Digital-only banks, or neobanks, are emerging in the MENA region. Both the UAE and Saudi Arabia are developing frameworks to license digital banks, creating opportunities for fintech companies with banking ambitions.
UAE Digital Banking
The UAE Central Bank has shown willingness to license digital-only banking operations. The CBUAE's framework allows for digital bank licenses with modified requirements recognizing the technology-driven operating model. Several applications are in various stages of review.
Saudi Arabia's Approach
SAMA has licensed digital banking operations and continues to develop the framework. The Kingdom's large, young, and digitally-savvy population represents an ideal market for mobile-first banking services.
License Requirements
Digital banking licenses require substantial capital reserves, robust technology infrastructure, comprehensive risk management frameworks, and experienced management teams. The requirements are significant but reflect the systemic importance of banking activities.
Business Model Considerations
Successful digital banks in MENA must offer differentiated products beyond basic accounts. Sharia-compliant savings products, integrated investment features, and seamless payment experiences are essential to attract and retain customers in competitive markets.
The Competitive Landscape
Established banks are investing heavily in digital transformation, creating a competitive environment for new digital-only entrants. Differentiation through user experience, product innovation, and underserved segment focus is critical for new licensees.