In January this year, the Dubai International Financial Centre (DIFC) announced the launch of FinTech Hive, the Middle East region’s first fintech specific accelerator. This is a welcome initiative from DIFC. FinTech Hive nicely underpins the content of the Dubai Plan 2021, as it provides an avenue for start-ups and SMEs to consider, and more closely align, with the opportunities in the region’s financial sector and fintech industry.
To date, fintech start-ups in the region were not able to gain access to such an environment as readily as in US, Europe and Asia, where fintech accelerator programs are larger in number, have been in existence for at least a few years and are often backed by significant financial institutions. For example in Asia, financial institutions such as Citi, Standard Chartered, OCBC, DBS, Mastercard and PayPal have all established specifically designed incubator and accelerator ecosystems for the fintech industry.
To follow up on the above initiative, the DIFC’s financial services regulator, the Dubai Financial Services Authority (DFSA), has recently announced that it will allow fintech firms to apply for a separate class of financial services regulatory licence, referred to as an Innovation Testing Licence (ITL). The ITL allows approved fintech entities to develop technologies within the confines of the DIFC, without enforcing the regulatory requirements typically associated with a DFSA-approved financial services firm.
The ITL will allow fintech firms to develop technologies in and from the DIFC for a 6 to 12 month period, and may also permit an upgrading to full authorisation as a financial services licence-holder where certain criteria are met following this initial period. It is usual that financial service providers in DIFC are required to meet regulatory requirements including, but not limited to, minimum capital thresholds, risk management, compliance requirements such as AML as well as meeting data protection regulations.
There is little doubt accelerators and incubators have played an important role in the fintech industry and the start-up ecosystem in other jurisdictions. With this welcome news and positive regulatory measure, we are sure to see more regional start-ups in fintech advance and upscale more quickly to support the growing financial sector across Dubai and the wider region.