ADGM Exclusive: Bridging The Gap For A UAE FinTech Revolution 

You recently launched Digital Lab, a virtual environment in which fintechs, financial institutions and regulators can seamlessly connect, experiment and develop innovative solutions. What ecosystem challenges led the creation of this initiative?

As a regulator, we have a bird’s eye vision of the financial services industry, interacting with licensed firms and institutions as well as the wider ecosystem and we are keenly aware that innovating is fraught with hurdles. We’ve identified a number of roadblocks such as:  

• Extensive procurement processes for simple proofs of concept (POCs). There remain far too many hoops for startups and SMEs to jump through in order to work with financial institutions, which are oftentimes challenging for minimal to low risk endeavours.

• Difficulty accessing and engaging with the appropriate stakeholders. Organizations can be vast and confusing to navigate, and identifying the right person remains an opaque endeavor for SMEs. On the flip side, organizations also struggle with validating the best startups on the market to fill the gap in their processes and offerings.

• Implementation of new products remains a systemic issue due to legacy infrastructure, as fundamental processes are maintained with a number of different technology stacks. New additions need to be interoperable, and that requires initial involvement from IT teams adding to the complexity of the project.

• Finally, regulatory uncertainty. Some new solutions or business models don’t fit into pre-existing regulatory frameworks leading to caution on the part of financial institutions as they navigate regulatory gray zones.

Where others see impossible hurdles to navigate, we see the opportunity to facilitate collaboration.

Fintech startups continue to be among the most funded in the UAE. Why is there such a need for Fintech in the region right now, and how is ADGM supporting this?

Fintech startups have sought to put people first with easy to use and intuitive solutions. They’ve addressed gaps in the market, promoting financial inclusion and placed pressure on incumbents to better service their clients. 

A diverse ecosystem is key to enabling novel products to emerge and if investors keep funding fintech startups it is because it’s an industry with huge growth potential. Financial services touches everyone across the UAE providing them with digital banking solutions, personal finance applications or methods of remittances. 

The UAE’s young, digitally savvy population make it a perfect market for launching new applications and products. ADGM supports all of its licensed firms, whether they’re startups, SMEs or banking institutions and is committed to building a level playing field that will allow innovative services to develop.

 Why is it important to create a collaborative sandbox platform like Digital Lab?

 The Digital Lab is a first of its kind regulator-led initiative to accelerate the growth and scale of startups. It is made up of two parts: 

1. A marketplace where financial institutions, fintech startups, venture capitalists, governments and academic interest groups can create profiles to signal their interest in collaborating and can connect with one another to exchange and map out synergies. Startups can expose and certify their APIs as well as showcase their solutions and products for financial institutions to browse. 

2. A digital sandbox environment that is populated with toolkits to generate synthetic data and system images simulating core banking functions and IT operating systems. This will enable financial institutions to trial fintech solutions in a secure and neutral digital environment, separate from their core production interfaces. This allows financial processes to accelerate procurement and IT processes by proving a business use case to internal stakeholders.

What kind of challenges can the Digital Lab help solve for the local SME sector? Are there specific products or solutions that can remedy these issues?

The Digital Lab aims to provide a visible and vibrant ecosystem where startups and SMEs can showcase their product offerings and solutions to a global network of local and international financial players and investors. 

As part of our commitment to enabling growth we provide a number of tools to allow startups and SMEs to prove their value-add to potential partners. SMEs can list their APIs and connect to synthetic data to prove the efficacy of their solutions within the Digital Lab. Our certification tool will validate those APIs as a signal to financial institutions that the solution is plug-in ready. 

In addition, the sandbox testing environment allows SMEs and startups to invite financial institutions to conduct POCs in one secure location. In addition, the Digital Lab also allows financial institutions to broadcast innovation challenges to the community, specifying problem statements they are looking to solve and inviting SMEs and startups to propose their products. This is a means of rapidly engaging with the market and creating relationships between financial institutions and fintechs. 

From the perspective of an SME seeking solutions to digitalise and automate their processes, the Digital Lab serves as an effective marketplace to source for solutions and collaborators.

There is a growing need for collaboration between traditional banks and fintech innovators, and we are already seeing signs of this regionally. How is ADGM helping bridge the gap between these two stakeholders in Abu Dhabi in a way that supports and revolutionizes the financial sector?

In the past there’s speculation on whether fintechs were out to disrupt banks as we knew them. We now know that fintechs are key enablers of change in the industry, promoting competition and lowering costs. 

Traditional banks are in an excellent position to collaborate with fintech startups, as they can leverage open innovation in order to get the best financial products out to consumers without limiting themselves to building everything in-house. Partnerships are a means of accelerating digital banking and benefitting from the widest possible pool of talent and innovative solutions possible. 

Partnering with banks allows fintechs to benefit from a strong and recognized financial brand as well as access to a ready-made market of clients. In order to help banks and fintechs navigate the innovation ecosystem and find the right fit to enable synergies, ADGM launched the Digital Lab marketplace to allow fintechs to list their solutions on a one-stop-shop platform. 

This allows them to be visible to external stakeholders, open to opportunities for commercial collaboration or investment and also seamlessly be able to prove their value-add within a dedicated digital testing environment.

What has been the traction so far for the Digital Lab: tell us more about the process, how can entrepreneurs apply and join in the program? What has been the engagement so far?

We officially launched in early April 2021 and have seen an enthusiastic response from the ecosystem with 40-odd entities that have joined the platform, including leading financial institutions such as ADCB and FAB as well as fintechs and venture capital firms. 

The Digital Lab is open to all participants, irrespective of where they are based and firms and financial institutions are invited to sign up as an entity in order to have access to the digital tools, datasets and products available. 

Once onboard, the person that has signed up has access to their own user management interface where different access controls can be set up for other members of the organization. Users can use the orchestration tools to build their very own no-code financial products using the drag-and-drop components. 

Finally financial institutions can invite fintech firms as participants into their workspaces to conduct proof of concepts in a secure and private environment.

About Wai Lum Kwok, CFA, Senior Executive Director, Capital Markets, Financial Services Regulatory Authority Abu Dhabi Global Market

Wai Lum joined the Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) in June 2015.  He heads up the Capital Markets division responsible for authorisation and supervision of financial market infrastructures and capital markets intermediaries.  The division also regulates the offering of securities and collective investment funds.

Wai Lum also spearheads FSRA’s strategy and efforts in the supervision of Financial Technology (FinTech) innovation and development of the FinTech ecosystem in ADGM.

Wai Lum has more than 15 years of supervisory experience.  Prior to ADGM, Wai Lum served as the Director of the Capital Markets Intermediaries with the Monetary Authority of Singapore.  Wai Lum graduated from Imperial College, London with an M.Eng in Electrical Engineering and holds an M.Sc in Applied Finance from the National University of Singapore.  He is a CFA charter holder.