MEA Finance - February 2022 by meafinance

February 2022

Lands of Promise Thierry Simon, Chief Executive Officer - Middle East and Africa, Crédit Agricole Corporate & Investment Bank

February 2022

Lands of Promise Thierry Simon, Chief Executive Officer - Middle East and Africa, Crédit Agricole Corporate & Investment Bank

12 Retail Banking | 24 Open Banking | 34 Climate Change | 46 Leaders in Banking Technology | 56 Opinion Piece

HOW CAN YOU ACCESS U.S. REAL ESTATE INCOME SOLUTIONS? FEATHER GLEN

In business for over 40 years, the Walton Group of Companies is an international real estate investment company focusing on the research, acquisition, administration, planning and development of strategically located land in major North American growth corridors. Working closely with the largest U.S. homebuilders, we specialize in providing innovative land-based real estate products focused on generating short to medium term USD income for qualified investors.

Endorsed as Shariah-compliant by Amanie Advisors

Speak to us today to learn more about our products and how you can deliver superior returns for your High Net Worth Clients. For more information, please contact TIM HAYWOOD at Timothy.Haywood@walton.com | +971 05 44 888 673 Risk disclosures: Investing in land has risk. Land investment is illiquid and it may be impossible for you to sell your land within a short period, or at any time at all. Land could potentially lose value over time. Past performance is not necessarily indicative of future results. No representation is made that profits, income or other returns will arise, or will likely arise, from the acquisition, holding, disposal or any other dealing with the land, or that any profits, income or other returns will arise or will likely arise within any specific time. These risk disclosures do not purport to disclose all risks associated with land purchases. Walton does not provide any investment, financial, accounting, legal or tax advice. You should carefully consider whether land investment is suitable for you in light of your financial circumstances, and consult professional investment and tax advisers if necessary. Walton and its representatives are not licensed to deal with real property located in Mainland China, Hong Kong, Macau, Taiwan, Japan, Korea, UAE, Singapore, Malaysia, Thailand, Vietnam, Indonesia, India, Philippines and South Africa.

202201_Feather Glen_MEA Finance Ad_210x270mm.indd 1

1/14/22 2:01 PM

In this issue...

elcome to the February issue, the first of 2022. We wish you a belated Happy New Year, and one (not quite as late) for those of our readers to whom we say Kung Hei Fat Choi. May this year bring the fulfillment hoped for at the start of each fresh calendar. Although now in the second month, some of us still wonder what 2022 will bring to the regional banking and finance markets. There are things we know to depend on, such as continuing digitisation and the growing importance of technology across all aspects of banking and finance; how the very real need to pay heed to ESG concerns will shape the regions industry; changes to our day-to-day personal banking, and the certainty that uncertainty will still be part of the picture. We touch on these matters throughout this issue. From page 12 we put the focus on retail banking, asking banks about what they think will keep them thriving and able to provide convenient and elevated levels of service into the future, “Improving customer experience and delivering personalized offerings are no longer “nice to haves””, cautions Amit Malhotra, General Manager, Personal Banking Group, CBD. The continuing development of open banking and APIs across regional markets, page 24, is discussed with Anthony Habis from BNY Mellon, “As one of the world’s most dynamic and evolving markets, the Middle East is a prime jurisdiction for Open Banking to take hold”; and with climate change being one of the leading ESG issues of our times, at page 34 the role finance can play in mitigating its effects is covered; “As a global bank with billions flowing through our books, we have a huge opportunity, and responsibility to make an impact for the better”, states Bas Bittink at ING. The cover story this month features an interview with Theirry Simon, Chief Executive Officer for the Middle East and Africa at Crédit Agricole Corporate and Investment Bank. Theirry enthusiastically expounds the opportunities for banking and finance in the Middle East and Africa, telling us, “We can see the market is moving very fast, and all players are keeping a close eye on the financial markets for opportunities.” Our regular look at technology runs from page 42, where once again we hear from regional leaders in banking and finance technology, providing their thoughts about what has been top of their minds, and where they feel we will see advancements in the industry in 2022 , “Banks will increasingly partner with Fintechs to provide innovative services competitors can’t offer” says Peter Hainz from SmartStream, and in an opinion piece this month, page 56, Riyad Banks, Amol Bahuguna tells us that the Kingdom of Saudi Arabia is well positioned for the adoption of open banking. Remaining with the topic of banking technology, MEA Finance has named the date for our annual Banking Technology Summit & Awards, 19th of May 2022, the exclusive forum connecting the region’s leading bankers and technology professionals in market shaping debate, and where the most notable achievements of technology providers and banks are deservedly highlighted to the industry. Nominations for the 2022 Banking Technology awards are open now. Finally, and as usual, we open this issue with some recent market news briefs to whet your appetite for the articles, thoughts, opinions and insights you will find in this, the first of the MEA Finance magazines in 2022.

mea-finance.com

CONTENTS

CONTENTS 30

MARKET NEWS

KPMG: Saudi Arabian insurance firms pursued digitalization and expected to close year-end with higher top-line

Citi launches sustainability-linked supply chain financing in Algeria

RETAIL BANKING

12 18 22

Girding for the headwinds Enabling the Market Enduring Partnership

OPEN BANKING

24 28

The Evolution Revolution Open to Change

CLIMATE CHANGE

MEA Finance WEB: www.mea-finance.com EMAIL: info@mea-finance.com PUBLISHED BY: Creative Middle East Media FZ LLE, 19th Floor, Creative Tower, Fujairah Creative City, PO Box 4422, Fujairah, UAE

Banking and Finance news in the MEA market

Instrumental Changes: The Role of Finance in Climate Change

38 41

A Nuanced Challenge Part of the Solution

BANKING TECHNOLOGY

How Digital Transformation is Empowering Banks to Deliver Better, More Competitive Customer Experiences

Core Value: Why banks should modernize without delay

LEADERS IN TECHNOLOGY

46 50 54

The Future is Now Composable Future A Future for All

OPINION

Open to Change

LIFESTYLE

Lights, camera and ready for action: Paramount Hotel Midtown sets the stage for early 2022 opening!

42 46

mea-finance.com

MARKET NEWS

KPMG: Saudi Arabian insurance firms pursued digitalization and expected to close year-end with higher top-line

nsurance companies in Saudi Arabia continued their top-line growth momentum at the end of Q3 2021, with a matching trend foreseen for year-end, KPMG in Saudi Arabia, said in its latest Insurance Pulse report. The report includes a detailed analysis of the financial performance of 28 insurance companies in Saudi Arabia in the third quarter of 2021. Aggregate gross written premiums (GWPs) hit SAR 31.81 billion by the end of Q3, 2021, increasing 7.7% year-on-year (YoY). Motor and medical segments were the biggest contributors of GWPs at 79% and 81%, respectively, of GWP and net underwriting income for the nine-month period ended September 30, 2021. “The Covid-19 pandemic changed the insurance industry’s perspective for customers around the globe, both in terms of the available products and services. Consequently, digitally advanced insurance companies in Saudi Arabia capitalized on their advantages as customers desired more seamless and improved digital interactions with their service providers,” commented Khalil Ibrahim Al Sedais, Office Managing

Partner - Riyadh KPMG in Saudi Arabia. The higher loss ratio of 80.9% directly impacted the overall industry’s net profit after zakat and tax, which witnessed a decline of 62.6% to SAR 537.65 million in Q3 2021, compared to SAR 1.438 billion in Q3 2020. “The insurance industry observed a decline in loss ratios in the mid of 2020, which was primarily in a motor and medical heavy industry that experienced a steep decline in relevant claims due to the lockdown and delays in discretionary medical treatments. However, analysis shows that the loss ratios in 2021 moved back to the pre-pandemic rates and stood at 80.9% as of Q3 2021, compared to 73.7% as of Q3 2020,” said Al Sedais. The total assets and total equity of the insurance industry stood at SAR 68.03 billion and SAR 18.93 billion, respectively, showing an increase of 5.4% and 4.9% YoY. This represented an annualized return on equity of 3.8% and annualized return on assets of 1.1% as of Q3 2021 YoY. Total investments grew 7.3% YoY to SR 32.97 billion. In today’s environment, digitalization, new risks and new customer demands

IN TODAY’S ENVIRONMENT, DIGITALIZATION, NEW RISKS AND NEW CUSTOMER DEMANDS ARE FUNDAMENTALLY CHANGING THE INSURANCE INDUSTRY. 6

Banking and Finance news in the MEA market

Khalil Ibrahim Al Sedais Office Managing Partner – Riyadh KPMG in Saudi Arabia

are fundamentally changing the insurance industry. “Therefore, it is becoming imperative for insurance companies to consider data analytics, artificial intelligence (AI) and other means of digital transformation to stay ahead of the curve,” said Ovais Shahab, Head of Financial Services at KPMG in Saudi Arabia. The risks of falling behind are growing larger than other business risks, while companies need to be aware of an evolving environmental, social, and governance (ESG) perspective of stakeholders, whether those are regulators, investors or customers, he noted. On the International Financial Reporting Standards (IFRS) front, insurers could face operational complexities and onetime accounting mismatches between insurance contracts and financial assets in the comparative information, which they need to present when applying IFRS 17 insurance contracts for the first time. “ The International Accounting Standards Board published a narrow scope amendment that aims to provide insurers with an option to present c o m p a ra t i ve i n fo r m a t i o n a b o u t financial assets using a classification overlay approach on the basis that is more consistent with how IFRS 9 will be applied in future reporting periods,” Shahab concluded.

BUILD A BETTER TOMORROW ON THE FOUNDATION OF INVESTMENT DECISIONS TODAY Investment management solutions from National Bank of Fujairah are built around your financial goals and growing needs, so you meet priorities of life in a planned and simplified way.

Your our next investment decision is just three th simple steps away: Step 01

Step 02

Step 03

Contact NBF's investment team to discuss your investment requirement.

Select the investment category to determine your exposure: • Conservative • Moderate • Aggressive

Choose your investment option: • Lump sum: Starting From 10,000 USD • Systematic Investment: Starting from $1000 (Monthly or Quarterly basis)

That’s it, you are all set! Our qualified Asset Managers take charge and keep you updated on a regular basis on your portfolio performance. NBF Investment Management Investing simplified!

Call 8008NBF(623) to start our partnership nbf.ae Terms and conditions apply

MARKET NEWS

Citi launches sustainability-linked supply chain financing in Algeria

Dave Aldred Citi Regional Head of Treasury and Trade Solutions - Middle East and North Africa, Bülent Pehlivan Henkel Regional Head of Finance - India, Middle East and Africa, Daniel Lopez Wismer Regional Treasurer of India, Middle East, Africa & Turkey (next to Dave), Marcel Hanen Citi Regional Head of the Global Subsidiaries Group Middle East, North Africa, Pakistan and Turkey

iti has launched its first Middle East and North Africa (MENA) Sustainability-linked Supply Chain Finance (SSCF) program in Algeria with the aim of supporting clients as they advance their ESG priorities, improve the resilience of their supply chains and manage their working capital needs. Citi’s first MENA SSCF program has been implemented for German chemical and consumer goods company, Henkel. The program has been initially launched with suppliers in Algeria and will be expanded to include additional markets and suppliers in the coming months.

The program is is targeted at existing or new suppliers who demonstrate strong or improving sustainability performance. Qualifying suppliers can access Citi’s supply chain financing at preferential rates, improving as a supplier ’s sustainability score improves. Henkel, with the support of a global leading sustainability assessment agency, will periodically assess the sustainability performance of its suppliers. Commenting on the collaboration, Bülent Pehlivan, Regional Head of Finance – India, Middle East and Africa said: “With sustainability being at the core of our company’s strategy, we are engaging in

WITH SUSTAINABILITY BEING AT THE CORE OF OUR COMPANY’S STRATEGY, WE ARE ENGAGING IN A RANGE OF ACTIVITIES WITH NEW WAYS OF GROWING AND INNOVATIVE SOLUTIONS TO CREATE VALUE 8

Banking and Finance news in the MEA market

a range of activities with new ways of growing and innovative solutions to create value. We are delighted to collaborate with Citi Group to introduce a sustainable supply chain financing program for the first time in the region. Launching first in Algeria, we are committed to continue to implement it in other countries of the region in the near future.” Citi’s SSCF program in MENA aligns with the bank’s ESG commitments. To help accelerate the transition to a global low-carbon economy, Citi launched its updated Sustainable Progress Strategy in July of last year, which includes its global US$500 Billion Environmental Finance Goal. Citi also recently established a commitment to US$1 trillion in sustainable finance by 2030, which includes the environmental finance goal and a US$500 Billion Social Finance Goal. “We are proud to be collaborating with Henkel in this first SSCF program in the MENA region. It is really pleasing to see that Henkel and Citi share a strategic focus on ESG. At Citi we are looking forward to this partnership and journey with Henkel which will ensure that we continue to adapt and develop our ESG solutions even further” said Dave Aldred. MENA Head, Treasury and Trade Solutions, Citi. “We are excited to be partnering with Henkel and helping them to achieve their sustainability goals via the launch of the first Sustainable Supply Chain Financing Program for Citi in the MENAPT region. Like Henkel, our ESG commitments are an essential part of our firm’s strategy, and we are committed to provide innovative ESG-linked solutions to our clients and to expand the use of our Sustainable Supply Chain Financing Program in the region,” said Marcel Hanen, Citi Regional Head of the Global Subsidiaries Group – Middle East, North Africa, Pakistan and Turkey

More hands on deck. Easier to navigate the winds of change. You are independent. But never alone.

In the investment markets, change can work to your advantage. You just have to know how to navigate it. See how you can make the best of the opportunities change brings with our in-depth briefings, staggering choice of investment options and much-awarded trading interface.

Extensive spectrum of investment products: 40,000 trading instruments across 125 global markets. Regulated by SCA Disclaimer: Century Financial Consultancy LLC (CFC) is Limited Liability Company incorporated under the Laws of UAE and is duly licensed and regulated by the Emirates Securities and Commodities Authority of UAE (SCA). Services offered by CFC include financial market products that are traded on margin and can result in losses that exceed deposits. Transactions or trades in the financial markets are very risky, and you should trade only with the capital you can afford to risk or lose. Before deciding to trade on leveraged products, you should consider your investment objectives, risk tolerance and your level of experience with these products. Trading with leverage carries significant risk of losses and as such margin products are not suitable for every investor, and you should ensure that you understand the risks involved and seek independent advice from professionals and experts if necessary. CFC is not responsible or liable for any result, gain or loss, based on this information, in whole or in part. Refer to risk disclosure on our website.

MEAFINANCE

Su mmit & Aw a rd s 20 22 19 May 2022

Armani Hotel, Burj Khalifa, Dubai United Arab Emirates

Continuing Innovation in Banking & Finance The exclusive annual forum connecting leading bankers and technology professionals to debate new developments in digitisation and identify emerging trends and opportunities in the regional financial markets.

Join more than 200 top executives from leading banks, financial institutions and technology providers from across MENA. SPEAKERS INCLUDE:

Arjun Vir Singh Head of Financial Services – MENA

Arthur D. Little

Dr. Bhaskar Dasgupta Head of Market Infrastructure, Digital and VC/FinTech Head of South Asia

Abu Dhabi Global Market

Devid Jegerson

Head of Customer Experience & Platform Development

National Bank of Fujairah PJSC

Mohamed Roushdy Founder

Fintech Bazaar

Mohammed Abdel-Razek CIO - Africa, Middle East & Islamic Banking

Standard Chartered Bank

Olivier Crespin

Co-Founder & CEO

Zand

The awards programme will recognise the commendable achievements of the region’s leading banks, financial institutions and technology businesses for their delivery of smarter banking solutions and for their ability to drive real growth in an increasingly competitive regional market.

Financial Institutions

Award Categories

Digital Banking Innovation of the Year

Best Digital Innovation in Islamic Banking of the Year

Best Neobank

Technology Vendors 1.

Digital Banking Provider of the Year

Best Cybersecurity Provider

Best Cybersecurity and Risk Management Implementation

Best Core Banking Technology Implementation

Best Data Management

6. 8. 9.

11.

12.

13.

14. 15.

16. 17.

18. 19.

20. 21.

22.

Best Islamic Banking System Implementation

Best Mobile Banking Services

10.

Best Cloud Implementation

12.

Most Innovative Emerging Technology Implementation Best Innovation in User Experience

Best Innovation in Investment Banking

16.

Best Regulation Technology Solution

18.

