Finance

A New Way

By introducing new payment methods and innovative solutions, Abu Dhabi is rapidly implementing digital platforms and fintech to satisfy its citizens' craving for online shopping services.

By introducing new payment methods and innovative solutions, Abu Dhabi is rapidly implementing digital platforms and fintech to satisfy its citizens’ craving for online shopping services.

The UAE has become a hub for financial technology, commonly known as fintech, in recent years. The country has made significant investments in this sector, resulting in its emergence as a major player in the global fintech market. The UAE’s fintech industry is projected to grow at a compound annual growth rate of more than 10% between 2023 and 2028, according to a report by Mordor Intelligence, a research firm.

Several large investments have been made in this industry in recent years. Since the launch of its innovation program in 2020, the Abu Dhabi Investment Office (ADIO) has allocated AED1.3 billion (USD354 million) to more than 40 innovative companies from around the world to thrive in Abu Dhabi. This investment follows other major deals, such as the launch of First Abu Dhabi Bank’s digital wallet Payit, and the AED300 million investment by Dubai-based venture capital firm BECO Capital in various fintech startups in the region such as Balance, Dapi, or Hubpay.

Foreign investors have also seen the untapped potential of the financial technology sector in Abu Dhabi and the rest of the UAE. One example is Brookfield’s purchase of 60% of the Magnati payments business in February 2022. Following the transaction, Magnati, a company that was 100% owned by First Abu Dhabi Bank, now has a valuation of up to USD1.15 billion, according to Brookfield. The proceeds from this transaction, after which First Abu Dhabi Bank retains the remaining 40% of the business, are expected to be used to give Magnati a boost to capitalize on increased payment trends in the region. These investments demonstrate the growing interest and confidence in the UAE’s fintech sector, positioning it as a key player at a global level.

Under a favorable regulatory environment established by the Abu Dhabi Global Market (ADGM), Abu Dhabi is becoming one of the hubs of the regional fintech industry thanks to the growth of the Emirate’s leading fintechs, such as mobile payment platform PayBy. “What I have seen over the past year or two in Abu Dhabi, especially ADGM, is that they have managed to put themselves on the global map as a financial center,” said Karim Sehnaoui, Senior Executive Officer at ADS Investment Solutions Limited, a company that manages, advises on, and executes investments for its clients.

The other two factors are UAE consumers’ preference for digital payments over cash as the world recovered from the effects of COVID-19, and the growing digital payments infrastructure in the country. “Adoption of digital payments among UAE consumers is high, with more than 9 out of 10 digital payment transactions in stores being contactless. Our recent studies indicate that the ecommerce sector in the UAE continues to grow, driven by rising consumer demand for digital payments,” Gutieva said.

Approximately 72% of Emirati consumers shopping in physical stores are more likely than others to use smartphones to process their purchase, while 56% of merchants offer mobile pre-ordering options, according to the 2022 Global Shopping Index: UAE Edition, a PYMNTS and Visa Cybersource survey. The growth in demand for digital payment services is so high that a solution was launched at the end of 2022 through the payment Abu Dhabi Pay digital platform for transactions with government entities in Abu Dhabi.
“The third factor is a growing digital payments infrastructure in the UAE or acceptance of payments. To support merchants and small and midsize businesses looking to provide their customers with a seamless, secure shopping experience online and in-store, we launched different initiatives in the UAE,” said Gutieva of Visa, one of the world’s leading electronic payments processors, which has also established the Visa Innovation Center in Dubai to find new solutions to advance digital commerce.

This growth in the use of mobile payments would not be possible without the acceptance of digital means of payment by the population. Demand for these services is so high that the UAE’s central bank has stated that it is planning to launch a central digital currency (CBCD) as part of its efforts to accelerate digital transformation.

“We believe that an economy that is inclusive benefits consumers, communities, businesses and national economies,” said Gutieva. “We know that sustainable economic recovery is reliant on small businesses being able to grow, and that is why over the past year our focus has been on ensuring that small businesses have more tools and cost-effective solutions at their disposal to adapt, learn and evolve,” she added. “Where does private sector activity come from? It is SMEs and giving them the ability to take advantage of the projects and the prospects that the government is putting out there is a core component of what we do,” said Aziz AlShamsi, Acting Director General at ADIO.