and customers interact. Rain, a cryptocurrency exchange, tested compliance frameworks safely, quickly becoming one of the Gulf’s trusted crypto players. Elsewhere, startups trialled AI-driven identity verification and seamless cross-border payments, all under the watchful yet adaptive guidance of Bahraini regulators. Successes were rapidly scaled; failures offered immediate lessons, free from damaging legal fallout. Bahrain proves regulation, thoughtfully applied, can genuinely empower innovation rather than restrict it.
Prioritise cross-border interoperability and unified standards
Cross-border payments have long been a maddening puzzle – expensive, sluggish, and unpredictably complicated. Most Western banks seem resigned to this reality, treating the spaghetti-like mess of correspondent banking relationships as a necessary evil. Yet Gulf states looked at this same complexity and saw not just inconvenience, but opportunity. Instead of battling against the tide, they cleverly redirected it, embracing standards like ISO 20022, which neatly streamline data exchange and slash friction from global transactions.
Examples abound: Saudi Arabia’s adoption of ISO 20022 through its Swift Service Bureau will notably accelerated cross-border transactions and improve transparency. The UAE and Saudi Arabia also jointly piloted Project Aber, a digital currency initiative that significantly reduced settlement times for interbank payments. Similarly, Bahrain’s collaboration with fintechs has simplified previously burdensome remittance processes, reducing both cost and complexity.
Target digital ecosystems for financial inclusion
One of the most intriguing elements of the Gulf’s payments transformation is the speed and enthusiasm with which consumers embraced new technologies. In Bahrain, mobile wallet payments surged by 196% in 2021, contributing to a nearly 50% year-over-year increase in digital payment volumes. Similarly, Saudi Arabia experienced a near tripling of mobile payment volumes in the same year, with mobile transactions accounting for 35% of all payments.
The West, by contrast, still struggles with financial inclusion. In the U.S., millions remain unbanked or underbanked, held back by distrust, geographic isolation, and high fees. Digital solutions exist, but widespread adoption has lagged, partly because major institutions view inclusion as a long-term aspiration rather than an immediate priority. The Gulf shows that when digital tools are made integral to daily life, rather than optional extras, the barriers to financial inclusion quickly dissolve.
The road ahead
As the Gulf region continues to refine its payment systems experimenting with digital currencies, advanced data protection laws, and AI-driven compliance the ripple effects will be felt far beyond the GCC. Western players can treat these developments as an external threat or as a chance to rejuvenate their own approaches.
Ultimately, if you want a glimpse of where financial services may be headed towards integrated platforms, real-time international transactions, and widespread digital inclusion – the Gulf experience is a prime example of what’s possible. The question is whether other markets will step up, follow suit, and even surpass these achievements. With global financial landscapes evolving at record speed, hesitation carries its own risks. The Arabian Gulf has shown that bold bets can pay off; perhaps that’s the most enduring lesson for the West.