Best AML/KYC Solution

20.

Best Innovation in Corporate Banking and Finance Best Innovation in Trade Finance

Most Innovative Trading Platform

Best FinTech Solutions Implementation

29.

15. 17.

19. 21.

Best Core Banking Solutions Provider

Best User Experience Solution Provider

Best Data Management Solution Provider Best Risk Management Solution Provider Best Analytics Solution Provider

Most Innovative Cloud Services Provider Most Innovative Mobile Banking App Best RegTech Solution Provider

Bset Trading Infrastructure Provider Best AML/KYC Solution Provider

Best Communications Infrastructure Provider Best Open Banking & API Solutions Provider

Most Innovative Payment Solutions Provider

Best Wealth and Investment Technology Provider Most Innovative Digital Wallet Deployment

Best Digital Transformation Consultancy Firm Tech CEO of the Year

Financial Services Technology Leadership Award

Best Islamic Fintech Solutions Implementation Best AI Technology Implementation

Best Corporate Payment Service

27.

13.

14.

25.

28.

11.

Best Innovation in Retail Banking

Best Open Banking & API implementation

26.

Best Analytics System

23.

24.

Islamic Digital Banking Provider of the Year

Best Branch Digitisation Implementation Best Risk & Compliance Implementation Best Retail Payment Implementation

Best Treasury Management Implementation Technology Leadership Award

HOW TO ENTER

Step 1: Choose your category. It is important to review the individual descriptions and criteria before choosing your category. Step 2: Upload relevant financial performance documents, case studies, or other relevant information. Step 3: Confirm submission of your entry.

*All nominations shall be submitted on or before 8th April deadline.

GOLD SPONSORS

SILVER SPONSOR

For inquiries, call +971 50 1005488 / +971 50 9313236 or email: info@mea-finance.com

RETAIL BANKING

Girding for the headwinds The regional retail banking sector has weathered several storms over recent years, ranging from the 2008 global financial crisis, the plunge in oil prices in 2014 and now the COVID-19 crisis. How will this key banking sector fare in the near future?

he outbreak of the COVID-19 pandemic two years ago was the ultimate gut punch that tested GCC banks’ resilience in unforeseen ways and yet, they have emerged even stronger. According to Deloitte, to fully utilize the newfound resilient energy to scale greater heights, banks should take account of the tectonic shifts reconfiguring the global financial services sector such as the growth in digitalisation and evolving customer demands and expectations. The emergence of the omicron variant of the coronavirus pandemic last November has increased growth risks and policymaking challenges globally. However, the general business

and operating environment for banks in the Gulf region are expected to remain broadly the same this year as in 2021. It is worth noting that growth in GCC banking assets is linked to regional GDP, which moves largely in tandem with oil prices. Gulf states are still reliant on oil which accounts for three-quarters of the six-nation bloc’s spending but the new lockdown measures that are being implemented globally to curb new mutations of the virus are blunting oil demand growth. “Credit growth will remain soft and below pre-pandemic levels in most countries with the exceptions of Saudi Arabia and Qatar,” said Fitch. Though profitability pressures and strong liquidity will continue across the Gulf

Banking and Finance news in the MEA market

financial services market, capital buffers are expected to remain adequate to avert any risks that may emerge due to the pandemic. Digital transformation has been a key battleground for banks in the Middle East region; a competition that is intensifying as incumbent banks are being challenged from all sides for market share by a combination of neo banks and nontraditional participants. Banks across the globe are spending hundreds of millions of dollars (more than most industries) on their digital transformation agenda but will these digitalisation strategies translate into a true return on investment (ROI)? McKinsey & Co. in a report said that since digital transformation is never-ending and the window of change is dwindling, leaders across the financial services sector need to escape the technology trap mindset and have clear, actionable plans. The GCC bankin g sector h as weathered several storms over recent years ranging from the 2008 global financial crisis to a plunge in oil prices in 2014 and now the coronavirus crisis. The second wave of deal-making across

the GCC banking could begin when the full impact of the current challenging operating environment becomes visible. Fitch Ratings said that the fragmentation in the Bahraini banking system is greater compared to its regional neighbours, resulting in strong competition and weak pricing power. Overall, the business environment for GCC banks is expected to remain solid because growth will continue to present business revenue and growth opportunities as regional economies are recovering from the COVID-related contraction.

Digital transformation The outbreak of the pandemic presented an opportunity for the global financial service sector to accelerate and strengthen the digitalisation of complex processes and end-to-end customer journeys across the front, middle and back offices, a trend that was already in full throttle in the Middle East. The current operating environment is putting to test banks’ digital transformation journeys and, in some cases, forcing the c-suite level to revisit their transformation strategies and make customers the focal point of their digitalisation drive.

Payments Digital payments remain one of the best performing financial services products but unfortunately for banks, traditionally the main providers of payments services, this momentum is no longer extending to most of them especially under the current operating conditions. “The payments landscape in the Middle East is heading for an inflection point,” McKinsey said while crediting new government and regulatory initiatives as well as the entry of new local, regional and global payment providers in the market for rapid changes in a region that remained heavily dependent on cash. The ongoing health crisis undoubtedly accelerated a string of existing trends in both consumer and business behaviors while introducing new developments that saw the use of digital payment

methods surpassing the use of cash and debit cards. “Driven by changes in digital technology, consumer demand and competitive forces, the way people make payments is evolving faster than any other area of financial services,” said EY. The competition between payment services providers can be considered a battle to achieve competitive advantages using precise strategies to obtain favorable positions. To maintain a competitive edge in a crowded market or adapt to changing operating environment, payment services providers across the GCC must understand the needs and expectations of their customer base. The ongoing shifts toward e-commerce, digital payments (including contactless), instant payments and cash displacement have all been significantly boosted in the past two years, said McKinsey. The COVID-related restrictions that were introduced by regional governments to curb the spread of the virus shifted consumer and business behaviour towards e-commerce platforms making it imperative for financial service providers to provide seamless payment solutions. A study that was conducted by Mastercard in the Middle East showed that 70% of the participants are using some form of contactless payment method since the outbreak of the pandemic due to safety concerns while 81% of the respondents noted that they would continue using digital payments post-pandemic. Boston Consulting Group and Swift expect the global digital payment sector’s revenues to hit the $1.8 trillion mark in 2024, from $1.5 trillion in 2019, buoyed by the continued transition away from cash, sustained strong growth in e-commerce and electronic transactions plus greater innovation.

Digital banking GCC banks are pro-innovative and industry experts expect them to continue to dominate the financial services industry as the sector goes more digital. The digital transformation in the financial

services industry is also being driven by banks’ tech-savvy customers and regulatory initiatives such as regulatory sandbox and open banking, which are creating an enabling environment. “Digital transformation is no longer a luxury, but a necessity. Banks that are agile, flexible, and willing to transform their business models will be the ones that succeed, and secure their financial strength for future growth,” said KPMG. UAE’s Mashreq Bank and Emirates NBD launched digital-exclusive banks for SMEs, NeoBiz and E20 respectively, in September 2019 to support one of the UAE’s important sectors. The unveiling of digital banks for SMEs came exactly two years after both Mashreq Bank and NBD had launched Mashreq Neo and Liv., lifestyle digital-only banks that seek to meet the banking needs of millennials. The country’s first independent digital banking platform, YAP, started operations in August 2021 and it is powered by RAK Bank. Abu Dhabi sovereign wealth fund ADQ is also considering setting up a digital bank using a legacy banking license of First Abu Dhabi Bank. Zand, the UAE’s first Shari’ah-compliant neobank is expected to open its doors for business soon after its shareholders acquired the majority of shares in Dubai Bank from Emirates NBD. Dubai Islamic Bank also unveiled its digital offering rabbit last December - a digital app that is aimed at tech-savvy customers. It offers a current account, globally accepted debit card, payments and money transfer services. Bahrain’s Bank ABC launched ‘ila Bank’ in 2019 – an AI-powered and data analytics digital-exclusive bank. ila Bank is expected to launch its services in Jordan this year before it expands into Egypt, and it also started offering credit cards and loans to Bahraini customers last March. Saudi Arabia’s cabinet also gave the Gulf state’s finance ministry green light to issue licenses for the country’s first digital banks in June 2021. stc pay (stc Bank) will be converted into a digital bank with a capital of $667 million, while the Abdul Rahman bin Saad Al-Rashed and mea-finance.com

sons company-led consortium will set up another digital bank (Saudi Digital Bank) with a capital base of $400 million.

Digital onboarding Digital onboarding is an essential feature that determines whether a bank can easily acquire new customers especially from the tech-savvy millennials, a key segment for GCC banks. It is the first contact that a new customer has with the bank and the process should be intuitive, seamless, responsive and efficient. “An automated process is a mutually beneficial situation offering speed, efficiency and convenience for the customers and bank professionals for more value-added tasks,” said Deloitte. Customer onboarding entails the guidance of a new user in the first steps of platform accessibility. The process is a critical step in a customer’s journey with a financial institution as it leaves a long-lasting impression in the clients’ minds about how they perceive a financial institution. Digital transformation in the banking sector is customer-driven as financial institutions seek to enhance services and products as well as tap into new market and customer segments. Having seamless onboarding and origination processes is pivotal in accelerating digital-first executions and increasing cross-sell opportunities. To adapt to a changing landscape in response to the evolving forces of customer expectations and maintain a competitive edge, GCC banks should ensure that their onboarding process is as simple as possible with low documentation requirements, offering simple online uploading capabilities and precise explanation during the onboarding process. Banks can also incorporate interactive assistance through chatbots to enhance the seamless customer experience.

M&A The region’s banking system remains highly fragmented making competition intense, and the situation is expected to intensify due to the shrinking population

in some countries after expatriates departed for their countries amid massive job losses in the past two years. The Bahraini banking system, in particular, is ripe for mergers and acquisitions (M&A) and the authorities are reportedly supportive of consolidations but sound profitability and a lack of common shareholders prevent obvious tie-ups. “Nevertheless asset quality, profitability and capital pressures at some banks could result in more tie-ups in 2022,” said Fitch Ratings. Last year, Bahrain’s Bank ABC agreed to acquire Blom Bank Egypt in a deal valued at $427 million and the takeover, which is subject to regulatory approvals in Bahrain, Egypt, and Lebanon, is expected to close in Q1 2022. Saudi Arabia last April completed the landmark merger between National Commercial Bank (NCB) and Samba Financial Group (Samba) into Saudi National Bank (SNB), a banking giant with around $241 billion (SAR 901 billion) in assets as of Q3 2021. SNB is expected to be on equal footing with regional rivals Qatar National Bank and First Abu Dhabi Bank. S&P Global said that the first wave of M&A was driven by shareholders’ desire to reorganize their assets, including the tie-up between NCB and Samba, a deal that involved a common shareholder, the Saudi Arabian government through the Public Investment Fund. Qatari lender Masraf Al Rayan also completed its $50 billion (QAR 182 billion) consolidation with Al Khalij Commercial Bank in November last year. The merged entity called ‘Masraf Al Rayan’ is expected to complete the integration of products and services this year. The tie-up created the Gulf state’s second-largest bank with an asset base and one of the largest Shari’ah-compliant banks in the region. Egypt’s biggest investment bank, EFG Hermes, also completed its takeover of state-owned Arab Investment Bank (aiBANK), transforming itself into an Egyptian universal bank, last November. EFG Hermes, which agreed to acquire a 51% stake in aiBANK last May, said that

the takeover will make it an investment bank, a commercial bank and a platform for non-bank financial institutions. Meanwhile, UAE’s First Abu Dhabi Bank, which acquired Bank Audi Egypt in April 2021, expects to finish merging its Egyptian operation with the newly acquired bank in 2022. However, the pandemic stalled the negotiations on the region’s only crossborder tie-up between Kuwait Finance House and Bahrain’s Ahli United Bank, which was postponed until further notice. The challenging operating environment might push some banks in the Gulf region to find a stronger shareholder or join forces with peers to enhance their resilience.

Fiscally fit The adverse economic headwinds of COVID-19 will challenge retail banking margins as the global economy remains in recession with the trajectory that the pandemic is following remaining unclear. Despite the ongoing economic uncertainty, higher oil prices and an increase in crude production this year and beyond will improve the fiscal position of GCC governments while reducing the debt burden of most of them. “Stronger government finances benefits banks’ solvency, funding and liquidity due to the governments’ dominant role as key depositors, borrowers and shareholders in their country’s banking system,” said Moody’s. Industry experts expect profitability for Emirati, Omani and Kuwait lenders to improve moderately in 2022, but a return to pre-pandemic levels is unlikely in the context of a lower interest rate environment. Meanwhile, Saudi and Qatari banks’ profitability is expected to remain resilient despite the lower interest rate environment and elevated loan impairment charges driven by a favorable market structure and healthy credit growth respectively. Moody’s said that the shock from the pandemic made little impact on GCC banks’ strong capital buffers and most lenders remain profitable despite higher loan-loss provisioning. mea-finance.com

RETAIL BANKING

Adapt and Survive Starting by highlighting the Mashreq Chairman’s view that banking will be shaped by banks that survive the next 10 years by transforming into fintechs with a banking license, Thomas Cherian Executive Vice President, Head of Retail Banking Technology and Retail Technology details what to expect in the development of the successful banks of the future

h a t key a c t i o n s should the regions retail banks take to ensure they thrive in the near to medium term?

Notably, Mashreq’s chairman H.E. Abdul Aziz Al Ghurair highlighted that the future of banking will be shaped by banks that survive the next 10 years by transforming into fintechs with a banking license. Digital transformation has left a strong mark on Middle East’s banking industry. Yet, the maturity scale of transformation is moderate with fewer banks reimagining their current strategy. However, the banking sector is beginning to reinstitute themselves while catching up with swift digitalization. To create winning strategies and synergies within the ecosystem, banks must focus on the following three trends. A . Digital-first platform- banks must adopt a digital-first outlook to provide greater flexibility, transparency and quicker access to solutions. Platforms like OTT have paved

Thomas Cherian Executive Vice President, Head of Retail Banking Technology, Retail Technology

Banking and Finance news in the MEA market

way for instant gratification and influenced consumers to expect on demand services. Similarly, the expectations from bank providers have evolved - consumers are on the look-out for digital bank platforms that can enable a wide array of services such as payments, fund transfers, and even deposits through online, zerotouch mediums. B. Lifestyle banking through open ecosystems – Increasingly, customers want their tools, information and services to be able to engage with different companies on an open network for a hassle-free experience. To enable this, banks must focus on building APIs for deep connectivity and partnership with platform businesses such as ecommerce service providers, social platforms, messaging platforms and home devices. C . Switch to microser vices – Switching from one major core banking provider to microservices and multiple third-party tech vendors will help banks avoid technical debt in the long-term, substantially reducing the time-to-market for new financial products to become market leaders. It provides a competitive-edge and help in better competing with dynamic market demand. Also, a microservice architecture allows banks to build ecosystems and partnerships for future scaling. Over the last two years, Mashreq has focused on becoming a superior customer experience bank. By leveraging the tech stack, we have been able to improve operational processes and increase efficiencies. Today, 85% of customers are onboarded through digital banking platforms and 92% financial transactions are performed through

digital channels. We have created zerotouch processes for customers, enabled work from anywhere for employees, and implemented AI-driven processes for operations. Mashreq is also digitalizing on the outside to build a super-app to provide platform banking systems by integrating our services and products with those offered by our partners in the ecosystem. Going forward, this year, we will transform into Banking as a Service (BaaS) to provide our solutions to our partners’ customers.

How will the co-existence of legacy retail banks and neo banks evolve in the coming years? Agility, innovation and data are three key components that enable banks to diversify and succeed. Traditional financial institutions are evolving with current times by responding to the modern requirements of consumers by focusing on those three components. As a result, legacy banks are launching digital banks of their own to remain competitive among fintechs and neobanks. One of the most effective operational models is represented by established players that leverage existing assets and tech-stack to offer omni-channel and interoperable experiences to consumers.

