From the sands of the United Arab Emirates desert grew a financial landscape that has now mirrored the trajectory of the country’s growth of the last 20 years.
Taking into account Dubai’s large tourist pull, Abu Dhabi’s high-luxury and the contributions other Emirati states have made to the UAE’s growth, there is a reason why the country is focusing on developing its financial infrastructure to rival the likes of its European and US counterparts.
Unlike these aforementioned regions, the UAE was not known as a global leader in finance. Rather, it began to undergo the same digital transformation that was being felt across the global financial ecosystem.
Recognising the proliferation of fintech and the future impact it will have on its financial landscape, banks in the country began to launch digital-first services for customers, such as when Emirates NBD launched Liv, a digital banking platform that encompasses all the modern day customer needs.
Nauman Hassan, Regional Director of MENA at Paymentology, told Payment Expert what went into building the backbone of the UAE’s financial landscape and how it is competing in modern times.
He said: “Over the past decade, the UAE’s financial infrastructure has undergone significant digital transformation, marked by technological advancements, regulatory reforms and strategic initiatives aimed at fostering financial inclusion and innovation.
“Key payments and financial infrastructure has transitioned from legacy hardware to cloud-hosting, providing the foundations for fintechs and institutions to build digital-first financial services.
“Clear regulatory support has also boosted the UAE’s payment and financial landscape, with the UAE’s Central Bank providing a regulatory sandbox and innovation hub to better support and coordinate with new and innovative fintech initiatives.”
Similar to Liv, Hassan highlighted the launch of the fully-digital bank Wio Bank in 2022 as a “significant milestone” for the UAE’s financial sector. However, this is not to say that native financial services have not been looking outside the UAE when it comes to offering more modern day popular payment methods.
Embracing modern day payment technology
UAE customers are quickly becoming more accustomed to and demanding personalised payment methods and solutions, such as Buy Now, Pay Later (BNPL) to enable more flexibility at the checkout.
Because the UAE has not had a 200/300-year long financial landscape that is world renowned, it is afforded the luxury of growing parallel into the field with new technologies, enabling it to differentiate itself from other markets.
When Payment Expert asked Tokhir Abdukadyrov, Senior VP and Head of Digital Social Infrastructure Solutions at BPC, on how the UAE has been able to cultivate a unique financial landscape, a strong and reliable regulatory framework was at the forefront of his mind.
He shared: “The UAE differentiates itself from regional competitors by taking unparalleled measures to attract and retain new players in its financial sector.
“First, the strength of the UAE’s labour market in the financial and technical sectors provides a solid foundation for international companies looking to grow in the Middle East. Extensive regulation, supported by the government initiatives laid out above, provides certainty to international fintechs and institutions that digitalisation efforts will be supported by regulators.
“Therefore, the UAE presents a strong case to new players, demonstrating its commitment to building a highly modern, financially inclusive society.”
The willingness to embrace new technologies from its leading banks is certainly only serving to help the country’s growth.
Migrating from legacy to modern-day cloud-based banking systems has been a battle traditional financial institutions, in the UK for instance, have constantly been mulling over, telling themselves the aged old saying of “if it isn’t broke, don’t fix it”.
However, whilst established markets like the UK have its own luxury in being able to maintain its financial leadership status whilst contemplating next-generation solutions, countries like the UAE are unearthing new payment innovations to achieve further recognition.
Whilst QR-code payments are not entirely new – they have been embedded into the cultures of Malaysia, Thailand and other Southeast Asian countries – the UAE’s Ajman Transport Authority and BPC’s O-CITY, an automated travel payment system – brought this payment method to life this year.
“O-CITY’s platform, adopted by over 130 cities across the world, allows commuters to use standard payment cards such as those issued by Visa and Mastercard to pay for their transportation fares, rather than relying on closed-loop systems like dedicated transport cards,” explained Abdukadyrov.
“The new open-loop fare collection system is also more convenient for the financial institutions involved, integrating directly with ecosystem stakeholders, such as international payment schemes, banks and fintechs, reducing barriers to enrolling new customers into their networks.
