New reforms accelerate FinTech activity in Dubai

Dubai is eyeing $1 billion in FinTech investments through to 2022, according to DIFC projections.

Dubai is set to launch the Middle East, Africa and South Asia (MEASA) region's first FinTech accelerator as efforts to update the legal framework for crowdfunding activities in the financial sector also make headway.
 
FinTech acceleration
With the emirate looking to take advantage of growth in FinTech investments worldwide, in January, the Dubai International Financial Centre (DIFC) announced a partnership with technical and professional services provider Accenture to launch FinTech Hive.

Scheduled to begin operations in the second quarter of this year, the accelerator will be established and operated by Accenture - a company with experience in setting up similar innovation labs in other major financial centres such as London and Hong Kong.

One of the key aims of the initiative is to provide a low-cost route for the development of FinTech companies, while giving them the tools, advice and support to develop or deploy advanced technology, according to Sushil Saluja, Accenture's senior managing director for financial services in Europe, Africa, the Middle East and Latin America. "The accelerator programme will identify the best entrepreneurs within the financial services industry and grant them invaluable access to and feedback from potential customers and funders," he told media at the launch of the partnership.

As well as helping select up-and-coming industry players, the project will also allow them to collaborate on innovations with executives from regional and international financial institutions.

Dubai-based lenders Emirates NBD and Mashreq Bank have signed on to join the programme, while UK bank HSBC and global payments technology company Visa have also committed to taking part.

The FinTech Hive project will begin with a 12-week accelerator programme, providing new market entrants with the opportunity to address and discuss emerging trends in the FinTech industry.

Growing market
FinTech investments worldwide last year rose by 10 per cent to $23.2 billion on the back of 22 per cent growth in 2015. Spending in Asia accounted for almost $11 billion of the 2016 total, outstripping outlays in both North America and Europe, according to figures released by data and analytics firm CB Insights in early 2017.

Dubai is eyeing $1 billion in FinTech investments through to 2022, according to DIFC projections. However, this still only represents a fraction of the $150 billion worth of investments the global industry is expected to achieve in the next three to five years, according to PwC's 'Blurred Lines: How FinTech is Shaping Financial Services' report published in March last year.

According to Arif Amri, CEO of the DIFC, FinTech Hive should be able to make a significant contribution to this projected growth.

"Over the next five years, we will be able to achieve 1,000 to 1,500 applications, and with that we look forward to graduate about 100 to 150 established solution providers. This will create the critical mass for the FinTech Hive for the next five years," he told media at the launch of the initiative.

Regulations
Rising investments in the FinTech segment and the DIFC's new focus on start-ups are also driving a process of reform in Dubai's legal framework, with regulators seeking to keep pace with the new developments.

To this end, the Dubai Financial Services Authority (DFSA) - the financial regulatory agency for the DIFC - is currently undertaking a consultative process on the proposed legislation it has prepared for regulating crowdfunding platforms in the DIFC.

These moves reflect the increasing importance of this funding source for the country's SME sector, according to Ian Johnston, CEO of DSFA.

"Our approach remains consistent for loan-based and investment-based crowdfunding platforms in its aim to define a clear structure for the sustainable development of this industry," he told local media in mid-February.

The present round of consultations with stakeholders and those in the financial sector covers the specific risks associated with investment-based crowdfunding, which allows start-ups or small firms to raise funds through selling stakes in their companies.

Greater certainty in the regulatory framework and a supportive environment in an already expanding market could see a wave of new FinTech firms using Dubai as a launch pad into the FinTech sub-sector.

The writer is managing editor for the Middle East at Oxford Business Group. Views expressed are his own and do not reflect the newspaper's policy.