In-Depth Analysis of Abu Dhabi and Fintech in 2020

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The capital of the United Arab Emirates (UAE), Abu Dhabi, with its historically oil-driven economy has been diversifying to create a robust and sustainable one that includes sectors such as financial services, fintech and wider tech.

It is often noted from a global audience perspective that the UAE, a federation of seven emirates, is home to two of the Gulf Cooperation Council’s fastest growing hubs in their own right – Abu Dhabi and Dubai. As part of the GCC’s wider economic development and diversification strategies, Abu Dhabi has been investing in a range of sectors in its economic ecosystem,  and its growth has been very impressive: in 2018 it had a gross domestic product (GDP) of under $1 trillion.

The emirate of Abu Dhabi is home to almost 3 million people, with metropolitan Abu Dhabi, according to the United Nations (UN) World Urbanization Prospects, accounting for 1.5 million of them, while nearly 80 percent of the total population are expatriates. Abu Dhabi’s economy is expected to expand by 6 percent to 8 percent over the next two years, with the oil sector, financial services, government spending and foreign investment driving that.

ABU DHABI GLOBAL MARKET

The capital of the UAE, Abu Dhabi has been building its financial services ecosystem as a whole, which, of course, fintech plays a large role, as is in much of the rest of the world. The clearest example of its growing reputation as a hub in the region and beyond is Abu Dhabi Global Market, or commonly known by its acronym, ADGM. It is the city’s international financial centre and free zone.

Richard Teng is the CEO of the Financial Services Regulatory Authority (FSRA)

Richard Teng is the CEO of the Financial Services Regulatory Authority (FSRA)

Richard Teng, CEO of the Financial Services Regulatory Authority (FSRA)

According to Richard Teng, CEO of the Financial Services Regulatory Authority (FSRA), “In accordance with the UAE’s economic agenda, Abu Dhabi has seen for many years now that diversifying its revenue sources across various sectors will be crucial to the emirate’s long-term success. Key sectors have been targeted for special attention, among them are aviation, high-tech manufacturing, alternative energy, technology, defence, agribusiness and, underpinning them all, financial services.

ADGM was therefore established as a critical enabler of international investment and business activity in the emirate. ADGM encompasses three key areas: as a registrar it offers a range of licencing to fit all sizes and types of businesses; as a regulator, it boasts progressive regulatory frameworks that encourage innovation; and as an arbitrator, it has the best jurisdiction in the region for doing business, based on English common law and with a precedent-based digital court system.” ADGM is celebrating its five-year anniversary, hallmarking its growth, and having won various awards and recognitions along the way.

Teng further adds, “In addition, both Abu Dhabi and ADGM encourage sustainable practices and vehicles that allow for greater investment towards the emirate’s sustainable development. This sentiment is evident in many of ADGM’s pioneering initiatives, including the MENA region’s first sustainable finance-focused event and the launch of a comprehensive declaration that enables increased collaboration between key public and private sector entities in favour of sustainable practices.”

THE WIDER ABU DHABI ECONOMY IN FINTECH

Abu Dhabi Global Market is the main financial centre of Abu Dhabi

Abu Dhabi Global Market is the main financial centre of Abu Dhabi

Abu Dhabi Global Market is the main financial centre of Abu Dhabi

The fintech sector as a whole in Abu Dhabi has had an active 2020 despite the current global circumstances of the World Health Organization defined pandemic.

2020 has showcased unique opportunities for the ecosystem to thrive despite the challenges raised by the COVID-19 pandemic. First, Mubadala Investment Company, one of Abu Dhabi’s sovereign wealth funds, has been active in the fintech and wider tech space in a global context. For instance, it made headlines via a $2 billion investment to US-based Silver Lake, a global leader in technology investing. Both firms have already worked collaboratively across investments such as EndeavorWaymo (Alphabet’s driverless technology company and is the parent company of Google) and India-based Jio Platforms. From the local Abu Dhabi scene, Mubadala announced that it will become an investor in Group42 (G42), an artificial intelligence and cloud computing company, via the integration of Injazat and Khazna Data Centres (Khazna).

