Fuelling the future of FinTech
Rushika Bhatia

Fuelling the future of FinTech

She’s far-sighted, ambitious and has a strong financial acumen. As we sit down with her, there’s no wonder why she’s at the forefront of the region’s most important FinTech development. She’s none other than Raja Al Mazrouei – Acting EVP of FinTech Hive at the prestigious DIFC. In a very short span of time, she’s managed to steer her initiative into an exciting phase; opening doors to FinTech start-ups from around the globe and giving a select few a platform to showcase themselves. Our conversation with her sheds light on the state of FinTech in the UAE, its future proposition and how it will disrupt the banking industry. Here are excerpts from the insightful chat…

1. How would you describe the FinTech ecosystem in the UAE?

Sector investment in the region is set to grow by 270 per cent in 2017, according to a recent report by Wamda. Through various initiatives and programmes established across the country, the UAE has pledged to support the rise of the FinTech industry and benefit from the key opportunities it brings to the private sector, including enhancing highly-skilled workers, as well as unlocking additional resourcing and capital. Smart Dubai, a strategy born out of the visionary approach of His Highness Sheikh Mohammed Bin Rashid, pushes institutions to embrace technology innovation, making Dubai the most efficient, seamless, safe and impactful experience for residents and visitors.

2. How does it compare to the global scenario?

The global FinTech sector has attracted more than US$50 billion in investment since 2010, but the Gulf region only accounts for around one per cent of that. The evolution of the FinTech sector will have significant repercussions on the country’s economy, including wider access to financial services to a larger pool of clientele. Wamda Research Lab (WRL) and PayFort recently found that FinTech companies in the region expect to raise US$50 million this year, compared with US$18 million last year – potentially fuelling a huge increase in sector growth.

3. How is FinTech impacting the banking industry? 

We have seen tremendous interest from major financial institutions operating in the UAE to work closely with innovative start-ups that may have the capacity to address sector-specific challenges. In a recent survey by EY, 70 per cent of participants stated that the GCC banking sector would be open to integrating FinTech innovations into their businesses to help enhance their customer experience and day-to-day operations. The FinTech industry is also reshaping fundraising practices by offering alternative platforms for commercial and personal lending. The major players in the banking industry understand the implications that FinTech may have on their business and are keen on investing in original ideas and unprecedented solutions.

4. What opportunities does FinTech offer?

The evolution of the FinTech industry in the region can help re-shape processes involved in the offering of financial products, leading to shorter application time and more focused customer engagement via technology. As a result, financial institutions can extend their services to a larger client base. FinTech firms provide creative ideas and unconventional solutions, which will help the financial services sector address problems relating to customer experience and cross-border services. With 70 per cent of the region’s population unbanked, there’s a visible need for innovative FinTech solutions, which will help provide this large percentage of the population, who can’t reach physical bank branches, with access to the latest services and financial solutions.

5. We are seeing several FinTech start-ups emerge. How do large organisations need to support their growth and advancement?

In the past, regional funding for FinTech has been very limited. The International Finance Corporation (IFC) estimates that the current SME funding gap in global emerging markets is more than US$2 trillion and approximately US$260 billion in MENA. Therefore, investing in these start-ups is crucial for their growth and development. Larger organisations must also provide the smaller FinTech firms with access to a communal workspace, legal workshops and other knowledge-sharing initiatives that will help the start-ups pave their way in the increasingly competitive financial industry.

At FinTech Hive at DIFC, we allow selected participants to develop and test their technologies under the dedicated supervision and guidance of senior executives from DIFC and regional financial institutions, alike. It is a dynamic programme that will continuously develop to address the needs of the FinTech industry in the region. In due course, we aim to provide a co-working space for creative start-ups in Dubai, offer more specialised mentorship programmes, and facilitate partnerships with public and private sector entities.

6. Are we progressively moving towards a cashless economy? What steps need to be undertaken to achieve that goal?

The technology of money has continuously been evolving through the implementation of networked machines, digital verification and the upsurge of smartphones. We’ve noticed a rapid change in the way people use the money for various daily transactions. In a recent EY survey, 36 per cent of respondents stated that up to 10 per cent of the GCC banking sector is at risk of being lost to stand-alone FinTech firms in the next five years. In addition, we have witnessed significant regulatory discussions aimed at accommodating FinTech start-ups in India following an executive order last November by Prime Minister Modi to retire 86 per cent of bank notes in circulation. In 2015, the Singaporean Government demonstrated its commitment to the industry when it established a FinTech & Innovation Group within the central bank. These are a testament that we are on the edge of becoming a cashless society. To ensure that these transactions are safe and credible, financial institutions must invest heavily in their cybersecurity offerings and promote programmes that educate their staff, as well as consumers, about cashless economies and its implications on their financial transactions.

One example is DIFC’s role as a founding member of the Global Blockchain Council, a strategic initiative of the Government of Dubai, aimed at exploring opportunities to apply blockchain technology to financial services. 

7. What are some of the critical factors for the UAE to become a FinTech hub?

The UAE has great potential to maintain its position as the region’s leading FinTech Hub, as well as extend its influence globally. Through attractive tax exemptions and a robust judicial system based on Western markets, Dubai has positioned itself as a regional platform for international financial players looking to set up in the Middle East, and at the same time encouraged the growth of home-grown financial institutions that cater directly to local demand. To secure its place as a FinTech hub, the UAE needs to create an environment where financial firms and technology companies can operate alongside each other. This means considering regulatory frameworks for FinTech firms, lowering the cost of starting a business, easing trade licence acquisition and speeding authorisations for companies to begin operating.

8. Can you tell us about DIFC’s FinTech and innovation priorities?

As the leading financial centre in the region, with an existing community of more than 21,000 professionals working across 1,600 firms, DIFC is the ideal platform to help both small start-ups and large financial institutions complement each other’s offerings.  With the establishment of FinTech Hive at DIFC, a first-of-its-kind accelerator in the region, we are looking to build on our existing FinTech ecosystem and bring cutting-edge financial services technology to the broader Middle East, Africa and South Asia.

Through the 12-week accelerator programme, FinTech Hive at DIFC intends to bridge the SME funding gap by offering leading technology entrepreneurs and companies the opportunity to collaborate and develop the necessary solutions to meet the needs of a larger client base. FinTech Hive at DIFC also presents the start-ups with the opportunity to showcase their products in front of potential investors from the large players in the financial industry.

In addition, we are seeing ongoing regulatory updates designed to meet FinTech industry requirements rolling out from the DFSA, including crowdfunding regulations and the Innovation Testing Licence.