AI's Disruption of UAE's Fintech Sector

The UAE's financial sector is becoming increasingly open, creating opportunities and new challenges for banking, legacy investments, non-government pension funds, and insurance corporations. Innovations are packaging traditional financial services into digital formats that are easy to consume and provide.

AI has become a crucial factor in the success of fintech companies in the UAE, energising financial technologies. Consider the Bankable Application Programming Interface (API) Marketplace. This SaaS API open banking system enables the swift launch of banking APIs, connecting banks and other companies interested in the financial sector. AI enables this process rapidly, creating API-as-a-Product.

AI & Fintech Services  

This is a step forward for banks in catering to the non-financial sector. Fintech, enhanced by AI, will continue to make significant achievements. For example, Bankr Tech simplifies all the work needed for lending institutions to make credit decisions. It shortens the time between when a potential borrower submits their application and when the lender approves the credit. The freed-up time for lending institutions can be spent on more thorough strategic analysis and leveraging AI applications.

Another example of how fintech and AI are transforming the financial sector is The Accounter. The services of this startup significantly lower the barriers for SMEs to enter the fintech sphere in the UAE by taking on the entire burden of preparing accounting and tax statements. Another player in this service market is Paci, which offers AI-driven accounting and invoicing services. These two examples show that the UAE tax authority and startup community have found a common language in AI, benefiting all parties involved.

Companies can gain more strength by cooperating with fintech startups. The PayMEE startup uses AI and ML to help the corporate sector forecast delinquency probabilities and improve accounts receivable management.

AI can automate many routine tasks, not just data entry or inventory management. AI can also support intelligent decision-making at startups, particularly in the rational aspects of pre-decision deliberation. AI algorithms can analyse historical data to predict future trends, enabling financial market participants to make data-driven decisions and optimise operations.

The development of fintech and AI in the UAE is taking a clear lead. Consider Fintech Galaxy, for instance. In the current digital environment, data is key. Fintech Galaxy's Open Finance approach enhances Open Banking APIs, giving consumers control over the personal data they wish to share.

We see how fintech startups are establishing bridges and blurring the boundaries between traditional financial entities and fintech startups. It is easy for any fintech startup to become a globally oriented financial company by unleashing the potential of AI-led fintech marketplaces.

Digital Innovations Create Equal Opportunities

In digital innovations, fintech and AI create equal opportunities for startups to provide financial services. The disrupting influence of fintech and AI on the financial market of the UAE means that, to a certain extent, almost everybody can consume financial services and provide them. However, this creates a new reality that the Central Bank of the UAE and financial supervisory bodies must deal with.

The difficult part of constructing new regulations is that AI and fintech leverage the potential of decentralised ledger technology, such as blockchain. Decentralised AI is a new and emerging field. Still, all blockchain-related activities essentially look like self-regulated operations rather than those that can be directly regulated, like legacy financial institutions.

So, one can chart the main challenges:

● Almost everybody in the digital realm can start offering financial services leveraging AI and fintech, creating competition for legacy institutions.

● More AI and fintech startups are leveraging decentralised principles of operations, leading to a resurgence of interest in decentralised decision-making after the initial blockchain hype subsided.

● These developments pose a significant challenge in regulating these activities. Decentralised AI is a new concept and needs a new approach to regulation.

● Innovations create a single big digital landscape in the world, making it challenging to regulate providers of digital financial services that operate from one country but offer services to residents of the UAE.

At the same time, these developments create complex issues for classical financial institutions and regulators to address and bring benefits. In 2024, the UAE may attract almost twice as many high-net-worth individuals as the U.S., promoting the UAE as the top destination for global fintech and AI-minded investors and skilled professional strategists.

The fintech market in the Middle East and Africa (MEA) is expected to hit a CAGR of 21.42% from 2024 to 2029 and the regional market size is predicted to be valued at USD 47.68 billion by 2029 from USD 18.07 billion in 2024.

In the banking sector, AI-driven credit scoring systems, such as those developed by Synapse Analytics, show better results in loan recoveries. Classical banks without comparable AI solutions will be less profitable and less attractive to investors. They will ultimately lose more market share to digital banks, Decentralised Finance (DeFi) platforms, and, in the future, to banks where AI will perform a significant portion of operations.

About the Author:

Konstantin Vladimirovich Tserazov, Former Senior Vice President at Otkritie Bank and a consultant to leading fintech companies. He is also a member of the Advisory Boards of major financial organisations and fintech companies in the CIS and Middle East regions.