The Dubai Financial Services Authority ("DFSA") has issued a consultation paper entitled "Testing Fintech Innovations in the Dubai International Financial Centre", which introduces a process to test and develop technology, products or services created by any fintech business in or from the Dubai International Financial Centre ("DIFC"). To implement this new process, the DFSA proposes to issue an innovation testing licence. 

What this means to you?

Ian Johnston, Chief Executive at the DFSA has said "the DFSA is very much 'open for business' when it comes to fintech and that we will deal with each firm, proposition or idea, and its unique circumstances, on a case-by-case basis". The proposed licence will allow our fintech clients to commence the testing phase of their fintech model and business plans in the DIFC without having to go through the full application process and compliance with DFSA rules.

What are the criteria?

The DFSA's aim is not to regulate the early stage of development and testing of fintech technology, products or services. Instead the DFSA has proposed that a fintech firm needs only to apply for a licence when its fintech technology, product or service has met the following criteria:

  • it involves the use of financial technology;
  • it will carry out one or more financial services regulated by the DFSA, in or from the DIFC using the fintech model, product or service;
  • it has reached the stage where it is necessary to carry out live testing with customers (whether other businesses or consumers); and
  • if tested successfully, it intends to implement its business proposition, model, service or product more widely, in or from the DIFC.

What is the process?

The consultation paper suggests that licences will be temporary (from 6 to 12 months or more, but no longer than 2 years) and issued subject to certain conditions and restrictions which include:

  • business activities under the licence being restricted to testing the technology, product or service;
  • a requirement to state clearly on all the firm's communications that it is "Regulated by the DFSA for innovation testing only";
  • a limitation on the number and type of customers involved in testing the product and service;
  • timeline and milestones for testing must be defined;
  • customers must understand the nature of the testing;
  • safeguards and protection for customers must be put in place in the event the technology or business proposition fails; and
  • an exit strategy must be prepared in the event the proposition is unsuccessful.

The steps for obtaining a licence and a subsequent full Financial Services Licence can be summarised as follows:

Step 1 – Initiate discussions with the DFSA by explaining the plan for testing and the business objectives in order to enable the DFSA to determine whether or not the fintech business proposition meets its criteria and what regulatory requirements should apply.

Step 2 – Issue licence for the testing phase, subject to certain restrictions and limitations which will be tailored to the fintech firm's test plan. The DFSA proposes a fee for the licence that would be proportionate to the scope of the licence.

Step 3 – Carry out testing during the testing phase and notify the DFSA of its progress and outcomes.

Step 4 – Notify the DFSA with a final test result and decision of the firm whether to proceed with its fintech business or to cease its activity. If the firm decides to carry on its fintech business, the DFSA will issue the appropriate full Financial Services Licence, which could be subject to full or modified compliance with DFSA rules.


The content of the consultation paper is not law or final policy. In fact, the process described above could change as a result of further input that the DFSA has sought from interested parties, which should be provided to the DFSA before 5 April 2017.

If the proposal finds support and is enacted as law or policy, the licence presents an opportunity to our clients who are interested in testing and developing innovative financial products and services using technology in the DIFC. This, in turn, will enhance the level of consumer and market confidence in the new technology and services that are being tested. For further information on the DFSA's proposed licences for fintech businesses, please contact us.