Digitalization of Banking in the UAE

Banking in the UAE

The current digital transformation in the UAE banking sector is thriving. What we are witnessing today is more than just a simple change in how we make transactions; it goes well beyond simply transitioning from a traditional into a digital world. This entire concept of digital transformation strategy in banking is integral to how banks and financial institutions assess, communicate with, and meet the needs of their evolving and demanding clients. 

The COVID-19 epidemic has proven to be a game-changer in terms of accelerating financial services’ digital transformation, with the shift to essentially online-only models being the most noticeable change. As a result, conventional financial institutions and traditional banks are now compelled
to develop innovative and competitive digital solutions in order to maintain their market survival in the long run. 

The Middle East, a Booming FinTech Region 

In terms of FinTech, the Middle East (MENA) and the UAE, in particular, are growing and booming markets when it comes to new banking trends and technologies. Concerning untapped potential, the MENA region is well-positioned to become the next extensive territory of digital banking innovation. 

Countries such as UAE, Saudi Arabia, Bahrain, Iraq, Turkey, and Egypt are just a few of the East, with over 20 established neobanks serving almost 15 million users. Indeed, the FinTech sector in the Middle East has grown at a 30 percent compound annual growth rate (CAGR) over the last year, with capital funding expected to reach two billion dollars by the end of 2022, according to a study by Milken Institute. 

Middle Eastern countries are now realizing the critical need for digital and customer-friendly services. They are loosening existing rules and regulations to meet the rising trends of the market. Cashless payments have become the new norm, and regulations need to be updated to stay current. This has not been the case previously, as historically, the Middle East has been defined by strict financial innovation norms, which have made the development of such disruptive institutions difficult. These changes clearly demonstrate the Middle East’s evolution to become a rich territory for such technologies. 

For example, the Dubai International Financial Centre has made bold steps toward financial innovation by establishing sandboxes to test the region’s innovative financial and banking enterprises. 

The UAE, Taking the Digital Leap 

The UAE has been closely and rapidly keeping up with worldwide trends in banking digitalization. This first began with the installation of ATMs, followed by the introduction of internet banking and mobile banking by all prominent banks in the country. Indeed, existing banks now offer digital-only solutions and non-bank newcomers have just entered the digital banking arena. 

At 97 percent, the region has one of the highest smartphone penetration rates in the world. The rate at which digital banking is adopted in the UAE will ultimately be determined by the ease with which online account openings are facilitated and the perception with which mobile banking apps are built. During the second half of the previous decade, UAE banks started to identify the challenges and opportunities
of the financial technology revolution. This has pushed the country to urge several banks to launch digital banking initiatives, extending from creating separate digital-only banking platforms to strengthening existing mobile banking platforms, shifting from branch-based services, and refocusing employees on value- added offerings rather than repetitive and less-profitable tasks. 

Updated Regulations for Cashless Payments 

The introduction of more than 40 financial-free zones across the seven Emirates and the gaining popularity of cashless payments has boosted digital banking innovation in the UAE. According to the current framework for FinTech licenses in the UAE, companies must associate with banks through a partnership model, where the bank owns 51 percent of the venture. Foreigners can also own neobanks in the UAE under English common law without needing a Local Service Agent, according to the regulations of these new financial zones. In other words, you can create and establish a new digital bank in the UAE while adhering to international banking regulations. The Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM) are the two central regulators in the UAE. 

The country has also adopted several new protocols and strategies to help make the digital transition even smoother. Indeed, the National Innovation Strategy has helped the UAE become one of the world’s fastest-growing economic and technical hubs. Other initiatives, such as the UAE Blockchain Strategy 2021 and the Artificial Intelligence Strategy 2031, have spurred investments in technology developments, particularly in the banking and financial industry. 

What Digital Banks Offer in the UAE 

While neobanks in other parts of the world provide essential services, neobanks in the UAE offer a more comprehensive and sophisticated range of financial products, thereby replacing traditional banking services. Most digital banks include advanced security features and a wide variety of flexible services that suit modern banking needs and are, more importantly, free of any paperwork. 

Safety characteristics include advanced methods such as multi-factor authentication, biometrics, and numerous cyber-security procedures, all of which are supported by a solid infrastructure, ensuring that consumers have a safe and secure banking experience. This factor builds a solid foundation of trust in digital banking, attracting more customers to join the trend. All financial digital bank applications also include a detailed financial analytic tool that can help users make better and well-informed financial decisions on the go. 

Digital banks are also an opportunity for many to be able to invest in gold, forex, and stocks from one single digital platform allowing users to manage all their financials and investments digitally directly from their phones. Customers can also use various millennial-friendly goods and services, opening up a new market for youth, such as transactional and goal-based savings accounts, a personalized digital credit card, and insurance. Such services can also
offer a youthful banking solution for children, which has led to outstanding client support and acceptance. 

A Promising Future for Digital Banking 

With a big number of emerging neobanks and traditional banks offering digital services in the UAE, it is believed that technology will continue to improve the banking industry by increasing activities and ensuring financial institutions follow rules. Customers now expect a different kind of service from their banks as the old traditional definitions are rapidly changing. Customers have more choices than ever before, ranging from national banks to neobanking to FinTech firms offering “super apps”; 

With such big transformations taking place at a very fast pace, large incumbent banks should in fact think about restructuring their operations the soonest possible to match this new emergent market.
In fact, we believe they should have started the transition process as they will need to keep up with major players who are already benefiting from this new opportunity. The winners will use new technologies to reimagine the customer experience, simplify and optimize internal procedures, and repurpose branch networks for sales and consulting rather than servicing. Banks will be able to make the shift only through reinventing how they serve their customers and meet their needs, develop new skills and products, and use new technologies to assist consumers succeed.

MyMonty, your Newest Neobanking Experience 

Monty Finance, a sister company of Monty Holding, has launched MyMonty the FinTech enabler and solutions provider bridging the gap between user expectations and current existing services in the market. The UAE represents a great opportunity for MyMonty as it’s the right time to push for digital-first solutions across sectors like payments and banking. 

MyMonty allows consumers to transact globally from the comfort of their homes, with speed and power placed in their hands to facilitate transactions anytime, anywhere. In addition to being a reliable business partner that can guide banks through their digital transition with the needed tools and solutions. It is a safe and secure neobanking platform, offering a fast, smooth, and secure global digital experience that goes beyond traditional payment and banking services. It is a step into the future where any player can connect to the world and allow customers to transact globally.