Digital Banking

Digital banks play a pivotal role in advancing the innovation and financial agenda of Abu Dhabi and of the UAE, particularly in relation to small and medium enterprises (SMEs) and corporate sectors, and in areas such as trade finance, SME lending and transactional accounts among others. Digital banking also enables and promotes financial inclusion accessing untapped, unbanked and underserved clients across markets.

ADGM’s Digital Banking Framework focuses on conventional banks seeking to establish digital banks, or branches of digital banks, as well as for firms with innovative value propositions. ADGM also invites applications from partnerships between technology companies and financial institutions looking to be issued a digital bank licence.

The services offered by digital banks are wide ranging and seek to provide novel customer and transactional solutions. A few examples of these services include:

• Trade finance: operating a digital trade finance bank from ADGM, utilising 21st-century technology to revolutionise how trade finance operates, reducing costs and risks in a well-regulated ecosystem
• SME lending: digital banks focusing on lending to small and medium-sized businesses. Advances in AI, data management and analytics enable more risk-sensitive and timely credit decisions at a lower cost
• Digital transactional banking: digital transactional banking will allow payments and treasury services to flow more smoothly, enabling real-time payments at significantly lower execution costs

To ensure high quality applicants meet prudential requirements and to safeguard systemic stability, ADGM’s Financial Services Regulatory Authority (FSRA) requires a base capital requirement of US$10 million, robust governance structures, compliance and risk management policies, IT security measures, and certain mandatory senior management appointments.

Depending on the type of innovative solutions to be provided, all applicants will be assessed appropriately for a digital banking licence. Entities looking to deploy innovative solutions in the payment space, such as e-wallets, tokens, and stored value card, can consider other forms of licences that attract a lower regulatory and capital burden than a full digital banking licence.

Financial services entities are required to meet specific resource requirements, either designated as Controlled Functions, which require approval by the FSRA, or as Recognised Functions, which are appointed by the entity itself and notified to the FSRA. For more information refer to Chapters 5.3 and 5.4 in the ADGM General Rulebook (GEN).

Entities that are either required or that want to have a physical presence, will find a wide range of Grade A office space on Al Maryah Island to choose from. The ADGM team will advise regarding office requirements on a case by case basis.

Digital Banking is one of five Banking focused areas at ADGM. The other areas include Corporate Transaction Banking, Private Banking and Wealth Management, Investment Banking and Money Service Business.