Expert roundtable: Rethinking banking for startups in the UAE

The United Arab Emirates is considered the home of tech startups in the MENA region, with 60% of investment funding for startups in the Middle East given to projects based in the UAE in 2019 (according to a report by data analysis company MAGNiTT). Not only is the UAE’s dominance a reflection of the largest start-up capital pot in the region, the nation’s share is also growing year-on-year.

In addition, the country leads the region in the World Bank’s Doing Business Ranking, as the 16th ranked country in the world for business friendliness. The World Bank has cited the UAE as an inspiration for the region in terms of business-minded reforms.

However, some pundits, investors and startup founders themselves have one concern: banking. Due to strict procedures and checks around anti-money laundering and anti-terrorism, opening a business bank account in the UAE can be an onerous process, sometimes taking as long as six months. It’s an issue that the government and the financial services sector is keen to address, says Nader Museitif, Head of Partnerships at Hub71, as removing barriers for new businesses and startups is all part of the work being done by Abu Dhabi’s global tech ecosystem, Hub71.

In order to find out the best way to tackle this issue head on, Hub71 published a whitepaper called Rethinking banking for startups in partnership with Mashreq Bank, First Abu Dhabi Bank and financial regulators to identify and solve banking pain points that face startups.

As part of this exercise, Hub71 brought together key financial services partners, tech startups, policymakers and key banking industry leaders for a virtual roundtable in October 2020 to discuss the best way forward.

Speakers at the roundtable were:

  • Steve Barnett, Executive Director Business Development, Abu Dhabi Global Market (ADGM)
  • Abdullateef H. Al-Ali, Head of Government Relations & Partnerships, Abu Dhabi Department of Economic Development (Abu Dhabi DED)
  • Nader Museitif, head of partnerships and business development at Hub71
  • Rohit Garg, Executive VP and head of business banking at Mashreq Bank
  • Sewis Van Wyk, Head Enterprise Architecture, Abu Dhabi Commercial Bank (ADCB)
  • Pankaj Asthana, Vice President – Digital Payments and Labs, Mastercard
  • Rabih Khoury – chief exit officer of Middle East Venture Partners
  • Pamela Attebery, Head of Innovation MENAT, HSBC
  • Abdulla Almoayed, Founder and CEO of Tarabut Gateway (a Hub71 startup)
  • Mohammed Aziz, Co-Founder, Dapi (a Hub71 startup)

Jumping straight in, moderator Kushal Shah, senior partner at Roland Berger, asked the Abu Dhabi DED what startups complain about most. And as suspected, the ease of banking was one of their major concerns.

“We hear many complaints from investors having issues opening bank accounts,” said Abdullateef H. Al-Ali from Abu Dhabi DED, “and the strange requests the startup owners get for documentation or proof of income – such as having their Abu Dhabi DED licence insured [which is often redundant, as the licence is only required by companies that want to operate onshore, as well as offshore].

“The main issue is that there needs to be a [unified] checklist for what’s required to open a banking account that is developed centrally – and that needs to be followed by all the financial institutions. The DED is currently working hard with ADGM and other government entities to solve this problem – it’s on our radar and we will come up with the best solution as quickly as possible.”

Mashreq Bank’s Rohit Garg said that his bank has the dual task of both doing due diligence and protecting its clients, as well as being user-friendly, and last year, rolled out a digital approach to solving this issue.

“Overcoming the physical interactions, particularly around the Covid-19 issue is important, because business owners are busy and they don’t have time to make repeated visits to the bank branch to supply documents. So we have a digital-only bank account that can be opened safely online and was developed specifically for SMEs, to help them get past the typical barriers they face. In all honesty, I think the bank account issue is an old one, and I think we are really right there in solving it,” he said.

Steve Barnett of ADGM said that one way his organisation is addressing the problem is by breaking down siloes: “It’s easy for startups to point at the banks and for the banks to point at the regulators, but really, we just need to be more collaborative. In order to facilitate that, we’ve done a lot to establish the startup ecosystem, including the support for Hub71, helping create smooth, streamlined startup licencing, the regulatory sandbox, the RegLab, and the Digital Lab; which will allow people to collaborate in bringing new technologies into existing institutions within a regulated environment.

“The other thing is that we’re working on programme to develop an SME platform here, which will help to bridge that gap between a startup looking for banking services, but doesn’t know how to deliver the right documentation to a bank. This platform will standardise that process, facilitate the availability of that information and make sure it’s user-friendly,” he concludes.

And while banks can sometimes struggle to adapt to changing business needs and models, as Shah pointed out, that sort of agility is something that credit card and investment companies such as Mastercard have been doing for decades. So how does a company like Mastercard help banks remove obstacles and continually drive progress for tech startups?

Pankaj Asthana of Mastercard said, “I think the important thing to remember is that it’s so high on everyone’s agenda to make it easier for startups to do their banking here – that commitment from both public and private sector is laudable – so firstly, this is all really about a balancing game, right? We have safety and security for the bank and the country, the time spent by staff and of course, wanting it to be easier for the end user (SMEs and startup owners).

“But being honest, banks can sometimes struggle with putting the end-to-end story together. Because I think what’s just happened is the speed at which fintechs, and technology providers have sort of come into the market and the way they have sort of led the way through user experience and UX design. Even at Mastercard, we are seeing that UX is very critical element for growth.

“For example, 10 years back, all the payments on a card network were defined by how a plastic card would look, how POS terminal would look, how a transaction must be done. We can regulate and control that. But then things moved so quickly into the digital sphere, and we realised that we had to quickly adapt and that we couldn’t so much control the UX, but on the contrary, needed to be led by that.

“And that’s now the journey the UAE’s banks are on and it’s wonderful to see the welcome change happening here.”

Originally published here.

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