October 07 2024

The UAE is an increasingly important fintech hub

On Oct. 1, Ripple announced it had received in-principle license approval from the Dubai Financial Services Authority (DFSA), an important step in the process of gaining a full license in the city. When it gains full approval, Ripple will be able to provide cross-border payment services in the Dubai International Financial Center (DIFC), a special economic zone. The focus of Ripple on being licensed in Dubai is the latest example of the United Arab Emirates’ (UAE) growing importance as a fintech hub.

Ripple aims to become a first mover in the UAE and launch its enterprise-grade digital asset infrastructure there. In a news release, Ripple CEO Brad Garlinghouse lauded the country’s “forward-thinking regulatory approach and clear guidance for innovative businesses seeking to invest and scale. Given those attributes, “the UAE is positioning itself as a global leader in this new era of financial technology,” he said.

In the news release, Reece Merrick, Ripple’s managing director of the Middle East and Africa (MENA), said that more than 20% of the company’s customer base is located in the UAE, underscoring the country’s growing role in the digital assets sector.  

To that end, in May, a report published by The Fintech Times in collaboration with Seamless Xtra said that the UAE was named a top-scoring “fintech hub” for the first time. The report estimates that Dubai is home to about half of fintechs in the MENA region. Breaking down the sector into segments, it found that payments, e-wallets and remittances account for 39% of digital financial companies in the country, followed by insurtech at about 12% and lending at 8%.

The UAE is also stepping up its ties with key fintech markets in East and South Asia. For instance, Its central bank is collaborating with the International Bank of Settlements (IBS) Bank of Thailand, Hong Kong Monetary Authority and the People’s Bank of China on the mBridge wholesale CBDC project for cross-border payments. The four central banks aim to solve traditional correspondent banking travails with the purpose-developed permissioned distributed ledger technology (DLT) called the mBridge ledger, or mBL, that supports instant peer-to-peer and atomic cross-border payments and FX transactions using wholesale CBDCs.

Further, the UAE is cooperating closely with India on digital payments. During Prime Minister Narendra Modi’s July 2023 visit to the UAE, the Reserve Bank of India (RBI) and its Abu Dhabi-headquartered counterpart the Central Bank of the UAE signed two MoUs. The first of the two MoUs aims to establish a Local Currency Settlement System (LCSS) to promote the use of rupee and the dirham bilaterally. It will cover all current and permitted capital account transactions. The second of the two MoUs links India’s Unified Payments Interface (UPI) with its UAE-counterpart Instant Payment Platform (IPP) as well their respective card switches RuPay switch and UAESWITCH. These linkages are likely to address bottlenecks for Indian expats sending money home from the UAE, such as high transaction fees.