FINTECH

The DFSA’s Innovation Testing Licence provides a controlled environment for a firm to develop and test innovative FinTech ideas without being subject to all the regulatory requirements that would otherwise apply to it as an Authorised Firm.

To be considered for this type of Licence, firms need to meet the following criteria:

• it must involve innovation and the use of FinTech;

  In assessing if a business involves innovation and the use of FinTech, the DFSA will consider, if the business model, product or service uses new, emerging or existing technology in an innovative way, and if it brings a new benefit to consumers or industry

• it must involve an activity that, if carried on in the DIFC, would amount to a Financial Service (or combination of Financial Services);

  In order to obtain a DFSA Licence, the activity proposed must involve a Financial Service within the scope of the DFSA’s regulatory regime, for example, arranging deals in investments or advising on financial products.

• it must be ready (or soon be ready) to start testing with customers or industry;

  In assessing if a business is ready to start testing, the DFSA will want to see a regulatory test plan that, for example, sets out the objectives and parameters for testing, and the timeline and key milestones for that testing.

• the firm must intend to roll out its business on a broader scale in or from the DIFC after it has successfully completed testing.

  The DFSA will want to see evidence of how the operator intends to roll out its business at the end of the test period.

If the eligibility criteria are met, and in order to be able to apply for an ITL, a firm must be accepted into one of the DFSA’s cohorts. Once a firm is accepted into one of the DFSA’s cohorts, the firm will be invited to complete an ITL application. As part of the ITL application, the firm will be required to provide a regulatory test plan that describes the proposed business model, product or service, and the details of how that will be tested and what controls will be put in place.

The DFSA will help applicants navigate through this process. Please see the ITL FAQs  for more information.
 

The DFSA will work with a firm to establish which Rules should apply during the testing period. While the DFSA will give waivers from, and modifications to, some Rules, there are some key requirements that must be met. These include, being located in the DIFC, complying with UAE Federal Laws, and acting with integrity and due skill, care and diligence.

Some limits will be placed on the testing activities to ensure appropriate controls for the safety of any customers involved. These include, for example, restrictions on the number and type of customers that may take part in testing.

The testing period will be for a finite period of time, normally six to twelve months. In exceptional cases, the DFSA will consider extending that period.

If a firm has met the outcomes in the regulatory test plan and has shown it can meet the full DFSA authorisation requirements, it will migrate to a full licence. If it does not, it will have to employ an exit strategy.