The UAE Ministry of Economy announced in 2022 that the country had the largest fintech market in MENA. A 2023 Mordor Intelligence Report notes that the UAE "is rated first in terms of innovation and market size as well as development potential." Dubai International Financial Centre is at the core of this growing ecosystem. It's an onshore financial center for the Middle East Africa and South Asia.
The DIFC was established in 2005 and has since become a launchpad for more than 4,300 regional and global financial companies. It is also home to more than 25,000 employees. The DIFC, in addition to helping with company formations, has been fostering innovative ideas in the UAE financial sector for over two decades. In 2020, for example, the DIFC introduced an Innovation License, which offers subsidized licensing options and co-working space for startups.
The DIFC has played a major role in the UAE's overall economic boom, but two of its subentities, the DIFC Innovation Hub (a technology hub) and the DIFC FinTech Hive (a fintech accelerator), have had a greater impact on the development of the UAE's fintech industry. The Innovation Hub, a technology hub, is home to over 500 tech companies in the growth stage. FinTech Hive, a fintech acceleration, offers mentorship by leading insurance and financial institutions, as well co-working space. Mohammed Alblooshi is the Head of DIFC Innovation Hub & FinTech Hive. Alblooshi explains that his role at DIFC Innovation Hub is to help the Center grow by managing and developing their fintech and innovative functions, in line with Dubai’s vision of becoming one of the four top global financial hubs. I work closely with entrepreneurs, startups and industry experts to foster an environment that encourages innovation and growth within the fintech sector. I am also involved in developing partnerships with international and local organizations to promote knowledge sharing and collaboration globally.
The DIFC has a great deal of influence in the fintech industry, and some of its biggest success stories have been attracted to the Center. DarwinBox, a human resources technology startup based in India and a fintech unicorn, joined the DIFC 2022. Alblooshi says that "over 1,369 fintech and innovation companies now operate within DIFC. This is up by 22% since 2021. In 2022, 291 new fintech firms and innovation firms will join, bringing the total to 686. A 36% increase," he adds. To facilitate access to investors DIFC Innovation Hub, FinTech Hive, and other platforms, such as investor meetings, pitching sessions and networking events, are organized by the two organizations. The DIFC FinTech Hive provides mentoring and guidance to startup companies on fundraising strategies. It also helps with pitch decks and financial modeling. Startups can then gain access to investors and strategic partners that can provide funding.
Alblooshi has been preparing for the first edition of the Dubai Fintech Summit, an event organized by the DIFC that will bring together regional and international experts in the industry, startups and investors. The event was launched under the patronage H.H. The DFS will be held in Madinat Jumeirah, Dubai, from May 8-9 2023. Sheikh Maktoum Bin Mohammed Al Maktoum is the Deputy Primer and Minister of Finance for the UAE, Deputy Governor of Dubai and President of DIFC. The DIFC has a wealth of industry resources and information available to the DFS. This will allow the DFS to shine a light on several themes, including digital payments and embedded finance, policymaking and regulation, and cryptocurrencies. The DFS hopes to set a benchmark for how governments and enterprises approach financial innovation with its roster of industry experts and speakers. Alblooshi says that he expects to host 5,000 executives, policymakers and investors from around the globe. As a rapidly changing industry, the growth of fintech depends on staying up-to-date with the latest technologies, trends, and regulatory development. The fintech industry faces many challenges around the world, including regulatory barriers, limited funding and a lack of skilled talent. I hope that these issues will be discussed at this event.
Source: Dubai International Financial Centre (DIFC)
The DFS attendees will also gain valuable insights into how sustainability, environmental, social and governance factors, as well as other important factors, can influence the future of fintech. Dubai would be the ideal venue to host such themes, given the numerous inroads it has made within these fields. Alblooshi says that Dubai has been a business hub for many years due to its strategic position, world-class facilities, and the government's support of foreign investment. The diversified economy and highly-skilled and diverse workforce, as well as the taxation policies of Dubai, make it a desirable destination for business. Dubai's government is a strong supporter of the fintech sector through initiatives such as the DIFC FinTech Hive and Dubai Future Accelerators, which provide startups with a platform to meet investors and industry experts.
The UAE's fintech industry is thriving, and with over 2,000 fintech companies in the UAE (according to the Mordor Intelligence Report), growth and innovation are a given. Consider the success of UAE-based Tabby's buy-now, pay-later platform. In January 2023 it raised US$58M in a Series C round, becoming the GCC's first startup to receive funding via PayPal Ventures. PayPal Ventures is the global corporate ventures arm of the US-based payment platform PayPal. Tabby's success in raising funds is not a one-off. Fintech in the UAE was a constant source of capital during a period when many sectors were facing a lack of investment, especially in 2022. Alblooshi states that the fintech industry is growing rapidly globally. According to MAGNiTT the MENA region, Pakistan, and Turkey has seen significant investment in the fintech industry, with $2.256 million invested in 351 deals. This makes it the most heavily invested in sector in terms of deal volume and number. The government's funding and priority for innovation and technology are key factors in boosting investor confidence. Alblooshi points out that consumer preferences are also a major factor in generating investor confidence. As the public becomes more comfortable with digital financial services, a greater emphasis has been placed on contactless payments and digital onboarding. A MarketWatch report states that the digital payments market in the region is expected to grow by a compounded annual rate of 15,39% until 2026. Alblooshi says that changing consumer preferences have fueled a boom in digital financial services such as digital wallets and online banking. Investors recognize the increasing role of fintech firms, which disrupt traditional financial institutions through more efficient solutions for long-standing problems within the financial industry. These include reducing transaction cost, increasing accessibility and improving customer service. Fintech companies have the potential to provide high returns to investors due to their scalability, low operating costs and ability to reach global audiences.
