FinTech agreements with Israel to expand market access and funding, ADGM exec says

The fast-evolving market in the region means developing hubs is 'not a zero-sum game', Richard Teng says

Richard Teng, chief executive of the ADGM Financial Services Regulatory Authority. Chris Whiteoak / The National

The agreement signed between Abu Dhabi Global Market and the Israel Securities Authority on Wednesday represents the first step of a broader co-operation between the two sides in the FinTech space – a move that will expand market access in both jurisdictions and deepen investment, the head of ADGM's regulatory arm said.

"There is so much more we are seeing not only at the government level, but [also at] the regulatory level," Richard Teng, chief executive of ADGM's Financial Services Regulatory Authority, told The National.

"We are also exploring other areas of growth in terms of working on areas of market infrastructure, liquidity, market access.

"With any new collaboration, as you widen market access, as you broaden market reach for local players internationally, it will only lead to more opportunities and we are seeing new funds that are being set up to co-invest in opportunities [in] both countries and both regions."

Israel has a strong reputation as a FinTech hub. The country is ranked 12th globally in Findexable's 2020 Global FinTech Rankings, with Tel Aviv the top-ranked FinTech hub in the region.

There are currently more than 500 active FinTech companies in Israel with equity investments into the sector more than doubling to $1.88 billion in 2019, according to Amir Yaron, governor of the Bank of Israel.

“The FinTech market in Israel is growing and is oriented primarily to markets in the US, Europe and Asia and is still almost not at all to the Arab market. There is a great potential for a leap forward,” he told the FinTech Abu Dhabi Forum on Wednesday.

“We expect new regional collaborations and initiatives will be a driver for Israeli companies to reach more markets and for foreign companies to reach Israel,” he added.

The substantial market opportunity in the wider Middle East, Africa and South Asia region means there are opportunities for multiple hubs to thrive, Mr Teng said.

"It’s not a zero-sum game. Financial services centres and FinTech hubs are here to support the real economy, to support growth. The more we can do, the more the real economy is growing," he added.

"If you look at Asia-Pacific, people have been playing the Hong Kong-Singapore story to death for decades now, and both have grown tremendously in their own right. And as they are growing, the rest are growing, too. Shanghai, Beijing – the likes of Jakarta, Kuala Lumpur, Bangkok, Seoul – they are all growing at a very fast pace."

The marketplace in the wider region is "extremely dynamic", he said.

"If you look at the Middle East and Africa alone, the number of young adults joining the workforce in the next three decades will surpass the number of young adults joining the Chinese workforce."

Mr Teng stressed the importance of co-operation between FinTech hubs for the industry to thrive.

"I think the competition part has been overplayed. It is more about collaboration because the pie is growing very quickly. We want to make sure the pie continues to grow," he added.

Abu Dhabi's technology sector has had a strong year despite the Covid-19 pandemic, Mr Teng said, attracting a "record" number of regional and global venture capital firms.

"The amount of money invested in FinTech has continued to grow quite rapidly. Despite Covid-19, the total amount invested [in the Middle East, North Africa and South Asia] in the first half of this year has matched the total amount invested in 2019. That momentum will continue," he said.

"If you look at the funding infrastructure, the funding ecosystem ... Mubadala has been big champions in that space, the likes of Softbank have expanded their presence here, Abu Dhabi Investment Office, the Executive Council, Abu Dhabi Holdings (ADQ) … I think all of these are key proponents and key investors. They have set aside funding and have started to invest in both VCs as well as direct investments. That makes for a very vibrant funding ecosystem," he said.

A five-year progress report published by ADGM earlier this month showed 2019 was "a record year" for the financial free zone, Mr Teng said. ADGM issued 2,932 licences over a five-year period and the centre was home to more than $33bn of assets under management at the end of 2019, the report said. It signed 45 agreements with regulators and 32 with FinTech entities from around the world.

"This year, the numbers that we have ... will surpass those of last year. In a Covid environment, it just shows you how much momentum we have. I think very few others in the region can say that this year's figures of growth have surpassed last year's by such a wide margin."