Exclusive: How Dubai is bolstering its global fintech hub status

The success stories of Careem, Kitopi and Noon are fuelling Dubai’s startup ecosystem by enticing entrepreneurs to launch ventures of their own. The Dubai Government, the business community and the city’s regulators are making concerted and coordinated efforts to further cement the UAE’s position as a global hub for both new and established fintech firms alike.

The economic downturn, stickier-than-expected inflation and soaring interest rates have boosted Dubai’s appeal to ambitious scaleups and startups that are gravitating towards the city where they can benefit from partnership opportunities, investment, talent and marketing exposure.

Dubai has launched wide-ranging initiatives designed to nurture entrepreneurship, which is expected to support startups to capitalise on opportunities across the GCC region.

With the city’s digital economy forecasted to grow to more than $140bn by 2031, Mohammad Alblooshi, head of DIFC Innovation Hub and FinTech Hive, gives an exclusive insight into the centre’s achievements and strategy to accelerate the growth of startups.

How is Dubai gearing up to be a global fintech and innovation hotspot and how do you see the sector contributing to the objectives of the Dubai Economic Agenda D33?

Dubai is on track to become a global hub for innovation in the fintech space. To foster a supportive environment for fintech startups and entrepreneurs, Dubai provides companies with access to resources, funding, and top-tier talent. For example, DIFC FinTech Hive offers mentorship, guidance, and access to investors, contributing to an attractive environment for innovation and entrepreneurship in the fintech sector.

Dubai also invests in infrastructure and dedicated zones, such as the Dubai Future District and the Dubai International Financial Centre (DIFC), the leading international financial hub in the Middle East, Africa and South Asia (MEASA) region, to support the rapidly growing industry. The city promotes innovation in the sector with a supportive regulatory framework, which includes a regulatory sandbox environment that facilitates testing and accelerates the development of solutions in a controlled environment.

DIFC contributes to the vision of Dubai Economic Agenda D33 to transform Dubai into one of the world’s top three cities for business and a leading commercial and investment destination. In 2022, DIFC-based fintech and innovation companies attracted more than $615m with 291 new clients. Fintech is boosting economic growth, creating new jobs, attracting foreign investment, and enhancing the city’s overall competitiveness.

One of DIFC FinTech Hive’s main strengths is its extensive access to mentorship with leading financial institutions and exposure to investors. How do you plan to further bolster this unique capability to cater to the needs of fintech companies in the UAE and the entire Middle East?

Our leading accelerator programmes cater to the unique needs of fintech firms in the region. Through these programmes, DIFC FinTech Hive collaborates with senior executives of leading banks and insurance companies to deliver valuable industry insight that addresses the region’s financial sector needs. Every programme has been designed to provide companies with access to funding, regional business intelligence, and market entry support, with an overarching focus on growth.

DIFC FinTech Hive also hosts a calendar of events and networking opportunities with a community of like-minded individuals including leading financial institutions and potential investors. The Hive provides access to an extensive investor network, including Dhs1bn Dubai Future District Fund (DFDF). We are fully aware of the rapid pace of the industry’s development, so our approach goes beyond linking startups with prominent regional financial institutions and investors, by also cultivating global connections to ensure comprehensive support for our partners across markets.

Our network of international counterparts of accelerators, hubs, and platforms allows us to stay connected with global advances while providing access to opportunities and intel for our startup community worldwide. Our connections with international fintech players in North America, Europe, the Middle East, Asia, and beyond lend to a deeper understanding of the industry, access to supportive platforms, and the sharing of ideas.

What challenges did the global fintech and innovation sector face in 2022 and how do you see this panning out in 2023?

FinTech has faced various challenges globally over the past year, mainly relating to regulation, cybersecurity, and an increasingly competitive market. Some regulators are struggling to keep up with the pace of innovation, leading to the development of policies and a complex regulatory landscape that can make it difficult for FinTech companies to expand globally. The need for a more flexible, hands-on approach to regulation, similar to that at DIFC, is greater than ever.

Another clear concern is cybersecurity as FinTechs collect and store a massive amount of personal financial data, making them a prime target for cyber-attacks. The rapid pace of industry growth must be matched by the development of new cybersecurity solutions.

Moving forward we can expect to see greater collaboration between FinTechs and traditional financial institutions, as well as continued investment in emerging technologies like blockchain and AI. The fintech industry is poised for an exciting era of growth and disruption in the coming years.

The global venture capital market, the traditional investors in fintech companies, dropped last year (in terms of value). What measures are you putting in place to ensure startups receive adequate funding from potential investors?

Despite a 7.6 per cent decrease in the number of deals between 2021 (679) and 2022 (627), the MENA region experienced an 8 per cent funding boost, raising a total of $3.2bn.

This trend of startup funding activity and investment growth is expected to continue in 2023, with more investors recognising the region’s potential. DIFC is committed to supporting the growth and development of FinTech startups by attracting more venture capital firms to the region and providing additional avenues of funding. MENA’s large population, growing middle class, and high level of digital adoption make it an increasingly attractive market for investors and startups.

