Fintech solutions are rapidly improving how we experience financial services. How quickly regional banks adopt new technology will ultimately define their legacy — and market share. In Kuwait, strong digital infrastructure and an entrepreneurial mindset have positioned the nation as a high-potential incubator for fintech. Fahad AlSharekh, Founder of TechInvest, a VC and Private Equity firm based in Kuwait City, spoke with us about Kuwait’s inherent fintech advantages, including the fact that Kuwait offers the “cheapest 5G in the world.” AlSharekh’s father founded Sakhr Software, which put out the world’s first Arabic operating system in 1982. Today, Kuwait can still be a place of tech visionaries, he concedes, if the market adapts to the needs of its up-and-coming tech savvy generation. Simply put: The future of banking, AlSharekh says, is in the app. “If the mobile app is not 30% of business, the bank will be obsolete soon,” AlSharekh asserts. “Every bank needs to get into smart banking and really just move into fintech as soon as possible.” Going forward, the COVID-19 pandemic has turbocharged many trends in fintech, opening up digital challenges for regional banks. “Over the next five years, SMEs and startups are going to be acquiring business loans through mobile apps,” AlSharekh observes. “We need [more of these] these micro-financing solutions — including small business loans for $200 or $500.” FinFirst has also anticipated this demand, which is why our mobile app has been specifically designed to better enable easy applications for business loans, large and small. In our discussion, we also discussed Kuwait’s new fintech regulations, its digital advantages and major tech trends AlSharekh is watching going into 2021. [Note: This below interview has been edited for brevity and readability.] Can you give us an overview of Kuwait’s tech ecosystem and how it is propelling fintech today? In Kuwait, the tech market has long been developed due to the entrepreneurial nature of Kuwaitis and the fact that it’s a free market; we have three telcos and five other ISP providers. On top of that, we’re generally early adopters. With a lot of the apps that blow up — such as Snapchat, Twitter and WhatsApp — the growth in Kuwait is always first. My father founded Sakhr Software in 1981, so Kuwaitis have been thinking about the tech space for a while. We developed the first Arabic operating system for MSX computers, which was pre-DOS Windows. Fast forward to 2020, it’s now 40 years later and the market has matured in a way where you have a lot of potential customers who are willing to adopt the latest tech. In finance, the banks are pretty advanced with offering online services. This has helped a lot of the young people who come back from college and can find similar services available to them here compared with what they have used from banks in North America or Europe. Kuwait’s digital infrastructure is competitive; data costs are lower compared to Dubai. Why is this and what other advantages does Kuwait have? I lived in Dubai and in Saudi Arabia and, while both are great countries that have great achievements in many fields, in terms of data their markets are limited. I wish that the UAE had six or seven carriers; that will help with competitiveness. Today, Saudi Arabia has three or four carriers, which is great, but for a while internet speeds were slow because of all the censorship; data had to go through different filters. Both countries are now moving along very well. However, at the moment Kuwait has the advantage. Kuwait has the cheapest 5G in the world at a time when 5G has not even been widely released yet. How has the coronavirus pandemic influenced fintech regulation in Kuwait? Following the coronavirus, the Central Bank of Kuwait updated laws to enable onboarding financial clients online. Now you can open an account with a selfie video as security and then complete all the documentation on an app. I did this with the Commercial Bank of Kuwait and I was happily surprised at how quick the process was. Sometimes the regulators impress and surprise you at how quickly they take action. Do banks need fintechs to stay relevant? Look, the big banks are going to be made obsolete if they don’t jump on the bandwagon quickly and start transferring their business from branches and corporate offices into the app. If the mobile app is not 30% of business, the bank will be obsolete soon. If you are still counting on people to show up to your branch, you’re definitely not realizing that someone took your lunch. I don’t think this is Baby Boomer stuff. How can fintech aggregation platforms help to boost a bank’s brand? A platform that builds collaboration between banks will enable each bank to be more customer centric. Instead of putting their brand first, they’ll be putting their service first. The best way for banks to fast track their transformation into the digital online world is to acquire or join forces with an aggregating platform that’s already out there. Finding a company that’s done all the technical work and R&D will save them a lot of time. Banks should either do an aqui-hire — acquiring and hiring at the same time to get the talent — or just sign up and test the platform. Why are fintechs that support these collaborations