Why 2023 will be the year of Fintech for UAE

If you're looking to get involved in Fintech (either as a founder or a user), there's no better time than now to do so - but what is driving this growth, and what are the biggest changes that Alaan believes will happen this year? Read more to find out!

What do we believe will be different in 2023?

‍Rise of Open Banking

In a milestone decision last year, the Dubai Financial Services Authority granted its first open banking license, marking a significant moment for the financial ecosystem. We believe licensing open banking service providers is crucial for fostering collaboration between disruptive newcomers and established players within the financial system, providing legitimacy and reassurance.

Open banking and open finance can transform how individuals in the UAE interact with financial service providers - offering new opportunities for startups, fintech, and tech companies in the country to challenge traditional finance models and enter the market.

Adoption of Finance Super Apps

Currently, 55 per cent of total payments are made in cash in the UAE, making it a dominant payment option in the country. We believe with the launch of super apps such as e& Money, this move will not only break down barriers customers face when accessing financial services even further, but it will also support the UAE’s ambitions for continued socio-economic development and a cashless economy.

Deployment of sophisticated internal finance control mechanisms

With the introduction of corporate tax in the UAE, businesses face a new challenge when it comes to reporting and controlling internal spending. Fintech will play a critical role here as companies look for innovative ways in which they can report business expenses with the aim of reducing every dirham worth of tax liability. Traditionally, businesses in UAE have been highly critical of incorporating newer technologies as compared to peer nations, since the worry about paying taxes and including write-offs did not exist. However, we believe that this is bound to change in 2023, with companies evaluating newer ways to control business spending.

Maturity in Blockchain Technology and Digital Currencies

2022 was a turbulent year for cryptocurrencies and the blockchain ecosystem - with price fluctuations, and trust misguidance, it was nothing short of a wild ride. We feel that the hype cycle will eventually come to a close and the true innovative systems will emerge as winners. With UAE being one of the pioneers in the space having open regulations and government support we believe adoption will not just be on the retail or customer side, but also in the ecosystem, with financial institutions and banks beginning to work with blockchain businesses

What stood apart for us was The Emirates Blockchain Strategy 2021, which aims to capitalize on blockchain technology to transform a whopping 50 per cent of government transactions into the blockchain platform by 2021.

Increase in Fintech Partnerships

As more cutting-edge fintech players emerge in the country, we expect that multiple providers will come together to create symbiotic relationships, strengthen their offerings, and ultimately provide greater value to the end customer. While we believe that these partnerships will be more prominent among the startup ecosystem, we expect that in the long run, larger and more established financial institutions will start to take notice and will look to partner with emerging tech companies to drive their growth.

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What do we think is going to drive this Fintech boom?

A forward-thinking Central Bank

In February 2023, The Central Bank of the United Arab Emirates (CBUAE) launched the Financial Infrastructure Transformation (FIT) program in an effort to accelerate the digital transformation of financial services in the region. According to us, this is going to be the biggest driver of growth

The FIT program will also see the CBUAE adopt advanced supervisory technologies and data management solutions to implement strong supervisory processes and better ensure financial stability.

As the UAE looks to prepare itself and its economy for the ‘digital decade’ the next stage of the initiative is to develop and implement a range of digital infrastructures. These include the establishment of financial cloud, eKYC and open finance platforms. The UAE hopes these will improve regulatory compliance, reduce operation costs, promote greater levels of innovation, and enhance customer experience. Ultimately, the program aims to strengthen the region’s security and “operational resilience”

Acceptance of Data-Driven Technologies

Middle Eastern companies have traditionally shied away from advanced technologies when it comes to finance-related functions, however, there has been a paradigm shift in this angle over the past couple of years. Data-driven investment tools are already becoming commonplace thanks to the development of machine learning. As companies become more sophisticated and look to more innovative ways to streamline their financial nuances; we believe that their interest in Data analytics and AI will drive growth in Fintech

Entry of global players

The Middle East has traditionally been underserved by Fintech companies - we’ve seen this first-hand at Alaan and it is precisely what made us enter the expense management space! However, as the market becomes more and more lucrative (it's not a surprise, the middle east is growing at a rate much higher than the rest of the world) - we believe that there will be more and more interest from foreign players to try and enter the market, hence pushing innovation and growth to another level

Increase in the number of Fintech product options

The UAE is well-positioned as a regional fintech hub, due to its strategic location at the crossroads of Europe, Asia and Africa. Additionally, with the launch of initiatives such as Dubai FDI and the Financial Services Regulatory Authority’s Innovation Testing License (FTL), it has become easier for fintech companies to establish their business in the country. Furthermore, investors will benefit from the government’s commitment to driving technological development across all sectors through its National Innovation Strategy 2020-2021.

All this combined makes the fintech industry highly lucrative for founders to start up, existing companies to branch out into, and partnerships to brew - all of which are positive for companies looking to adopt Fintech into their existing operations.

An ideological shift toward Digital Banking

One of the biggest developments in the UAE’s fintech sector over the past few years has been the emergence of the digital banking industry, a sector that has historically been dominated by incumbent banks. Currently, the country is underbanked - according to a Digital Banking Adoption Report, only 17 per cent of Emirati adults currently have a digital bank account while an additional 13 per cent plan to open one in the next five years.

As companies and individuals start trusting ‘digital’ finance more, the need for options and alternatives will drive demand from fintech - hence, we believe this will be a big factor in fintech growth in the region.

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So what's next?

Alaan is truly optimistic about what the year holds for the fintech space in UAE and feel that the country is a prime market for disruption. With the intersection of government incentives, availability of great talent, and the presence of companies inclined to understand the flexibility and adaptability of the modern consumer, there’s no limit to what can be achieved. We believe the country is poised to become the fintech capital of Asia, and are super excited about what the nation can achieve in the next 5, 10 and 15 years - are you?

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