Abu Dhabi Global Market makes fintech overtures with new initiative
Abu Dhabi Global Market (ADGM) is aiming to promote excellence in financial innovation with the launch of a two-year "Regulatory Laboratory" (RegLab) window to allow fintech start-ups to test and develop new ideas in a safe environment.
Promoted by ADGM regulator, the Financial Services Regulatory Authority (FSRA), the scheme is intended to maximise young entrepreneurs' potential, while keeping licensing procedures and costs to a minimum. A month-long consultation period on the programme was due to end on June 13.
Due diligence
Details remain sketchy about exactly when the RegLab will be launched, as well as the likely date for ADGM to "go live", as the UAE capital's regulatory planners proceed with a thorough period of due diligence to allow broad industry consultation on the centre's future both inside and beyond the UAE's borders.
ADGM hopes its fintech sandbox will help to create an eco-system to build on the UAE capital's financial strengths, which include wealth management and private banking. In addition to the FSRA, ADGM boasts a registration authority and the English common-law ADGM courts.
Dubai, home to existing competitor the Dubai International Financial Centre, has also been active regarding fintech, having established the Global Blockchain Council in May with the participation of 32 government institutions and private companies. The number of participants has already swelled to more than 40.
Two-year test and development period
Under the RegLab framework, fintech participants will enjoy a two-year period to develop, test and launch their products and services in a controlled environment, after which those with viable business models will be transferred to full authorisation and a supervisory regime, ADGM said.
"Firms which are not ready after the two-year period will exit the RegLab framework," it said.
"ADGM has been actively engaging fintech stakeholders in Abu Dhabi, the GCC, as well as globally, to explore opportunities for collaboration," said Wai Lum Kwok, intermediaries director at ADGM's FSRA.
"These stakeholders span the gamut of the fintech ecosystem, and include not just companies providing innovative products and services, but also government agencies and regulatory authorities, financial institutions, investors, accelerators, academic institutions and industry groups."
Fintech memoranda of understanding
ADGM has also signed fintech memoranda of understanding with Flat6Labs Abu Dhabi, a technology incubator with roots in Egypt, and NYU Abu Dhabi, an affiliate of New York University which was established in 2010.
"While fintech is a very regulated industry, current regulations are not feasible for start-ups," said Victor Kiriakos, managing director, Flat6Labs Abu Dhabi. "For a new online bank or insurance brokerage, obtaining a licence is prohibitively expensive."
The structure ADGM hopes to put in place would allow fintechs to enter the market with lower costs and limited financing, he said. The ability to upgrade licences might also widen the scope of work available for start-ups.
"As companies grow, they will have bigger scope and capture larger market share, in terms of risk and innovation," Kiriakos said.
"We are now working on the building blocks at ADGM, and on facilitating the regulatory side. We are looking at how we can engage fintech start-ups. We see many start-ups here and there are several international companies involved. Entrepreneurs see the UAE as a very good market. There is also scale in the region. We want to make market entry much more accessible."
Kiriakos said Flat6Labs' existing technology accelerators in Cairo and Jeddah had seen more than 80 percent participation from local Egyptian or Saudi ventures. Under its memorandum of understanding with ADGM, he expected the first programme participants to be nominated by the end of the year.
"What we have seen in the UAE is that we have a mix of international as well as local talent. In our first cycle we had 750 applications to join our programmes, from 78 different nationalities, with 70 percent of them based outside the UAE. The mix is diverse."
Need for innovation in banking and insurance sectors
The financial industry is on the eve of disruption, said Michele Grosso, founder and CEO of Democrance, a consulting house which provides software to the insurance industry. "Banking and insurance are sectors that have been doing business in the same way they were doing centuries ago," Grosso said.
Through its fintech platform, Dubai-based Democrance helps insurers distribute, service and administer insurance policies through mobile and digital channels, making their products accessible to the low-income population, a glaring gap in the UAE market.
