ADGM recruits UAE Exchange as latest fintech partner
(8/13/2017 6:26:00 AM)
Abu Dhabi Global Market (ADGM) has announced the latest initiative in the development of its fintech ecosystem, in the form of a partnership with leading remittance firm UAE Exchange, the freezone’s fifth major fintech announcement in the space of two weeks.
The Maryah Island-based freezone has been marketing itself as a fintech hub for the Middle East since its inception in early 2016, in a bid to capitalise on technology trends within the financial services sector and to differentiate itself from competing financial centres around the region.
UAE Exchange’s involvement in ADGM’s ecosystem comes as it and other traditional remittance firms around the world face challenges from fintech startups that have gained significant market share in recent years.
Under the terms of the partnership, UAE Exchange will work with fintech participants in ADGM’s Regulatory Laboratory, a programme created in November to help foster innovative solutions designed for the UAE’s financial services industry, particularly to develop and implement innovative solutions in the areas of remittance, foreign exchange and payments.
“In addition to delivering solutions that would benefit the financial services sector, the collaboration with UAE Exchange will create a feedback loop for ADGM as a financial services regulator to fine-tune and enhance its rules and regulatory approach to financial innovation,” said Richard Teng, chief executive of ADGM’s Financial Services Regulatory Authority.
“ADGM will continue to actively engage fintech stakeholders and forge partnerships with them to bolster the fintech ecosystem in Abu Dhabi and the UAE.” ADGM's Regulatory Laboratory gives startups a space to develop and test their fintech ideas for up to two years without placing regulatory restrictions on the participants, giving such startups the ability to pilot projects while gaining a better understanding of the surrounding regulatory framework to help grow their business.
The project in turn is designed to help ADGM and participants including UAE Exchange understand the industry challenges surrounding fintech.
“Collaboration between established financial services providers and fintech start-ups is necessary to build a sustainable innovation ecosystem,” said Promoth Manghat, chief executive of UAE Exchange Group.
He said that this was the way to add greater depth to the industry, helping to create more value for customers via digitally-delivered services.
The number of fintech start-ups in the Mena region could double to 250 by 2020, compared to 105 fintech start-ups in 2015, according to report released in March from Payfort and Wamda.
The report’s authors said that Mena’s fintech start-ups have raised US$100 million in funding over the past decade with a 43 per cent rise in terms of deal flow in 2015 to 2016, with that expected to rise as $50m is expected to be raised this year alone.
The report said that 86 per cent of adults in the region lacked a bank account, creating a major opportunity for new digital service operators.
“Financial services and traditional banking are being challenged by very innovative digital technology startups, offering simple, accessible and lower cost mobile solutions,” said Fadi Ghandour, chairman of Wamda. The challenge from fintech startups is particularly noticeable among remittance players like UAE Exchange, who are expected to handle over $600 million worth of money transfers to developing countries during 2017.
While still dominated by traditional players including Western Union and Money Gram, fintech start ups TransferWise and WorldRemit are now the fourth and fifth largest remittance firms in the world, according to a report last year from BI Intelligence.
The tie up with UAE Exchange is just the latest in a series of international partnerships ADGM has signed to burnish it