PYMNTS GCC Series: High Smartphone Penetration, Govt Support Boosts UAE’s FinTech Growth

Although not all countries in the Gulf Cooperation Council (GCC) — Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE) — are known for their tech industries or their leadership in digital finance, a closer look reveals that the Arab Peninsula is home to some of the most exciting innovations in FinTech today.

This PYMNTS series will consider each member of the GCC in turn, highlighting some of their FinTech success stories and elaborating on their respective politico-economic environments with respect to technological innovation in finance.

Of all the GCC nations, the UAE is probably the most known for its booming FinTech sector.

Read more: The UAE’s Increasing Role as a Regional FinTech Hub

The country’s largest cities — Abu Dhabi and Dubai — operate as global financial hubs and are home to some of the largest banks in the Middle East and North Africa (MENA). As the UAE increasingly looks to digital transformation as a key avenue for economic diversification, unsurprisingly, the country’s two megacities have emerged as important locations for FinTech innovation.

Pioneering Wave of Neobanks

One area where the UAE especially leads is in the field of mobile banking, where a high level of smartphone penetration and a healthy retail environment have allowed digital-first banking apps to flourish.

Related: 59% of UAE Shoppers Use Smartphones to Enhance Their In-Store Experience, Study Finds

Unlike in other parts of the world, where innovation has been left to a rising generation of neobanks, in the UAE, established players were among the first to launch multi-feature banking apps in the market.

For example, although its parent company Mashreq is the oldest privately-owned bank in the UAE, the digital-first Mashreq Neo has been at the forefront of pioneering new technologies like facial recognition.

See also: UAE Digital-First Bank Mashreq NEO Debuts Facial Recognition

Other app-based solutions on offer from the UAE’s banks include Liv and E20 by Emirates NBD, and the Abu Dhabi Islamic Bank’s (ADIB) ADIB Smart Banking and ADIB Amwali.

Not to be outdone by their peers in the traditional Islamic Banking sector, in recent years, a young cohort of neobanks have also entered the fray.

Yap, Wio and Zand are pioneering a wave of mobile banking apps that take the branchless model popularized in Europe and the U.S. as their model while catering specifically to the needs of customers in the UAE and its GCC neighbors.

Read more: UAE Approves New Digital Bank Wio

But their ambition doesn’t stop there. With foreign investment flowing into the country’s startups, alongside the sizable Emirati sovereign wealth funds, the UAE has both the human and financial capital to act as a launchpad for new FinTechs to step up to the international stage.

Related: UAE-Based Digital Bank YAP Raises $41M to Expand to Saudi Arabia, Pakistan, Egypt

In fact, UAE-based companies play an increasingly critical role in the whole of the MENA financial system. Companies like Nymcard are strategizing around building regional dominance thanks to the UAE’s established banking center and close political and economic ties to other countries in the GCC and beyond.

What’s more, as scaling startups from other countries look to grow across the region, Abu Dhabi and Dubai are seen as the go-to locations for setting up MENA headquarters.

See also: The Key to Solving MENA Banking Challenges Starts With Regulators

Active Government Support

By GCC and global standards, the UAE is generally regarded as having an economically progressive political environment that cultivates innovation and an entrepreneurial spirit. Since the 1970s, efforts to diversify the country’s economy have seen successive governments plow billions of dollars of oil wealth into the cities of Abu Dhabi and Dubai.

The government’s support has also been instrumental in the creation of several initiatives and business development programs, including enterprise and innovation hubs, technology parks, free economic zones, Dubai Internet City and the Dubai International Finance Center — all aimed at shaping the country’s financial landscape.

Related: DIFC Selects Tarabut Gateway for MENA’s First Open Finance Lab Partner

As a further sign of its support to drive business growth, the government recently announced a scheme to offer up to a one-year paid leave to government employees who want to start their own businesses.

Read more: UAE Government Employees Offered Year Paid Leave to Start Businesses

“Our goal is to encourage the youth to take advantage of the huge commercial opportunities offered by our national economy,” Sheikh Mohammed bin Rashid Al Maktoum, the vice president and prime minister of the UAE and ruler of Dubai, said in a translated tweet.

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