Countries in the Middle East are quickly accelerating their regulatory standards to enable and nourish the latest fintech innovations. A new report from KARM Legal Consultants, the emerging technologies-focused law firm, provides insightful analysis into how the regulatory environments of the United Arab Emirates (UAE), Kingdom of Saudi Arabia (KSA), Bahrain and Turkey compared to one another as well as to the EU and UK.

The research addresses regulatory frameworks for each country before diving into promising subsectors – stored value facilities, merchant acquiring and payment aggregation services, buy now, pay later (BNPL) and open banking – and how each region is responding to them.


Commenting on the importance of the report as a benchmark for regulations, Dr. Nouran Youssef, senior financial sector specialist at the Arab Monetary Fund, said: “This report offers valuable insights for all looking to navigate the evolving world of fintech. The visionary leadership in the UAE positions it as a fintech pioneer in the MENA region, while KSA and Bahrain emerge as players fostering startup growth.”

Differentiating merchant acquiring and payment aggregation

With the UAE standing out as a highly innovative ecosystem driving fintech development forward, the whitepaper highlights the different regulators within the country that have played a pivotal role in helping the region to prosper.

The Central Bank of the UAE (CBUAE), along with the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM), are recognised as key players in fostering innovation within the financial sector. Notably, the report underscores CBUAE’s proficiency in merchant acquiring and payment aggregation, facilitated by its distinct regulatory framework.

The reportalso highlights a parallel drive for innovation in KSA, where the Kingdom has introduced ‘Implementing Regulations’ aimed at enhancing the efficiency of its payment system infrastructure. Notably, these regulations streamline the process for fintechs, eliminating the necessity for entities to directly engage with a merchant acquirer. This advancement fosters seamless transactions for both entities and merchants alike.

Capitalising on the digital wallet boom

The expertise demonstrated by the Dubai Financial Services Authority (DFSA) surrounding digital wallets is also acknowledged, with the latter’s regulatory scope mirroring those of the EU, UK and Singapore. This is due to risk management, record keeping and auditing regulations. Furthermore, six licensed entities are issuing digital wallets and/or pre-paid cards in DIFC, with four of them currently testing their services and holding an innovation testing licence.

The report also reveals that the Kingdom’s regulatory framework encompasses essential compliance requirements related to client money handling, outsourcing, risk management, and information security.

Keeping up and leading open banking innovation

Bahrain was one of the first nations in MENA to come out with a comprehensive open banking regulatory framework. It has remained at the forefront of innovation within the space as the Central Bank of Bahrain (CBB) encourages the development of new, customer-centric products and services using open banking tech.

The Kingdom’s framework and constantly updating regulations have enabled the technology to flourish, and this is something the whitepaper notes the UK must emulate. It notes the importance of the UK in evolving and innovating open banking, however, it points out that the technology is at a crucial crossroads as greater regulation is needed to drive new use cases.

A regulatory minefield

The final regulatory space the report puts the spotlight on is BNPL. As one of the hottest talking points in paytech, many regions are continuing to explore how they can best take the technology forward. We learn how some regions have specific BNPL measures in place while others have more general regulations, like Turkey, or even stricter rules such as the UAE.

Within the UAE, both the DFSA and FSRA limit the availability of credit services to businesses and professional clients only. In Turkey, however, there are more general regulations in place. In short, firms can take part so long as they meet certain criteria: they are evaluated within a framework of financing agreements and consumer credit agreements.

While each region examined in the whitepaper presents its unique set of regulatory challenges, KARM’s research sheds light on how these ecosystems are actively addressing these obstacles. Moreover, it elucidates how these regions are proactively striving to enhance and evolve their regulatory frameworks to foster a conducive environment for fintech innovation.

Akshata Namjoshi, associate partner and fintech head, KARM Legal “By delving into the regulatory frameworks of the UAE, KSA, Bahrain, EU, UK and Turkey, our report provides actionable insights that offer a beacon of clarity amid the complexities of fintech regulation, aiding industry players in their decision-making.”