Kuwait’s Boubyan Bank and Zain Telecom are joining forces to create one of the Middle East’s first purely digital Islamic banks.
The news broke during the Central Bank of Kuwait’s International Banking Conference, a massive event gathering over one thousand attendees. The story of how they united was told by the vice chairman and CEO of Boubyan Bank, Adel Abdul Wahab Al Majed, during one of the conference panels. “Two years ago we decided to do a digital wallet. Everyone was doing it so we jumped in. By the time we reached the final stage all players were into it, so we looked at ourselves and thought, 'does it really make sense?,'” he recalled.
Al Majed called the deputy chairman of Zain group, Bader al-Kharafi.
“I told him, 'I’m doing a wallet.' He said, 'I already have one!' We met and shook hands. In the end, I dumped my wallet and joined with Zain. He has over 3 million customers, I have 600,000, so together, we made a wallet for four million,” said Al Majed.
Although the details are not public yet, the agreement between Zain and Boubyan goes well beyond a digital purse. Once they receive approval from the Central Bank of Kuwait, the partners are expected to set up a digital-only Islamic bank.
Digital banks are only a handful in the Middle East and typically operate under the arm of an already established lender. Existing examples include Neo by Mashreq, Liv by Emirates NBD, Meem by Gulf International Bank.
Zain Telecom is one of the Middle East largest telecom providers with operations in over eight countries. However, telecom providers’ profits worldwide took a huge hit over the last few years with the emergence of services such as Skype, Whatsapp or Viber that offer free calls and messaging services.
Telecom companies are therefore looking to explore new business verticals and create new revenue steams. With smartphone penetration nearing 100% in most countries of the Middle East-North Africa region, mobile payments is a compelling option.
Zain was looking for the best method for expanding its digital and fintech services and faced a choice: either invest in or acquire a bank, or enter a strategic partnership with one of the banks. "After conducting thorough studies, management found that the second option better suited our business direction,” said Al-Kharafi during the conference.
Zain Group is the most advanced example of telcoms stepping into the payments space in the MENA region. In 2016, Zain Cash was the first licensed mobile wallet to launch in Iraq. Today, the services runs like a full-fledged digital bank, offering QR code payment services, money transfer, e-payments, fund disbursement, bill settlement and merchant online/offline payment. Zain Cash also exists in Jordan and the group runs a micro lending platform in Saudi Arabia.
For Boubyan Bank, partnering up with a regional telecom operator offers a way to leverage on innovation and growth.
“Our bank is small so we chose to be disruptive, in our organisation, in our mindset, in the way we work,” says Al Majed.