Are new developments in retail customer onboarding nearing their limits or is there room for further innovation? Innovation is a continuous process and requires constant agility to respond to current market requirements. Hence, there is always room to enhance, ideate and create further with the help of technology. Onboarding is a crucial step in the customer lifecycle as it often among the first experience customers have with banks. To smoothly onboard customers, open networks and integration with third parties play a crucial role in cross-sharing of existing KYC data. If banks optimally enhance this process, it can result in minimal identity verification and lesser KYC data-entries,

further improving the onboarding time. By implementing simplified & intuitive user interfaces, banks can also reduce onboarding steps to enable instant account opening. At Mashreq, we believe it is important to collaborate with companies in the ecosystem to offer superior experiences to customers. We have partnered with EFR to validate the customer identity in real time, while providing KYC related

During this period of ongoing digitization how are you managing the generational differences between your customers? Banking preferences and customer behaviour are continuing to evolve. Due to restrictions on in-person interactions, M a s h re q N e o, o u r n e o b a n k i n g platform witnessed positive customer engagement and satisfaction from various age segments, especially those

ONBOARDING IS A CRUCIAL STEP IN THE CUSTOMER LIFECYCLE AS IT OFTEN AMONG THE FIRST EXPERIENCE CUSTOMERS HAVE WITH BANKS

information which requires minimal inter vention from the customer. This simplifies the journey - enabling customers to open accounts with Mashreq in under two minutes.

In a time of more options and easier onboarding, how are you encouraging customer loyalty? Mashreq has been at the forefront of introducing innovative services and digitalizing processes, including onboarding to provide customers with choice and flexibility. On average, customers have a lifecycle of 7 years with Mashreq as per our internal research. While this loyalty is built on rewarding customers at various stages of the lifecycle such as first transactions, birthdays, anniversaries etc. it is also formed at the back of innovative, valueadd services we offer customers. Our core competency is delivered through digital intelligence that enables us to analyse consumer trends and provide tailor-made products and services geared towards their requirements.

45 and above. On the other hand, Gen Z and millennial customers are more drawn to mobile banking apps than other generations for instant banking satisfaction and functionality. To build a sustainable engagement strategy across different generations, Mashreq is focused on delivering omnichannel experiences that offer integrated, hybrid banking experience across all touch points such as branches, online banking, mobile apps, chatbots and call centers. This can help cater to the younger, digital native segment as well as the older generation. We’ve also seen that mobile apps are a core and central platform for customers. As a hub of interconnected and interoperable experiences, these apps witness higher digital engagement, irrespective of a customer’s generation. While accelerated demand for digital services continue to rise across customer generations, preferential differences between physical and digital touchpoints will remain. Hence, a hybrid banking experience will be crucial in the success of banks. mea-finance.com

RETAIL BANKING

Enabling the Market Speaking with MEA Finance, Amit Malhotra General Manager, Personal Banking Group says that traditional banks cannot rely on their legacy alone and foresees data as being key in the coming years with personalised offerings helping secure loyalty however, neobanks must become more than just a valuation play if they want to succeed

spend more, exhibit deeper loyalty to companies, and help organisations lower costs and increase profitability. In this dynamic of value creation and sustainable competitive advantage, d e l i ve r i n g d i g i ta l s e r v i c e s a n d operations has emerged as a key enabler in reshaping customer experience in almost every sector. As digital giants such as Amazon, Netflix, Apple, and Uber continuously reinvent themselves by delivering simple, immediate, and individualized experiences, banks are also taking bold moves to build dynamic shared digital ecosystems around customer needs. Data will continue to be a key differentiator for retail banks in the coming decade. Analytics can help banks find new business models and provide more personalized offerings and improve risk rating of customers. Banks have enormous amounts of data which they get through ATM deposits/ withdrawals, point-of-sale purchases, online payments, loans etc. However, until they fully leverage these data sets, they will remain “data rich” but “insights poor”.

How will the co-existence of legacy retail banks and neo banks evolve in the coming years?

Amit Malhotra, General Manager, Personal Banking Group, CBD

h a t key a c t i o n s should the regions retail banks take to ensure they thrive in the near to medium term?

To thrive in the near to medium term requires agility. The landscape of the financial sector is changing dramatically. With technological disruption, the

emergence of new entrants, both FinTechs and digital giants, as well as constantly evolving customer expectations, organizations are forced to continuously adapt to these changes. Improving customer experience and delivering personalized offerings are no longer “nice to haves”. Results have shown that satisfied customers

Banking and Finance news in the MEA market

Legacy retail banks will need to evolve and cannot depend on their legacy and customer base alone. They need to adapt to the new digital world and offer relevant and customized solutions to retain and grow their customer base. Neo banks will have the advantage of speed and agility and a digital only approach for all their products and services. However, they will need to quickly figure a way to scale their business to reach optimal levels and more importantly make it a profitable business and not just a valuation play. I foresee a future where there will be

an increased level of collaboration and partnership rather than competition between legacy banks and neo banks and FinTechs. This is an area where we, at CBD, have had some fantastic success. By partnering with FinTechs from across the globe we have been able to offer our customers world class offering in remittances, wealth management and robo advisory. In fact, in recognition of the benefits through FinTech partnering, we have established a Digital Lab in the heart of the Dubai International Financial Center Innovation Hub, the largest FinTech innovation ecosystem in the region.

Are new developments in retail customer onboarding nearing their limits or is there room for further innovation? I definitely feel there is room for further innovation in this space. CBD has been actively driving digital transformation and investing in state-ofthe-art technology to provide customers with a seamless onboarding experience. Almost two years ago, we launched our “Digi Account”, which enables customers to open an account instantly, our ‘Digi Cards’ which provides customers a credit card instantly and our ‘Digi Loan’ product which allows customers to avail of a personal loan within minutes, all by simply using their Emirates ID. Last year we launched the region’s first Robo Advisory automated investment solution “CBD Investr”. The app has a fully digital on-boarding process, and we are currently extending this approach to mortgages as well where customers will be able to get pre-approvals on their mortgages within a few clicks using their Emirates ID only. For our SME customers, we have launched our “CBD Rise” proposition which allows customers to open accounts digitally and within thirty minutes provides them with an IBAN number and the ability to make transactions instantly. We continue to innovate to back the ambitions of our Retail and SME customers.

In a time of more options and easier onboarding, how are you encouraging customer loyalty? At CBD, we constantly work to provide our customers with value-added benefits and exclusive privileges to enrich their lifestyle and drive customer loyalty. We also recognize the varied needs of our customers and provide them with personalized and relevant offerings ranging from travel, dining, health and wellbeing offers to cashback and ‘buy one get one free’ offers. Our credit card “CBD One” is one such example. “CBD One” is the first credit card in the UAE that empowers the customer and offers them the flexibility to choose the card benefits according to their own needs and desires, all enabled digitally. So, if you love watching movies, you

spends. Cardholders get up to 10% cashback in these four categories, a maximum of up to AED 150 per category per month. For other spend categories, customers will earn 1% cashback on every AED 2 spend. Moreover, Super Saver cardholders enjoy a range of lifestyle benefits including complimentary lounge access at over 900 airports globally, free valet parking, discounts of up to 50% on cinema tickets and dining offers across 500+ outlets in the UAE.

During this period of ongoing digitisation how are you managing the generational differences between your customers? Different generations typically exhibit differing needs and expectations.

IMPROVING CUSTOMER EXPERIENCE AND DELIVERING PERSONALIZED OFFERINGS ARE NO LONGER “NICE TO HAVES can choose to get cashback on Netflix, Amazon Prime, Spotify, VOX cinemas, Roxy cinemas and Reel cinemas. If you love food and exploring new restaurants you can get cashback on Zomato, Deliveroo, Talabat, Starbucks, Costa and lots more. We have also partnered with Etisalat to introduce the CBD Smiles Visa Credit Cards which offers Smiles points to customers on their purchases. Those points can then be redeemed seamlessly via the Smiles mobile app for a wide range of discounts, deals and experiences across categories such as shopping, entertainment, travel, dining, wellness and bill payments at over 300+ partners. Our Super Saver Credit Card is also another example of rewarding our customers as it offers customers cashback across all Bills, Education, Supermarket and Transport related

While the younger generation like the convenience, speed and accessibility that digital banking offers, the older generation might still prefer the human touch and the personal connection that we offer through our distributed branch network. The current pandemic has, however, reduced the generational difference with both younger and older audiences now more quickly adopting digital solutions. In the future, I see an increasing proclivity to use both physical and digital channels, giving rise to a new set of expectations for interconnected experiences. It may become increasingly normal for consumers to engage in multichannel journeys, and banks will need to evolve to be able to provide these interconnected journeys across multiple touchpoints straddling the physical and digital worlds across devices and formats to meet customer needs. mea-finance.com

RETAIL BANKING

To Be Continued Talking with MEA Finance, Yustus Aribariho Head, Digital & Data, AME/E for Standard Chartered Bank, explains that change remains on-going with meeting customers’ needs as central to the success of retail banking in the region, and that there is much room for further innovation Yustus Aribariho Head, Digital & Data, AME/E, Standard Chartered

h a t key a c t i o n s should the regions retail banks take to ensure they thrive in the near to medium term?

There is no doubt, COVID has further accelerated disruption of the banking and financial sector which was already happening with the advent of new technologies, client demographics and new players coming into the sector. The pandemic has created a sense of urgency and brought forward technology advancements in the sector changing the pace of innovation. We are seeing a race in digital investments as the primary driver for business success. As consumer needs continue to evolve, their expectations grow. Digital adoption has increased at terrific pace driving a reshape of distribution channels. On the backdrop of this, there are 3 critical strategic components that retail banks must focus on to thrive.

A. They must look for avenues of revenue growth in a diversified manner B. B e more efficient and optimise their costs C. M ake digital the integral part of their business and use it to open new business opportunities, grow revenue and cut cost of doing business At the centre of all this is the evolving customer needs. Retail banks in the region must use data to understand client behaviours and needs and customise solutions. The advantage is that the opportunities exist, and banks must look at using technology to unlock these opportunities.

How will the co-existence of legacy retail banks and neo banks evolve in the coming years? Their co-existence will be driven by the evolving needs of customers. The desire to meet these needs will determine how

Banking and Finance news in the MEA market

the neo-banks or legacy retail banks will turn out. The two have different approaches but converge at one point which is solving customer problems. What Neo-Banks bring is the new approach driven by design thinking, executed using agile methodology. This encourages creativity, new approaches to product development and alternatives to financial needs. However, they still have a long way to go to build brands that are trusted and can withstand a test of time in an over regulated environment. Incumbents or legacy retail banks on the other hand are not sitting and watching. True they are characterised by slow pace of response to consumer needs, lengthy processes etc., but at the same time, they have built resilience over the years and created trusted brands. Most of them are investing significantly in the digital to transform themselves into entities that can respond quickly to consumer needs. They are embracing new technologies

and engaging in partnerships that create value. In the region, neo-banks are starting to set up. In preparation for their arrival, we have seen legacy banks start on massive transformation programs. You look at what we have done at Standard Chartered, transforming our Africa franchise into a digitally driven business and now recently in Pakistan. We have also seen other banks creating moon shoot digital banks on the back of their brands to leverage the advantages legacy banks have over neo banks. We however cannot avoid the impact of changing demographic dynamics and how younger generations are being influenced by technology. To survive, both Neo and legacy banks must adapt to this new way of thinking which the neo banks seem to have an upper hand by virtue of their set up. In a nutshell, changing customer needs, adoption of new technologies and regulatory framework will determine how legacy and neo banks will exist.

In a time of more options and easier onboarding, how are you encouraging customer loyalty? Customers will only come to you if you are solving their problem and fulfilling their needs. If you solve these consistently, you will get their loyalty. We are differentiating ourselves, creating unique solutions that are targeting specific client segments. We are obsessed about client experience and everything that goes with the client

WHAT YOU SEE SO FAR IS JUST A TIP OF THE ICEBERG. THERE IS STILL HUGE ROOM FOR IMPROVEMENT

Are new developments in retail customer onboarding nearing their limits, or is there room for further innovation? What you see so far is just a tip of the iceberg. There is still huge room for improvement. The developments in onboarding you see today are due to the technology we have so far, existing regulatory environment and infrastructure in markets to support these initiatives. On the technology front, I believe the advancements in facial recognition technology or virtual reality for that matter, could further revolutionalise how we conduct KYC which is a fundamental part of customer relationship creation. Partnerships and collaborations between banks and other entities that have client bases will also play a big part in improving this space. The partners have data that can be leveraged. Regulators are also aggressively putting in place frameworks to govern open banking and data, all these will further enable banks innovate more to make client onboarding seamless.

journey thought process. It is these thoughts that drive loyalty. In line with that, we have been able to do a number of things. First, we have invested heavily in digital servicing. What this has done is to enable customers to engage with us on a click of a button via their mobile device. As a result, over 80% of our servicing is digitally initiated, and we see this encouraging clients to engage. S e c o n d l y, we h a ve d e p l oye d technologies that are enabling us create cohorts of clients in specific segments for us to engage them regularly. This way, we create a community of consumers according to their needs and provide tailored solutions for common needs. Thirdly, we have invested in our employee experience by providing them with digital tools that simplify customer interactions. For example,

our Relationship Managers can access relevant data and information on the go in order to have meaningful discussions and be true advisors to our clients.

During this period of ongoing digitisation, how are you managing the generational differences between your customers? We have always applied a no single size fits all kind of philosophy to meet the different needs of our clients. We have drawn a baseline on commonalities that delight customers or basic expectations. For example, providing convenience by digitising journeys and make these available on the mobile device, speed to respond to customer queries etc. On top of that, we have differentiated offering and engagements with clients cognisant of the generational differences. We understand the lifecycle of our clients and meet the needs at the stage of the journey. For example, we are fully aware that millennials are generally big transactors, and their needs are around how quickly they access products and information that can enable them to complete the transaction on their own digitally. On the other end, we have the baby boomers as we refer to them who are at a stage of making meaningful investments. T h e s e c l i e n t s re q u i re a d v i s o r y services and hence our deployment of relationship management model. Our distribution models are also in line with the generational differences. As we attract an increased number of younger populations, we have gone into agent banking distribution models to increase the number of transaction touch points. At the same time, we are remodeling our branch network to convert into advisory centres to cater for those that require investment advice. At the end of the day, it is all about understanding your customer needs and meet them at every point of their journey. We are striving to do that and make sure that we have differentiated product offering and servicing that meets the needs of different generations. mea-finance.com

RETAIL BANKING

Enduring Partnership Colin Dallas Head of Retail at NBF explains that seeing themselves as a financial partner for clients, reflects how important customer loyalty is to them and with this in mind, their approach to ongoing innovation in banking is to build longlasting successful partnerships with customers

Colin Dallas, Head of Retail at NBF

Banking and Finance news in the MEA market

h a t key a c t i o n s should the region’s retail banks take to ensure they thrive in the near to medium term?

Retails banks play an important role to further place the country on the right track towards economic recovery. As we move ahead, innovation and digital transformation will continue to be on the top priority list of most banks. The UAE is not a newcomer to the digital age; rather, innovation sits at the centre of the country’s vision for the future. In addition, the young generation has a lot to do with impacting the existing landscape. Mobile wallets and cashless payments have now become second nature across the country. What is now required more than ever is for retail banks to internalise and accelerate the current trends and stay agile and nimble in order to fit into the new mould of this digital age. While doing so, banks should maintain client-centricity at the heart of their digital initiatives. Any digital offerings will need to respond to client needs and preferences instead of responding to trends. In addition, banks need to consider the adoption and acceleration of ESG as carbon footprint and issues related to climate change continue to become key priorities in the business agenda across sectors and industries. At NBF, we see ourselves as a financial partner for clients across their professional and business needs. Although many have seen an acceleration in digital transformation plans as a result of the pandemic, we have been on this path long before. In fact, we have made significant advancements in digitization resulting in improvements in customer experience, enhanced efficiency through automation and optimisation, improved

security and better resilience. We are also at the forefront of many of the country’s efforts to become a cashless society, as we have partnered with the Ministry of Finance to launch eDirham Instant, the latest digital payment method that allows customers to pay for governmental fees and services using online banking. We also went live with the Emirates Digital Wallet ‘klip’, a cashless payment application that allows customers to store, transfer and conduct payments in a seamless and secure manner. That said, banks are required to maintain caution to navigate an everevolving environment and unprecedented risks and challenges. At NBF, we believe we can achieve this by leveraging our multi-sector expertise and acting as the financial partner for our clients. We also realize that from time-totime customers require the personal touch of experienced relationship managers due to their more complex requirements. Subsequently, NBF’s approach is a blend of digitization for day-to-day client interactions where speed & efficiencies are the key drivers and the human interaction to handle more complex issues.

