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Fintech thrives as digital transformation jolts finance sector

Fintech thrives as digital transformation jolts finance sector

UAE expected to attract $2.5bn in investment into fintech by 2022

Cash dominates commerce, with 75 per cent of global consumers conducting most of their transactions in notes and coins.

Physical payments have traditionally been seen as secure and reliable, with e-payments relegated to back-up status. This year has however seen a major reversal in the status quo, accelerating a shift years in the making. In the past nine months, 71 per cent of consumers in the UAE reported an increase in using digital payments, even when shopping in-store.

The fintech industry is poised to benefit from the virtual lifestyle imposed upon us by the ‘new normal’. According to startup resource MaGNiTT, the UAE attracted $237m in investment in fintech in 181 deals between the period of 2015-2019. This figure is expected to rise to $2.5bn by 2022, according to a report by Clifford Chance.

What is fintech, exactly?
Financial technology is the umbrella term for products and services that use the internet, software, mobile devices, or cloud capabilities to enable individuals, businesses, governments, and others with anything money-related. The technology is being used in crowdfunding platforms, cryptocurrency, mobile payments, insurance, and stocks.

As financial services are transformed, new business models are generating significant growth. With a tech-savvy population, the UAE should see a sharp increase in electronic and contactless payments, digital banking, and AI-based insurance products.

According to the Dubai International Financial Centre, 50 per cent of the Middle East, Africa and South Asian (MEASA) population have limited or no access to financial services. This provides a promising opportunity to provide these fast-growing markets with an easier and more accessible banking option – such as digital banking and financial technologies. Offering digital banking solutions to markets where physical bank branches are scarce or hard to reach, or banking without a minimum account balance is an opportunity worth exploring.

Digital transformation is a megatrend across the globe that has already disrupted financial services, with more innovation on the way. As the world shifts to digital finance, investment in fintech is a no-brainer.

David Stubbs is head of Market Strategy & Advice at JP Morgan Private Bank

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