The Dubai Financial Services Authority (DFSA) is inviting financial technology (fintech) firms to apply for an Innovation Testing License (ITL) that will allow qualifying companies to develop and test concepts for between six to 12 months in a restricted regulated environment.
The temporary exemption from the usual regulatory requirements that normally apply to regulated firms effectively creates a 'sandbox' within the Dubai International Financial Centre (DIFC) free trade zone in which fintech firms can experiment with new ideas.
The DFSA overseer says it will work with qualifying participants this year to understand and develop their business proposal on a case-by-case basis, helping them establish appropriate controls for customers in the banking, finance, loan, remittance and other financial services sectors prior to a possible later 'go live' date.
In exceptional cases, the DFSA will consider extending the maximum year-long exemption period. If a firm meets the outcomes detailed in the regulatory test plans that will be developed it will eventually have to migrate to full authorization or cease trading.
The DIFC hosts financial services firms on a 110-hectare free trade site in Dubai. A FinTech Hive was opened there in April of this year as a further attempt to encourage a local fintech industry. The technology accelerator program might at a later date play host to some of the early stage companies that will be selected to go through the nascent sandbox. The FinTech Hive is intended to help companies to scale up and industrialize their approved ideas, as well as attract investors and publicity for the final product.
The United Arab Emirates (UAE) capital city, Abu Dhabi, recently launched its own rival ADGM Reglab down the road in the next Emirate, aka state, along the UAE coastline. Both initiatives are designed to try and make the UAE the middle-east's premier financial services and technology hub, although there is of course some local rivalry too.
Commenting on the DFSA invitation Ian Johnston, its chief executive, said in a statement: "Fintech is changing the landscape for financial services, providing more opportunities to seek financing and increasing financial inclusion. As regulators, it is our responsibility to provide a framework which supports the sustainable development of this industry while protecting consumers and financial stability."
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