UAE at 50: How technology has revolutionised our personal finances

As the UAE celebrates its Jubilee year, the country has emerged as a leading global player in the financial services industry that has been revolutionised by technology and transformed the way we bank, invest and save our money.

From opening bank accounts with facial recognition technology to investment robo-advisories that deploy artificial intelligence to measure risk factors to instant money transfers, neo banks and landmark legal reforms, the sector has come a long way since the early 1970s, when the dirham was first introduced as the country's official currency.

That was a time when it would take weeks to remit money home, when financial services employees would painstakingly fill out forms manually and consumers would line up at a bank or exchange house to apply for travellers cheques before taking an overseas holiday.

But it was the 1980s that proved to be the turning point for the sector, when the humble fax and telex machines became a crucial means of “real-time” communication for the country’s banks, exchange houses and other financial services firms.

“I recall the handwritten book-keeping and the use of carbon paper to create copies before the photocopiers and computers came into the picture,” Rashed Al Ansari, the chief executive of Al Ansari Exchange told The National.

“I also recall when travellers cheques revolutionised international money transfers, which is today considered obsolete. There were days when transactions were being recorded by hand and mailed, before being sent by telex and fax.”

However, it was the internet that was the driver behind the sector's transformation, which made transactions simpler, quicker and more affordable than ever before, while today’s mobile technology has also influenced the way money is being transferred around the world, Mr Al Ansari said.

The digitalisation of the UAE’s financial services sector accelerated during the Covid-19 pandemic, as consumers increasingly relied on the convenience of mobile apps to do their banking, send money home, trade in stocks or shop online during movement restrictions.

“Smartphones and other mobile devices effectively reshaped the future of the global remittance business,” Mr Al Ansari said. New technology will continue to drive the sector's transformation thanks to innovative FinTech start-ups, which are working with numerous lenders and exchange houses on open banking concepts and blockchain, for instance, in an effort to further streamline services.

Banking customers today want a seamless, automated experience with little waiting time – a far cry from the days when the internet did not exist and queuing up to make a deposit or cash withdrawal at a physical bank was the norm, according to Philip King, the head of retail banking at Abu Dhabi Islamic Bank, the biggest Sharia-compliant lender in the emirate.

To enable this, banks in the region are digitising complex processes and end-to-end customer journeys across their front, middle and back offices, according to the UAE Banking Perspectives 2021 report by KPMG.

“At ADIB, we believe the digitisation of banking services is a necessary advancement to help banks fuel new growth opportunities and unlock greater value for customers,” Mr King said.

“For simple transactions like payments and transfers, customers prefer digital or mobile channels that provide instant and convenient services,” he adds.

“For more complex or critical banking products, including investments and home finance, customers prefer to visit the branch and interact with their relationship managers. So, the appetite for digital interactions varies across banking products, which is why at ADIB we always look at a hybrid approach.”

Meanwhile, the UAE introduced landmark legal reforms in 2020 that improve the protection of our personal finances in the future. The sweeping amendments to laws on inheritance, bounced cheques, bankruptcies and economic support during the Covid-19 pandemic were introduced as part of the Emirates' efforts to reshape its legislative and investment environment for the 21st century.

One of the most welcome changes was the update to the Federal Law on Commercial Transactions, which includes several new provisions that aim to discourage criminal lawsuits against people and businesses for bouncing cheques.

The amendments come into effect in 2022 and will introduce a mechanism that ensures banks partially pay the amount to the beneficiary after it is deducted from the available funds in the account of the cheque issuer.

The opportunities for retail investors to take control of their investments has also undergone a significant change compared with the days when financial advisers, driven by high commissions, would mis-sell complex investment products to unsuspecting people.

These days, retail investors are increasingly seeking access to markets with the help of technology, leading to a surge in popularity for zero-commission trading apps such as Robinhood, eToro and Interactive Brokers.

Digital wealth managers such as the UAE's Sarwa and StashAway are also helping to revolutionise the financial services landscape in the Middle East by offering low-cost investment solutions to a large market that has traditionally had limited access to trading and investing in the past.

Demand for trading apps soared during the pandemic as monetary easing by the US Federal Reserve and other central banks around the world gave novice day traders more money to invest during pandemic lockdowns, according to a report by Finra Investor Education Foundation and the National Opinion Research Centre at the University of Chicago.

This trend is set to continue. The global robo-advisory market size is projected to grow by 31.8 per cent to $41.07 billion by 2027, up from $4.41bn in 2019, according to Allied Market Research.

“There have been a lot of milestones that we can point to [in investing], but the main trend at every step was making it cheaper, low cost, almost free in some cases, and making it more accessible so there is more wealth in more hands,” according to Mark Chahwan, co-founder and chief executive of Sarwa.

“It started with mutual funds, then it went on to exchange-traded funds. There was a resurgence in passive investing, but now active is making a comeback with trading, where it's not just about securing your safety net and a diversified portfolio, but also about investing in themes you believe in.”

Over the coming decades, it will be Generation Z and their younger cohorts who will reshape the financial industry in their tech-savvy, mobile-first image, which will have ramifications for all consumers, companies and investors, according to Morgan Stanley.

Mr Chahwan agrees: “I won't say this is a plot twist, but the new big element that's now shaking up the industry is the amount of young people that are investing … and are growing up in such an environment”.