Banking License Puts Profitability Within Reach for UAE Neobanks

If the Middle East was late to the neobank party, the United Arab Emirates, at least, is making strides toward the future of digital banking.

In an interview with Jayesh Patel, CEO at UAE-based neobank Wio Bank, he said that the new platform emerged out of “trying to understand what the needs of the next 10 years of the digital economy are.”

Read more: Wio Digital Bank Launches in UAE With Initial Focus on SMBs

He told PYMNTS that Wio — which he called “a technology platform with the heart of a bank” — represents the next chapter in the evolution of banking: an operational model that combines digital banking, embedded finance and banking-as-a-service (BaaS).

The firm’s proposition is to offer digital-first accounts that take advantage of mobile apps to deliver innovative features to customers. But as well as offering user-facing services, Wio’s embedded finance solutions are about integrating with key digital players to “create a richer, better ecosystem for financial services.”

Related: YAP CEO Says Collaboration, Not Competition, Creates More Wins for MENA Neobanks

On the third pillar of Wio’s platform banking model, BaaS, Patel added that the intention is to offer the bank’s tools and capabilities to empower FinTechs in the region.

Advantages of a Full Banking License

While digital banks in other parts of the world have often launched under the umbrella of a preexisting license, or with an electronic money license as opposed to a full banking license, Wio, which launched earlier this month, has been granted a full license from the Central Bank of the UAE.

See also: UK Digital Bank Kroo Granted Banking License

Explaining how the license allows Wio to offer a greater range of products and services, Patel said that for most digital banks that launch operations using eMoney licenses or other products, the biggest challenge they face is monetization. As a result, they tend to focus on only building a transactional banking business.

Wio, however, is bucking the trend.

“We want to be an enabler to our business customers and an enabler to our individual customers,” Patel explained. “For that, we need to serve both sides of a balance sheet. Given that we have a full banking license, we can start propositions related to lending [and] we can do a lot more for our customers.”

He added that the banking license means customers will make Wio their primary account faster than has been the case in other instances, while helping the bank become “profitable and sustainable” — a milestone many digital banks have struggled to reach.

Although Wio wants its customers to use the bank for their primary account, Patel admits that this may not happen straight away if they already have accounts with other banks. However, he anticipates that Wio’s value-added services, which include features such as virtual cards and tools for expense management, will convince users to pass more money through their Wio accounts.

What’s Next?

Currently only available in the UAE, Patel said that regional expansion is on the cards for Wio, but that “our first focus right now is to get our products right in the UAE and build our platform so it’s scalable into other markets.”

On the general state of its financial ecosystem, he stated that the country has “a very favorable regulatory environment,” which he expects will continue to incubate innovation both from existing players and new players entering the space.

When pressed on which countries had the most appeal outside of the UAE, Patel said that Saudi Arabia was “an incredibly, interesting market [with] a ton of innovation and FinTechs coming out.”

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