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UAE is largest financial technology hub in Middle East and North Africa region

(Image credit: Future)

Fintech (financial technology) has become the buzzword in the Middle East and North Africa (Mena) region due to emerging startup ecosystem and is ranked first among all industries by the number of venture investments in both 2018 and so far this year.

Fintechs are disrupting the financial markets across the world and have become the driving force for having a direct impact on banks’ business or customers’ bottom line.

Dubai International Financial Centre and Abu Dhabi Global Market play a key role in the growth of fintechs in the UAE.

According to a MAGNiTT report published in collaboration with Abu Dhabi Global Market (ADGM) and revealed at Fintech Abu Dhabi, fintech has received 181 investments worth a total of $237m over five years, accounting for 10% of all venture investment deals across Mena.

The UAE is the largest fintech hub by fintech startups (46%), as well as by the number of deals (47%) and total funding (69%) in this year, followed by Egypt with 27% deals and Lebanon with 6%.

Payments & remittance startups are the top sub-industry within fintech, accounting for 45% of all deals in this year.

Richard Teng, CEO of Financial Services Regulatory Authority (FSRA) at ADGM, digitalisation of financial services is happening at an unprecedented pace, from payments, banking, financial advisory, capital market and insurance, deployment of fintech via artificial intelligence, data analytics, cloud and blockchain have reimagined the financial services sector resulting in innovation, efficiency and greater financial inclusion.

Top of all government and central bank agendas

“As a progressive financial services regulator, ADGM remains resolute in enabling fintech to realise its full potential and also in providing modern and effective markets,” Teng said.

Philip Bahoshy, CEO and founder of startup platform MAGNiTT, said that fintech has many similarities to transport and logistics such as a large addressable market, the ability to disrupt historical business models and solutions that can cross borders.

Fintech (97) surpassed e-commerce and logistics (84) in 2018 as the most invested industry by the number of deals and, at the same time, the number of fintech startups across the region has grown quickly over the past years, increasing quicker in numbers than many other industries. Since 2012, the number of fintech startups has seen a compound annual growth rate (CAGR) of 39%.

In 2017, the number of fintech startups stood at 245 and it increased to 310 in 2018.

Bahoshy said the best part for fintech startups is that the industry is at the top of all government and central bank agendas.

“They understand the importance of modernization of processes and are providing sandboxes and other incentives to work with them and grow their solutions. However, similar to all Mena startups, the scale is the name of the game. Founders need to navigate multiple regulatory and jurisdictional challenges to build successful companies in this space. The ground, however, is currently fertile and the interest is extremely high,” he said.