In 2019, Dubai received the ‘World Capital of Blockchain Award' at Barcelona's Smart City Expo. The UAE has always been synonymous with development over the years, but this was not an award for another illustration of architectural excellence. It was a FinTech award. Having identified FinTech as a national priority, the UAE is leading the way in disrupting finance through technology. As it sought to diversify away from an oil-dependent economy, the Emirates succeeded in becoming a leading trading hub, but the third largest economy in the Arab League is now a leading global financial hub, and it is evident that they are quickly becoming a leader in technological advancements in that sector.
The UAE is strategically and geographically well placed to continue leading the way in the financial revolution. It is one of the most accessible nations on earth. Over 3 billion people live within a 4-hour flight to the UAE, and billions more can access the location with an 8-hour flight. The country's government has recognized its position as the safest bridge between the developed West and the growing East.
The Emirates is also the gateway to the Middle East, South Asia, and Africa, regions that have a combined GDP of about $8 trillion. Access to state and investor funding as well as favourable regulation has made the UAE a hotbed of innovations in the financial sector. The leading sectors have been blockchain, payments, alternative financing, capital markets technologies, and digital security.
Rapid Development and Innovation
The Dubai International Financial Center (DIFC) and the Abu Dhabi Global Market (ADGM) have been at the heart of this financial revolution. Established in 2004 as a financial-free zone, the DIFC now hosts more than 3500 companies, with over 1100 of them being financial or related firms. The ADGM also hosts over 4000 companies and has been proactive in the blockchain space, both in launching projects as well as leading in promoting positive regulation for virtual assets.
Additionally, the UAE has promoted the development and implementation of technologies in areas such as AI, robotics, E-wallets, and IoT (internet of things). The payments sector has witnessed the biggest impact, especially in the aftermath of the COVID-19 pandemic. There has been a big demand for contactless payments and online banking. The UAE leads in remittances throughout South Asia, and there have been innovative solutions to enhance the near-instant transfer of payments within and outside of the country.
The country has also witnessed immense growth in funds collection and alternative finance. Sukuk and other non-Islamic bonds have flourished, as have multiple crowdfunding initiatives and other non-fund investment opportunities.
Beyond banking and investment, the UAE also leads in the creation of technology software that provides retailers and institutions with access to the global financial markets. The country has also provided favourable regulations and a friendly environment for existing companies, acting as an MT4 broker to set up shop in the UAE without any red tape. Overall, many FinTech start-ups choose the UAE as their location of choice owing to already world-class infrastructure as well as convenient access to a global market.
But FinTech also has its threats, and the biggest of them all is cyber security. As a result of this, the UAE has also been leading in implementing advanced security technologies to protect consumers and counter the threat of anti-money laundering and terrorism financing in global finance.
Emirates Leads the Way
Beyond the obvious risks, there is plenty of optimism for the UAE FinTech scene. The established DIFC and ADGM financial hubs will continue to support the innovation and implementation of financial technologies. The Emirates also remains a major global trade centre as well as an enviable destination for travellers, professionals, and investments. This fuels the pressure for digital financial solutions, and the nation must continually rise to the occasion.
The nation has also witnessed massive capital inflows, and there is also a need for the development of diversified investment strategies and platforms. Already, some smart bourses and strategies have allowed investors and other participants to easily monitor opportunities and investments inside and outside the ‘free zone.'
UAE banks and broader financial institutions were previously at the background of the nation's exponential development, but they have now been thrust into the frontline to drive forward the ambition of making the nation a leading global financial centre. There is already a great infrastructure in place in the form of world-class financial hubs, as well as massive financial backing from sovereign wealth funds and even international financiers. As it stands, the UAE has all the ingredients to continue being a leader in the ever-growing FinTech space.