Second, Hub 71, a tech ecosystem based in ADGM, was active. It signed a Memorandum of Understanding (MoU) with Mastercard, where the collaboration will identify relevant companies for Mastercard’s startup engagement program, Start Path, opening up market access for Hub71’s startups and Start Path companies – for mutual benefit. In addition, just months prior, the appointment of Hanan Harhara Al Yafei as the new CEO took place, where she joins from Mubadala Investment Company where she was an executive director.

In terms of companies, a success story in 2020 has been Abu-Dhabi based MidChains. They announced in the summer that it has closed its latest funding round with investments from Mubadala Capital, the asset management arm of Mubadala Investment Company; Miami International Holdings; the Abu Dhabi Investment Office (ADIO) and other notable regional investors. According to Basil Al Askari, Co-founder and CEO of Midchains, “We have seen an amazing level of enthusiasm from Abu Dhabi in the fintech and virtual asset space with the goal of creating a vibrant ecosystem since 2018. As we get closer to launching MidChains, the backing of local sovereign wealth funds such as Mubadala and ADQ, and regulatory supervision from the FSRA of ADGM demonstrates the support and alignment with our values in executing our long-term growth strategy. We firmly believe in the Abu Dhabi 2030 Economic Vision objectives and aim to contribute to the development of healthy and liquid regulated financial markets.”

Other successful companies in the fintech space based in Abu Dhabi are numerous. For example, [email protected] signed an MoU with Khaled Abdulla Almass and his investment company, iMass LLC to facilitate the expansion of [email protected] into the Middle East market. [email protected] is a fintech company that is owned by Italy’s Avantgarde Group, which is traded on the London Stock Exchange (LSE).

Also, the FSRA of ADGM and Sunline Holdings, UK, Ltd, which is part of China-based Sunline Holdings, signed an MoU to promote the development of ADGM’s fintech ecosystem that will support and connect businesses and markets in the Middle East and North Africa and the Belt-and-Road corridor, including developing digital financing and loans solutions for SMEs to support and grow their operations in a post-pandemic environment. In addition, ADGM has been a chosen destination for a dynamic and renowned group of companies, reinforcing its growing influence not only as a hub but a place of innovation.  These include the likes of Payby and Key Way Markets Ltd, the former making headlines through its growth in 2020 with partnerships such as major GCC supermarket chain Lulu Group, which also is another successful Abu Dhabi-headquartered conglomerate.

In the banking industry, the capital is home to not only the UAE’s leading banks but to some of the largest in the GCC and wider Middle East and Africa (MEA) region – including First Abu Dhabi Bank (FAB Bank) and Abu Dhabi Commercial Bank (ADCB). For instance, FAB Bank, the UAE’s largest bank, announced it would carve out its existing payments business into a fully owned subsidiary with regional growth ambitions. In addition, they also announced a partnership with Visa to bring an innovative mobile acceptance solution to UAE merchants.

In addition, digital transformation – both pre and during COVID-19, has been felt across the banking industry. For example, Abu Dhabi Islamic Bank (ADIB) announced that it has seen a substantial rise in customer demand for its digital banking services this year. Even after the phased re-opening of the UAE economy, ADIB has continued to see strong uptake for digital services, with 75 percent of customers now enrolled through the bank’s digital channels.

Also, in terms of the wider tech infrastructure, there have been large investments to help further grow the ecosystem. For example, Abu Dhabi recently unveiled the Technology Innovation Institute (TII), the dedicated applied research pillar of the Advanced Technology Research Council (ATRC). The unveiling of TII follows directions from His Highness Sheikh Khaled bin Mohamed bin Zayed Al Nahyan, Chairman of the Board of ATRC, to create an ecosystem for the emirate’s R&D activities that will position Abu Dhabi and the UAE as a global hub for advanced technology research.

