‘Embrace digital, don’t just change the cushions’ says official

Dubai’s biggest companies must embrace digital transformation as a way to advance the financial sector, instead of joining the “innovation theatre”, according to a government official.

Hamad Buamim, president and chief executive of Dubai Chamber of Commerce, said large organisations, especially banks, need to steer clear of superficial efforts if they are truly to make progress. 

“We all know it’s not just banks – it’s a fact really associated with a lot of big organisations, [which is] when you are too big it’s very difficult for you to disrupt your business model and disrupt the way you do things,” Buamim said.

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“It’s a big risk to disrupt the way you do things. If you are profitable and things are progressing well, why should disrupt that?

“This is a dilemma known as the innovators’ dilemma [and] this is the disadvantage with banks.

“Many banks, to be able to innovate, start getting into incremental innovation – which is good. However it’s not the next big thing – or [it could be called] ‘cosmetic innovation’.

“They start having these innovation labs and changing the furniture and having all the colourful cushions. But this is innovation theatre.

“[It’s] not only [the] banks, [it’s] many big organisations too. We all fall into this trap, because it’s the easiest way to address this innovation culture.”

Fintechs don’t deal with the same risks, Buamim said, making them more agile and an ideal partner for banks. 

“Their risk is always zero so they can disrupt,” he said. “We cannot ignore that they have the skills others don’t have and they have the ability to come faster to the market.

“What’s really important – and we hope we can do more with – is trying to [bring together] the advantage of the banks and the advantage of the fintechs.

“If [they] can collaborate in a certain partnership, that can definitely take banking and the financial services sector forwards.”

Buamim was speaking at DIFC Fintech Week, an event to discuss the future drivers of growth in the financial services sector.

He added that Dubai serves as a launchpad for global entrepreneurs to build and scale their businesses across the Middle East, Africa and South Asia, and various policies and initiatives are being put in place to accelerate the growth of Dubai’s digital economy including the introduction of long-term residency programmes and 100 percent ownership of business.

“There is no denying that the future of business in Dubai is digital,” Buamim said.

“We recently created the Dubai Digital Assets Business Group to represent this sector to ensure that the government and society understand their needs.

“We plan to have more such specialised groups to support the digital economy and ensure sustainable growth of the fintech sector.”

The UAE Digital Economy Strategy aims to double the digital economy’s contribution to gross domestic product (GDP) in the next 10 years from 10 to 20 percent.

Commenting specifically on blockchain and cryptocurrencies, which continue to cause controversy due to their volatile nature, Buamim added: “We know the challenges that cryptocurrencies are going through, but there is no doubt also that blockchain provided a lot of innovation.

“Not necessarily all innovations are successful, which is normal. But it supports the development of financial services.”

Essa Kazim, governor of Dubai International Financial Centre, added that the financial industry is undergoing “a profound and unprecedented transformation powered by digital technologies and innovation that are reshaping payments, lending, insurance and wealth management” and a collaborative environment would lead the way forward. 

“We need to foster greater collaboration between banks, regulators and industry players, including startups who can deliver solutions for use cases,” Kazim said.

“By working together, we can create the future of finance here.”

He added that the recently launched DIFC’s venture studio platform aims to helps startups scale their businesses by providing legal and regulatory support, access to talent and offering shared services such as marketing, branding, design and engineering.

Meanwhile, Dubai has launched the region’s first venture debt – a 370 million dirham ($100.75 million) fund which provides an alternative to equity capital and a new funding option for startups and growth-stage companies, without substantially diluting their existing shareholding structure.

Managed and supervised by the DIFC, which is also a 15 percent contributor to the fund, it is set to contribute around 3 billion dirhams ($817 million) to the emirate’s GDP during the implementation period, which will run for eight years, extendable for two additional years. It will also create more than 8,000 jobs.