How will the co-existence of legacy retail banks and neo banks evolve in the coming years? Legacy retail banks and Neo banks are co-existing in a competitive market. We still live in a multi-generational time in which both options are in demand due to their distinct offerings. Neo banks will have their own set of customers of course, where traditional retail banks still enjoy a wide customer base and not only offer the digital services and products but also ensure that human touch is still present in the customer experience journey. Traditional retail banks will need to adapt and evolve to meet the next generation’s demands that revolves around digital experiences and efficiencies, speed of processing etc. that digitization offers.

Are new developments in retail customer onboarding nearing their limits or is there room for further innovation? There’s always a room for innovation. In 2022, banks will seek to embrace a futurefit technology strategy and accelerate their end-to-end digital transformation to compete and navigate an increasingly unpredictable, post-pandemic world. The future is about leveraging innovation in an aim to build business resilience, and more importantly long-lasting successful partnerships with customers. In addition, with technology advancing at a fast pace, it is difficult to make hard plans in to what to introduce in the medium term, and therefore NBF has to remain flexible to

CUSTOMER LOYALTY IS A CRITICAL ELEMENT THAT WE TAKE VERY SERIOUSLY AT NBF incorporate new ideas as they emerge, such as biometric authentication for processing payments, the movement of traditional payment schemes such as cheques, remittances, payment orders etc, to instant digital platforms.

In a time of more options and easier onboarding, how are you encouraging customer loyalty? Customer loyalty is a critical element that we take very seriously at NBF. It took more than just a brand name to build a long-term and strong relationships over the years at NBF, with the trust sitting at the centre. It is true that the financial services market is becoming increasingly competitive in the digital era, however, NBF’s swift response to the developments we have seen on the market was a key factor in our customer retention over the years.

Adding to that, NBF’s customer service excellence coupled with our bespoke and differentiated customer experience boosted our customer loyalty. Customers increasingly demand 24/7 access to their finances through the channels that accommodate their communications preferences not only to retail, but also in the corporate and business category; our response to this was the launch of the digital platform NBFX to provide customers round-the-clock access to finance trading transactions. We consider loyalty to be an extension of swift and efficient customer service. By using technology to meet the everincreasing customer demands, we believe we maintain client trust and subsequently their loyalty as customers know they can rely on NBF.

During this period of ongoing digitisation how are you managing the generational differences between your customers? There is no doubt that generational differences do exist between customers and are considered across the range of our product portfolio. NBF Ajyal, for instance, is built with the needs of the Emirati young generation in mind. O n e c o m m o n t h re a d a c ro s s all generations is the adoption of technology as part of customers’ daily life. To date, more than 70 per cent of the bank’s customers of all age groups have transitioned from traditional to online banking. Now, we can see the customer’s demand is rising and so we are onboarding our offerings across all channels that can be a potential use of any age and to make sure are covering all generations. Within this generation, we have mapped out our customers in a form of groups that we cater to through our customised approach. That means we carefully study the needs of each group, their preferred channels, tendencies and what will serve their financial well-being in order to provide tailored technologybacked services that suit this group’s specific requirements. mea-finance.com

OPEN BANKING

The Evolution Revolution The COVID-related restrictions that were implemented to curb the spread of the virus have proved to be a powerful catalyst for open banking and the fintech ecosystem in the Middle East

he coronavirus pandemic is shaping up to be a crucial turning point in the financial ser vice sector, changing regulators’ perception towards open banking. “The COVID-19 crisis has reshaped the global economy and society as banks face an urgent imperative to reimagine their business models amid a shift in the operating environment which is having an unprecedented impact on their bottom line,” said McKinsey & Co. Banks in the Middle East region are cautiously exploring technological innovations and new business models such as digital banking, open banking, predictive banking and modernization of payment systems in a bid to enhance user experience (UX) and personalization of products while keeping an eye on surging cyber-attacks. Though digital transformation was already apparent in the financial services sector in the Middle East, the outbreak of

the pandemic has brought about more than decades’ worth of changes in the way banks do business in just a few months. Deloitte said that digital technology has been a catalyst for radical innovation, as previously closed industrial systems have become networked and open, providing ideal conditions for open banking to flourish. T h e a d va n c e m e n t s i n d i g i ta l technologies such as artificial intelligence (AI), real-time analytics, machine learning (ML) and blockchain are creating ideal conditions for financial services providers to enhance their services and products from the front, middle and back-office. Open banking platforms allow financial services customers to securely share financial data in real-time and share account information and transaction history with external parties such as vendors, suppliers, business partners and other banks using Application Programming Interfaces (APIs)—a set

Banking and Finance news in the MEA market

of communication protocols used to develop computer applications. It is a paradigm underlying the organisation of the future financial data ecosystem.

The promise of open banking The GCC region’s financial service sector is unarguably mature when it comes to regulators’ preparedness for open banking compared to other emerging markets though there are some teething problems such as the need to modernize the regulatory landscape. PwC said that open banking has the potential to reshape the financial services landscape and several financial centres in the emerging markets, the GCC region included, are making considerable moves in this space. By leveraging API’s, open banking platforms authorise retail and enterprise clients to access consumers’ financial data in real-time and share account information and transaction history with external parties such as vendors, suppliers, business partners and other banks. KPMG said that it expects a rapid uptake of open banking approaches and models over the coming few years as consumers and small to medium enterprises (SMEs) are becoming more aware of the benefits it can bring; the ability to quickly understand their financial position, explore alternatives and make better financial decisions.

The COVID-related restrictions that were implemented to curb the spread of the virus have proved to be a powerful booster for open banking and the fintech ecosystem in the Middle East, as bank customers have been forced to embrace digital channels. New York-based Tiger Global Management led a $12 million funding round for Tarabut Gateway in November last year as the Middle East fintech firm seeks to expand its open banking platform into Saudi Arabia and North Africa. The Saudi Central Bank (SAMA) introduced its open banking framework earlier in 2021. The move is expected to revolutionize how customers, merchants and financial services providers enhance the value they reap from accessing financial data. The Gulf state is investing in the development of its financial services sector as part of the kingdom’s economic diversification drive under Vision 2030. Open banking will enhance trust between customers, banks, fintechs and other financial players, and SAMA plans to go live with open banking during the first half of 2022. Bahrain’s central bank last September ordered retail banks and financial institutions operating in the country to implement the requirements for the second phase of its open banking framework by the end of June 2022. The framework seeks to enhance the reach and quality of services offered by retail banks through digital online and mobile channels. It is part of a broader strategy by Bahrain to advance its financial service sector and remain competitive amid a surge in demand for connectivity within the financial services ecosystem. PwC said that new open banking platforms are rising with fintechs and lenders moving towards the adoption of open API solutions amid the defining of the roadmap towards open financial markets by national and offshore regulators. The UAE central bank opened a FinTech Office to support financial innovation in the country while the Abu Dhabi Global Market proved its unwavering support

towards the open banking revolution having awarded its first digital-exclusive banking license and Category 1 status to Anglo-Gulf Trade Bank in September 2019. Meanwhile, incumbent banks in the UAE have already begun to implement open banking. Mashreq, for instance, launched an active API developer portal in October last year which provides a secure and isolated space where developers can test their applications’ code without touching any real accounts or user data. Emirates NBD says it was the first UAE bank to enable open banking

GCC region is one example of an emerging global open-banking microcosm. Bahrain is implementing a European-style regulation-driven approach and the UAE has adopted an American-style marketdriven approach under the guidance of the Abu Dhabi Global Market and Dubai International Finance Centre. Saudi Arabia is also implementing a market-driven strategy, but the kingdom’s approach is inclined towards a more formal regulatory framework though its regulations don’t follow Bahrain in requiring the opening up of APIs which

“DIGITAL TECHNOLOGY HAS BEEN A CATALYST FOR RADICAL INNOVATION, AS PREVIOUSLY CLOSED INDUSTRIAL SYSTEMS HAVE BECOME NETWORKED AND OPEN, PROVIDING IDEAL CONDITIONS FOR OPEN BANKING TO FLOURISH – Deloitte

collaboration with the launch of its API sandbox in 2018. However, amid these developments, KPMG said that the challenge facing policymakers and regulators is how to structure an open banking regime that balances the need for innovation, information security and privacy, and does not inadvertently create an uneven playing field for both traditional and nontraditional players.

A global approach Open banking is playing a significant role in the rise of the digital economy as it makes payments easier and more transparent. Despite fundamental commonalities, there are now as many versions of open banking as countries or jurisdictions are using it. “In practice, open banking can take many forms including standards and directives such as PSD2 in Europe and Open Banking in the UK,” said KPMG. The

facilitate data sharing, or in mandating security standards. Outside the GCC region, several countries including India, Japan, Singapore and South Korea are implementing a market-driven approach. These countries do not currently have formal or compulsory open banking regimes, but their policymakers are introducing wide-ranging measures to promote and accelerate data-sharing frameworks in the financial service sector. Meanwhile, outside the European Union two major jurisdictions, Hong Kong and Australia, have adopted a regulatorydriven approach. The Hong Kong Monetary Authority issued an Open API Framework in July 2018 while in Australia, Commonwealth Bank of Australia last May became the first lender to allow customers to check account balances from other banks through its mobile app following the passing of the Consumer Data Rights Act. mea-finance.com

Open banking requires a robust, agile, and scalable IT architecture to enable API integrations with multiple entities. Its implementation promises to create a new data-sharing infrastructure, which will form the basis of a much richer range of services and products across the whole of financial services.

Digital payments Consumers’ increasing desire for frictionless, more seamless and intuitive value-added banking experiences amid a surge in fintech firms and ‘challenger banks, who are seeking to capitalize on these development, are driving incumbents to develop open, collaborative financial ecosystems. French multinational group Thales said that whether buying groceries on Amazon or ride-hailing on Uber, customers are increasingly relying on the convenience of online services globally. Payment initiation service providers (PISPs) offer end consumers payment solutions giving online retailers such as the Middle East-based noon and Careem a convenient way to make direct fund transfers for online transactions. The process mandates banks to provide open APIs to allow software at third-party companies to access payment account information and payment initiation from another. “There are two fundamental trends shaping this ecosystem around the world

THE COVID-19 CRISIS HAS RESHAPED THE GLOBAL ECONOMY AND SOCIETY AS BANKS FACE AN URGENT IMPERATIVE TO REIMAGINE THEIR BUSINESS MODELS AMID A SHIFT IN THE OPERATING ENVIRONMENT WHICH IS HAVING AN UNPRECEDENTED IMPACT ON THEIR BOTTOM LINE – McKinsey & Co.

at the moment, one being acceleration in the speed and availability of payments, the other being the democratisation of access to data,” said Mastercard. Hence, open banking means the removal of barriers between competitors as it requires banks to allow their account details and transactions to be shared with third parties through APIs. PwC projected that 71% of SMEs and 64% of adults will adopt open banking by 2022, which reflects a significant adoption of open banking technology across the financial services sector. Collaborations between banks and fintech companies are a valuable addition to the internal innovation programs of the financial institutions that seek to foster the development of innovative services based on open data in the banking payment landscape.

THE CHALLENGE FACING POLICYMAKERS AND REGULATORS IS HOW TO STRUCTURE AN OPEN BANKING REGIME THAT BALANCES THE NEED FOR INNOVATION, INFORMATION SECURITY AND PRIVACY, AND DOES NOT INADVERTENTLY CREATE AN UNEVEN PLAYING FIELD FOR BOTH TRADITIONAL AND NONTRADITIONAL PLAYERS – KPMG

GCC banks are leading or participating in several accelerators, incubators and training programs to advance their access to financial technologies. For fintechs and startups, such partnerships provide easy access to resources, data, funding, space and networking opportunities to test and showcase their prototypes. Treating payments as a stand-alone entity for instance in the case of Emirates NBD’s Network International allows for the expansion of services across the financial services sector and opens the service to a broader array of customers, thereby driving scale and improving profitability. “Carving out the payments business allows a more flexible approach to growth while also establishing a currency that makes subsequent consolidation possible, as carve-outs can tap into the higher valuation afforded payments companies,” said McKinsey. UAE’s First Abu Dhabi Bank (FAB) completed the carve-out of its existing payments division into a stand-alone operational entity called ‘Magnati’ in April last year. Aside from its payment services, Magnati seeks to provide enhanced capabilities to partner with fintechs on product and service innovation. The nexus between banks and digital payments service providers is no longer about competition but is now about collaboration through adopting cuttingedge technology services to meet customer needs and expectations. mea-finance.com

OPEN BANKING

Open to Change Anthony Habis Head of Middle East and Africa, BNY Mellon tells MEA Finance where their focus lies in implementing Open Banking. With much space for further innovation across platforms and functions and the regions’ vibrant innovation communities, they expect the trends of collaboration and open architecture to grow with artificial intelligence and machine learning playing an important role

hat is BNY Mellon’s overarching philosophy around Open Banking?

We’re in a rapidly changing industry and markets landscape—from both a business and a technology perspective – where client needs, requirements and expectations change quickly. In response, we introduced an openarchitecture approach to our core operating model. Open architecture gave us the ability to collaborate and integrate with the relevant market players of choice: fintechs, traditional providers, and clients. We t ra n sfo r m e d t h e institutional space in 2019 by launching a series of industryfirst front-to-back alliances with Amundi ALTO, BlackRock Aladdin, Bloomberg AIM, and SimCorp Dimension. Open architecture is a collaborative,

integrated approach that enables us to 1) respond to clients evolving needs fast; 2) offer clients greater choice and flexibility through an ever-expanding suite of proprietary and third-party solutions; 3) and have access to innovation through BNY Mellon’s reliable, resilient and safe global infrastructure. Through this model, BNY Mellon is able to provide innovation and efficiency at scale for clients and other market participants. Our focus is on three main drivers of value: accelerating new product development, bolstering our own and our clients’ operational resiliency and efficiency, and enhancing the client experience. This open mindset has allowed us to participate in meaningful collaborations and strategic investments that ultimately help drive improvement across the industry.

Would you say that Open Banking is now the norm in the regional day-to-day banking experience? When we first went live with BNY Mellon OMNISM, our Open Architecture platform three years ago, we were virtually the only ones in the market pursuing this. Following the successes, we now see a sharp uptick, with more companies embracing the approach globally. As one of the world’s most dynamic and evolving markets, the Middle East is a prime jurisdiction for Open Banking to take hold. Open banking is evolving in the region and starting to gain traction, with the UAE and Saudi implementing enabling regulations in order to promote adoption. In 2020, the Dubai Financial Services Authority (DFSA) commenced the UAE’s involvement in the open banking sector by granting licenses to specific entities.

Anthony Habis Head of Middle East and Africa, BNY Mellon

Banking and Finance news in the MEA market

In 2021, The Financial Services Regulator y Authorit y of the Abu Dhabi Global Market introduced a new framework to supervise FinTech companies that provide third-party services to customers. Additionally, the framework is set to provide a foundation to support the growth of open banking in the UAE with a focus on customers having control over their financial data. In the Kingdom of Saudi Arabia, the Saudi Central Bank (SAMA) issued its first open banking policy in 2021, which expected to go live this year. The policy is a pivotal movement for the Kingdom as it seeks to further develop its financial sector in line with its Vision 2030 and to help foster collaboration amongst financial market players. Global market realities and shifting client needs, combined with rapidly advancing technologies, will see the increased need for open banking becoming the norm. Moreover, Allied Market Research estimates that the global open banking market is projected to reach $43.15 billion by 2026; we expect to see other countries in the region increase their focus on supporting growth in order to capitalise on the vast market opportunity. Given the region’s vibrant fintech and innovation community, we certainly expect the trend of collaborations and open architecture to continue. In fact, we ourselves are actively pursuing it in the region and collaborating with the regional fintech organizations. We are proud to be helping to deliver a future-ready market infrastructure in the Gulf Cooperation Council based upon a common data management platform that connects market participants.

How do you assess Open Banking propositions to ensure positive experiences for clients and customers? Our goal is to provide clients with greater flexibility and agility to help grow, futureproof and transform their businesses. BNY Mellon already offers a range of services which all form part of the open-architecture platform. We have differentiated

capabilities in distribution, ESG, liquidity, markets, data and much more covering all parts of the investment lifecycle. When evaluating propositions, we consistently consider the ever-evolving technology landscape and offer solutions designed to respond to advances in machine learning, AI, and digital assets. We are also sharply focused on customization, recognizing that a one-size fits all approach does not fit every client. The natural evolution of our open platform will be the creation of a fully integrated front-to-back platform capable of hosting all BNY Mellon and third-party solutions. For those clients who are

experience digitally. In our own business, we’re continually augmenting our API offerings for clients and third parties, which are focused on the accessibility of data and enable technology integrations. Our well-established and robust API library is interconnected and seamless within our front-to-back service model and platform.