There is also the recent Abraham Accords between the UAE and Bahrain and Israel, where fintech and wider tech is projected to benefit in terms of an increase in both trade and investment.

THE CHALLENGES AND SOLUTIONS TO 2020

Fintech Abu Dhabi returns for its fourth year in a virtual format

Fintech Abu Dhabi returns for its fourth year in a virtual format

Fintech Abu Dhabi returns for its fourth year in a virtual format from the 24-26th November 2020

COVID-19 has not been easy for global markets and the push towards digital transformation, a common theme across much of the world, has only intensified. In terms of the pandemic, Teng adds, “These efforts were only amplified amid the COVID-19 pandemic, as both ADGM and the Emirate at large introduced comprehensive support measures to ensure the business community was shielded from the full impact of the global crisis. In line with Abu Dhabi’s support measures, ADGM also introduced initiatives, including the elimination of fees for funds, that would look to sustain the growth of its business ecosystem and preserve the stability of its community of registered entities.”

As with the rest of the world, many events have had to go virtual. In the fintech space, Abu Dhabi is home to the FinTech Abu Dhabi Festival (FinTech AD). Co-hosted by ADGM & the Central Bank of the UAE (CBUAE) and powered by Unbound, the annual event in its fourth year will be held virtually from the 24-26th November. Under this flagship initiative, ADGM also hosts several engaging fintech-related activities, such as the Innovation Challenge, which aims to identify the next generation of talents in the sector. Following a five-month highly competitive selection process, seven firms, including Uqudo (United Arab Emirates), MarketIQ (Canada), Taiger (Singapore), modefinance (Italy), FutureFlow (UK), Elucidate (Germany) and Finverity (United Kingdom) were selected from a total of 189 applications. They will showcase their winning products at the upcoming Fintech AD and will develop a possible solution to address a particular problem statement with a proof of concept process by working with one of five Corporate Champions, including First Abu Dhabi Bank (FAB), Abu Dhabi Islamic Bank (ADIB), Anglo Gulf Trade Bank (AGTB), Etihad Credit Insurance (ECI), and the ADGM Financial Services Regulatory Authority (FSRA).

Speaking about the Fintech AD, Teng adds, “Innovation and technology have been identified as the key enablers of Abu Dhabi’s vision for growth, and ADGM is ensuring that financial services are no exception. As a result, the UAE is now home to one in three FinTech start-ups in the MENA region, and many of the companies that serve them, such as the renowned accelerator platform, Plug and Play, are based at ADGM. ADGM has also pioneered the introduction of the region’s first-ever Regulatory Sandbox, which is now the second most active sandbox globally. The programme attracts international, regional and local participants to innovate and create progressive solutions under the governance of the ADGM FSRA.

ADGM’s commitment to FinTech is demonstrated by the annual FinTech Abu Dhabi Festival, co-hosted by the Central Bank of the UAE.  Now in its fourth annual edition, FinTech Abu Dhabi gathers more than 5,000 participants annually and provides FinTech companies, venture capitalists and the wider investment community with an opportunity to network, converse and innovate on a crucial subject.”

Finally, according to Mehdi Fichtali, CEO and Founder of FinaMaze, who will be one of the many participants at Fintech AD, said, “We are excited to launch during FinTech Abu Dhabi 2020 FinaMaze, the “AI-powered” Asset Management firm, that brings to the region an innovative class of personalized investments and to be part of FinTech100 exclusive club. After screening several centers in the Middle East and Europe, the FinaMaze Senior team, with its decades of banking experience in New York, London, and Dubai with Morgan Stanley, Barclays, and Citibank, opted to anchor FinaMaze and develop its proprietary systems and platform in ADGM, a fintech ecosystem in sync with our core values: dynamic, agile, decisively forward-looking, empowered by visionary leadership, in a region with untapped growth potential, impatient to live the future today.”

Despite the challenges of the pandemic, Abu Dhabi and the wider UAE economy, particularly with fintech, has been accelerating.

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