Neo Banking 101: The Emergence of Digital Banking in the UAE

The Emergence of Digital Banking in the UAE

The emergence of internet users and the accessibility of the same have affected the banking sector vigorously in the past few years. Moreover, the worldwide Covid 19 pandemic added fuel to the process. 

According to Statista, the UAE is home to almost a third (35%) of all new startup enterprises in the MENA area. However, in the UAE, having access to banking is typically considered a challenge for new businesses.

Therefore, the banking sector is in the era of witnessing evolution in the nation. The introduction of digital banks in the UAE is expected to change the former look of banking.

Go on and read the blog to know more about this evolution in the UAE.

A Short Brief to Neobanking

The banking sector also has evolved into a digital form like currency. Read more on an introduction to Bitcoin, a digital currency

A "neo-bank" is a new form of financial institution with no physical branches. Instead, it provides all of its banking services via digital/mobile channels such as a smartphone or a web interface. 

Depending on the regulatory regime of the given market, a neo-bank may possess a full-fledged banking license, a specialized digital banking license offering a limited set of goods or services, or operate without a bank license by collaborating with traditional banks.

In the fintech and consumer banking realms, "neo-banking" has become a buzzword. Neo-banking, often known as "Challenger Banking" or "Open Banking," is a trend in established and developing nations. In essence, it's a new banking method that exists outside of traditional brick-and-mortar locations and has a strong internet presence.

Advantages of Neobanking

Are you wondering about the benefits of Neobanking? Have a look:

  • Customers' banking is made simpler, easier, and more entertaining
  • Provides personalized banking services to the customers
  • Customers' transaction processes will be more transparent
  • Cost redemption and effective cost management

Current Neobanking’s Global Landscape

The neo-banking market has grown exponentially over the last five years regarding client base and total market size. In the next 5 years, the market is projected to increase by at least 25-30%. Neo-banking holds a lot of potential in the near future, thanks to its unique benefits for both the fintechs that engage in it and the clients it serves.

According to current forecasts, neo-banking will become mainstream within the next few years, with an increasing number of consumers and small companies overcoming their reservations and accepting this new wave of banking and financial revolution. It will be interesting to see if it succeeds in displacing traditional banking.

Initiatives Taken by the UAE in the Neobanking Platform

DUBAI, United Arab Emirates (Reuters) - the Central Bank of the United Arab Emirates has given in-principle clearance for a new digital banking platform sponsored by state holding firm ADQ to begin operations in digital banking.

The decision comes following the introduction of a neo bank supported by Dubai-based YAP, the new digital bank in UAE, launched in 2021. It has collaborated with RAK Bank, which provides YAP users with foreign bank account numbers and safeguards their cash under its own banking license.

Some UAE banks, such as Emirates NBD's LIV and Mashreq Bank's Mashreq Neo, have recently introduced their own digital banking products aimed at digitally adept and younger people.

Like other neo banks without physical offices, YAP does not provide specific banking services such as loans or mortgages. Instead, it focuses on spending and budgeting analytics, peer-to-peer payments and transfers, and bill payment.

Impact of Neobanking on the UAE’s Economy

To move towards a fully digital world, regulators want to link the UAE's digital strategy with the country's banking business. Despite the UAE now has over 50 commercial banks, the Central Bank of the UAE created a separate FinTech office in 2020, paving the door for new local digital banks.

In addition, these newly established digital banks are focused on optimizing operations to execute high-volume digital transactions to meet the growing need for digitalization.

Banks are also adapting their business strategies to serve as a hub for various digital transactions. For example, to create their brands, they define the essential recruiting needs and other operational issues.

So, UAE has become a hub for startups; the investors are now keen to move their business or start a new entrepreneurial venture in the nation. Additionally, the introduction of neo banking accelerated the business setup process in the UAE.

UAE has different lucrative places for start-ups; read more about choosing the best location for your next startup venture.

However, in order to avoid the complexities of opening a company in the UAE, it is advisable to grab assistance from business consultants. Business Setup Worldwide is here to assist you in the process of your company formation overseas.

Our experts will help you with all the logistics during the UAE business setup process. Contact us for further queries. 


1. What is the expected growth in the neobanking sector?

47.1% and hit a $333.4 billion market size.

2. What are the new rising trends in the banking sector in the UAE?

‘Metaverse’ utilization
Increased digital presence
Providing financial education as a means of democratizing banking

3. What are the examples of neobanking?

Razorpay X