Dubai financial services regulator launches temporary licence aimed at fintechs

The financial services regulator in Dubai has announced a new type of licence that will enable financial technology (fintech) providers to try out their ideas in the real world before jumping through the hoops to qualify for a full licence.

This is the latest move by the Dubai Financial Services Authority (DFSA) to attract businesses looking to offer financial services technology to the city.

The restricted licence, which will last for between six and 12 months, is the latest move by the United Arab Emirates (UAE) to create an environment encouraging innovation.

Ian Johnston, CEO at the DFSA, said: “Our efforts to develop a regulatory framework that promotes growth and innovation, while protecting financial stability and consumers, is part of our contribution to Dubai’s greater vision of becoming an information-based society and a smart city.”

The DFSA said it will work with applicants to understand their business proposals and establish the appropriate controls.

If these companies meet the regulations set by the DFSA test plan, they can migrate to full authorisation. This will enable fintechs to test their initiatives out while protecting consumers.

Fintech development has been slow in the Middle East compared with other regions, but regulators are now encouraging it. In fact, capital investment in fintech in the Middle East is forecast to grow by 270% this year as the region looks to finally gain momentum in the rapidly growing global sector.

The region has been slow to establish a fintech sector. A report from Wamda Research Lab (WRL) and Payfort found that fintech companies in the region expect to raise $50m this year, compared with $18m last year. According to the report, the region’s fintech firms have raised only $100m over the past 10 years.

Meanwhile, figures from Innovate Finance, a UK fintech trade body, show that $1.156bn was invested in UK fintech in 2016, $7.7bn in China and $6.2bn in the US.

But the WRL/Payfort report expects more to come from the Middle East, including the number of fintech companies more than doubling from 105 at the start of 2016 to 250 by 2020. Half of these would be payment services, and one-third would be money-lending and capital-raising platforms, the report said.

The UAE leads the way in the region with the most support and is attracting the most promising enterprises. For example, German challenger bank Fidor has opened up an operation in Dubai to gain access to the Middle East market. Also in the UAE, telco Etisalat launched a mobile wallet to enable its customers to make payments and money transfers on their smartphones.