How Dubai is embracing fintech to become a smart city
We explore how the city of Dubai is leveraging fintech in order to become a truly smart city, and with that, potentially the fintech capital of the world.
The Middle East is the embodiment of the speed at which humans evolve, taking dusty expanses of land and building smart cities that overtake nations which have stood centuries longer. Cities such as Abu Dhabi are an exciting monument to the technological revolution taking place, and planned new urban sprawls like Masdar in Abu Dhabi and Neom in Saudi Arabia prove that the UAE doesn’t plan to slow down any time soon.
Since 2015, the number of fintechs in the UAE is expected to grow by as much as 230%, from 559 companies. By 2022, the fintech market is estimated to reach a value of $2.5bn across the broader MENA region, according to Accenture. To understand these projections, we take a closer look at the city of Dubai, which closely leverages financial technology with smart city initiatives.
Smart Dubai is an institution championing smart city initiatives across the region in a bid to make Dubai “the happiest city on earth”, a vision set out by His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice-President & Prime Minister of the UAE. The initiative seeks to harness AI, data and blockchain in order to drive Dubai’s economy and achieve the ultimate goal of making it entirely paperless. Banks are notorious for paper waste and in order to digitally transform these services incumbents will either need to develop in-house solutions, or obtain assistance from fintechs. Government-owned bank, Emirates NBD, is driving this change by undertaking one of the largest digital transformations in the region. In addition to this, it also launched digital banks Liv and E-20, which are driving fintech capital.
As a part of Dubai’s Smart City initiative, it will support startups in three components: Global Blockchain Challenge, the Dubai Smart City Accelerator and Dubai Future Accelerators. These will seek to nurture blockchain, AI, ML, IoT and connectivity in order to drive a smarter government, transportation and retail sectors. The Dubai Smart City Accelerator is powered by Startupbootcamp, a European company that supports early-stage tech companies and plays a supplementary role to supporting fintechs.
The Dubai International Financial Centre (DIFC)
The DIFC is the region's largest financial ecosystem, comprising over 24,000 professionals across 2,200 companies. The institution drives the future of finance, which will continuously play into the technological advancements that take Dubai closer to becoming a paperless, smart city. The key way it nurtures fintech growth in the region is through The FinTech Hive, which runs an annual accelerator programme that provides mentoring, funding opportunities and marketing exposure to fintech, insurtech, regtech or Islamic fintechs. It received 425 applications for the programme, a 42% increase from its 2018 event. As of September 2019 the centre has registered over 100 fintech firms. Arif Amiri, Chief Executive Officer of DIFC Authority said: "We aim to continue this momentum and growth through our evolving regulatory environment and the quality of collaborators we bring into the DIFC, as our vision of driving the future of finance becomes a reality.”
The DIFC also recently announced the launch of a new onboarding platform designed to meet Dubai’s Smart City needs. Alya Al Zarouni, Executive Vice President of Operations, DIFC Authority, said: “Adopting the latest technology and innovation reflects our culture, values and commitment to the Smart Dubai 2021 strategy and we fully believe the new digital onboarding journey will deliver client satisfaction supported by value add tools at every step.”
Dubai is continuing to gain a notable amount of attention from international banking and fintech firms. A number of companies have signed onto the DIFC, including UK-based architect of digital banking and payment solutions company, Bankable, and global mobile payment technology company QFPay, which provides backend solutions to Alipay and Wepay.
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Robinhood faces $35mn fine from New York DFS
The company’s crypto division was issued with a wrist slap in 2020, following the red flagging of several “matters requiring attention”. Robinhood revealed it had reached a settlement with the New York State Department of Financial Services regarding the issues, which related to “alleged violations” of cybersecurity and anti-money laundering rules.
The news follows on from the announcement earlier this week that the trading platform favoured by armchair investors, which almost broke Wall Street earlier this year, has an expected valuation of $35bn following its IPO.
Critics of the platform say Robinhood encourages “risky behaviour” among inexperienced (armchair) investors. The app has also been criticised for not informing customers that much of its profits are generated by routing their trades to Wall Street firms taking the other side, or so-called "payment for order flow."
Robinhood said last month they expected the DFS fine to be at the $15mn mark, adding it would be “the bottom of the range for our probable loss in this matter”. The $35mn penalty is on top of the record $70mn Robinhood incurred from US financial regulator FINRA in June, for “lax vetting and outages.”
However, the settlement indicates the company’s IPO will go ahead as planned, despite initial concerns the investigation could see the float delayed until later this year.
Robinhood floats imminent
Despite the regulatory hiccups, Robinhood priced its IPO between US$38-US$42 per share, giving the platform the US$35bn valuation and analysts predict the firm’s debut on the Nasdaq could occur as early as next week.
Robinhood democratising investment
Launched in 2013 by Tenev and Bhatt, who were Stanford University roommates, Robinhood’s founders will retain most of the voting rights after the IPO. Bhatt reportedly holds 39% of the voting power of outstanding stock, while Tenev holds 26.2%.
The online brokerage, which came under fire for its handling of the GameStop trading debacle, which saw the platform limit stocks to investors, states its mission is to “democratise” investing and is one of the most highly anticipated IPOs of the year.
Robinhood was valued at $11.7bn in autumn 2020 following a private equity funding drive. The new valuation will mean represent a three-fold increase in the company’s market value in less than 12 months.