Fintech reshapes U.A.E's financial industry

Since its introduction, the rise of financial technology is unstoppable. A lot of consumers and countries around the world are increasingly adopting fintech. And all its products and companies are on a fast rise. Research showed that between 2015 and 2019, consumer use of fintech globally increased a whopping 75% as more and more people prefer this technology for money transfers and payment services. As many countries continue to adopt fintech, the Middle East is fast rising with its use of the technology, and the United Arab Emirates is not left out of the bandwagon. Financial technology has undergone tremendous growth in U.A.E and the main contributing factors include supportive government policies, a tech-savvy population interested in adopting the most recent fintech innovations, the idealistic measures of financial free zones, and a private sector that is very interested in partnering with innovative fintech startup which has all revolutionized the financial sector in the U.A.E.

Fintech adoption in the UAE

This is more so as the region’s National Vision for 2021 has fintech deeply rooted in it, urging the U.A.E strive to become one of the world’s best economies by becoming the commercial and economic capital of 2 billion individuals by moving to a more knowledgeable and tech-based system. The U.A.E has appointed several Ministers of Artificial Intelligence and Advanced services in order to bring this vision to fruition. In this light, several tech institutions have been established throughout the emirate like Smart Dubai, Dubai Future Foundation, Abu Dhabi Digital Authority, and also initiatives that have already been launched such as Area 2071 and Hub71 for the support of entrepreneurs in different technology-related fields.

Since 2017, the Milken Institute Center For Financial Markets has been making more efforts towards ensuring that governments in the Middle East and North Africa implement regulatory frameworks that support financial technology, and the U.A.E is very active in these measures, and totally reshaping its financial industry to reflect. A more technological structure. 

Throughout the past five years, the use has established itself as the biggest hub for financial technology especially with regards to start-ups in the MENA region. According to studies, UAE accounted for 47% of all financial tech deals and 69% of total funding and is home to the majority of the MENA region’s fintech start-ups. Not only are countries in the world like the U.A.E are reshaping their finances, but the world at large and the financial markets see it as an instrument that will tremendously transform the capital markets and finances. Forex brokers and trading apps are incorporating a more technological structure in the way they function. And trading platforms such as cTrader have powerful automated AI assistance features that help traders manage and perform trades.

Positive Growth Trends

Although the region only represents about 1% of the world’s fintech investment, the sector is rapidly growing across the Middle East at a CAGR (compounded annual growth rate) of 30%. It is estimated that by 2022, about 465 fintech firms in the UAE will generate about $2 billion in investment capital funding in comparison to the $80 million in tinted investment capital raised in 2017.

Most of the ventures in the region are moved to improve the fintech sector. And a lot of emphasis is put on startups that focus on payment, online lending, remittances, InsurTech, RegTech, crowdfunding, digital banking, blockchain, and crypto companies emerging the most. However, a majority of the funding focuses more on the payment sector with about 85% of the fintech companies in the MENA region operating in transfers, payments, and remittances.

It is quite understandable that most of the ventures in the region have focused on the payment sector as the region continues to be the hub for tech-related payments. The activities of the U.A.E in this sector have led to a rise in remittances thanks to their growing population representing over 90% of the country’s total population. Remittances from the region summed up to a whopping $44.5 billion in 2017 a majority of which was transferred through money exchange firms and one-quarter through banks. This clearly indicates that the country’s financial sector is being revolutionized from the standard financial systems to more technological frameworks.

The U.A.E has highly adopted ICT ranking to the 6th of 140 countries. Mobile broadband and Mobile cellular telephone subscription have increased to about 243% and 211% respectively. About 91% of the country’s population are internet users making it easier for fintech to be fully adopted. The fintech industry in the U.A.E has a lot of potential to grow and together with it comes innovation. And blockchain is one of those technologies that the region is not taking lying down as they adopt an electronic payment system that most foreign exchange apps in the region use for transactions. On the forex markets, a majority of financial instruments are now traded through the use of fintech assets such as Bitcoin and electronic methods of payments such as PayPal, Skrill, e-wallets, and a lot more. And according to information on https://www.axiory.com/, the broker provides several methods of payment for its traders such as Skrill, e-wallets, and PayPal, just to name a few. 

Contributing Factors To The Growth Of Fintech In The U.A.E

The increase in the use of mobile devices and better internet connection has also been a contributing factor to the growth of the fintech industry in the region. In 2017, mobile penetration in the Middle East reached 100% and smartphones on the other hand reached 60%. The U.A.E, Bahrain, and Qatar were found to be the most penetrated markets in the world in 2019. And reports indicate that Kuwait and Saudi Arabia plan to join these countries to launch a 5G network system.

Administrative bodies are encouraging the development of more fintech-related businesses and are even partnering with companies in the private sector to ensure that this vision comes to fruition, establishing a very sound fintech ecosystem.

A lot of major fintech experts are moving to Dubai for investment especially because the growth in the region has proven that the industry’s potential is on a path of exponential growth.

Bottom Line

One thing about fintech is that it is making the financial system a whole lot faster and easier, online the situation with a traditional financial institution such as a bank. There is no doubt that most young people prefer fintech but besides that, who wants to go waiting at a bank for hours just to make simple payments? Nobody! And as the world becomes more and more technologically savvy, blockchain technology and cryptos will continue to be used to reshape standard financial systems not only in the U.A.E but throughout the world at large.