ADQ will be setting up a digital bank in the United Arab Emirates (UAE) with an initial capital of US$544 million. Using the legacy banking license of First Abu Dhabi Bank (FAB), the biggest lender in the UAE. FAB, formed following a merger between First Gulf Bank (FGB) and National Bank of Abu Dhabi (NBAD), will transfer its license for FGB to ADQ. It will own a 10% stake in the digital bank and will have preferential access to an additional 10% when it goes public. The UAE’s financial sector has long been conservative, remaining to this day dominated by incumbent banks which have benefited from a favorable regulatory framework. Free zones including the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM) have been pushing for greater digitalization of the financial sector and introduced licensing schemes specially designed for digital banking services. But since these offshore jurisdictions have no authority over banks licensed by the UAE central bank, their licensing schemes are viewed as advisory guidelines rather than regulations, creating jurisdictional uncertainties for both fintech startups and investors.
Neobanking has nevertheless began emerging in the UAE over the past few years, primarily through bank/fintech partnerships. This allows neobanking startups to operate under their partner financial institution’s license. For banks, this allows them to provide their customers with more convenient digital services, as well as reach underserved demographics such as low-income individuals and migrant workers.