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UAE embraces fintech, plans more investments
Building on to the progress that was made in the financial technology (Fintech) sector in 2017, financial institutions across the UAE say that they are ready to increase their investments in internal innovation and disruptive technologies.
"The future of finance is headed towards digitisation," says Raja Al Mazrouei, executive vice-president, Fintech Hive at DIFC.
"There are lots of initiatives across the whole region that are supporting this trend. The UAE has its own innovation strategy and innovation agenda that has resulted in it adopting technologies to improve the services that are provided to consumers. This ecosystem has supported the rise of the Fintech industry in the country. Today, we see technologies such as Blockchain that are contributing to the vision set by the country's leaders."
Al Mazrouei was speaking at Finovate Middle East, which will run until Tuesday. Held in partnership with the UAE Ministry of Finance, the event saw the participation of over 400 Fintech experts. In addition to bringing together early-stage startups, the event also provided officials with the opportunity to see the future of Fintech both regionally and globally.
In 2014, the value of Fintech investments worldwide amounted to approximately $10 billion, and experts expect this number to reach $46 billion in 2020. According to Magnitt's annual State of the Middle East and North Africa Funding report, which looks at Mena specific investments, 2017 proved to be a record year for the Mena startup ecosystem. The report highlighted that $560 million worth of investments were made in over 260 Mena startups. In 2017, total Fintech startup deals in the Mena region were valued at $66.6 million.
The UAE continues to be the dominant market in the region, with 70 per cent of all investment amounts and 37 per cent of transactions - excluding Careem's investment of $150 million. E-commerce and Fintech maintained their positions at the top of the investment deal flow, both accounting for 11.9 per cent of all deals. The number of Fintech startups in the UAE continues to grow as more businesses realise the potential and opportunities that exist in the market. At the same time, Dubai is positioning itself as a FinTech hub for the Mena region, with the recent establishment of a $100 million Fintech-focused fund by DIFC to accelerate the development of financial technology.
"The Fintech industry in the UAE is quite dynamic because there is less regulatory tape as compared to other locations such as the US and Europe," says Ruth Wandhofer, MD, Global Head Regulatory and Market Strategy at Citi.
She explained: "It is a market that is still immature, but you see more flexibility and a lot more interesting solutions with very new technology such as Blockchain, which has been a little bit slower to take off in other markets. The UAE is a hotbed when it comes to the drive towards improving the economy with modern technology. The country is very well positioned to accelerate its path towards its vision, and inspire other regions."
Thomas Buemsen, MD for the Middle East at Dorsum, an investment software technology provider, noted that financial institutions in the region are very interested in disruptive technologies such as AI and chatbots, that can help them save costs in their operations. Dorsum was showcasing its enhanced Botboarding chatbot platform, which allows financial services companies to create onboarding chatbots.
"Chatbots will get better and better as time goes on," he said. "I do not believe that robots or AI will totally overtake all operations, because you still need human emotions in certain areas, but they will be increasingly used by companies. What we feel is that chatbots in the next phase will take away the repetitive administrative duties as much as possible, so that relationship mangers in banks will have more time to speak to their clients."
According to pwc's global Fintech report for 2017, 82 per cent of incumbents expect to increase FinTech partnerships in the next three to five years; and 77 per cent expect to adopt Blockchain as part of an in production system or process by 2020. Statistics also show that 30 per cent of large financial institutions are investing in technologies such as Artificial Intelligence (AI), and that the expected annual return on investment on FinTech related projects stands at 20 per cent.
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