GCC initiatives that are strengthening the FinTech sector

Approximately 70 percent of the population of Egypt and the UAE do not have access to bank accounts. While reasons differ from country to country, this means that there is a huge market that needs to be addressed. Fintech is not only about easing the way people bank, it is the driving force behind boosting the economy by making it easier and faster for people to manage and spend money, which in turn opens new market opportunities.

Middle Eastern countries are realising the potential of Fintech and have therefore introduced several initiatives and regulations that enable entrepreneurs to implement their Fintech solutions.

The UAE has been at the forefront of Fintech revolution in the Middle East, evident by the highest number of investment deals and Fintech startups established in the country. Recently, DIFC announced it has surpassed the registration of 100 Fintech firms.

Dubai and Abu Dhabi have been leading the way through several accelerators, incubators, funds and sandboxes. In Dubai, they include: the Fintech Hive, the DFSA’s regulatory sandbox called Innovation Testing Licence, Dubai SME’s Intelaq programme, the Dubai Technology Entrepreneur Center (Dtec) accelerator introduced by Dubai Silicon Oasis Authority, as well as the DIFC Fintech Fund and the AED 2 billion Mohammed Bin Rashid Innovation Fund.

Late last year, Startupbootcamp, an accelerator from the UK also set up in the DIFC, offering its programme in partnership with Visa, Mashreq, HSBC, and of course the DIFC itself. This means there are now two accelerators in DIFC: Fintech Hive is a government initiative while Startupbootcamp remains a private accelerator that is providing its 3-month programme in partnership with other entities.

In a statement on their website, Startupbootcamp said: “Over the next three years, Startupbootcamp in Dubai will accelerate 40 startups working in a range of fields impacting financial services innovation, such as artificial and machine intelligence, distributed ledger technologies and digital and open banking.” Startupbootcamp announced the intake of 10 Fintech startups who started their programmes on 19 February 2019.

In Abu Dhabi, the initiatives include ADGM’s RegLab (sandbox) and Plug and Play ADGM, whose Fintech accelerator is now in its third year; along with multiple government funds and initiatives such as Hub71 that subsidises living and operating expenses, as well as the AED 535 million Ghadan Ventures Fund announced in May 2019.

Last year, the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Markets (ADGM), also agreed to initiate the world’s first cross-border testing of its Fintech sandbox connectivity in collaboration with the ASEAN Financial Innovation Network (AFIN), an entity located in Singapore.

“The ADGM digital sandbox (DSB) supports and enables the creation of APIs, System Virtual Machines, data and applications that connect legacy systems of Financial Institutions to Fintechs, more established technology providers and other relevant parties in a cost-effective and scalable manner, hosted securely on the cloud,” explained a spokesperson from ADGM. Moreover, ADGM also announced 'Fintech 50', a new initiative, as well as the third edition of the 'Innovation Challenge', as part of the Fintech Abu Dhabi Festival 2019 taking place on 21-23 October.

The rest of the GCC countries are strongly pushing their Fintech agenda too. Bahrain has its Fintech Bay, as well as the regulatory sandbox launched by the Central Bank of Bahrain in June 2017. Moreover, the country signed an MoU with the Government of Maharashtra in India in 2018, to provide a framework for co-operation between the two authorities to promote Fintech in their respective markets.

The Central Bank of Bahrain also licensed ‘Rain’ — the first cryptocurrency exchange in the Middle East to be fully licensed to operate. Mubadala and ADGM in the UAE have also been making investments to further the blockchain and cryptocurrency platforms. In September, Abu Dhabi Global Market (ADGM) launched a regulatory framework for "spot crypto asset activities."

In May 2018, the Kingdom of Saudi Arabia initiated a collaboration between the Saudi Arabian Monetary Authority (SAMA) and Deloitte Middle East, giving rise to FintechSaudi — an initiative to support the Saudi Arabian Fintech ecosystem. Moreover, in February 2019, SAMA also launched its regulatory sandbox and announced the selection of 18 companies to join its sandbox in June this year.

The specialised Fintech accelerators, sandboxes and funds are helping startups in the respective countries to trial their technologies while developing next-level solutions in the fields of open APIs, banking, blockchain technology, crypto assets, machine learning, and more. The governments’ support for Fintech is key to promoting industry-wide adoption of digital technology, improve interoperability, raise digital standards of operations, as well as promote financial inclusion.

Fintech not only has the power to revolutionise the financial sector, but positively impact most other industries. Moreover, through economic inclusion, they play a crucial role in widening the market as well as bridge the gap between the various segments of society.