"Getting an insurance broker licence in the UAE today is a very costly, lengthy and heavily regulated process. It does not take into account the specificities of players like Democrance," he said.
Promoted by ADGM regulator, the Financial Services Regulatory Authority (FSRA), the scheme is intended to maximise young entrepreneurs' potential, while keeping licensing procedures and costs to a minimum. A month-long consultation period on the programme was due to end on June 13.
Due diligence
Details remain sketchy about exactly when the RegLab will be launched, as well as the likely date for ADGM to "go live", as the UAE capital's regulatory planners proceed with a thorough period of due diligence to allow broad industry consultation on the centre's future both inside and beyond the UAE's borders.
ADGM hopes its fintech sandbox will help to create an eco-system to build on the UAE capital's financial strengths, which include wealth management and private banking. In addition to the FSRA, ADGM boasts a registration authority and the English common-law ADGM courts.
Dubai, home to existing competitor the Dubai International Financial Centre, has also been active regarding fintech, having established the Global Blockchain Council in May with the participation of 32 government institutions and private companies. The number of participants has already swelled to more than 40.
Two-year test and development period
Under the RegLab framework, fintech participants will enjoy a two-year period to develop, test and launch their products and services in a controlled environment, after which those with viable business models will be transferred to full authorisation and a supervisory regime, ADGM said.
"Firms which are not ready after the two-year period will exit the RegLab framework," it said.
"ADGM has been actively engaging fintech stakeholders in Abu Dhabi, the GCC, as well as globally, to explore opportunities for collaboration," said Wai Lum Kwok, intermediaries director at ADGM's FSRA.
"These stakeholders span the gamut of the fintech ecosystem, and include not just companies providing innovative products and services, but also government agencies and regulatory authorities, financial institutions, investors, accelerators, academic institutions and industry groups."
Fintech memoranda of understanding
ADGM has also signed fintech memoranda of understanding with Flat6Labs Abu Dhabi, a technology incubator with roots in Egypt, and NYU Abu Dhabi, an affiliate of New York University which was established in 2010.
"While fintech is a very regulated industry, current regulations are not feasible for start-ups," said Victor Kiriakos, managing director, Flat6Labs Abu Dhabi. "For a new online bank or insurance brokerage, obtaining a licence is prohibitively expensive."
The structure ADGM hopes to put in place would allow fintechs to enter the market with lower costs and limited financing, he said. The ability to upgrade licences might also widen the scope of work available for start-ups.
"As companies grow, they will have bigger scope and capture larger market share, in terms of risk and innovation," Kiriakos said.
"We are now working on the building blocks at ADGM, and on facilitating the regulatory side. We are looking at how we can engage fintech start-ups. We see many start-ups here and there are several international companies involved. Entrepreneurs see the UAE as a very good market. There is also scale in the region. We want to make market entry much more accessible."
Kiriakos said Flat6Labs' existing technology accelerators in Cairo and Jeddah had seen more than 80 percent participation from local Egyptian or Saudi ventures. Under its memorandum of understanding with ADGM, he expected the first programme participants to be nominated by the end of the year.
"What we have seen in the UAE is that we have a mix of international as well as local talent. In our first cycle we had 750 applications to join our programmes, from 78 different nationalities, with 70 percent of them based outside the UAE. The mix is diverse."
Need for innovation in banking and insurance sectors
The financial industry is on the eve of disruption, said Michele Grosso, founder and CEO of Democrance, a consulting house which provides software to the insurance industry. "Banking and insurance are sectors that have been doing business in the same way they were doing centuries ago," Grosso said.
Through its fintech platform, Dubai-based Democrance helps insurers distribute, service and administer insurance policies through mobile and digital channels, making their products accessible to the low-income population, a glaring gap in the UAE market.
"Getting an insurance broker licence in the UAE today is a very costly, lengthy and heavily regulated process. It does not take into account the specificities of players like Democrance," he said.
Peter Shaw-Smith is a contributor editor to Thomson Reuters Regulatory Intelligence. He is based in Dubai