The United Arab Emirates (UAE) is the largest fintech hub in the Middle East and North Africa (MENA), being home to more than 46% of all fintech companies in the region, and attracting most of fintech investments in 2019, according to the 2019 MENA Fintech Venture Report by the Abu Dhabi Global Market (ADGM) and Magnitt.
As of October 2019, the UAE accounted for nearly half (47%) of all fintech deals and more than half (69%) of fintech funding in the region that year.
Four out of the five most well-funded fintech companies in MENA are based in the UAE. These are Network International (US$30 million), a provider of tech-enabled payments solutions in the Middle East; Aqeed (US$18 million), an insurtech startup; Yallacompare (US$17.2 million), a financial comparison platform; and Beehive (US$15.5 million), a peer-to-peer (P2P) lending platform.
In the first half of 2019, the Dubai International Financial Centre (DIFC), a special economic zone in Dubai, saw its fintech industry doubled in size to more than 200 companies, 80% of which were fully licensed fintech firms. The DIFC Fintech Hive accelerator program received 425 applications from fintech, regtech and Islamic fintech startups for the third cohort of its accelerator program, a 42% increase from the 2018 program.
Fintech-related initiatives from the government
The UAE’s rapidly growing fintech industry, notably in Dubai and Abu Dhabi, has been driven by the numerous initiative led by the government to foster the domestic market. These include the establishment of funds such as Abu Dhabi Catalyst Partners, the Abu Dhabi Investment Office, and the DIFC, as well as the presence of some of the region’s top fintech accelerators like the DIFC Fintech Hive, and Plug and Play ADGM.
Since 2016, UAE governments have been launching fintech-related policies to encourage the development of the industry, including several regulatory sandboxes and a special Innovation Testing License for fintech firms.
In 2019, ADGM launched the so-called Digital Sandbox, a cloud-based environment for fintechs, banks and others to co-create and test products with regulators’ guidance aimed at facilitating and encouraging the development of fintechs.
The year also saw the launch of a US$100 million fintech fund by the DIFC, and the introduction of several new rules, including a regulatory framework for digital investment managers, or robo-advisors, by the ADGM.
In July, the Dubai Chamber of Commerce launched a working group in cooperation with Smart Dubai, Dubai Technology Entrepreneur Campus, and a leading UAE bank, to develop and launch new digital solutions, including a “one-stop shop solution powered by blockchain technology” that would enable startups and small and medium-sized enterprises (SMEs) to apply for a business license and open a bank account.
And most recently, the Central Bank of UAE announced that it will be setting up a fintech office to develop countrywide fintech regulations.
Fintech collaborations
2019 also saw the establishment of several fintech collaborations. Among the most notable ones is the partnership between the Central Bank of UAE and the Saudi Arabian Monetary Authority to develop a common digital currency powered by distributed ledger technology for use in cross-border financial settlements between Saudi Arabia and the UAE.
At the UAE-China Economic Forum in July, representatives from both countries signed 16 agreements covering the economy, trade, investment, technology, artificial intelligence, culture, education, environment, and food security.
And in June, the MENA Fintech Association was launched to foster an open dialogue for the MENA fintech community. At launch, the organization had established 46 country bridges globally.