What does the move to Open Banking mean for banks in terms of risk assessment and liability? Open Banking can enable organizations to better assess and reduce risk through faster and more accurate monitoring and

AS ONE OF THE WORLD’S MOST DYNAMIC AND EVOLVING MARKETS, THE MIDDLE EAST IS A PRIME JURISDICTION FOR OPEN BANKING TO TAKE HOLD looking to reduce their technology and infrastructure costs, this will create a single integrated environment that will host, manage, support and service their digital and data requirements.

Do you foresee a point where API’s have developed as far as naturally possible or will there always be space for continual innovation in banking services? We believe there is infinite room to innovate across platforms and functions, and APIs are no exception to that rule. APIs are helping to provide new opportunities for collaboration, efficiency and the delivery of financial services globally. With API adoption continuing to accelerate industrywide, investment and human capital will continue to drive greater innovation in the financial industry. APIs are helping to deliver more seamless payments and transactions for clients, allowing firms to increase service offerings and streamline the client

insights. As with any industry innovation or shift, especially one involving massive amounts of consumer data, there is risk involved. But as one of the world’s premiere financial institutions at the intersection of trust and innovation, risk management is embedded into BNY Mellon’s DNA. For Open Banking to be successful industry-wide, market participants will need to take a more proactive approach to risk and compliance and focus on data quality and cybersecurity. We believe that adopting forwardlooking tools, such as risk monitoring to predict investment breaches, will be critical to success. We also work closely with clients to ensure data integrity. We use bots, for example, in some of our fund-accounting operations today. Advanced technologies such as artificial intelligence and machine learning will continue to play an important role in securing the industry as Open Banking continues to gain momentum. mea-finance.com

COVER INTERVIEW

Lands of Promise Thierry Simon Crédit Agricole CIB, Chief Executive Officer for the Middle East and Africa, speaking with MEA Finance talks openly and enthusiastically about the future prospects for the Middle East and Africa, as well as the real opportunities for banking and finance that currently exist and are set to expand further in these regions

hat do you think make the Middle East and Africa such a p ro m i s i n g a n d exciting region for the banking and finance sectors?

Crédit Agricole CIB was one of the first foreign banks to establish operations in the MENA region. Our long history (over 40 years) in the UAE and in-depth knowledge coupled with strong commitment to this region have enabled us to form strong, lasting relationships with our clients. We were established in Saudi Arabia since 1949, in Dubai since 1975, in Abu Dhabi since 1981, in Egypt since 1979 and in 1977 we set up Banque Saudi Fransi in Saudi Arabia. Therefore, it has always been an attractive region, a region at the centre of the world. When I arrived in Dubai three years ago, I noticed there were three major areas of transformation. Firstly, the

region is facing a 180-degree change in the outlook vis-à-vis energy and especially fossil fuels. Previously the goal had been to hold on to the reserves and make them last forever, however this has changed abruptly. What we are seeing now is the desire to cash in on the reserves rather than preserving them for the future. If you look at the most recent quarterly results published by Aramco you can see this trend: 30 billion US Dollars net profit. This means that they are cashing in to prepare for the future. This is the energy transition. It is going fast, in fairly large volumes and is the first major disruption I wanted to talk about. The second area of evolution which is accelerating rapidly concerns the social, legal and environment. With regards to the social aspects, you can notice that there some improvements in women’s rights and access to housing. In the 2030 Vision of Saudi Arabia, the objective is to reach 70% home ownership by 2030. Between 2018 and 2020, mortgages doubled, and we saw +30% increase in mortgages in 2021. It’s amazing to see what Saudi

Thierry Simon Crédit Agricole CIB, Chief Executive Officer for the Middle East and Africa

Banking and Finance news in the MEA market

Arabia is doing about access to housing for the population and it is going very fast. The legal environment in the whole region has also seen significant upgrades to bring it in line with international standards such as a greater emphasis on the enforcement of law, such as the new AML laws. The third area of transformation is about food security. Improved self-sufficiency and food security are an important topic across the whole region. The UAE are particularly focused on food security as illustrated by the recent acquisition of 45% of Louis Dreyfus by ADQ, which it considered to be a unique investment in one of the world’s top global Agribusiness commodity powerhouses with presence in 100 countries. This is a major move from the UAE and Crédit Agricole CIB will continue to contribute its expertise and capacities in this major shift.

you don’t have a significant investment banking business. In Africa, the countries with the highest GDP figures are South Africa and Nigeria. As ultimately your strategy is based on allocation of resources, you need to make sure that you allocate sufficient resources to the best market, the most relevant market to you. Therefore, our commercial strategy is to concentrate on a small number of quality clients rather than many, and we decided to concentrate our activities on four countries and not more, unless one of our key clients is asking us to do so. Islamic banking is a key feature for the region, and we have developed a very interesting offering in this space. So, why is the region interesting for financial institutions and investment banking businesses? Look at the sovereign wealth funds, the energy infrastructure

you pitch to a client such as Aramco, you better pitch something that none of your competitors have pitched before. We leverage on our expertise where we are the leader. We pitch the vision of an investor like Amundi, a leader in European asset management and part of the Crédit Agricole Group and we position ourselves. This is what investment banking is about: knowing exactly what you are good at, knowing what your clients are expecting and provide them with tailor-made solutions, adding value to their business.

Could more be done to mentor and develop local skills and expertise in the regional financial markets? This is a crucial issue because when – as a country - you decide or realise that you have to change, you have to do it very quickly and have people with those necessary skills. What is unique about

What do you see as the current key areas of interest to the regional banking and financial markets? When I arrived here three years ago, I started with a thorough review and studies of the region to avoid drawing any rapid conclusions. I looked at the countries’ profiles and key actors: both from a social and government perspective as well as a financial perspective. If you look more closely you can notice that it’s quite wellbalanced between financial institutions and corporates, which is a special feature of the region. Why? Because sovereign wealth funds, which we consider as financial institutions, are well developed and active here with seven of the world’s biggest sovereign wealth funds being based in the region. So, the company profiles you are dealing with are different from the rest of the world, and financial institutions are very interesting for investment banking, with a lot of opportunities. For a country to have big business potential for investment banks you need GDP of a significant size. It is a major driver and without a significant GDP

THIS IS A REGION WHERE YOU MUST BE AT THE TOP OF YOUR GAME AS THIS IS WHAT YOUR CLIENTS EXPECT, AND YOU ARE COMPETING WITH 150 OTHER BANKS

business, Islamic banking and of course ESG. Crédit Agricole CIB fits very well in this landscape for several reasons: we are a world leader in export credit financing and sustainable finance, we have great expertise in capital markets whereby we can provide structured solutions tailored to our clients’ needs. As a result, in the past three years we have seen a sharp increase of our revenues in the region and we are becoming more attractive to the key actors. This is a region where you must be at the top of your game as this is what your clients expect, and you are competing with 150 other banks. Believe me, when

the region is that everybody is ready to listen, and as an investment bank partner you have to bring a lot to the table. As an international player we bring our global expertise and adapt it to the local needs of our clients. To be a part of building the future is to bring education and you can then partner and support local institutions. For example, here in Dubai there is the University Council leading initiatives where you look for and develop the right skills locally. Ultimately, we offer our expertise but instead of importing foreign bankers and expertise into the country, we are committed to recruiting and training local people. mea-finance.com

COVER INTERVIEW

an unique expertise in education in Africa, and we bring the two together. As a second step, you need to develop financial tools, and this is where the investment bank comes in. Together with “Dubai Cares” and the World Food Programme, we are working on a new initiative, a social impact bond that can attract investors by developing new tools that currently only exist on a very small scale: social impact certification, to guarantee investors their return on investment.

Will investment banking grow to take a larger share of overall financial activity in the region?

As the world leader in export credit financing, we offered to Ministries of Finance, sovereign wealth funds and key corporate actors to train them in Paris and London, in the centres of expertise and share our techniques and knowledge in areas such as Debt Capital Markets or loan distribution. This is a way to contribute and accelerate local expertise. Ultimately, we are doing more as we consider it is critical that we bring value to society; the Group’s “raison d’etre” is “Working ever y day in the interest of our customers and society”. The Crédit Agricole Group is well known for two areas of expertise in particular: food and agriculture as well as housing. I mention the latter as housing is an emerging topic in the region, with individual ownership of homes a fairly recent trend, for example in Saudi Arabia. Governments want to give access to housing to the whole population, but which kind of model are they going to offer? Are you going to propose a U.S. based model built on the property value only? Or do you provide a model like the French one, the Crédit Agricole model, where you work

WE CAN SEE THAT THE MARKET IS MOVING VERY FAST, AND ALL PLAYERS ARE KEEPING A CLOSE EYE ON THE FINANCIAL MARKETS FOR OPPORTUNITIES with your client on a long-term capacity and take security against the loan. These are the main discussions we have and what we want to bring to the region in terms of expertise. Lastly, I would like to mention a joint initiative we are working on with a great foundation in Dubai “Dubai Cares”, and the World Food Programme. A new initiative bringing together schooling and food, we call it “School Feeding”. We have an unique expertise in micro-finance for supporting farmers in Africa and “Dubai Cares” has

Banking and Finance news in the MEA market

Yes, definitely there are significant opportunities. We can see that the market is moving very fast, and all players are keeping a close eye on the financial markets for opportunities. If you look at Debt Capital Markets opportunities, you look at the US Dollar, the Euro, Asian markets no matter whether you are a government, sovereign wealth fund or a corporate. So, all actors in the region are developing and expanding their financial tools. IPOs are going to be a big topic for the coming years, again leveraging the financing. What is impressive in the region is that they benefit from high level of fossil fuel reserves, and they want to cash it in fast. But at the same time, they also know the importance of developing the financial skills and tools to diversify funding sources and funding maturities. We are now in the middle of it but three years ago, it was nascent. To d a y, t h e re i s a s t re a m of opportunities for investment banks. Having said that, there are two points of attention that I would like to stress. First, I have myself been surprised by the evolution of Islamic banking and the depth of Islamic banking. To my opinion Islamic banking has reached a plateau and there is something to be done to further its potential as I believe it is a very interesting tool for investors. The Middle East is 75% of the world in terms of Islamic banking, so the place to do it is here.

What can we do to help Islamic banking grow and bring more value to the region? The second point of attention is how can we provide long term financing commitments to the region, short term financing is easy but going over five years, ten years, fifteen years, it becomes more difficult. Today, we do it through export credit financing, where we can bring material to all institutions or governments to help supporting those long-term risks. The projects in the region are usually ten times in terms of value of what you would find in Europe. So, it means you need huge financial resources to accomplish this. What we are missing today is the way to pool those assets, those risks and distribute those risks to investors. This is

an area which a lot of banks are working on, including Crédit Agricole CIB. So, each of us, we work in our own ways and try to do it. Overall, I would expect Islamic banking to support more of this expansion and tools for distribution of long-term risk. This is crucial because the region is going for a very long-term project, the project with regards to Renewables, Power and Infrastructure. How do you finance that?

As the 21st century continues, how do you think the Middle East and Africa will measure up alongside the rest of the world’s major economic regions? I like your question and it’s the right time to ask it as I feel that the tectonic

plates are moving. If we look at the latest IMF mapped view of the GDP of the world’s regions and countries, you will see that the Middle East and Africa are smaller than the rest of the world. Today the world looks like this, but I believe that there are new ecosystems arising very fast with a major change in terms of expectation of the populations and opportunities for investments. Today, we can also see it in terms of business opportunities and, more importantly in our clients’ attitudes, because ultimately, we are here for our clients. For example, our oil and gas clients are looking at Southeast Asia, they are looking at India. In telecoms, they are looking at Indonesia. If you look at Africa, the Middle East and the South Asia ecosystem, it becomes very consistent. There is a majority shared Muslim culture. Forty percent of the population is less than 25 years old, meaning that their need of energy is going to grow. They have fossil fuel resources, and they are very rich countries and then you plug Singapore into it, and you have all the sovereign wealth funds too. So, you have a very consistent ecosystem and when you look at it from an investor standpoint or an investment banking standpoint, today you will look at the numbers in Asia, so when you look at the region, you make an arbitrage in terms of resources, and allocation of resources. China, Europe, the issues of the population, the energy issues have nothing to do with what is going to happen in Africa, the Middle East and the rest of Asia, and this is what is happening today. But this is what will happen tomorrow, I believe that this GDP map will change significantly, but we need to create this wide understanding and connection to match the expectation of the region’s population. I can tell you that well know large international corporates are doing that because it makes sense. Because they feel that the market is a consistent market and a growing market. I truly believe that in the coming ten years, this is what is going to happen. mea-finance.com

CLIMATE CHANGE

INSTRUMENTAL CHANGES:

The Role of Finance in Climate Change The market for green bonds in the Middle East is growing quickly as retail and institutional, sovereign wealth funds, banks and portfolio managers are utilising ESG considerations to build and manage their portfolios

he oil-rich Gulf Arab countries made a seismic shift by unveiling a raft of measures to eliminate planet-warming emissions within their borders last year despite regional economies’ heavy reliance on oil and gas—which accounts for 70% of the six-nation bloc’s total goods exports and government revenues. The initiatives, which were unveiled ahead of COP26 last October, are part of the GCC states’ broader strategies to diversif y and open their economies with a strong focus on sustainability.

While reacting to the Intergovernmental Panel on Climate Change (IPCC) report on climate change in August 2021, the UN Secretary-General António Guterres cautioned that global warming is dangerously close to spiraling out of control, saying it is “Code Red for Humanity”. Over the past two years, as the ongoing global health crisis morphed into an economic one, J.P Morgan said that investors are calling the COVID19 pandemic the 21st century’s first ‘sustainability’ crisis, one that is a wakeup call for decision-makers to prioritize a more sustainable investment approach.

Banking and Finance news in the MEA market

Meanwhile, “green” or ethical investing is attracting increasing attention from both investors and lawmakers alike across the region owing to the strategy’s promise of utilising a range of nonfinancial information to better align finance with long-term value and societal values. Sustainability, which incorporates environmental, social and governance (ESG) concerns, is increasingly topping the agendas of most financial institutions in the region. The pandemic is also expected to put the Islamic finance industry back on ESG investors’ radar. Fitch Ratings said that sustainable Islamic bond volumes soared 17.2% y-o-y to $15 billion, with the theme likely to remain prominent in 2022. However, S&P Global said that though the pandemic offered the possibility of more broad-based and transformative growth, Islamic finance has not yet fully increased its share of sustainable finance activity. ESGs are increasingly becoming an integral part of how the global financial services sector operates. “Investors representing more than $45 trillion in assets under management have already agreed to drive climate change action across their portfolios,” Karin Oertli, the COO, Personal and Corporate Banking and Switzerland, UBS said in a report published by the World Bank. Industr y exper ts believe that sustainable financing together with technological innovation and digitalisation in the financial services industry is

instrumental to sustainable innovation and growth and the transition to a less carbon-intensive economy.

