The Sultanate of Oman (Arabic; سلطنة عُمان) is situated at the meeting point of the Persian Gulf and Arabian Sea. Its neighbours are the Kingdom of Saudi Arabia (KSA), Yemen and the United Arab Emirates (UAE). Located along the northern coast is its capital city, Muscat. Historically, Oman was known for its frankincense and metalwork, which has emerged today as a tourist destination offering pristine landscapes. The sultanate is a hereditary monarchy which is ruled by Haitham bin Tariq Al-Said, as its Prime Minister and Sultan. Oman controls the Strait of Hormuz which is a strategic gateway for ships travelling between the Persian Gulf and the Arabian Sea, considered the world’s leading oil passageway.

Undoubtedly, Oman has a strategic geographic position which plays into its economic outlook.  Oman has been a member of the World Trade Organization (WTO) since 2000, alongside having free trade agreements with other Gulf Cooperation Council (GCC) states and the United States of America. The official currency is the Omani Rial (RO), which is regulated by the Central Bank of Oman (CBO) and ranked the third strongest currency in the world. The Omani Rial is pegged to the US Dollar, at 1 Omani Rial  = 2.6008 USD -  its stability has helped mitigate the oil price volatility. Considered one of the most progressive markets in MENA, Oman has focused on economic diversification away from oil. Last year, black gold accounted for 66% of exports and 70% of government revenue. Oman Vision 2040 speaks to the aspiration to move away from oil, towards a “sustainable economy based on technology, knowledge and innovation”. Fintech is an important pillar of this vision, with innovation and entrepreneurship at the heart of economic sustainability.

Subsequently, in 2020 the Public Authority for Special Economic Zones and Free Zones was established to oversee Oman’s Free Trade Zones (FTZ) to promote export-driven industries including manufacturing, shipping and logistics. The gross domestic product (GDP) for 2023 is estimated at $108.28 billion, which is a drop from last year’s GDP of $114.67 billion. To drive fiscal revenue, Oman became the 4th Gulf state to impose VAT at 5%. Muscat Stock Exchange Company was also created to attract foreign investors to Oman. Earlier this year, the Oman Future Fund committed $5.2 billion to boost the local economy through key investment. This follows a three-year fiscal stability programme since 2022 to aid post-pandemic recovery, bolster the financial sector and create jobs. The sultanate has agreements with its GCC neighbours to boost the economy, including a $3 billion railway connecting the UAE with Oman and a $320 million infrastructure project with KSA.

The Omani population is estimated at 5 million, where 40% of the total population are expats. Most of the expat community is from India, Bangladesh and Pakistan. The  official language is Arabic and the expat community has brought other languages to the sultanate including: English, Baluchi, Urdu, Bengali and Hindi. The Omani median age is 29.2 years old, with one of the highest recorded birth rates of the Gulf states. According to the National Centre for Statistics and Information's (NCSI) recent survey, 44% of the population is under 17 years old. The youth-driven population and expat community provides an interesting opportunity for a modernised cross-border remittance landscape in Oman.

Given the high density of expats, remittances are a key feature in the payment landscape. Oman is currently 24th on the global remittance rankings. Outward remittances equal 10.8% of the sultanate’s GDP, with India, Pakistan and Bangladesh being the largest beneficiaries at $6.4 billion, $1.1 billion and $0.9 billion respectively. Latest remittance data showed that the total market value in 2021 was $9.8 billion. With money steadily flowing from Oman to India, the National Bank of Oman (NBO) has partnered with Federal Bank of India to bring efficiency to the remittance corridor. Plus, NBO has joined the Buna Payment System: Buna is an international, multi-currency payment network which enables seamless remittances across the Arab region.

Like the rest of the GCC, Oman is traditionally a cash-based economy. In recent years, there has been a definite shift to digital payments across various demographics. This transition was facilitated through government initiatives, infrastructure development and retail adoption. CBO data on digital payments reveals an uptick of adoption: Cheque usage has declined from 4.7 million in 2019 to 3.8 million in 2021 and the digital payment growth rate was 40.6% in 2021. This year the digital payments market is valued at $7.71 billion. At an annual growth rate of 16.37%, the market will consist of 2,965 thousand users and total $14.14 billion by 2027.

In June this year, CBO launched a new 24/7 national Real Time Gross Settlement System (RTGS). RTGS offers Omanis efficient money transfers beyond traditional banking hours. A major benefit is that the system also enables cross-border remittances, through the integration with the GCC payment system, AFAQ. Since 2019, eFloos powered by telecom Omantel offers 12 000 Omanis a digital wallet solution for both local and international fund transfers. Similarly, Ooredoo Oman along with the National Bank of Oman (NBO) launched its own mobile wallet solution, pay+ for merchant payments, bill payments and money transfers.

CBO has taken steps to innovate Oman’s payment regulations in line with international standards. In partnership with The World Bank, CBO designed a payment systems strategy which led to issuance of The National Payment Systems Law in 2018. The regulation includes oversight on key issues such as licences, electronic money and direct debit. In 2020, CBO issued its first Payment Service Provider (PSP) licence to a Fintech company, Thawani Technologies which enables mobile payment solutions. This PSP licence has a minimum capital requirement of OMR 500,000 (~ $1.3 million). In terms of Stored Value Facility (SVF), CBO has defined this as ‘Mobile Payment Clearing and Switching System Operating Rules’ in the regulatory framework.

For a company to obtain SVF capabilities under these rules, it is defined as a Bank licensed by CBO with SVF described as the “availability of an e-wallet”. The PSP can provide mobile payment services to banked and unbanked customers. Payment thresholds and limits are identified based on the payment and customer type. Plus, the licensed company requires an Omani national to manage the entity. Whilst the CBO takes a cautious approach to licensing, it has also offered Fintechs the opportunity to test their products in a safe environment, through its regulatory sandbox. The Fintech Regulatory Sandbox (FRS) is available to local Omani Fintechs for a minimum duration of 6 months which covers all mandated activities under CBO regulations (such as banking and payment services). The sandbox requirements include a Commercial registration, Omani bank account and compliance with CBO Fit & Proper criteria. To participate in the sandbox, the associated fee is OMR 200 (~ $520).

Oman offers payment companies an opportunity to innovate and provide interesting solutions to the local market. The high demand for remittance services and modern regulations enable a platform for a new wave of payments. If you’re looking to Oman as part of your expansion plan in MENA, reach out to our team at Fuse to help you unlock payments.