UAE and UK sign agreement to boost fintech

November 3, 2023

PIF submitted a request to increase its stake in Egypt's E-Finance Company almost a month ago

MoU signed in Dubai
Coordinating on open banking
UK’s regulatory ‘sandbox’ has global influence

The UK and the UAE have signed an agreement to strengthen ties on financial services that its backers hope will provide a boost to fintech.

The Memorandum of Understanding (MoU), signed in Dubai late last week by Andrew Griffith, UK City minister, and Abdulla bin Touq Al Marri, UAE minister of economy, seeks to promote collaboration in areas like capital markets, wealth management, innovation, green finance, insurance, and SME financing.

Charlotte Crosswell, chair of the UK’s Centre for Finance, Innovation and Technology (CFIT), added that the agreement holds “much promise for financial innovation”.

“For example, it invites coordination around critical open payments and data standards,” she said.

The MOU follows disclosure in July that the UK has provided advice to the UAE authorities on anti-money laundering. The UAE is now expected to be taken off the Financial Action Task Force’s “grey list,” a category that means financial institutions must conduct more research on individuals and companies based in the country.

Fintech is among the UK’s strongest startup sectors. More than 1,500 high-growth firms operate in the sector, according to Beauhurst, a data tracker. Its 20 fintech unicorns – those with a value of $1 billion or more – make up around half of the UK total.

Pritam Basu, founder and CEO of Boseman, a UK-headquartered credit, investment and payment fintech, said the deal could help the UAE tap into London’s talent pool and reputation for regulatory innovation led by the Financial Conduct Authority (FCA).

“London has one of the most forward-looking regulators in the world who have been first movers on things like open banking, regulatory and digital sandboxes, and even currently on seriously researching and considering generative AI from the perspective of financial services and consumer benefit,” Basu told AGBI.

The UK’s FCA has been a major influence in setting standards of international regulation. In 2015 it created the “regulatory sandbox”, an innovation which has since been adopted globally. Sandboxes offer fintechs controlled testing environments for their products with a limited set of customers.

Basu also pointed out that the agreement could open up opportunities for British fintech companies to explore new markets – an appealing prospect given the “very saturated” landscape of fintech products within the UK market.

Lessons for UAE banks

Veteran banker Suvo Sarkar – founder of Liv, a digital bank, and CEO of 3D Advisory, management consulting business – expects the deal to drive the UAE’s banks and fintechs to improve performance.

“There’s a lot for digital banks in the region, and especially the UAE, to learn from them,” he said.

Sarkar said UK fintechs offer products that the UAE market “is really crying out for”.

Those that offer a “host of possibilities” for the UAE market include the likes of Updraft, which helps lower the cost of credit; Tide, a business a banking platform which focuses on small businesses; Monzo, a challenger bank which lets users invest with as little as £1 and Wise, which offers cost-effective money transfers, he said.

He added that although new digital players are unlikely to worry legacy banks, fintechs are gradually gaining market share.

“It’s death by a thousand cuts so it’s going to hurt over time,” Sarkar said.