Fintech, which refers to financial technologies, has come to be a buzzword in today’s age of rapidly moving technological vehicles used in the financial services sector. Initially, the advancement of financial technologies was in the backend of institutions in order to streamline and fast-track processes. However, more and more companies have started incorporating cutting-edge fintech technologies in their front-end in order to limit delays and cut down costs. These fintech technologies have proven to be game-changers and have initiated disruption in the traditional model of financial payments in multiple areas such as loans, mobile payments, asset management, fundraising and money transfers. In fact, with the ever-increasing pace of development, fintech has continued to evolve and make its impact beyond financial institutions and into the wider horizon of all services that are linked to the financial services industry.
Making life easier for users
With fintech continuing to move to the front-end, their axis of influence also continues to grow as they serve an underserved segment through their faster and more efficient mode of service. In the process they have disrupted several established players and systems as more and more companies have started doing away with traditional methods.
Whether you are applying for a loan or depositing a check through your mobile, chances are that you are availing fintech services that are enabling you to get more done in a day than you previously could have through traditional systems.
Fintech in the UAE
The UAE has positioned itself as the regional fintech leader and one of the most competitive countries in the world in terms of its financial ecosystem which is only behind Israel with regards to the rate of digitalisation of financial services. UAE has witnessed advancements in banking, payments, capital markets, financial advisory and insurance at an unprecedented rate, leading to more financial inclusion, efficiency and resulting in greater innovation. Most of the credit for this boom goes to the Abu Dhabi Global Market (ADGM) and Dubai International Financial Centre (DIFC) which have provided the perfect environment for fintech companies to thrive and grow.
ADGM has developed a RegLab fintech sandbox for fintech companies to test out and develop innovative solutions within their secure and regulated framework. The efficacy of the initiative can be gauged from the fact that RegLab is not only the first of its kind in the region, but is also the second most active fintech sandbox globally.
DIFC has developed an ecosystem that provides companies access to accelerator programmes as well as mentorship opportunities from the leading insurance partners and financial institutions. By allocating $100 million to its ‘FinTech Hive’, DIFC has brought on board several key financial services firms such as Cigna, AWS, NBD, K&L Gates, FAB, Careem, Standard Chartered. Microsoft, MetLife, and Visa.
Drivers of success
The UAE houses almost 50 per cent of the fintech companies in the Middle East, making it one of the largest fintech hubs of the region. However, regulations across the region are at different stages of development as authorities are in the process of working out the best way to protect people as well as promote digital innovation.
Success for fintech services in the UAE did not happen overnight. It was a mixture of factors including a younger, more tech-savvy demographic coupled with the nation’s high per capital GDA that led to a consumer base that was more acceptable for new products and financial solutions.
The fact that more than 92 per cent of the population had access to internet was another significant contribution. Other overlapping drivers included the regulatory sandboxes by ADGM and DIFC that gave fintech companies to test and try out their products. Last but not the least, the ease of various procedures and access to government and private funds also played a positive role in attracting fintech startups from all over the world.
Enabling private sector partnerships
It is very hard for any business or startup to go it alone without assistance or forging any partnerships with supportive institutions. The UAE has nurtured an environment that encourages the development of private sector partnership with like-minded institutions. Many traditional and large-sized local financial institutions have contributed to this environment by providing accelerator platforms for fintech startups. ADCB’s partnership with Plug and Play and ADGM in order to join the Plug and Play global ecosystem is one such example that has led to the development of a comprehensive digital transformation strategy.
Another such example is the partnership between DIFC FinTech Hive and Emirates NBD that certifies startup fintechs that have successfully availed Emirate NBD’s application programing interface sandbox.
The Abu Dhabi government digital payment platform (ADPay) launched in collaboration by Abu Dhabi Digital Authority and FAB is another positive example of a private sector partnership leading to simplified digital payment solutions for customers and investors.
DIFC Fintech Hive and Statrupbootcamp have partnered to provide consultation and mentoring services for clients. Visa has also been promoting its vast reach to both new and established fintechs through its Fintech Fast Track programme.
Another example was when in 2019 American Express launched a corporate accelerator that invited regional fintechs to participate and collaborate in finding solutions to the challenges faced by the credit card company. Similarly, Citibank also held the first MENA Fintech Challenge which asked fintech companies to come up with innovative solutions to challenging problems.
Setting the UAE apart
The MENA region present one of the most diverse landscape as it borders three continents and encompasses 21 countries each with its own unique set of conditions and challenges that suit its population. The region is home to a population of 500 million and harbours an economically, culturally and political diverse milieu of nationalities.
Creating an environment for fintech companies to grow and thrive in the region has been a challenge that UAE has mastered through its developed and mature ecosystem for fintechs. What attracts fintech companies to the UAE is its enabling environment for new companies to tap into the existing accelerators, and government and private funding platforms. This has led to a wide range of opportunities for fintech companies to identify gaps and realise product opportunities.
As more and more regional governments wake up to the positive opportunities created by welcoming fintech companies into their ecosystem, they are in various stages of development.
In this scenario, the UAE model is shining bright as a beacon of hope for other governments to look up to and replicate. Competition in any shape and form is always good as it weeds out underperforming and stagnant models to make room for more impactful and cutting-edge solutions.