Fostering sustainability The market for green bonds in the Middle East has grown tremendously over the last decade as retail or institutional, sovereign wealth funds, banks and portfolio managers are utilising ESG considerations to build and manage their portfolios. Several corporate and sovereign borrowers in the region have also increased the issuance of fixed-term securities to raise funds for projects with environmental benefits such as renewable energy projects. Following the issuance of its $587 million debut green bonds in March 2017, UAE’s First Abu Dhabi Bank (FAB) is spearheading the financing of projects that has key environmental impact including climate change, renewable energy and energy efficiency. The Abu Dhabi-based lender issued $23 million yuan-denominated green bonds (the first private placement in the Middle East and North Africa) in June 2021. FAB also issued around $219 million in green bonds last November, the lender’s second Swiss Franc-denominated bonds in 2021 after it had raised $226 million in January, bringing its total issuance to $1.36 billion. FAB is also the first bank in the Middle East region to join the UN Net-Zero Banking Alliance, an initiative comprising global banks that commit to reducing emissions by 2050 through responsible lending and investments. Qatar National Bank (QNB), the Middle East region’s biggest bank, is also increasing its lending to businesses that contribute towards sustainable development goals in a bid to help customers manage their environmental and social risks. The Qatari bank issued a $600 million green bond in September 2020 signalling a growing investor appetite for the instruments in the Gulf region. Abu Dhabi-based Sweihan PV Power Company issued a $700.8 million amortising green bonds at 3.625% in

January 2022 as the solar energy joint venture, which is 60% owned by TAQA with Japan’s Marubeni and China’s JinkoSolar holding a 20% stake each, seeks to save 9 million metric tons of carbon dioxide from being emitted between 2020 and 2030. The Arab Petroleum Investments Corporation (APICORP) also sold $750 million debut green bonds with a five-year maturity in September last year after drawing as much as $2.1 billion in demand for the climate-friendly debt. The oil-rich Gulf region has seen a surge of interest in ESG-related initiatives and deals as large public institutional investors are gradually incorporating the strategy into their investment mix. Saudi Arabia’s Public Investment Fund (PIF) reportedly hired five international banks as members of an ESG panel for its medium-term capital-raising strategy in September 2021. PIF’s ESG framework will allow the Saudi wealth fund to expand its funding base by attracting sustainable-focused investors. Meanwhile, Abu Dhabi Investment Authority (ADIA), the UAE’s biggest sovereign wealth fund, said last September it would increase its exposure to technology and climate changeoriented investments as part of its post-pandemic strategy. Mubadala also joined forces with Abu Dhabi National Oil Company and ADQ last year to produce hydrogen from renewable energy amid a regional shift to developing hydrogen as fuel as several buyers are moving towards less-polluting alternatives to crude oil. Though the outbreak of the pandemic slowed down the implementation of ESGs, it is evident that banks and institutional investors in the Middle East continue to embrace the strategy as new banking products and models are being developed, tested and commercialized.

Islamic finance Though not mutually exclusive, Shari’ahcompliant financial instruments offer a framework that embodies the social and ethical values of ESG investing, providing

investors in the Middle East with an opportunity to adopt more sustainable, responsible investment strategies while tapping into the potential value of conscious investing. According to S&P Global, funds raised from green Sukuk typically support investments in renewable energy or other environmental assets such as solar parks, biogas plants, wind energy projects as well as renewable transmission and infrastructure projects. The pandemic crisis is projected to boost the appetite for sustainable instruments in the GCC region as governments and corporates look to revive their economic diversification efforts while driving the growth of sustainable projects. Islamic finance social instruments can help core Islamic countries, banks, companies and individuals economically affected by the pandemic to navigate these choppy waters, with market participants eyeing Qard Hassan, Zakat, Waqf and Social Sukuk, said S&P Global. As GCC sovereigns and corporates are tapping debt markets to finance projects that may have been shelved following the outbreak of the coronavirus and plug their ballooning deficits, analysts expect Shari’ah-compliant social instruments to widen the appeal of Islamic bonds beyond traditional markets in the Middle East and South Asia to include ethical investors in West. Sustainable debt covers a variety of instruments, from the well-established green bonds to the fast-emerging category of sustainability-linked loans. Despite Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) standards implementation challenges, the economic impact of the pandemic and a rebound in crude oil prices, global Sukuk issuance surged by 36.1% in 2021 to reach $252.3 billion, said Fitch Ratings. Islamic banks in the GCC region are witnessing a growing frenzy for green bonds although the appetite is still in its infancy as more investors are committing to responsible investment. Nasdaq Dubai set a record $23.1 billion debt listing last mea-finance.com

WEALTH MANAGEMENT AS INDIVIDUAL AS YOU

At OCS International Finance Ltd we pride ourselves on the personal care of our clients. As a competent and reliable partner, we offer bespoke financial solutions, built on truly personalized relationships and a solid foundation of financial expertise.

OUR EXPERIENCE - YOUR FINANCIAL SUCCESS OCS International Finance Ltd +971 4 525 0600 | info@ocs-finance.net | ocs-finance.net

Regulated by the DFSA

This information is provided by OCS International Finance Ltd (“OCS”), a private company, established under the laws of the Dubai International Financial Centre as a Category 3C Authorized Firm that is regulated by the Dubai Financial Services Authority (“DFSA”). This information is intended only for Professional Clients or Market Counterparties (as defined in the DFSA Rulebook – Conduct of Business Module – Section 2.3) and no other person should rely or act upon it. This information is provided for general information purposes only and is not intended to be relied upon as advice or a recommendation and does not take into account the investment objectives, financial situation or needs of any particular investor. An investor should seek independent professional advice when deciding if an investment is appropriate.

CLIMATE CHANGE

year and $11.9 billion of the total listings were Islamic bonds. Meanwhile, Standard Chartered Bank’s Islamic banking services ‘Saadiq’, partnered with the Malaysian Halal Development Corporation in November 2021 to launch a $100 million Islamic finance programme aimed at funding SMEs and corporates in key halal markets including the UAE, Saudi Arabia and Bahrain.

Sukuk issuance On the Sukuk front, S&P Global projected that total issuances would range between $140 billion and $155 billion this year compared with a plunge in issuance to $139.8 billion in 2020 from $167.3 billion in 2019. The Saudi National Bank, the Gulf state’s largest bank that is 50.4% indirectly owned by the government, raised 750 million in debut ‘sustainable’ Sukuk last month after demand topped $3.2 billion. Saudi-based Islamic Development Bank, a regular issuer in the capital markets, raised $1.7 billion in five-year Islamic bonds last October after the Sukuk drew more than $2.4 billion in demand. IsDB raised $2.5 billion in March 2021 with sustainability Sukuk finance projects including renewable energy. The multilateral lender also sold $1.5 billion in Sukuk in June 2020 to support its member states to mitigate the fallout from the pandemic. Though overall Sukuk issuance is gathering steam in some of the world’s largest financial hubs such as London, the market for green Islamic bonds remains small compared to the conventional Sukuk market. Last March, the UK issued a $686 million (GBP 500 million) sovereign Sukuk in its second foray into the Islamic finance market, doubling the amount it raised from its debut Sukuk in 2014.

Leading from the front Saudi Arabia, the world’s top oil exporter, announced last October that it would aim to reach net-zero carbon emissions by 2060 by investing more than $186 billion

(SAR 700 billion) into a green economy, in a way that’s compatible with the Gulf state’s development plans and advances its economic diversification strategy. Crown Prince Mohammed bin Salman said that the kingdom’s green initiative includes cutting carbon emissions by over 270 million tons per year. The Gulf state’s majority-owned energy giant, Saudi Aramco, also set a target to achieve net-zero emissions from its operations by 2050, a decade sooner than a government timetable for the kingdom. The pledge puts Aramco at par with European energy majors such as Royal Dutch Shell and BP and ahead of US oil companies Chevron and Exxon Mobil. Saudi Arabia is not the first Gulf petrostate to pledge to eliminate planetwarming emissions. The UAE, earlier in October last year said that it would invest $163 billion (AED 600 billion) in renewable energy as part of its strategy to achieve net-zero emissions by 2050. Meanwhile, the country is extensively investing in nuclear energy, solar plants and sustainable transport. Bahrain’s cabinet also made the same net zero commitment in October 2021, saying the Gulf country aims to reach net-zero carbon emissions in 2060 to help tackle climate change and protect the environment. Last May, the International Energy Agency (IEA) in a report said that the energy sector accounts for around three-quarters of greenhouse gas emissions and “holds the key to averting the worst effects of climate change.” The Sultanate of Oman updated its climate action plan in July 2021 to include a 7% reduction in emissions by 2030 while Qatar aims to reduce greenhouse gas emissions by 25% by 2030. The net-zero commitments are the latest in a series of green initiatives by the Arabian Gulf petrostates, but Oman’s target is far short of the 50% reduction scientists say is needed to stem runaway climate change. As Gulf countries continue to fight the threats associated with environmental and climate risks, and in light of the ongoing coronavirus pandemic crisis, sustainable

finance is expected to serve as a deal enabler or implementor for sustainable projects while acting as a solution to curb and manage future threats.

Global perspective McKinsey said that banks are under rising regulatory and commercial pressure to protect themselves from the impact of climate change and to align with the global sustainability agenda. As the world continues to battle the pandemic, regulators, oversight authorities and policymakers are expected to take the lead in calling for the need for greater adoption of ESG. Investors are also ramping up pressure on banks to some extent due to the increasing recognition that conscious investing, in particular issues to do with climate change, represents material risks that must be managed. This has seen several global lenders refusing to renew loans on existing fossil-related projects such as coal mining to improve their carbon disclosures. JPMorgan Chase & Co. in May 2021 unveiled its carbon reduction goals for clients in line with the Paris financing commitments as the investment bank is facing mounting pressure from shareholder activists to align its funding activities with their climate change commitments. The Wall Street lender also unveiled a $2.5 trillion funding package to lend, invest and provide other financial services over the next decade to advance long-term solution projects that address climate change and social inequality. In October 2021 Standard Chartered Bank set new targets for reducing its funding to carbon-intensive sectors by 2030, including plans to mobilise $300 billion in green and transition finance as part of the bank’s broader goal to reach netzero emissions for itself and its clients by 2050. Globally, almost all sectors including the fashion industry are focusing more on environmentally friendly and sustainable investments amid pressure from clients, consumers, shareholders and regulators to align with ESG. mea-finance.com

CLIMATE CHANGE

A Nuanced Challenge Addressing the role of finance in climate change, Christophe Lalandre SEO at ADGM Branch and Michael Urban, Deputy Head of Sustainability Research, say that while it occupies the highest priority level as an investment conviction and that the financial sector’s role in enabling climate transition should not be underestimated, the matter is complex and open to misconceptions, but there are many opportunities too

the climate transition comes with many opportunities as well. For instance, as the world accelerates its transition towards renewable sources of energy, many Arab World countries face major opportunities to improve their energy security as well as their global trade competitiveness as they are gifted with some of the world’s highest wind and solar energy potential.

Does the public understand why banks must continue to provide services to essential though possibly carbon generating industries? There are a lot of misconceptions here. Perhaps the most prevalent and

ow does combatting climate change figure in your business mission imperatives?

It is mission critical, but to understand how and why we first need to define our terms as “combatting climate change” can be interpreted in several ways. Climate change is a complex phenomenon that entails environmental as well political and economic processes and outcomes, all which can be material to the risks and return profiles of financial investments. At Lombard Odier, sustainability is first and foremost an investment conviction. As investors, our key objective is to make sound investment decisions on behalf of our clients—as such, climate change is an integral part of our investment research and implementation strategy. Take physical risks for instance. In essence, physical risks are the physical manifestations of climate change (for instance heat waves, water stress, or hurricanes). Middle Eastern and North African countries are already naturally affected by difficult climatic conditions including high temperatures, scarce arable land and limited rainfalls and groundwater.

Christophe Lalandre, SEO at Lombard Odier, ADGM Branch

Michael Urban, Deputy Head of Sustainability Research

These are all set to be exacerbated by unmitigated global warming and could have dramatic effects on the prosperity and stability of the region. According to the World Bank, sea level rise could affect 43 port cities in the region (24 in the Middle East and 19 in North Africa). More specifically, in Alexandria, Egypt, a halfmeter sea level rise would cause over 2 million people to be displaced, and trigger $35 billion losses in land, property, and infrastructure value. But it is not all doom-and-gloom and investors should remember that

problematic one is the persistent use of carbon footprints (a current amount of greenhouse gas emissions) as a sole basis to assess the climate-suitability of an investment. To put it simply, being low carbon today does not necessarily mean being green today nor tomorrow. To illustrate this argument, take a company operating in a typically low carbon industry like media. Now imagine this media company is currently investing heavily in energy-intensive technologies like cloud-computing and satellite telecommunications without putting

Banking and Finance news in the MEA market

in place a plan to transition towards renewable energy sources. While that company starts with a low footprint (relative to say a steel manufacturer) this media company is setting itself up to see its emissions rising through time, thus contributing to climate change and, in the process, exposing itself and its investors to transition risks (if the government were to introduce a new tax on carbon, for instance). Conversely, a forward-thinking steel manufacturer with a very high footprint today might invest heavily in hydrogen technologies and consequently set itself on course to radically decarbonize its business model. In the process it will not only mitigate climate related risks (for instance future liabilities arising from climate related lawsuits) but it will also capture the upside as global demand for green steel increases. Ultimately, a high carbon company can be a better investment than a low carbon one. This is not just important from an investment standpoint, but it also matters in terms of impact. Indeed, the greatest positive impact on decarbonisation is destined to come from companies that are currently high emitters and that have the commercial need and financial resources to transition to a much lower level of emissions in the future.

Can banks have a positive role in the region as enablers in the fight against climate change? Absolutely, but one should remain cautious about over or underestimating the financial sector’s agency in enabling the climate transition. For green finance to be unlocked, there is a need for green projects and conversely. Ultimately, finance and the real economy have to work hand-in-hand to promote a transition towards a more sustainable economic and financial model. Forward-thinking

banks will play a critical role in financing the necessary climate mitigation and adaptation projects to tackle rising sea levels and temperatures (flood prevention and cooling infrastructure for instance). Equally, they will play a central role in facilitating climate mitigation projects, for instance by providing access to capital to renewable energy companies. We do see very encouraging signs in this direction in the region. The Middle East, whilst traditionally associated with fossil fuel expertise, are endowed with substantial renewable energy resources, particularly relating to solar energy. Our recently published joint-study with the University of Oxford shows that some key renewables projects are in the pipeline. For example, there is a $5 billion-dollar green hydrogen production facility planned for NEOM1, Saudi Arabia. When operational, it will be powered by 4 GW of solar, wind and storage and should produce some 650 tons per day of green hydrogen for export to Europe and globally to meet the growing demands for clean transport fuels. The UAE also presents an excellent case study into the future of Middle Eastern green competitiveness. Whilst fossil fuels still account for nearly 97% of the country’s energy mix, the UAE’s Energy Strategy 2050 targets a 50% share of low carbon energy by 2050. The UAE government’s “Operation 300bn” industrial strategy aims to develop the country’s manufacturing capabilities, including renewable energy equipment and hydrogen.

Can you see banks and financial service providers pulling away from working with some sectors in the coming years? I think one should pay as much attention to between sector shifts as to within sector shifts. Again, think about the steel sector—it is unlikely to go away, but it will be reshaped

Any reference to a specific company or security does not constitute a recommendation to buy, sell, hold or directly invest in the company or securities. It should not be assumed that the recommendations made in the future will be profitable or will equal the performance of the securities discussed in this document

Source for World Bank Middle East and North Africa - Adaptation to Climate Change in the Middle East and North Africa Region (worldbank.org)

by incumbents that embrace new ways of producing steel that are adapted to the green economy. Equally, it won’t just be about pulling away from certain sectors, it will also be about redirecting financial capital towards new ones. Ultimately, the climate transition is provoking a massive reshaping of the risks and opportunities sets within and across sectoral and geographical landscapes.

Are climate considerations spurring new product and service development in the MEA region’s banking and finance sector? The rise of climate awareness has caused a fundamental evolution in the MEA region’s Banking and Finance sector in recent years. The climate transition has subsequently generated a finance transition, and we are currently seeing a shift towards a more sophisticated approach to ESG and sustainable finance. Where this was once focused on individual “green” investment products, it now takes account of the wider impact of investments on climate change. The Gulf Cooperation Council (GCC) countries are becoming a global hub for new technologies that impact the green economy and its financing, aiming to create long-term economic growth whilst simultaneously protecting the environment. Re c e n t a n n o u n c e m e n t s h a ve demonstrated the acceleration of climate-related financing in the region. For example, Abu Dhabi National Energy (Taqa) just issued its first joint green bond, valued at USD700M, together with Emirates Water and Electricity Company (EWEC), a bond that has helped to diversify fund sources for a planned solar project, to include sustainable financing. This trend is beneficial to local investors as sustainable investing aims to generate higher returns than conventional strategies. The impact of climate change means that we also have to rethink the way we invest for the benefit of the planet, but also to take advantage of the opportunity for good returns, driven by these new investment solutions. mea-finance.com

CLIMATE CHANGE

Part of the Solution Sebastian Frederiks Head of Wholesale Banking Middle East, and Bas Bittink Head of Middle East & Turkey Debt Capital Markets at ING, address the opportunities and responsibilities they have in addressing climate change, highlight their actions and programme to steer their portfolio to meet clients goals

Sebastian Frederiks, Head of Wholesale Banking Middle East, ING

ow does combating climate change figure in your business mission imperatives?

