Fintech Ecosystem of Dubai in 2022

Dubai is the largest city and commercial hub in the United Arab Emirates (UAE), so its economic development naturally receives a lot of attention as it continues to grow at a tremendous pace. But how does fintech play a role in accelerating and driving this growth?

The most visible symbol of the role that financial services play in Dubai specifically, but also the UAE as a whole, is Dubai International Financial Center (DIFC), which is the city’s primary Special Economic Zone (SEZ) driving its status as not only a regional hub but also a global player. The DIFC alone is estimated to contribute at least 12 percent of Dubai’s total gross domestic product (GDP).

DIFC is the only financial center in the Middle East, Africa and South Asia (MEASA) to be ranked among the world’s top 10 leading financial centers (according to Global Financial Centers Index) – joins the ranks of other centers in Hong Kong, Singapore, New York City and London.

In accordance Ian Johnstonmanaging director i Dubai Financial Services Authority (DFSA)“The UAE economy has been quick to recover in 2022 and achieve pre-pandemic growth levels. Initiatives such as the National Innovation Strategy have encouraged the development of the UAE’s fintech sector.

“Within the DIFC, the regulated financial services ecosystem continues to grow with the DFSA authorizing 63 financial institutions in the first nine months of 2022. This represents a 26 per cent increase from 2021.

“As a result of the introduction of new regulatory frameworks such as our money services regime in 2020 and investment token regime in 2021, as well as our Innovation Testing License (ITL) programme, we continue to see diversification in the types of firms being licensed within the Centre. These include crowdfunding platforms , SME financing platforms and digital debt and sukuk issuance platforms.

“We expect to see further growth in the ecosystem following the introduction of our crypto token regime in November.

“As more and more innovative financial products and services are introduced to the market, the DFSA has built dedicated teams within the organization to effectively monitor these products and services. We look forward to seeing the sector flourish and be at the forefront of the future of finance.”

Across the Middle East and North Africa (MENA), Dubai is estimated to be home to around half of the fintechs in the entire region. Many of them are based in DIFC Fintech Hivewhich is also based within the DIFC and acts as the main catalyst for the fintech sector in Dubai.

For example, the DIFC FinTech Hive has its DIFC Fintech Accelerator programme, which gives the most innovative start-ups access to the region’s largest financial industry banks and insurance companies for partnership opportunities, exposure to investors, mentorship and more.

This year, 20 startups were selected to participate – tackling challenges including crypto, digital asset wallet, investech – to name a few. Additionally, alongside this program was their AccelerateHER program, which was sponsored this year by HSBCwhich received a record number of applicants.

In terms of startups, Dubai now accounts for 57 percent of scaleup funding in the MENA region, while the emirate is home to 39 percent of the region’s scaleups, according to a new report developed by Dubai Chamber of Digital Economy in partnership with Watch out for the bridge and Crunchbase.

Dubai also made news this year in the metaverse world where they announced their strategy and ambitions to be a global metaverse hub. The the government of Dubai recently formed the Higher Committee for Future Technology and Digital Economy to oversee the city’s push to become a leading global hub for metaverse technology adoption.

Even companies such as Emirates NBD, which is one of the largest banks in the Middle East and Africa (MEA), has launched a global accelerator program for metaverse startups. This is in collaboration with DIFC Fintech Hive and powered by Microsoft.

The environment will match authentic real-life events and locations, with a beta version expected to go live in the fourth quarter of this year.

According to a report from PwC on the UAE’s cryptocurrency regulation, the UAE’s share of the global market is around $25 billion in transactions, a figure that has increased 500 percent between July 2020 and June 2021. Regionally, the UAE ranks third by volume, behind Turkey at 132 billion dollars and Lebanon to 26 billion dollars.

The United Arab Emirates has actively encouraged the growth of its crypto industry, having passed Dubai’s Virtual Assets Law along with the establishment of Dubai Virtual Assets Regulatory Authority (VARA)and while the industry was largely unregulated a few years ago, recent legislative measures have demonstrated the government’s commitment to reducing the potential risk of financial crime in the nascent industry.

Dubai is becoming even more digital

Data from MasterCardits limitless payment report 2021/2022 reveals more than half (51 per cent) of those in the UAE who made cross-border payments online to family and friends in the past 12 months believe the recipients would have struggled financially without this support. This compares to 40 percent globally as the payments continue to provide a lifeline for people with families abroad.

Businesses have also become more digital in Dubai. The Department of Economics and Tourism (DET) in Dubai and Visa Economic Empowerment Institute (VEEI) conducted a joint study and published their findings to assess the resilience of small businesses in Dubai during covid-19.

The resulting White Paper, Dubai MSMEs: Digital and robustlooked at the digital journey of micro, small and medium enterprises (MSMEs) in Dubai and drew on Visa data to provide insights into UAE commerce trends.

The paper explored the results of a survey of more than 900 Dubai-based MSMEs which found that digital capabilities – in terms of acceptance of digital payments, expanded use of social networks, messaging apps, online marketplaces and cross-border reach – were key to MSMEs’ recovery and resilience.

The Covid pandemic also led to an increase in e-commerce as business owners moved quickly to meet customer demands. The joint Visa and DET study examined businesses that actively accept card-not-present (CNP) payments as an indication of e-commerce activity. For all businesses in Dubai, this percentage increased from eight percent in July 2019 to 13 percent in August 2021, a growth of 60 percent.

With its neighboring city and the capital of the United Arab Emirates, Abu Dhabi, Dubai’s combined offering has continued to benefit the country as a whole, and I see more positive things ahead in terms of wider economic development and diversification. This gives the fintech sector a growing role to play in the future of the economy.