To facilitate access to investors, DIFC organises platforms such as investor meetups, pitching sessions, and networking events. The DIFC Innovation Hub and FinTech Hive also provide mentorship and guidance to startups on fundraising strategies, assisting with pitch decks, financial modelling, and valuation. By providing a strong support system, DIFC is positioning itself as a hub for FinTech investment in the region.

Currently home to 60 per cent of all fintech companies based in the GCC, Dubai – and specifically DIFC – is being recognised as a global centre for innovation, with its unique ecosystem, driving not only the future of finance but increasingly the future of the economy.

DIFC Innovation Hub and FinTech Hive, the largest innovation community in the region, is home to more than 500 growth-stage tech firms, established innovation companies, digital labs, venture capital firms, regulators, and educational entities. This thriving facility aims to generate new economic value through innovation, enterprise and talent across various sectors, especially in future-oriented industries.

Our teams work actively to foster the growth of emerging fintech, InsurTech, RegTech, and Islamic fintech startups looking to capitalise on the opportunities a city like Dubai brings. By enabling these startups to grow in the region DIFC Innovation Hub and FinTech Hive is advancing the growth of Dubai’s financial services sector.

What opportunities do you presently see for fintech firms and the innovation industry?

This is an incredible time for startups in fintech. Governments are actively supporting the development of new firms, providing funding, tax incentives, and other resources to help them grow. Regulators are also extending proactive support to create an enabling environment for fintech startups in the region by combining robust yet flexible regulatory frameworks and innovation initiatives.

I also see a growing opportunity where fintech and innovation firms that mature in certain locations are now seeking to scale beyond their regional borders and into new markets. For example, DIFC is currently seeing elevated levels of interest from fintech in Singapore, Southeast Asia and Asia-Pacific as fintech and innovation firms in these locations are looking to expand into new economies.

Another critical area for fintech firms is the rise of sustainable finance. With an urgent emphasis on environmental protection globally, green finance is another big opportunity fintech and innovation firms can embrace by actively implementing environmental, social and governance (ESG) initiatives.

Lastly, there is a growing demand for financial services and an increasing supply and demand for hedge funds particularly in Dubai, which provides a huge opportunity for FinTech firms.

UAE fintech market has an estimated value of $39.3bn and Dubai alone is home to more than 80 fintech firms, according to Mordor Intelligence. How confident are you about the future of the fintech industry (digital payments, e-commerce activity and digital banking)?

As fintech advances more quickly, customers will reap the rewards of faster and more cost-effective services as transactions become increasingly automated. Presently, fintech is centred on integrating digital trends with customer needs, aiming to save consumers time, cost, and hassle.

Recent years have witnessed a paradigm shift leading to an exponential increase in the desire for completely digital services. Customers have come to expect integrated experiences. This trend is ongoing and compelling the industry to seek rapid, robust, and adaptable resolutions to address customer issues and simultaneously reduce internal inefficiencies. Furthermore, we anticipate an amplified utilisation of data and extensive implementation of artificial intelligence (AI), chatbots, crypto and robo-advisors in the coming years. In other words, FinTech is here to stay, with the continuous advancement of technology and its increasing integration into people’s daily lives, we can expect a surge in embedded finance, encompassing payments, lending, and a considerable rise in embedded insurance.

Fintech has seen overwhelming recognition from investors, resulting in a booming sector, despite some challenges.

Which trends do you expect to revolutionise the fintech sector in the medium term?

In the medium term, we can expect blockchain technology to be adopted more widely in the FinTech sector, as it enables secure, transparent, and efficient transactions without intermediaries. AI and machine learning (ML) will play a bigger role in analysing vast amounts of financial data, offering more personalised services and detecting fraud. Open Banking is expected to continue gaining momentum, allowing for greater innovation in financial services and more competitive pricing. These trends have the potential to revolutionise the FinTech sector, making financial services more efficient, secure, and accessible.

What are you most excited about in 2023 and what would be your areas of interest in the next 12 months?

2023 promises to be a catalyst for the finance sector in Dubai, UAE and the wider region.

We are hosting the city’s first-ever Dubai FinTech Summit here in Dubai on 8-9 May, under the patronage of H.H. Sheikh Maktoum bin Mohammed Al Maktoum, Deputy Ruler of Dubai, Deputy Prime Minister & Minister of Finance. The event will welcome over 5,000 C-suite executives and over 1,000 pre-qualified investors. Speakers such as Michael Shaulov, CEO of Fireblocks, Bill Winters, Group CEO of Standard Chartered and Brian Armstrong, Co-founder of Coinbase will lead panels on crypto and Web 3.0, open finance, startup investment and policymaking support.

This year we have also announced the launch of our venture-building programme, DIFC Launchpad. The initiative aims to develop a strong model that promotes the growth of innovative startups and scaleups in the region. Another very exciting initiative is DIFC’s role in COP28, which takes place in the UAE in November. DIFC and the Global Ethical Finance Initiative are bringing the global finance community together to encourage thinking and action relating to climate and ESG principles in the build-up to COP28.