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Forging Ahead: How The Middle East Has Become A Driving Force In The Global Fintech Landscape By continuously refining their regulatory frameworks and embracing emerging technologies, Middle Eastern countries are poised to lead the next wave of fintech innovation, contributing to global financial stability and economic growth.

By Akshata Namjoshi

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The Middle East has become a powerhouse in the global fintech landscape, utilizing its strategic location, robust economic policies, and progressive regulatory frameworks to foster an environment ripe for innovation and growth. Particularly, the UAE, Saudi Arabia, and Bahrain have not only embraced financial technology, but they have also set high standards for regulatory practices, ensuring a balanced approach to fostering innovation, while managing risks effectively.

Stored value facilities (SVFs) have gained considerable momentum in the Middle East, driven by the region's focus on digital transformation. SVFs, including digital wallets and prepaid cards, provide a convenient and secure alternative to traditional banking, especially in areas with significant unbanked populations. For instance, the Central Bank of Bahrain (CBB) has been a leader in this domain, issuing the CBB Rulebook Volume 5, which governs digital wallets and prepaid cards. This regulatory framework ensures that SVFs operate under strict guidelines, protecting consumers and maintaining financial stability.

The acquiring and payment aggregation sector has experienced substantial growth, fueled by the rise of e-commerce and digital payments. The UAE, with its financial free zones such as Abu Dhabi Global Market (ADGM) and Dubai International Financial Centre (DIFC), has created an enabling environment for payment aggregators. These zones offer distinct financial, civil, and commercial laws, overseen by independent regulatory authorities like the Financial Services Regulatory Authority (FSRA) in ADGM and the Dubai Financial Services Authority (DFSA) in DIFC. This dual regulatory system promotes flexibility and innovation, while maintaining rigorous oversight.

The buy-now-pay-later (BNPL) sector has transformed consumer financing in the Middle East, offering flexible payment options that enhance purchasing power and financial inclusion. Under the guidance of the Saudi Arabian Monetary Authority (SAMA), Saudi Arabia has introduced comprehensive regulations to govern BNPL services. The 2023 Implementing Regulations for the Law of Payments and Payment Services outline the requirements for entities offering BNPL services, ensuring they adhere to strict licensing and operational standards. This regulatory clarity has attracted both local and international players to the Saudi market, driving competition and innovation.

Open banking is a significant shift in the financial services industry, promoting transparency, competition, and customer-centric innovation. The UAE has been a pioneer in this field, with the Central Bank of the UAE (CBUAE) playing a crucial role. Recently, the UAE launched regulations for Open finance, paving the way for both open banking and finance regimes. The CBUAE's collaborative approach with financial institutions and fintech companies has led to the development of standards that facilitate secure data sharing and interoperability. This regulatory framework has positioned the UAE as a leader in open banking and finance, attracting significant investment and fostering a thriving fintech ecosystem.

Related: Digital Assets And Crypto Infrastructure: How MENA Banks And Fintech Companies Can Tap Into An Opportunity Worth More Than US$400 Billion


The Middle East's regulatory landscape is defined by its proactive and forward-thinking approach, setting a high standard for fintech regulation globally. The region's regulators have shown an exceptional ability to balance innovation with risk management, creating a stable and secure environment for fintech growth.

The UAE's regulatory system is notable for its multiple regulatory authorities working in unison to promote fintech development. The CBUAE, as the federal monetary regulator, sets the standard for financial regulation, ensuring a unified approach across the country. Its efforts are complemented by the independent regulatory authorities in the financial free zones– FSRA in ADGM, and DFSA in DIFC. These authorities have established detailed financial regulations that address the unique needs of the fintech sector, providing clarity and certainty for businesses. For instance, companies operating in ADGM and DIFC must obtain specific licenses distinct from those required in the rest of the UAE. This tailored approach allows for specialized oversight, and fosters an environment where innovation can thrive, without compromising regulatory standards.

Saudi Arabia has made remarkable progress in enhancing its fintech regulatory framework, establishing itself as a regional leader. The 2021 Payment Services Providers Law (PPS Law) marked a significant milestone, creating a comprehensive framework for regulating payment service providers. The 2023 Implementing Regulations further refined this framework, focusing on improving the efficiency and security of the payment system infrastructure. A notable aspect of Saudi Arabia's regulatory approach is the Senior Positions Requirements, which set stringent criteria for appointments to senior positions in SAMA-regulated financial institutions. This ensures that only qualified and competent individuals are in leadership roles, maintaining high standards of governance and operational integrity.

Bahrain has also distinguished itself with its pioneering regulatory approach. The Central Bank of Bahrain (CBB) is empowered by the Central Bank of Bahrain and Financial Institutions Law 2006 to regulate, supervise, and license a wide array of financial services. The CBB Rulebook, particularly Volume 5, addresses the specific requirements of digital wallets, merchant acquiring, payment aggregation, and open banking services. Volume 5 is structured into common and service-specific modules, ensuring that all licensees adhere to a core set of standards while also meeting specific requirements relevant to their services. This modular approach provides a clear and comprehensive regulatory framework that supports innovation while safeguarding consumer interests.

The Middle East has firmly positioned itself as a driving force in the global fintech landscape, thanks to its strategic vision, robust economic policies, and superior regulatory frameworks. The UAE, Saudi Arabia, and Bahrain have demonstrated that fostering innovation while maintaining rigorous oversight and consumer protection is achievable. The region's proactive and progressive approach to fintech regulation thus serves as a model for other countries aspiring to create a thriving fintech ecosystem. By continuously refining their regulatory frameworks and embracing emerging technologies, Middle Eastern countries are poised to lead the next wave of fintech innovation, contributing to global financial stability and economic growth.

Related: "We Envision Dubai As A Global Leader In Fintech": DIFC Innovation Hub CEO Mohammad Alblooshi On The Drivers For This Year's Dubai FinTech Summit On May 6-7, 2024

Akshata Namjoshi, Associate Partner at KARM Legal Consultants, heads its fintech, payments, and gaming verticals, with over a decade of regulatory experience in the banking and financial system. Her expertise in banking and fintech spans retail payments, remittances, and digital wallets, supporting innovative solutions like pay-later options and open banking. she offers expert advice on structuring, licensing, and regulatory matters. Her collaborative work spans government entities, central banks, digital banking platforms, payment service providers, and game operators. She has played a key role in drafting regulations for open banking collaborating closely with central banks and regulators in the UAE and GCC. Her contributions extend to drafting policies on digital ID and e-KYC in the Arab region through engagements with esteemed organizations. She is also recognized as a recommended lawyer for TMT and Financial services by the prestigious Chambers and Partners and Legal 500 EMEA.

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