The UAE has seen huge investment and growth in the Fintech sector over the last couple of years leading to it being ranked number 1 in the Arab Nations for Fintech by “FinxAr” a regional Fintech index set up to track the development of the financial technology industry in Arab countries.
Much of this growth is due to the efforts of the UAE government and centres such as, the Dubai International Financial Centre (DIFC) which is the leading global financial centre in the Middle East and South Asia.
The DIFC now ranks 8th in the world’s global finance centres alongside other well-established financial hubs such as, London, New York and Hong Kong.
A recent report titled “Fintech News Middle East: UAE Fintech Report 2021” claims, “in the United Arab Emirates (UAE), the fintech sector continues to grow and mature on the back of rising adoption of digital payments, booming e-commerce activity and a nascent, yet vibrant, digital banking landscape”.
The highlights of the report can be found below and the full report is available here.
The Fintech report looked at six main indices (during the period from 2018 to 2020) representing the foundations of the fintech ecosystem which are:
• policies and legislation
• consumer/client demand
• access to finance
• financial markets infrastructure
• talent development to support innovation
• collaboration and partnerships
The Arab countries were assessed based on the criteria above and given a percentage score. The following are the top five:
1. United Arab Emirates – 75%
2. Saudi Arabia – 65%
3. Bahrain – 64%
4. Tunisia – 55%
5. Egypt – 52%
The report also considered aspects linked to Fintech such as, banking, fiscal inclusion, internet penetration rate, and so on, to give a clearer picture of financial technologies in the Middle East and the accessibility of these for the general public.
The following data was collected for the UAE:
• GDP – US$ 354billion (2020)
• GDP Growth – down 7% (2020)
• Internet Penetration – 99% (2020)
• E-Commerce User Penetration – 69.4% (2021)
• Population – 9.99million (2021)
• ATMs per 10,000 Adults – 6.1 (2020)
• Mobile Connections – 172% (2021)
• Number of Debit Cards in Circulation – 10.2million (2020)
• Network Readiness Index World Bank Rank – 30 (2020)
• Bank Branches per 10,000 Adults – 0.95 (2019)
• Mobile Banking Penetration – 90% (2019)
• Number of Credit Cards in Circulation – 8.8million (2020)
It also highlighted the growing trend of consumers to move away from cash towards contactless payments and the embracing of financial technologies:
• US$18.5 billion Digital Payment Transactions in UAE in 2020
• 88% of in-person transactions are contactless
• 73% of consumers shop more online than they did before the pandemic
• 83% of consumers state they will continue to use contactless payment post-pandemic
• 97% of consumers plan to use at least one new method of digital payment such as wearables, biometrics, digital currencies or QR codes within next year
• 5in10 UAE individuals plan to use cryptocurrencies within next year
The report attributed some of these trends to the COVID pandemic.
For instance, digital payments have more than doubled over the last two years with two-thirds of UAE residents expecting the country to become fully cashless by 2030.
But many of the other factors are due to the UAE’s government supporting mobile financial services initiatives for the unbanked and their Wage Protection System, an electronic transfer system which requires all corporations to pay wages through approved financial institutions.
The decentralized, “free-zones”, set up by the UAE government, have also assisted its rise in the Fintech sector.
With more than 40 of these free zones, across the seven Emirates, operating mostly independently under separate regulations and authorities, many finance companies are finding their feet within these centres.
For example, in 2020, the DIFC recorded more than 2,500 active registered companies operating in the Centre, of which 821 were financial services firms.
Other national innovations include:
• The UAE Fintech office
• The National Innovation Strategy
• The National Artificial Intelligence Strategy 2031
• The Emirates Blockchain Strategy 2021
By supporting and encouraging investment and innovation in financial technology, the UAE government has cemented its position as number 1 in the Arab countries for Fintech.