Sebastian Frederiks As a financial institution, we play a role by financing change, sharing knowledge, and using our influence. Being sustainable is not just about reducing our own impact, it’s in all the choices we make as a lender, in our financing and through the services we offer our customers. That’s why sustainability is inherent to our purpose

Bas Bittink, Head of Middle East & Turkey Debt Capital Markets, ING

of empowering people to stay a step ahead in life and in business. ING takes a holistic approach to climate action. On the one hand, we’re acting on how our business impacts climate change, which includes using our Terra approach to steer our portfolio towards global climate goals. And on the other hand, we’re considering how climate change impacts our business, as we work to assess climate risks and take action to mitigate them. We have been steering our loan book towards global climate goals since 2018.

Banking and Finance news in the MEA market

In August 2021, we committed to steer our loan book towards limiting the rise in global temperatures to a maximum of 1.5 degrees Celsius, rather than 2 degrees Celsius. As such, where previously we were aligning our lending portfolio with the goal of net zero emissions by 2070, we’re now committed to achieve net zero emissions by 2050. As we start implementing our new commitment to net zero by incorporating it into our Terra approach, our Integrated Climate report shows our progress mostly in line with the former ambition. Of the nine sectors in scope for Terra, five (power generation, automotive, residential real estate, shipping, and fossil fuel) are on track with our existing climate-alignment pathways. Another three sectors (steel, cement, commercial real estate) are within 5% of their scenario and we’re confident we can bring these into alignment in the years to come. Finally, aviation comes out well above the pathway due to the extraordinary impact that Covid-19 had on the sector in 2020.

Does the public understand why banks must continue to provide services to essential though possibly carbon generating industries? Bas Bittink We want to help create a healthy planet with prosperous people. A planet free from the threat of the climate crisis. People with basic human rights, decent work, good labour conditions and ultimately, good financial health. We must at the very least ensure that our own operational impact on the environment and people is being made responsibly. Looking inward, that means making sure our operations – our buildings, data centres and how we

use transport – are in line with the lowcarbon economy of the future. That our employees are treated well and that neither we nor our suppliers infringe on human rights. But we can do more. As a global bank with billions flowing through our books, we have a huge opportunity, and responsibility to make an impact for the better. Doing more than just mitigating harm by bringing aspects of fighting climate change and protecting human rights into our dialogue with clients and financing decisions. For example, ING structured the inaugural green bond for a large oil & gas company transitioning into a multi-utility company. While the green bond naturally only finances green assets, we advised on increased transparency and accountability regarding its strategy to transition to a low-carbon business model through commitments to publish scope 3 GHG data and set targets for reducing its scope 3 GHG emissions. We can play a role by financing change, sharing knowledge, and using our innovation skills. Being sustainable is in all the choices we make as a lender, as a partner and through the services we offer our customers

Can banks have a positive role in the region as enablers in the fight against climate change? Sebastian Frederiks Absolutely, yes. We engage with clients, business partners and other stakeholders, and collaborate in supply chains and at industry level. We share knowledge based on research and commit to or are part of many international initiatives. We call upon world governments to create incentives for long-term investments, for instance by setting science-based targets to mitigate climate change and to develop alternative energy sources. We also urge world governments to work towards an effective price on carbon emissions and to stimulate and enable enterprises and institutions to publicly disclose their carbon emissions and forward-looking transition strategy,

so banks are better capable to take climate impact into account in financing and investment decisions. Transparency is an impor tant aspect of combatting climate change. We’re committed to transparently communicating the impact of climate change on our business and our impact via our financing on climate change, following the Taskforce for Climaterelated Financial Disclosure (TCFD) recommendations. We report more extensively on climate risk and our progress on alignment of our portfolio with global climate goals in our integrated climate report. We also recognise that other areas benefit from and contribute to tackling climate change, such as human rights, biodiversity and the circular economy. We have an approach for these areas and continue to strengthen their connection with our climate action agenda.

We also support our clients by financing circular economy solutions where people and companies ‘reduce, reuse and recycle’ instead of ‘take, make and waste’, including making the transition from ownership to access. We’ve been using our Terra approach to steer our portfolio towards global climate goals since 2018. As it became clearer that the world needs to move faster to reach climate goals, we increased our ambition in 2021. We joined the Net-Zero Banking Alliance and aim to steer our portfolio in line with keeping the rise in global temperatures to 1.5 degrees Celsius rather than two degrees, and achieve net zero by 2050 rather than 2070.

Can you see banks and financial service providers pulling away from working with some sectors in the coming years?

Bas Bittink ESG product developments are not entirely novel to the region as banks have been providing retail clients with green mortgage and auto loans for several years. We, however, are noticing an acceleration in the breath of possibilities and digitalization of the traditional banking services (ATM e-receipts, contactless payments, and recycled credit cards). Furthermore, wholesale banking is picking up pace with ESGstructured syndicated facilities as well as ESG-structured bonds incentivizing that sustainable pathway. Tailoring towards the client’s needs and possibilities, while ensuring ESG credibility is of key importance to create a sustainable market practice. ING has been at the forefront in that respect by structuring the region’s first Sustainability-Linked Loan as well as the largest conventional green bond issuance from a bank. Other new wholesale services include for instance ESG ratings advisory, an in-depth advisory proposition which ING is actively engaging on in the region as well.

Sebastian Frederiks We’ve financed billions of euros in energy projects, through green loans, green bonds and other innovative products and financing constructions. Our sustainability-linked products, for example, offer corporate clients a lower interest rate for improved sustainability performance. We’ve supported hundreds of these types of loans since we introduced them in 2017. In addition, ING executed and placed over 230 ESG bonds since 2015. We say ‘no’ to certain companies and sectors, like with our aim to reduce our exposure to coal power generation to close to zero by 2025. We also respond to financing requests with “yes, but…”, outlining sustainability improvements the client must make first. We believe helping clients improve is more effective than excluding clients altogether. Of course, if they don’t meet our standards and aren’t willing to change, we don’t do the deal.

Are climate considerations spurring new product and service development in the MEA banking and finance sectors?

mea-finance.com

DATA SECURITY BANKING TECHNOLOGY

How Digital Transformation is Empowering Banks to Deliver Better, More Competitive Customer Experiences The digital revolution has indeed taken the Middle East by storm and every industry is being transformed by technology. The banking sector is no different, and traditional banking systems are rapidly changing

illions of people have now embraced fully integrated mobile banking experiences, for example, using smartphones and tablets to do everything from buying products and services online to opening new accounts and making payments. A recent outlook from McKinsey notes that amongst urban consumers in the UAE and KSA, at least 80 percent now prefer to do their banking on computers, smartphones and tablets— visiting branches and call service hotlines only to meet specific and more complex needs.

Digitalisation is no longer a choice but a necessity. Banks must continue to embrace digital applications in order to provide more value to their customers. But what does that journey look like, and what strategies can banks apply in an increasingly competitive market?

Digitalization and enhanced customer experiences There are various areas in the region’s banking sector that are getting digitalized. These include online banking applications, fraud detection systems, virtual assistants, mobile banking tools, email marketing, data encryption, KYC software, and more. A robust digital transformation strategy is ultimately one that is aimed at benefiting both the bank and its

Alaa Elshimy, Managing Director & SVP, Enterprise Business Group, Huawei Middle East

Banking and Finance news in the MEA market

customers. This is especially true at a time when customer experience has become the new battleground for differentiation. According to some estimates, 86% of consumers are now willing to pay more for a better brand experience. Digitalisation has the potential to significantly improve these customer experiences in various ways: Technology can now enable banks to make sense of large amounts of structured and unstructured data to enable hyper-personalization, relevancy and real-time feedback to better understand customer behavior and purchase journeys. They can in turn offer an enhanced customer experience based on these accurate and timely insights. Furthermore, banks can now maintain constant and real-time interaction with customers through an omnichannel approach. AI-powered chatbots, for example, can quickly answer customer complaints, allowing an organization to build a better brand image and establish trust with their customers. With digital banking, customers can also have the flexibility to access services anytime and from anywhere, saving time and offering convenience.

The technology to get there There are a variety of technologies available today that can aid in the banking industry’s digital transformation, perhaps most notably: Blockchain - The use of blockchain in banking could result in a more user-friendly interface, increased accuracy, and more secure data and transactions. Furthermore, blockchain technologies will make transactions transparent, allowing for easier collaboration. Artificial Intelligence - Chatbots and online assistants that can help customers resolve issues or complete various transactions are examples of AI in banking. Apart from that, AI can now help in data analysis for security purposes,

for example, evaluating client data in seconds to detect fraudulent transactions. Cloud Computing – Another vital technology that can assist banks in becoming more successful is cloud computing, which enables them to boost efficiency, streamline operations, and offer products and ser vices more quickly. In addition, cloud may aid in risk analysis and provide a secure environment for clients and internal bank operations. Bringing together the right technologies for the right customer

the adoption of all digital channels offered by DIFC with full access to services and connectivity for clients. A core component of the transformation was launching next-generation Wi-Fi 6 in partnership with Huawei, offering the fastest Wireless Local Area Network (WLAN) technology to date. The solution was deployed across public areas in DIFC, reinforcing the centre’s position as the most advanced financial hub in the MEASA region. As DIFC looks to triple in size by 2024, the launch of Huawei’s AirEngine Wi-Fi 6 will help DIFC meet its growing connectivity requirements, ensuring its community

A ROBUST DIGITAL TRANSFORMATION STRATEGY IS ULTIMATELY ONE THAT IS AIMED AT BENEFITING BOTH THE BANK AND ITS CUSTOMERS experience applications requires the right ecosystem partnership. Since entering the financial services industry a decade ago, Huawei has empowered 2000+ financial customers in more than 60 countries and regions, including 47 of the world’s top 100 banks. Huawei has become an important partner in the digital transformation of the financial services sector worldwide. Today, Huawei offers full-stack cloud, device and edge capabilities through the aggregation of SaaS services, as well as closely collaborating with financial institutions and the ecosystem to build new services for any scenario. As just one example in the Middle East, Huawei has helped Dubai International Financial Centre (DIFC) prioritize connectivity and accessibility. Having realized the importance of digitalization ahead of the arrival of COVID-19, the pandemic played a role in accelerating

has access to the latest technology and network, with the capacity to support innovative smart services.

Future industry outlook and opportunities The future of financial services is based on being agile. All organizations must be fast to create new services, fast to respond to competitors, innovative and, above all, stable. As consumers shift from bricks to clicks, financial service institutions will need to keep up with the needs of a growing number of ‘digitally-savvy’ consumers. Digital transformation opens a plethora of opportunities and gives financial institutions a new competitive edge, and one thing is for certain: digital transformation in the banking sector is unavoidable, and it will be an instrument that will drive the new financial reality of tomorrow. mea-finance.com mea-finance.com

DATA SECURITY BANKING TECHNOLOGY

CORE VALUE:

Why banks should modernize without delay While seeking to make the best of their investments in digitalisation, many are held back by inflexible legacy infrastructure and are adding further layers just to provide quick offerings. Venkatramana Gosavi Senior Vice President & Global Head of Sales, Infosys Finacle, says this can only go on so long and a reckoning is coming however, he shows that there is light on the horizon.

fter accelerating digital adoption in 2020-21, banks are now seeking to maximize value from those investments by doing things differently. Our conversations with clients veer between tapping the Banking as a Service opportunity, riding the embedded finance wave, and introducing a Buy Now Pay Later option at checkout, and doing these successfully amid competition from big tech, fintech and challenger banks. At the same time, banks are focusing their innovation agenda on three things: the products and services to offer, the channels and experiences to offer them through, and the ecosystem partners to work with on both. And everyone is in a hurry to progress in all three areas. So it is frustrating that so many banks are not able to move fast enough. Mostly, the problem is the underlying legacy infrastructure, in particular the inflexible core systems, which are unable to support

Venkatramana Gosavi, Senior Vice President & Global Head of Sales, Infosys Finacle product extension, innovation, API development and advanced analytics, to name a few. A secondary problem is that provisioning additional (legacy) resources takes months, way longer than the hours or days that cloud-native infrastructure needs to multiply capacity. But since the business still wants its outcomes, and fast, the organization resorts to shortcuts, such as bypassing the legacy

Banking and Finance news in the MEA market

core by layering new capabilities onto it. From algorithm-driven autonomous investing and structured deposits to personalized mortgages and customized small business loans, banks have been forced to build capabilities on top of their existing processes and systems because changing the core is just not prioritized. While this approach allows the banks to launch offerings quickly – and buys them a bit of time – it gradually piles on both technical debt and architectural complexity to unsustainable levels. A number of banks we know are facing this problem; they can no longer afford to drag their feet on core modernization. The good news is that core migration in 2022 is far removed from what it was a decade ago. All major vendors have componentized their solutions significantly to facilitate a progressive upgrade of legacy infrastructure. Also, most solutions come with composable architecture, enabling discrete capabilities to be composed effortlessly into innovative products such as Buy Now Pay Later. Open APIs/ RESTful APIs and Events, aligned with BIAN standards, support BaaS propositions without the need for significant investment. Finally, being cloud-native, modern core systems can scale on demand to support galloping banking transaction volumes. What’s more, every enterprise can choose its own pace and path to core modernization. For example, a small bank might do a full replacement at one go, whereas a large institution with more complexity would transform in stages. Some are even taking a “speedboat” approach, that is, creating a parallel technology stack to support new initiatives to start with, and subsequently migrating existing products on to it. Given that there are so many options now, banks have little justification for delaying core replacement. If anything, the case for modernization has become stronger since an up-to-date banking core is a prerequisite for digital engagement and innovation, and not just an enabler of automation. Indeed, no digital transformation is complete without it.

Unlock Cloud-Native Banking Gain unparalleled resilience, efficiencies, and agility Finacle is an industry leader in digital banking solutions. Our cloud-native solutions and SaaS services address the core banking, digital engagement, payments, cash management, wealth management, and treasury requirements of banks globally. Today, financial institutions of all sizes and personas are partnering with Finacle to unlock the potential of cloud-native banking. Talk to us to accelerate your cloud journey.

LEADERS IN BANKING TECHNOLOGY

The Future is Now T The ongoing coronavirus saga continues to reshape the bank of tomorrow as financial institutions are accelerating and strengthening their digital transformations, from an increasing adopition of openbanking, improving and faster payments and easier and seamless onboarding

Banking and Finance news in the MEA market

he outbreak of COVID-19 and the new variants that ensued is truly a tipping point that changed everything, certainly not ‘the next normal’ as normal is no longer available but a new reality that is made of complexity, uncertainty and opportunities. The pandemic is continuing to reshape the bank of tomorrow as financial institutions are accelerating and strengthening their digital transformation amid evolving banking preferences and

behaviours among consumers globally. “COVID-19 has demonstrated how the capacity of a company or a bank to shift its business online is critical for its continuity,” said S&P Global. The next phase of the digital payments revolution is expected to stem from open networks, which empower banks to reimagine their payments offerings for newly-demanding customers. Advancements in the sector are being driven by several factors including the growth in e-commerce and associated services, the shift from cash payments a t h e i g ht of t h e p a n d e m i c a n d regulatory support. Despite the unprecedented transition in the financial ser vices sector, bankers are confronting a wide range of challenges, many ongoing, but also some new obstacles in a bid to improve competitiveness and boost capital after the pandemic significantly impacted the industry. On the Islamic banking front, higher digitalisation and fintech collaboration could help strengthen the industry’s resilience in more volatile environments and open new avenues for growth. Meanwhile, the rally in crude oil prices on growing optimism for a speedy global economic recovery and easing concerns about the impact of the Omicron variant is a boon for GCC banks given how growth in the sector is linked to regional GDP. “Stronger government finances benefits banks’ solvency, funding and liquidity due to the governments’ dominant role as key depositors, borrowers and shareholders in their country’s banking system,” said Moody’s.