essential to the future of banking? Old brands really are going to be irrelevant going forward. Big established brands have disappeared overnight. No one cares about the old brands except the Baby Boomers. But for Generation Z, technologies like augmented reality are the future, and they want a certain service to match that is efficient, productive and user friendly. Over the past 10 years, most of the new tech has come from young people that are more in touch with the digital world. Just looking at credit cards in the U.S. now, you have companies like Brex. They’re backers are all the big companies; they are betting on the new guys, not their guys. The only way for banks to survive is to invest directly in the current fintech leaders. FinFirst stands out because they have the approval of the Central Bank; they’re in the sandbox. In the fintech world, three years is a lot of experience. As they continue to transform, they will be more needed. Fintechs are not a “good to have” anymore; they are a “must have”. Let’s try a hypothetical: You’re in front of the CEO of a bank in Kuwait and they’re debating whether to cooperate with a fintech. How would you advise them? If the bank’s business comes from branches and from corporate bankers who are at desks in office towers in urban centers, you are stuck in the eighties. That worked before. But it’s over now. Fortunately, all the banks in Kuwait have an online platform, and some are really advanced; some even have robo advisory and wealth apps. The fact that they’re doing it means they’re going to work to perfect it as well. I’d also tell this CEO to look at how others have taken big market shares because they adopted online banking. Every bank needs to get into smart banking and really just move into fintech as soon as possible. We also need to help push the regulators to open it up even more with open banking and open data sharing to further speed up this move into the new world. What trends in fintech are you watching this year given the current pandemic? Let’s say that during the pandemic somebody had a business idea about how to solve a problem. However, that startup idea requires financing. You wouldn’t be able to acquire that funding because the banks were closed. However, if the world of microlending and financing was alive online, nothing would stop anybody, right? The economy would continue and the business could still be launched. We need these micro-financing solutions — including small business loans for $200 or $500. But regional banks are currently not moving fast enough. Already, a lot of Kuwaiti students that studied in Europe or the US opened accounts while they were in college and now they still have these accounts, so they can get access to microlending. Therefore, it is entirely possible that international banks could take away the market share of regional banks. It’s an online world. Over the next five years, SMEs and startups are going to be acquiring business loans through mobile apps. Regional banks really need to get into microlending and online banking to finance these growing companies. [To learn more about how FinFirst is getting involved in developing fintech in Kuwait, read this article that explains how our mobile app allows users to easily compare business loans and apply within 10 minutes.] Overall, what are three major tech trends you’ll be watching going into 2021? Number one: Whatever is cool that’s made in China is going to get blocked in India, Europe and the US. Find the alternative. These markets want to block TikTok. So find something that is just as silly and goofy and sticky and that will blow up and have 2 billion users. That is where I’ll be putting my money now. I see this trend emerging in India and Southeast Asia; I love that. It feels like it’s Silicon Valley 20 years ago there, which is exactly where you want to be. Number two: What’s clear following the coronavirus pandemic is that globally every single business, whether large or small, will need remote work-enabling tech, such as Slack, Skype and Zoom. These are great. But video conferencing is not corporate work. It’s only one part of it — it’s communication. There is a lot of work that goes into the business of operations, and it’s not just simple workflow. The reality of business processing is much more complex, including managing, administrating and executing operations. In fintech, there are lots of opportunities in remote work-enabling tech. For example, Deel, a payroll for remote teams company, just got funded by Andreessen Horowitz. Then there is Mercury, which offers banking for startups, and is a new star. During the pandemic, they continued providing services while the banks were counting on people showing up to their branch. Now Silicon Valley Bank is backing Mercury, providing another example of a big bank betting on a fintech startup. Number three: Educational tech. Everyone teaching kids online now is realizing that what we have is crude. Their kids are not learning. In fact, no one’s kids learned anything for six months. Everyone saw all this cool, cute software with the teacher and 10 screens on Zoom. But that’s not teaching; that is just web conferencing. It is an ad hoc solution. Overall, fintech has an important role to play with all of these trends.