BATOOL GHAITH (ABU DHABI)
The UAE’s emergence in Open Finance and central bank digital currency infrastructure is laying the foundation for a faster, more connected and data-driven financial system, according to experts.
Experts say the UAE is entering a new phase of digital finance transformation as Open Finance and the Digital Dirham begin reshaping payments, liquidity management and SME lending across the economy.
The developments come as the Central Bank of the UAE continues to expand its digital financial infrastructure, including the rollout of Open Finance systems, the launch of the Al Tareq platform and the advancement of the Digital Dirham.
Speaking to Aletihad, Dr Wissam El Khoury, Associate Dean of the School of Business at the American University in Dubai and a wealth and investment consultant, said Open Finance and the Digital Dirham are strategically important because they modernise the UAE’s financial infrastructure rather than simply introducing new payment tools.
“Open Finance creates the rails for secure data sharing and payment initiation across institutions, which lowers frictions in retail finance, improves competition, and allows credit, payments, and treasury services to be delivered with much greater precision,” El Khoury explained.
He noted that the Central Bank has already established the Digital Dirham as legal tender, unveiled the national currency symbol in both physical and digital forms, developed wallet infrastructure and executed the first live government transaction.
Al Tareq platform has also gone live with two banks and two Third-Party Providers meeting operational requirements, El Khoury noted.
“In economic terms, that combination supports lower transaction costs, faster settlement, stronger transparency, and a more competitive platform for domestic and cross-border innovation,” he explained.
El Khoury added that these developments are especially significant for a diversified economy like the UAE, where financial services, manufacturing, construction, wholesale and retail trade and real estate remain among the largest contributors to non-hydrocarbon growth.
On liquidity management, El Khoury said a retail Central Bank Digital Currency (CBDC) does not replace traditional monetary tools such as reserve requirements or the Base Rate, but significantly improves the precision and speed of liquidity transmission.
“Physical cash is slow, opaque and operationally costly. A retail CBDC gives the central bank a digital liability that can move instantly, settle with finality, and support programmable features within a regulated framework,” he said.
He added that the Central Bank has deliberately positioned the Digital Dirham as a complement to existing payment instruments rather than a sudden replacement for cash.
According to El Khoury, one of the clearest indicators of improved transmission is the narrowing gap between the Dirham Overnight Index Average and the Base Rate, which declined from around 20 basis points in 2024 to about 5 basis points in 2025.
“Over time, a retail CBDC can make liquidity management more targeted and more responsive than under a purely cash-based architecture,” he noted.
Michael Brown, Senior Strategist at Pepperstone, also said the broader economic impact of Open Finance and the Digital Dirham will largely depend on adoption levels.
“These developments can be hugely important for the economy at large, considering that they make payment rails considerably more efficient, while also allowing more rapid settlement of transactions both within the country, and cross-border,” Brown told Aletihad.
He noted that the key issue will be adoption, given that none of these benefits can be realised without the technologies reaching something of a critical mass in terms of usage.
Brown described CBDCs as a double-edged sword from a liquidity perspective. “On the one hand, it becomes easier for a central bank to manage liquidity, given that various limits can be put in place very quickly to either increase or decrease the attraction of funds being moved around the financial system,” he explained.
At the same time, Brown cautioned that extreme levels of CBDC adoption could eventually affect traditional banking models by reducing the low-cost deposits banks typically rely on to fund lending activities.
A major focus of the UAE’s Open Finance strategy is improving financing access for small and medium-sized enterprises (SMEs), which have historically faced difficulties obtaining bank credit.
El Khoury said Open Finance could materially reduce the information gap that often disadvantages SMEs under conventional collateral-based lending models.
“With consented access to transaction data, payment flows, cash-flow patterns and account histories, lenders can assess repayment capacity more dynamically and at lower cost,” he explained.
El Khoury noted that the UAE’s API Hub and aggregator model are designed to standardise implementation and reduce fragmented data systems, one of the largest barriers to SME financing.
The Central Bank also enhanced its SME Customer Protection Regulation in 2025, introducing revised requirements for banks and finance companies to act in the best interests of SME clients.
“Open Finance will not eliminate credit risk or replace prudent underwriting, but it should widen the pool of bankable SMEs, speed up decisions and improve pricing for firms with healthy cash flows but limited fixed collateral,” El Khoury said.
Brown similarly noted that Open Finance could help shift lending models away from heavy dependence on collateral. “The initiative should help engineer a shift away from the need to provide collateral in order to access credit, instead permitting credit to be offered based on real-time data,” he said.
According to Brown, this would provide lenders with a broader understanding of a company’s financial performance and creditworthiness while potentially shortening loan approval times and improving efficiency for borrowers.
The UAE’s fintech sector has also expanded rapidly under the Central Bank’s regulatory framework. According to El Khoury, fully licensed fintech entities under Central Bank supervision reached 36 by January 2026, up from 18 in 2024, while more than 60 firms were either licensed or granted in-principle approval during 2025.
At the same time, the UAE advanced to eighth place globally in the Global FinTech Centre Index, up from 21st place the previous year, maintaining its position as the highest-ranked fintech jurisdiction in the Middle East.
El Khoury said this acceleration reflects what he described as regulation-led market development. “That kind of acceleration does not happen without clear rules, licensing pathways, sandbox capacity, payment-token regulation and now Open Finance infrastructure,” he said.
He added that the UAE’s fintech ecosystem is now expanding across digital wallets, payment aggregators, buy-now-pay-later services, Open Finance providers, stablecoin-related activities and tokenisation services.
“The UAE model is best described as regulation-led market development. Policy created the rails, and demand is now scaling on top of them. That sequencing — clear rules first, innovation second — is increasingly recognised as the most durable path to fintech leadership, which is why the UAE is now the highest-ranked fintech jurisdiction in the region,” El Khoury said.