Issue 46: Can Digital Banks Transform Finance?
Welcome to Backstory, a weekly newsletter turning global technology shifts into a three-minute read. This week, we’re thinking about the role of digital-only banks in the finance sector at home and across emerging markets – Mary Ames, Director of Strategy
THE BIG TAKE
Can Digital Banks Transform Finance?
Global financial technology is heating up fast. Everywhere you turn there are fresh sources of capital pouring into fintech start-ups, which fuel innovative banking solutions for the global unbanked. The UAE punches above its weight in fintech. As record numbers of people cross borders to find work, for example, the remittance market is one particularly hot spot for UAE-based fintech startups. Recent developments in the United States could present another opportunity for local investors and engineers.
Digital only: You may not have heard of Varo Money but it’s having a global impact. The bank is a digital-only US outfit that just received crucial FDIC approval. Until this point, digital banks needed to join forces with older, more established banks to complete their operations. With FDIC backing, Varo will be the first digital-only bank in the world’s largest economy. The flood gates are about to open.
Local implication: How does an American bank influence the local finance sector? With one of the most trusted banking sectors in the world, the US is showing other markets that digital-only banks are viable. The onus is now on local institutions to follow suit and roll out similar products at home. A digital-only UAE bank could specialise in remittance payments, offer multiple digital currencies, and easily expand operations around the emerging world. Emirates NBD has already started the process with their Liv product.
From West to East: By following developments in the West and emulating best practices, the UAE can further enhance its fast-growing fintech sector. With the leading technology infrastructure in the region, the UAE is ideally positioned to create the first digital-only bank in the Middle East. Leveraging the country’s position as a leader in the emerging markets, the UAE banking sector could become a world leader in digital finance. It’s a critical part of our growing knowledge economy.
QUOTE OF THE WEEK
“I don’t dream at night, I dream all day; I dream for a living.”
Steven Spielberg, film director
OUR VIEWS THIS WEEK
Economic horizon: Circular economies are rising. The idea of an economic model focused on reducing, reusing, recycling, and remanufacturing resources to ensure growth has transitioned from academic theory to a guiding ideology. This week, we took a deep dive into how circular economies operate and explore the benefits the model would have in Dubai. The potential upside is staggering.
The age of pandemics: In the wake of the deadly coronavirus, which continues to spread across the world, authorities have been re-examining their preparedness for pandemics. More resources are needed for research and infrastructure to ensure the next pandemic isn’t as deadly as the current outbreak. We reviewed how the UAE is investing in medical technology to stay on top of global threats and build the local knowledge economy.
A Message From Digit AI
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SPOTTED ELSEWHERE
There’s an AI for that. Have you ever tried to edit a Wikipedia article? If you have, you know what a daunting task it can be. Well, it seems that some programmers are working on an AI solution to this burdensome task. According to Silicon Republic, researchers from MIT “are set to unveil a new AI that could be used to automatically update any inaccuracies on the online encyclopaedia”, thereby giving human editors a robotic helping hand. The question is whether the AI can cut down on bias in Wikipedia.
Please regulate me: Speaking of Silicon Valley, executives are back in the news demanding to be regulated. Mark Zuckerberg, the CEO of Facebook, wrote in the Financial Times this week that “new rules might hurt Facebook’s bottom line in the short term but will help long term”. At the same time, the United States Congress is debating whether to create a US Data Protection Agency. As we have said many times in the past, the wheels of regulation are starting to move. It’s critical to pay close attention to how the debate unfolds.