(MENAFN- Khaleej Times)

A fintech expert has called for deeper collaboration between fintech companies and banks in the region, as new data shows that although fintechs remain far smaller than traditional banks in assets and revenue, they continue to command significantly higher valuations.

“This is driven by several factors, starting with their much lower cost to serve,” said Sagar Shah, associate partner manager at consulting firm McKinsey & Company.“Fintechs operate at roughly 15 to 20 times lower cost than traditional banks, yet they are growing far faster, expanding their customer base by more than 50 per cent a year, with revenue per customer rising at the same pace. Another major advantage is that about 95 per cent of their technology is built in-house.”

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He added that these companies have also become powerful consumer brands, often ranked alongside the likes of Netflix and Spotify.“They're not viewed as just financial service providers but as brands people want to be associated with,” he said. This strong brand identity helps fintechs achieve high valuations despite much smaller balance sheets.

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Sagar was speaking at the fifth edition of the Banking Innovation and Technology Summit, organised by Khaleej Times at Address Skyview Hotel in Dubai on Tuesday. The three-day event brings together CEOs, CIOs, regulators, fintech founders and innovation leaders to explore the future of banking.

Banks undervalued

Unveiling the Banking and Fintech Innovation Report 2025, Sagar said that although global banking is enjoying record profitability, it remains one of the most undervalued industries as investors remain cautious due to macroeconomic pressures, slow tech adoption, and intensifying competition.

Meanwhile, fintech funding has stabilised at 2021 highs, public fintech valuations have tripled, and global“hyperscaler” fintechs such as Revolut and Nubank are expanding rapidly and profitably.

“In the last few years, the number of fintechs in the bubble has not increased much, but market cap has nearly tripled,” he said.“That's because the hyperscalers are emerging as leaders; building profitable business models and scaling faster than their peers.”

He said the region must now prepare for AI-driven disruption, consolidation, and more ambitious bank–fintech collaboration.“There are many conversations between fintechs and banks, but we are still waiting for large-scale, multi-million-dollar partnerships,” he said.“This remains a major opportunity in the region.”

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