Revolut, regulators and the future of UAE remittances

London-based Revolut has finally received regulatory approval to operate in the UAE. This is good news for consumers who have had to put up with flabby foreign exchange rates and high charges – see below – for too long. It will be less welcome to incumbents.

For the moment, only payments and remittances will be affected. The licences allow Revolut, now valued at about $75 billion, to offer multi-currency accounts, payments, cards and international money transfers, according to John Crowley.

Well done to the Central Bank of the UAE for allowing the disruption. It has been some time coming. The next frontier will be other services – Revolut is entering without a full banking licence – in the form of loans, mortgages and, crucially, the ability to take salary deposits. That would really open up the migrant workers’ remittance market.

The company is not one to hang about. It wants to achieve a $200 billion stock market listing in two years, which means rapid expansion.

Revolut and other challengers are, however, likely to face obstacles integrating with domestic payment systems such as UAE PASS and Saudi Arabia’s Mada system, according to Ali Nanji of banking tech specialist Backbase.

These are “competitive moats that local players have spent years building”, Nanji told AGBI last year. Yikes.

In the UAE and elsewhere in the Arabian Gulf, the incumbents have been preparing for this for years. Emirates NBD launched its digital brand Liv back in 2017. Zand, headed by Emaar chairman Mohamed Alabbar, started in 2022 – the same year FAB and other Abu Dhabi heavyweights set up Wio.

Qatar National Bank launched Enpara; Bank ABC in Bahrain set up digital-only Ila Bank in 2019; Saudi Arabia has STC Bank.

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In other parts of the Middle East, fintechs such as MNT-Halan and Fawry are shaking up the torpid Egyptian market. MNT-Halan offers a range of banking services but its chief executive told AGBI last year that it was primarily targeting the underserved poorer segment of Egyptian society.

But Morocco, which Revolut had previously identified for market entry, has already given the digital bank the no-no. We can only speculate on the reasons, but you cannot order from Amazon in Morocco either.

Back in the UAE, during a roundtable hosted by Standard Chartered Ventures, participants said the banks had already lost the remittances market and were on the verge of losing payments for small and medium-sized businesses, according to Shruthi Nair.

Banks – those that survive – are likely to evolve into fintech-like platforms, participants said. Those that fail to adapt risk becoming little more than providers of balance sheet capital, which means deposits for others. We shall see.

Iraq, hitherto not often associated with (legal) financial innovation, provides an indication of the future. Yazen Altimimi, chief executive of ZainCash, an Iraqi startup majority-owned by Kuwaiti telecom Zain, told Valentina Pasquali that payment companies in the UAE take 4 or 5 percent on transactions. In the US fees of 2 to 5 percent are typical.

“These fees you will never see in Iraq,” Altimimi said. In Iraq, 1 percent is “on the high end”.

So, it is possible to make money on much reduced margins. The question is whether the regulators allow it. But the good times for incumbents look to be coming to an end.

James Drummond is Editor-in-Chief