Many startup sectors saw a dip in funding last year compared to the investment boom in the peak of 2021 and 2022. Fintech was no different.
In 2023, $51bn was invested into fintechs across the globe according to Innovate Finance, almost half (48%) that of 2022. But there were some exceptions to the rule: the UAE recorded a 92% increase in investment year-on-year.
So, how did this ecosystem buck the trend — and what can Europe learn from its development?
Support and sandboxes
Part of the UAE’s fintech ecosystem’s recent developments can be attributed to the community and atmosphere being cultivated in the region, says Basil Moftah, managing partner at VC firm Key Capital.
The UAE, just like London, is a very eclectic and diverse city to live in.
“The UAE, just like London, is a very eclectic and diverse city to live in; there are people here from all around the world,” he says. “Being a global hub, the UAE, and [specifically] Dubai and Abu Dhabi, have been able to get access to some great talent and great entrepreneurs. We also see a growing opportunity in Riyadh, Saudi”
Alongside the growing community, governmental and regulatory support have given fintechs a boost.
The UAE has made a concerted effort to become a leader when it comes to developing supportive regulations for fintechs, says Moftah. Those initiatives include a dedicated regulator focused solely on digital assets — the virtual assets regulatory authority (VARA) — which works with emerging crypto businesses to proactively guide regulation in collaboration with founders.
“You can go to them and say, ‘here's what I want to do,’ and if there isn't a regulation [already], they will work with you to build it, which is cool. How many places do you get to write the regulation rather than wait to receive the regulation?,” says Mofta.
Omair Ansari, cofounder of UAE and Pakistan-based flexible salary access platform abhi, agrees, pointing to initiatives like the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM).
Being a global hub, the UAE, and [specifically] Dubai and Abu Dhabi, have been able to get access to some great talent and great entrepreneurs.
He says their efforts have been instrumental in creating a conducive business environment for startups: “We are incredibly grateful for the support from regulators whose forward-thinking policies and frameworks have significantly contributed to our success and the overall development of the fintech sector in the UAE.”
For fintechs in the midst of building and developing, there are also testing opportunities to be found through sandboxes set up specifically to help founders hone their product.
“[Something] the UAE has done very well is the establishment of several sandboxes where, while you're building your product and while you're testing your solution and while the regulation is being developed, you have regulatory cover to be able to go out to clients prematurely and actually have users experience and feedback,” says Moftah.
Not only is that a positive step for perfecting fintech products for target customers, but it can also help when it comes to fundraising conversations.
“This is incredibly useful for investors,” says Moftah. “As you can imagine, nobody wants to invest in just an idea that hasn't yet been tested when waiting around for regulation to come about can take longer than [investors are] willing to wait.”
Unlocking collaboration
So, what can Europe’s fintech ecosystem learn from those building in the UAE?
Moftah suggests a shift in perspective — from creating just European-wide businesses to EMEA-wide businesses. “There’s a lot that could be collaborated on,” he says.
The UAE’s geographical location could open up new markets for the European startups willing to collaborate. “Within six hours of Dubai, there's over a billion and a half people. [By] collaborating with businesses and all the people working here, you can access a much bigger market,” adds Moftah.
Traditional businesses, real estate [etc] have done really well here in the region and so as people get more wealth, they need to diversify and invest.
Ansari concurs, having gained value from events that encourage cross-collaboration and knowledge sharing. “Regular events and forums, such as the Dubai FinTech Summit and LEAP, provide valuable opportunities to connect, share knowledge and drive the fintech industry forward,” he says.
And embracing collaboration could not only foster valuable connections across ecosystems, but also open up prolific new avenues of funding, says Moftah.
“There are certain skills like AI, for example, that are more in abundance in Europe than they are in the UAE regions — but there are deeper pockets and higher willingness to pay from customers here in the Middle East,” he says. “Traditional businesses, real estate [etc] have done really well here in the region and so as people get more wealth, they need to diversify and invest. They're interested both to invest locally and to invest internationally.”
Moftah adds that while many founders are moving from European countries to the UAE, collaboration and access to the region’s funding doesn’t always require such a life changing step.
“Many entrepreneurs from around the world are moving here to be able to access that capital,” he says. “It'd be great to have people who want to move here, but you don't have to move to access that capital: there are other ways to access it without being here.”