“The solution represents BPC’s vision for open cities with zero paper and zero barriers. It removes the need to queue at counters and contributes to efforts to reduce the environmental impact of public transport. BPC is committed to an open, digital future, enhancing accessibility through seamless integration of daily micropayments.”
Indicative of the country’s overall infrastructure transforming over the last 20 years, the need for efficient, seamless transport payments has coincided with the UAE’s acceptance of next-generation payments.
This has become a vital part of the government’s ambition to diversify its economy, and there may be no better sign of approval of the UAE’s financial market than when the top companies come calling.
A sign of approval
In 2024, you will find mostly all major companies having some form of operations within the UAE. From the card network giants of Visa and Mastercard, to banks such as HSBC and BNP Paribas, and even emerging fintechs like Revolut and Nubank are looking to establish a presence in the gulf country.
Hassan commented on how the UAE has been able to attract some of the globel’s largest financial entities, stating: “In the Middle East, the fastest route to adoption involves international fintech experts and infrastructure leaders forming partnerships with an emerging generation of local entrepreneurs, and together, they hone the user experience for the market segment.
“Coupled with an attractive environment for venture capital and startup investments, the UAE and its neighbours have become a hotbed for fintech innovation, and as more global payments companies enter the market, competition will drive an even faster rate of innovation.”
In order to consolidate its position as not just a leading Middle Eastern financial sector, but a global entity, the UAE will have to look into the future to evolve its landscape and stay ahead of the curve to not only keep up with the pace with other regions, but also gain an advantage.
Dubai is becoming a central financial hub for international companies. It is also quickly establishing itself as a destination for cryptocurrency, backed by flexible regulations that a large majority of countries have yet to even put the wheels in motion on.
When asked what other financial fields the UAE can look to develop should the country look to gain a foothold and step ahead of other markets to become an established renowned world leader, Abdukadyrov stressed the importance of its legal framework.
He said: “To build a truly innovative banking ecosystem, established incumbents in the UAE must recognise and address their reliance on legacy financial infrastructure.
“Incumbents can take a collaborative approach to the digital transformation of their infrastructure, recognising the advantages of working with agile payments and banking technology providers, reducing implementation and maintenance costs whilst boosting flexibility.
“Financial institutions and the wider financial, telecoms and industrial sectors will benefit from reduced time to market for highly secure platforms, enabling Emirati companies to move fast in the UAE’s highly competitive business environment.”
Building for the future
With its card payments market expected to increase at a 10.6% CAGR by 2028, higher than the UK (5%) and the US (7%), the UAE is expected to continue its growth trajectory by potentially expanding on the exploration into Open Banking, embedded finance, etc.
Where the country can gain an advantage over its competitors is its continued development of its blockchain and crypto infrastructure, which has already been praised by the likes of Bybit and Crypto.com who have set up offices in Dubai.
For Hassan, he believes this focus on financial technologies like blockchain will help it set the UAE apart from other countries and help establish itself as a home and leader within this respective field.
“The UAE has embraced digital transformation in finance with initiatives including the Emirates Blockchain Strategy 2021 and the Smart Dubai Strategy 2021. These efforts create significant opportunities for fintechs and institutions to enhance operational efficiencies, improve customer experience, and foster transparency,” said Hassan.
“Open Banking is also an important opportunity for innovation in the UAE and across the Middle East. Efforts to build a cohesive Open Banking system, where banks open up and standardise their data to third-party providers, have recently progressed from the discovery stage to implementation, marking a fundamental shift in how payments are processed.”
There is no doubt that Emirati states like Dubai and Abu Dhabi have become desirable tourist destinations for travellers seeking to experience the life of luxury the cities have hung their hat on.
But what the UAE has strategically mapped out during the diversification of its economy, which is ahead of the likes of Saudi Arabia and Qatar, is a strong focus on building out a financial landscape that a New York or London would be impressed by.
With the financial and payments sectors constantly evolving and the UAE moving in line with its evolution, the country will be aiming to be at the forefront of innovation and become a leading hub for payment giants and startups alike within the next decade.