Dubai is one of the world’s largest trading hubs. Non-Oil Foreign Trade in 2019 reached AED 1.4 trillion. Its trading roots have been tracked back to the 5th century. At that time, there was an established trading route stretching from Oman, through Dubai and onto Iraq. Even then, payment tools were used during trading. Every traded item had a value. Additionally, buyers wanted to know that sellers were reputable, and sellers wanted to know who their customers were.

Whilst forms of payment are different today, the principles behind sharing and receiving money, and needing mechanisms to make payments remain the same.

For decades, Banks have been the main custodians of money flows between buyers and sellers. They have and continue to provide guarantees that money is coming from legitimate sources, whilst ensuring recipients receive payments.

The average consumer now makes 70 transactions a month. China, the United States of America, Japan, United Kingdom and South Korea currently process the highest value of digital transactions in the world. However, higher rates of growth are expected from emerging markets in the coming years.

The traditional management of money services is being disrupted by new FinTech companies and user behaviour in places such as Africa where mobile payments using platforms such as M-Pesa account for close to 10% of sub-Saharan GDP.

Around 35% of FinTech companies are developing payment solutions. These start-ups have been one of the key drivers behind new innovative business models, increased transparency and better customer experience. They are creating new jobs and addressing financial inclusion among individuals and SMEs.

As more digital transactions are completed by consumers and companies, so must the regulation and provision of money services.

Last year, the Dubai Financial Services Authority (DFSA) issued a consultation paper looking to expand the range of money services that can be offered by companies operating in DIFC. Subsequently, in April this year the DFSA and DIFC became the first and only financial centre in the Middle East, Africa and South Asia (MEASA) region to enact comprehensive money services regulations including providing money services and arranging and advising money services activities.

The consultation and regulations emerged due to rapid advancements in technology and to address risks associated with money services activities.

New money services rules will allow companies to issue payment instruments, provide money transmission, provide payment accounts and perform transactions on a payment account held by another person. These payments can only be made electronically and exclude foreign exchange services as a stand-alone service.

Transparency and reporting of activities are critical to the reputation of the money services sector. Therefore, firms providing and arranging money services will be subject to an independent annual money services auditor’s report.

Resolving payment disputes is a hot topic in the money services industry. This is why the bar will be raised by implementing tighter timeframes to solve them. To support complainants, if they are not satisfied with the outcome, they will be able to make use of an independent resolution service, such as the DIFC Court’s small claims section. This will be free of charge to the complainant if they are successful.

The regulations should stimulate more innovation in the financial sector and unlock new business models that can support the recovery of the economy post COVID19. . Established global FinTech firms as well as new regional start-ups wanting to break into this space will naturally choose DIFC as their regional hub, due to its leading regulatory and legal framework and global standards (for example intellectual property and data protection) to develop their proposition. The new money services regulations also lay the ground for open banking in the region as they include Payment Services Directive (PSD 2) activities. These include payment initiation services, which will enable emerging FinTech’s in this space to get regulated and gain trust from Banks to work together. DIFC has proven to be a regional launch pad and gives access to the largest financial and FinTech services ecosystem that will set them up for success.

Dubai and DIFC’s ranking as one of the world’s leading financial centres will be further enhanced by these regulations. This is also because the DFSA, which is the region’s most proven and experienced financial centre regulator, has addressed all important questions and uncertainties to make this regulation as clear and practical. Our contribution to developing the industry through regulations including these will continue to become the benchmark used by others.

The world will continue to trade. However, ways of trading may change. DIFC’s commitment to driving the future of finance means we will always be there to find new ways to advance the money services sector.

Written by Arif Amiri

In his capacity as Chief Executive Officer of DIFC Authority, Arif Amiri oversees the strategic and operational functions of the Centre. Under his leadership, DIFC has grown substantially and set out an ambitious 2024 Strategy, which will see it further enhance its position as the leading financial hub for the Middle East, Africa and South Asia (MEASA) region.