FinTech Is Here To Stay
Imagine it is the year 1980. You pay your rent in cheques, you buy your groceries in cash, you visit your bank to make transfers, and you consult currency exchange companies when you need to make international transactions. You live in a paper world where almost every financial task must be completed in person and where buying anything more complicated than everyday items – for example property – requires hours of form-filling and numerous appointments at different offices.
Put very simply, FinTech is what makes that 1980s world look so tedious and old-fashioned now. However, so many real estate developers still refuse to move from those processes.
FinTech, short for financial technology, is the industry that applies technologies and innovations to improve the delivery of financial services. It is a huge sector that covers a diverse multitude of companies and also has a longer history than people may think; innovations like credit cards in the 1950s, ATMs in the 1960s and bank mainframe computers in the 1980s are all early products of FinTech. Progress exploded in the 1990s with the launch of the Internet and over the course of the next thirty years, many services that we now take for granted – such as payment apps, mobile wallets and equity crowdfunding platforms – have been developed. Every time you use your mobile phone to transfer money or buy an item, you have FinTech to thank.
As a result of this ongoing progress, traditional financial methods are being disrupted as companies attempt to better meet the evolving financial service needs of today’s consumers.
Why is this relevant to the real estate industry? Because FinTech falls into a general set of verticals that are highly applicable to our sector, including lending, payments/billing, personal finance/wealth management, money transfers, blockchain, and even equity crowdfunding. Given that the global real estate market makes up half of all mainstream assets in the world, its close connection with the world of financial services is clear. FinTech is also becoming increasingly important as the real estate industry moves toward more customer-focused delivery.
So how is the real estate industry shaping up in the face of the FinTech revolution? From a global viewpoint, not well. In many countries, real estate remains a conservative industry that has been slow to embrace technological transformation and the benefits it can offer. However, in the UAE we are fortunate to be working in an entirely different environment – one that is characterised by progress, innovation and a future-centric vision that is driven by our forward-thinking leadership.
FinTech is already permeating the real estate sector in our part of the world and when it becomes ubiquitous our industry will enter a new stage of development that enhances Dubai’s values of transparency, efficiency and happiness.
How will this happen? To answer this question, I would like to highlight two main FinTech innovations that have already taken seed in Dubai’s real estate sector and that I believe will grow exponentially over the coming years. The first is blockchain and the second is crypto-currencies.
In 2016, His Highness Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai and Chairman of the Board of Trustees of the Dubai Future Foundation, launched the ‘Dubai Blockchain Strategy’, which aims to make Dubai the first government in the world to apply all transactions through this network by 2020. In response, wasl Asset Management Group, Dubai Land Department (DLD), Dubai Electricity & Water Authority (DEWA), the Smart Dubai Office, Emirates NBD, and the General Directorate of Residency and Foreigners Affairs (GDRFA), have jointly introduced a new electronic services system for registering and renewing smart real estate contracts using blockchain technology. This is very big news because it makes wasl the first real estate service provider in Dubai, and indeed the world, to adopt this revolutionary technology.
Blockchain technology is best imagined as a means of transferring assets while also creating permanent records of the details of each transaction. The magic of the system is that it is decentralised and does not rely on one authority. Instead, it contains a transparent ledger of shared data from a series of different parties (like wasl and its partners). The parties can transact freely with each other and it is the system itself that controls the validity of the exchanges.
This is a breakthrough for the real estate sector, which involves numerous third parties like estate agents, lawyers, surveyors, governmental entities, local authorities, banks, credit rating agencies, and utilities providers, to name only a few. Blockchain does not remove these parties but it allows them to work through a central system where all property details are available in one place and can be pulled from the blockchain in seconds. This will allow wasl and its partners to produce smart real estate contracts in a fraction of the time and with greater accuracy than ever before, reducing costs and risk while increasing efficiency and transparency.
Ultimately, this means that customers can complete the entire property rental or purchase process electronically. This can be achieved within minutes at any time and from anywhere in the world, and without having to visit all of the individual offices in person or even touch a piece of paper.
Blockchain technology also underpins crypto-currencies like Bitcoin, which present investors and buyers with a quicker and cheaper way to make transactions, particularly for international sales. This is because with Bitcoin transfers, third parties are eliminated and the transaction fee is just 1%. Earlier this year, Dubai’s first major real estate development to accept Bitcoin as payment was launched. Aston Plaza and Residences, from the Knox Group, provides the international crypto-currency community with an ideal opportunity. One-bedroom apartments will be available for 54 bitcoins (USD 250,000), while two-bedrooms can be bought for 80 bitcoins (USD 380,000). This is certainly an innovative way to draw fresh international investment to Dubai’s real estate market.
Bitcoin and other crypto-currencies like Ethereum and Ripple are still struggling to enter the mainstream, particularly in the Middle East, where their inherently risky character does not sit well with the local investment culture. However, OneGram, the first Islamic Sharia approved cryptocurrency, is stepping in to fill this gap. Each OneGram Coin (OGC) is backed by a gram of gold, which ensures that it remains a fully capitalised and stable digital currency. In compliance with Islamic Sharia law, it is zero interest, profit-loss sharing and non-speculative as it is pegged to gold. It is also simple to buy and trade. Could this innovation spark more widespread crypto-currency adoption in the Middle East? And how long will it be before the first Dubai property is bought with OGCs?
These are exciting questions because we are on the brink of a second wave of FinTech innovation. I believe these new technologies are already finding an ideal home in Dubai’s real estate sector, where they are enhancing the transparency, efficiency and happiness that has always distinguished our property market on the global stage. The seeds have been planted and it is now our responsibility to nurture them.