Source: Dubai International Financial Centre (DIFC)
Alblooshi says that the key to maintaining this growth is how well fintech companies read market trends. He explains that startups and entrepreneurs should keep an eye on various trends within the fintech sector, such as the growth of digital currencies, and the importance of artificial intelligence and analytics. "Another trend that is growing is the use of AI and Machine Learning (ML) for improving risk management, fraud detection and customer experience. Startups and entrepreneurs working in the fintech sector should adapt to evolving customer preferences and needs, while also continuing to innovate. Alblooshi says that while digital trends and consumer behavior have played a part in the success of fintech firms from the UAE, the regulatory framework of the country has also helped to ease the growth trajectory of so many companies. He says that the UAE has taken a proactive approach in creating a regulatory framework to support fintech startups. Entities such as the Dubai Financial Service Authority (DFSA) and the Central Bank of the UAE have played a key role in this regard. "DIFC offers a framework designed to support initiatives that encourage innovation and growth in fintech companies. DIFC Innovation Licence, for instance, offers a regulatory framework that allows fintech companies to test out new products and services prior to seeking regulatory approval. This is to help fintech entrepreneurs bring their innovations to the market faster and with more confidence."
Alblooshi, while praising the UAE for its fintech-friendly laws and his own company for theirs, is aware that improvements can always be made. Alblooshi says that while the UAE has made great strides in creating a regulatory framework that is optimal for fintech startups in the GCC, the regulatory landscape for fintech continues to evolve. There is an increasing recognition by regulators that it is important to create more integrated and supportive frameworks which enable firms to work smoothly across borders. The region can become a hub of fintech innovation and entrepreneurship with continued collaboration between fintech firms and regulators, and a commitment to balance innovation with consumer protection.
Alblooshi points out that regulatory improvements could also help some fintech areas to gain traction in the UAE. He says that to help untapped fintech sectors grow, the issue is not what changes need to be made, but rather what needs attention. "Policymakers can further improve the regulatory environment that supports fintech startups by providing more incentives to entrepreneurs. "I also believe that collaboration and knowledge sharing between fintech startups, established financial institutions and untapped areas can help drive growth and innovation."
Unlocking the hidden potential in such sub-sectors is only possible if the existing challenges are addressed. Alblooshi says that access to financing is one of the greatest challenges facing fintech entrepreneurs. We are addressing the issue by creating a comprehensive ecosystem, through the DIFC Innovation Hub, FinTech Hive, that provides access to funding, regulatory assistance, and networking with investors, venture-capitalists, established financial institutions, etc. The Dubai Fintech Summit, which will take place in May, will bring together industry leaders and global fintech experts to discuss the innovations, challenges and opportunities of the sector. DIFC's goal is to create a comprehensive ecosystem which offers fintech entrepreneurs access to capital and regulatory support as well as networking opportunities. This will help them overcome the challenges they face in the UAE.
Alblooshi is aware, however, that the discussions that occur at DFS 2023 do not represent the end of the road. He hopes the Summit will serve as a springboard for more significant, sector-wide changes that happen long after the event ends. Alblooshi: "I hope that financial inclusion will be increased by encouraging the creation of innovative financial services and products for underserved population, especially in developing countries." "Improving security and privacy is also a top priority to create more consumer confidence and trust in digital financial services. Fintech partnerships are also important, and DFS-2023 could encourage collaboration among fintech companies and traditional financial institutions as well as other stakeholders. This would lead to comprehensive solutions that meet the needs of everyone. "I hope that enhanced regulatory frameworks will foster innovation, collaboration, and competition between fintech firms and traditional financial institutions. This will lead to better services for the consumers."
Alblooshi, the DIFC team and others have already set their plans in motion to achieve these goals. Alblooshi says that there are a number of exciting and upcoming initiatives for DIFC. "We recently announced the launch our venture building program DIFC Launchpad. The initiative is aimed at developing a venture building model to promote the growth of innovative startup and scaleups within the region. DIFC's Path to COP28 initiative is another very exciting initiative. DIFC and Global Ethical Finance Initiative bring together the global finance community to promote action and thinking relating to climate change and environmental, social and Governance (ESG), principles as we approach COP28. Fintech is poised to grow next year."
Mohammed Alblooshi discusses the unmet consumer needs by fintech and what could be done to address them.
"This must be addressed urgently." Consumers are increasingly concerned about their privacy and security as financial services become more digitalized. Many consumers struggle to understand financial products and services. Fintech companies could create financial education resources and tools that are easy to use for consumers. Many consumers in the UAE rely on traditional institutions to provide certain services. Fintech companies must work with traditional financial institutions in order to offer integrated solutions that combine both sectors' strengths.