An open letter on open banking, a framework for responsible innovation for banks and the fintech community in the UAE

Members of the Advisory Council & CEOs of UAE Banks, 

Last month on 23 and 24 August, DAPI, a financial technology (fintech) startup which was founded in the United Arab Emirates in 2019 (we operate from the Abu Dhabi Global Market’s Reg Lab), participated at Y- Combinator (YC 20), the world’s most successful technology accelerator. DAPI was only the third company from the UAE to participate at Y-Combinator since its formation. 

We participated at YC 20 not just in our own capacity but as proud representatives of the UAE’s  fintech community and as a testament to the enabling environment and ecosystem of innovation and investment that the UAE Government has purposefully built over the last decade – an ecosystem that in 2020 drove the USD $3.1bn acquisition of one of our national tech champions, Careem (our early investors include early investors in Careem including Beco Capital and Class 5 Global (ex Lumia Capital). 

Following our participation at Y-Combinator, we write to request that we seize this moment to launch a new and enduring phase of collaboration between the UAE’s licensed banks and the UAE’s emerging fintech community. 

As you likely know, DAPI is a financial infrastructure provider that enables fintechs to securely develop and deliver compelling applications that empower consumers to simplify transactions and make better decisions with their financial data. Simply put, we enable consumer permissioned payment initiation and account information services in pre-Open Banking regulatory environments across emerging markets. 

Over the last few weeks we have been made aware of certain UAE banks seeking to have our activities restricted by, for example, requesting the ADGM to rescind our licence. We believe it would send a chilling signal to the technology investment community (both foreign and domestic venture capital funds) about the investment climate in the UAE if such a precedent was created. 

There has to be, and is, a better way forward for Open Banking and bank – fintech collaboration in the UAE. 

On August 4th, 2020 we wrote to His Excellency Abdulhamid Saeed, the Governor of the Central Bank of the United Arab Emirates requesting the Central Bank’s guidance on, and consideration of, an industry driven initiative and roadmap for Open Banking in the UAE. A copy of that letter was shared with the UAE Banks Federation. 

In that letter we noted that: 

(a) UAE banks are strongly in favour of the implementation of Open Banking - recent research by Finastra shows that 88 per cent of financial institutions in the UAE plan to enable Open Banking in the next 12 months ie by June 2021

(b) an increasing number of venture-capital backed UAE fintechs are developing new payment initiation 

use-cases on the DAPI platform demonstrating innovation and consumer demand; and 

(c) that enabling an Open Banking framework in the UAE will result in increased levels of investment (both foreign and domestic), heightened innovation and competition, job creation, and ultimately the increased happiness of our residents 

The success and regulation of Open Banking in markets such as Europe, the United Kingdom, and Australia was built on first enabling companies like DAPI to operate, learning from such experiences, and then having such experience drive better regulation. Across the world best-practice regulators have not restricted companies like DAPI from operating in pre-Open Banking environments and allowing compelling applications to develop on top of them. This is the period we are currently in in the UAE and the wider region/ 

Whilst the analogy may come from another industry, our experience in the UAE and our region shows that companies like Careem would never have emerged had they not been able to operate responsibly prior to being regulated. 

It cannot be the intention of banks in the UAE to block such innovation where similar innovation has not been blocked in other developed markets, particularly in an area, Open Banking, which has their strong support. We do understand however that banks may have questions for us. We wish to enter into a dialogue to answer those questions. In fact, in June 2020, and in a spirit of openness and collaboration, DAPI held a series of discussions with a number of banks on our security protocols and architecture. 

In our August 4th letter to His Excellency Abdulhamid Saeed we proposed the formation of an inclusive industry group to move forward with proposing an interim framework for Open Banking in the UAE. We noted that such a framework should prioritise for example, consumer protection, cyber-security, regulatory oversight and reporting mechanisms whilst also enabling companies like DAPI to continue to operate – it cannot be that any collaboration is discussed only upon DAPI suspending operations which had previously been suggested to us by a UAE bank. 

Given the context and what is at stake it is incumbent on us (both banks and fintechs) to take a partnership approach to enable Open Banking and fintech innovation rather than one of attrition that may be perceived to be designed to block the emergence of innovation in the UAE. 

We respectfully propose to build such a collaborative framework as partners. To this end, we would welcome the opportunity of having an initial meeting with you in August to kick start the conversation, listen to each other, and drive things forward. 

Now is the time for us to walk the walk. Let’s walk it together. 

Yours, 

Mohammed Imran Aziz co-founder and CEO