Five trends UAE fintech can leverage to stay competitive
An article by Viktor Kasianov, CEO of UnaFinancial’s digital finance app to be launched in the UAE.
With its developed entrepreneurial culture, investment openness, and large-scale support from the government, the UAE is increasingly turning into a new regional and global fintech hub. The local fintech market is estimated at $39.3 billion in 2023 and projected to show a CAGR of more than 15% until 2028. Also, the country is ranked as the premiere fintech hub in the Middle East and Africa (64). 46% of fintech startups, 47% of fintech funding deals, and 69% of all fintech funding in the MENA region come from here (8). Since 2017, 2600 fintech companies have been registered in the UAE, which also has 9 regulatory sandboxes and RegLabs, 5 regional investment funds, and 4 government fintech accelerators (11). The future prospects for the fintech market in the country look pretty bright. Yet, the local industry can gain more by leveraging the latest trends.
Islamic finance and services for overseas workers. According to the report, the global Islamic finance market is expected to reach $179 billion by 2026, growing annually by 18%. The UAE is one of the leaders in this process, taking 4th place by volume and conduciveness for its development. The UAE is also a country with a large share of overseas workers (9 out of 10.17 million). Financial services are becoming a key growth factor in the local fintech industry. Along with the products intended to serve the unbanked, it is worthy to highlight cross-border remittances. The main directions are India, the Philippines, Bangladesh, and African and European countries.
Growing demand for data-driven investment tools. The UAE has not only been an attractive country for foreign investment, but is also developing outward investment activity. More than 600 investment companies are registered in the country, including 6 of the 10 largest in the Arab world. Private investors also show activity. From January to August this year, the number of downloads of the 20 largest investment applications in the UAE increased by 1.6 times, and the number of active users increased by 1.5 times YoY. The investment technology segment makes up about 15% of the entire market for Emirati fintech companies. According to UnaFinancial’s forecast, its volume will more than double—from $313 million in 2022 to $637 million in 2025.
UnaFinancial’s digital finance app will also contribute to the development of the investment technology sector in the UAE. The app will include an online investment platform, allowing customers to acquire and trade multiple asset classes like equities, forex, bonds, commodities and derivatives. The service will be aimed at overseas workers, which is also one of the trends mentioned above.
Rise of RegTech. The beginning of the fintech boom in the Emirates also caused shifts in regulation, which raised the question of compliance with the new rules. To streamline the situation, RegLab, launched by the government in partnership with the Dubai Future Foundation in January 2019, amplified its activities. Fintech regulators also interact with each other, striving to create a single register of fintech rules. For instance, six regulators approved the creation of the Guidelines for Fintech Companies at the end of 2021.
The market is becoming more innovative and complex. There is a growing need for the fintech business to have relevant practical tools to comply with all the legal requirements. This is supported by the regulators; for instance, ADGM began using RegTech software to automate applications for its licences. DIFC takes part in arranging RegTech events. There is also a joint e-KYC project that has been operating in the country since 2018, international events, such as the MENA RegTech forum, and other initiatives.
Moving to phygital. Being a high-tech country, the UAE is one of the world leaders in integrating modern payment digital technologies into the everyday physical environment. This is especially true when it comes to shopping. Last year, 59% of UAE shoppers used smartphones to enhance their in-store experience. As a result, a year ago, the first “fashion, lifestyle phygital store” opened in the country. There are other examples outside of retail. For instance, in December 2022, a Dubai start-up claimed to have developed a technology that would increase restaurant sales by combining code scanning. Another company started offering a combination of QR codes with cashless payments to its visitors.
Being borderless. The value of foreign direct investments in the UAE amounted to $22.7 billion in 2022. Given the geographical size of the country, this is a truly impressive advantage. Today, fintech is becoming the main priority in attracting foreign capital, taking first place in the list of the Ministry of Economy. Another example is the launch of NextGen FDI, a programme that aims to attract digitally enabled businesses from all over the world. The future of fintech in the Emirates is associated with the foreign component, both in the form of specialised investments and through the direct expansion of foreign fintech companies. Further establishment of interstate fintech ties and a ban on tightening tax legislation are the main levers that can amplify results in this regard.