The future of banking The GCC financial services sector is currently in the midst of a profound digital transformation, as c-suite level executives and their teams prepare to embrace the next major phase of digitalisation, thanks to the pandemic. The outbreak of coronavirus two years ago presented an opportunity for the global

banks to accelerate and strengthen the digitalisation of complex processes and end-to-end customer journeys across the front, middle and back offices, a trend that was already in full throttle across the region. Banks in the region are exploring technological innovations and new business models that include digital banking, open banking, predictive banking, and modernisation of payment systems

number of consumer digital payments transactions in the UAE soared at an annual rate of 9% between 2014 and 2019, compared to 5% growth in Europe. Saudi Arabia also recorded an astronomical growth in card payments with more than 70% growth between February 2019 and January 2020. The GCC region is witnessing a burgeoning digital payment industry as financial watchdogs are issuing

OPEN ARCHITECTURE IS A COLLABORATIVE, INTEGRATED APPROACH THAT ENABLES US TO 1) RESPOND TO CLIENTS EVOLVING NEEDS FAST; 2) OFFER CLIENTS GREATER CHOICE AND FLEXIBILITY THROUGH AN EVER-EXPANDING SUITE OF PROPRIETARY AND THIRD-PARTY SOLUTIONS; 3) AND HAVE ACCESS TO INNOVATION THROUGH BNY MELLON’S RELIABLE, RESILIENT AND SAFE GLOBAL INFRASTRUCTURE.” – Anthony Habis, Head of the Middle East and Africa, BNY Mellon

to harness innovation, drive operational efficiencies and grow business. Consumer use of digital banking in the Middle East has also entered a stage of acceleration, driven largely by innovations launched in the region. The current operating environment calls for regulators who can strike a balance between supporting innovation and protecting consumers as most global banks have moved all interactions with customers to digital.

Digital payments The digital payments sector was growing rapidly even before the outbreak of the pandemic. McKinsey said that the

regulations governing the licensing, set-up and operations of digital wallets allowing the expansion of the market to include fintechs, tech companies and telecom companies alongside incumbent banks. Globally, payments remain one of the best performing financial services products but unfortunately for banks, traditionally the main providers of payments services, this momentum is no longer extending to most of them especially under the current operating conditions. The emergence of new technologies is offering regional banks a window to be more innovative and efficient in-service mea-finance.com

Let’s talk about the next wave in AI, Machine Learning & Managed Services

SmartStream’s fully integrated suite of solutions and platform services for middle- and back-office operations are more relevant than ever – proven to deliver uninterrupted services to critical processes in the most testing conditions. Their use has allowed our customers to gain greater control, reduce costs, mitigate risk and accurately comply with regulation. With AI and machine learning growing in maturity, these technologies are now being embedded in all of our solutions and can be consumed faster than ever either as managed services or in the cloud. Simply book a meeting to find out why over 70 of the world’s top 100 banks continue to rely on SmartStream.

info@smartstream-stp.com smartstream-stp.com

delivery, but it is also opening the door to new entrants such as fintechs, global retail giants as well as card networks and neobanks. While digital transformation in the financial services sector is boosting growth in the payments sector, changes in the environment such as lower merchant discount rates may be necessary to fuel wider adoption of digital payments by merchants.

Digital onboarding Customer onboarding is the first contact that a new user has with the bank and the process should be intuitive, seamless, responsive and efficient. The implementation of an automated customer onboarding process is an essential feature that determines whether or not a financial institution can obtain new customers. Digital customer onboarding provides a mutually beneficial situation offering speed, efficiency and convenience for the customers while freeing bankers for more value-added tasks. The process should remain as simple as possible with low documentation requirements as compared to customer onboarding in legacy banks, should offer simple online uploading capabilities, precise explanation during the onboarding process as well as interactive assistance through chatbots. KPMG identified three approaches that banks should adopt in their digital customer onboarding journey: • P rote ct – w hi ch enta i l s the development of in-house processes and standards to ensure compliance with jurisdictional requirements in terms of data privacy and API guidelines. • Compete – that is investing in strategic enablers both in-house and externally including internal data usage (e.g. unstructured, big data) and external (e.g. mobile app, social media). • Innovative – products and services offered through the building of strategic partnerships with non-

financial ser vices players to enhance user experience.

Open banking The radical transformation in the financial services industry across the Middle East region is partially being driven by the advancement in digital technology as previously closed industrial systems have become networked and open, providing ideal conditions for open banking to flourish. “Open architecture is a collaborative, integrated approach that enables us to 1) respond to clients evolving needs

beyond incremental change and deliver breakthrough value,” said Deloitte. G C C s t a t e s a re u n a rg u a b l y mature when it comes to regulators’ preparedness for open banking. The Saudi Central Bank (SAMA) plans to start the implementation of its open banking framework in the first half of 2022, a move that is expected to enhance trust between customers, banks, fintechs and other financial players. Bahrain’s financial regulator ordered financial institutions operating in the Gulf state to ensure that they implement the requirements for

THE BUSINESS TRANSFORMATION TOWARDS A PLATFORM-BASED OPEN BANKING ECOSYSTEM WILL PROVIDE THE OPPORTUNITY TO DEFINE A COURAGEOUS AMBITION THAT GOES BEYOND INCREMENTAL CHANGE AND DELIVER BREAKTHROUGH VALUE – Deloitte

fast; 2) offer clients greater choice and flexibility through an ever-expanding suite of proprietary and third-party solutions; 3) and have access to innovation through BNY Mellon’s reliable, resilient and safe global infrastructure,” Anthony Habis, Head of the Middle East and Africa, BNY Mellon tells MEA Finance. Open banking requires a robust, agile, and scalable IT architecture to enable API integrations with multiple entities. Its implementation promises to create a new data-sharing infrastructure, which will form the basis of a much richer range of services and products across the whole of financial services. “ The bus ines s transformation towards a platform-based open banking ecosystem will provide the opportunity to define a courageous ambition that goes

the second phase of its open banking framework by the end of June 2022. Meanwhile, the UAE central bank opened a FinTech Office to support financial innovation in the country to aid efforts by the Abu Dhabi Global Market and the Dubai Financial Services Authority to support the growth of open banking in the Gulf state. Profitability in the GCC banking sector is expected to pick up this year driven by a recovery in regional economies, which is set to solidify as the effects of the pandemic lessen and businesses and consumers adapt. Meanwhile, the region’s state-of-the-art technology infrastructure, a highly tech-savvy population and high penetration of smartphones and internet use will boost digitalisation in the financial services sector as banks receive support from pro-innovative regulators. mea-finance.com

LEADERS IN BANKING TECHNOLOGY

Sally Bou Jaoude Account Director, Avaya

Composable future Sally Bou Jaoude Account Director, Avaya, tells MEA Finance that, while banks have responded well to the requirements forced on them by the global pandemic, a new, composable approach to technology will be required to enhance the overall banking experience and enable the adoption of emerging technologies

hat is top of mind for regional banking leaders at the moment?

In a word, ‘experience’ is top of mind for regional banking leaders. Banks were quick to digitize over the last two years in their response to the pandemic. Now, armed with a new impetus, and new capabilities, local banks are in a better position to push the boundaries of customer and employee experiences.

Banking and Finance news in the MEA market

Customers are more comfortable than ever with the convenience that online services deliver – indeed, they’re clamouring for even further digitization. As a result, banks see improving the quality of experiences through both the customer and employee journey as among their most important differentiators and creators of brand affinity. The good news is that banks have realized that they cannot keep up with the demands of their customers and employees using legacy technologies, and many used the forced digitization of the pandemic to do away with monolithic, glass-ceiling apps. Now that they have the right technology platforms, they’re looking at how they can compose the experiences they need to address ever y step of the customer and employee journey. As an example of this transformation away from monolithic apps, Emirates NBD last year partnered with Moro Hub and Avaya to create a cloud-based omnichannel platform. That platform exchanges legacy systems such as business phone systems, meeting services, and on-premises contact centre solutions with a fully integrated, endto-end cloud communications platform that can really create a Total Experience. And we’re seeing other banks across the region adopt a similar approach.

What are the big developments of the past year? Over the past year, the word ‘effortless’ has been key to ensure the success of every business plan, and strategy. For example, an explosion in app use brought on by local stay-in-place orders compressed five years of mobile banking growth into a single year. And on the employee side, hybrid working models have become an expectation – workers are much more demanding about how and where they work (and this trend isn’t limited to the banking industry). This has created the need for composable technologies that can really address the Total Experience, which is the

interconnection of customer, employee, user, and multi-experience. The idea is that, if you want to be truly customer centric, you need a cohesive customer experience (CX) strategy that gives employees the tools they need to wow every customer, on any device, at every step of their journey. Sure, the world is returning to something resembling normal, but it’s got a different flavour now, and consumer and employee expectations are never going back to how they used to be. Any banks that haven’t prepared for this shift are going to have a difficult time competing when experiences are the currency against which they’re measured. Which sectors or aspects of the regional financial markets will see the greatest advancements in technology this year? We’re s e e i n g s o m e i m p re s s i ve innovations in the field of customer

What are the big trends to watch out for 2022? The most successful banks will realize that true customer-centricity interweaves c u sto m e r ex p e r i e n c e, e m p l oye e experience, multi-experience and user experience. The good news is that many of them have the right tools, and many have the right strategy. But the big trend we’ll see in 2022 will be banks working out how to bring those tools and strategies together to build a total experience. On the CX side, an inability to satisfy customers’ needs in the moment will contribute to them switching brands, and with switching becoming more consumer-friendly in this region, that creates even more of an impetus to focus on effortless experiences. And in the workspace, banks will assess what has worked and what hasn’t for their employees over the last two years. This may be the year when banks accept that working from the office may

THE MOST SUCCESSFUL BANKS WILL REALIZE THAT TRUE CUSTOMER-CENTRICITY INTERWEAVES CUSTOMER EXPERIENCE

experience – from conversational AI for customer interactions to AI-powered analytics that provide employees with in-the-moment, contextual knowledge on live customer conversations. And regional banks are only just scratching the surface of the possibilities of AI when it comes to experiences. Elsewhere, the fintech sector remains promising, but depending on the individual country, regulations are impacting the rate of uptake when it comes to innovations. In markets where open banking hasn’t yet taken off, banks are instead partnering with trusted technology providers to build out the capabilities that fintechs promise.

no longer be the ideal scenario, and instead think more about how work gets done, rather than where it gets done. Finally, as a result of the composable platforms that banks have been building over the past year, expect to see much more experimentation with emerging technologies such as robotic process automation, voice and facial recognition, and conversational AI. Not all of these experiments will pan out, but the beauty of a composable platform is that it massively reduces the time (and cost) for new capabilities to be rolled out, reducing the risk for that experimentation. mea-finance.com

LEADERS IN BANKING TECHNOLOGY

The Great Lakes Head of Cloud and Cyber Security, at SmartStream, Peter Hainz tells MEA Finance that banks are looking to partner with fintech to provide a competitive edge and that making use of data lakes will provide them with unique advantages

s a regional leader in banking technology, what has been at the top of your mind in the past year?

Just few years back, banks were very shy to move their applications outside on-premises environments. In the past, banks moved only non-critical infrastructure to the cloud to benefit from cost reduction. However, in the last year, there was a huge uptake for cloud migration related to any service like Infrastructure, Platform or Software as a Service. Last year, some financial institutions were migrating practically the entire IT infrastructure, from the back-office to the front-office, to the cloud. Banks not only migrated non-critical infrastructure but also real-time components. This illustrated how banks now believe that cloud computing will be of strategic importance to their organisations. Banks realised that data storage is much less expensive when using a cloud-based infrastructure. Banks are awash with data, and data lakes provide fertile ground for Artificial Intelligence

Peter Hainz, Global Head of Product Management, Cloud and Cyber Security

(AI) supported, predictive and analytical models. These models support not only innovation but also tailor-made solutions for clients. Data lakes may utilize AI to generate forecasts for back-office and front-office applications. Moreover, data lakes are used to overcome siloed

Banking and Finance news in the MEA market

infrastructures, which is often found in financial institutions. SmartStream has worked with many financial institutions during the past year to develop real-world solution that take advantage of what these data lakes can uniquely provide. Working with these customers we have developed and deployed data lake APIs that represent a real step change in compliance and enterprise resource management saving the client money and manhours as well as providing clearer more concise data. Managed ser vices, automation and digitization have also been important themes. Managed Services and Business Process Outsourcing, provided by Fintech providers like SmartStream, enable saving costs, automation, and highly efficient AI workflows. Banks have stated that “approximately one-third of all IT spending is cloudinfrastructure related. Increasingly, this spending includes Platform as a Service testing environments, since cloud environments can be constructed much faster than on-premises”. As a result, on top of my mind last year was how to combine the power of data lakes, AI, and security workflows in the cloud.

Describe how your experience of the past year has influenced the role you are in today? During my career I have held various cyber security roles in the finance industry. In the past, there was always a perception that on-premises solutions were the most secure ones.

This has now changed, and banks often see the cloud as more secure with state-of-the art monitoring, logging, encryption solutions, business continuity and disaster recovery workflows and all this is audited. SmartStream is the perfect example with PCI-DSS, ISO 27001, SOC 1-3 and C5 certification. Additionally, SmartStream is at the forefront, working very closely with AWS to develop innovative solutions. As mentioned earlier, we worked with them to construct a state-of-the-art data lake to better mine large swaths of data. We also co-operated with AWS to develop different encryption and data masking workflows in the cloud, as many of our banking clients have regulatory needs along sensitive data. It was very important to increase employee’s knowledge level with fast upcoming technologies. As a result, we have AWS professional architecture and vendor independent security speciality certified employees, who provide consulting to our banking clients. Banking clients also seek regulatory advice due to different local guidelines of data transfer to the cloud and storage requirements. SmartStream is closely working with AWS to provide state-ofthe-art regulatory compliant solutions. We have multiple clients in Singapore, where the Monetary Authority has one of the most stringent regulatory regimes in the world.

Which sectors or aspects of the regional financial markets will see the greatest advancements in technology this year? Those financial institutions that can leverage their data into business intelligence and innovative customer d r i ve n s e r v i c e s w i l l s e e g re a t technological advancements. Banks will increasingly partner with Fintechs to provide innovative services competitors can’t offer. Cloud-based Managed Services provided by Fintechs will increase as banks are largely unable to construct

these without experience. We received feedback from our banking clients, that they wanted to engage with a trusted, experienced Fintech provider to create solutions that focused on the automation of workflows based on AI technology. SmartStream conducts this workflow automation with state-of-the-art security features which is often much easier to implement in the cloud, due to a variety of factors including the availability of a trained security team 24/7. The head of IT of one bank told me, ‘We start with moving back- and frontoffice applications to the cloud as it is much more secure and there are no silos’. In the cloud you can more easily tag resources and implement software defined networking, which limits the

way. For example, cash management will now be in the managed services SaaS portfolio. Another key element of that portfolio is SmartStream AIR, the company’s AI-enabled reconciliations platform, which can match any structured or unstructured data in seconds rather than weeks. A relatively new feature to join the managed services cloud family is Affinity, an observational learning solution driven by machine learning, which can improve operational data management and data quality by learning how individual users work within the por tfolio of solutions and automate the optimisation of their workflow.

BANKS WILL INCREASINGLY PARTNER WITH FINTECHS TO PROVIDE INNOVATIVE SERVICES COMPETITORS CAN’T OFFER

blast radius of any attacks. Therefore, in the cloud you have much more granular security control of your environment. AI and cloud are perfect due to scalability and automation. We experienced that AI in combination with data lakes is a very powerful tool. We believe that openness and APIs will be very important in the coming days. In an increasingly interconnected world, APIs will play a critical role connecting various environments within the cloud, as well as hybrid workflows.

In the light of the past year, what are your plans for 2022? SmartStream’s managed services will bring more market-leading solutions to its banking customers in a scalable, reliable, secure, and cost-effective

Alongside powerful, cloud-enabled tools for reconciliations, corporate actions processing, collateral management, cash and liquidit y management, fees and expense management, and reference data, clients can also access the data lake functionality. Data lakes act as centralised repositories in which clients can store their structured and unstructured data. Once the data has been gathered, banks can mine it to aid in enhanced regulatory reporting and to gain a deeper understanding of the data. Having these data lakes as part of the managed services portfolio allows clients to ramp up the use of the company’s comprehensive suite of cloud-based solutions enabling any kind of query or reporting requirement without any additional configuration. mea-finance.com

LEADERS IN BANKING TECHNOLOGY

A Future for All

Arnav Rath Head of Region (MENA), Global Processing Services (GPS) welcomes the tide growth of in banking technology but believes that financial inclusion and digital accessibility is key to economic development and that through collaboration and idea sharing, much will be achieved

Arnav Rath, Head of Region (MENA), Global Processing Services (GPS)

s a regional leader in banking technology, what has been at the top of your mind in the past year?

We have seen a seismic shift in consumer spending habits as we have all grappled with the physical restrictions placed on us by the continuing pandemic. Simultaneously, innovation in payments technology is accelerating in MENA which is exciting to see. Here in UAE, I’m fascinated by the ideas I am hearing as fintechs explore innovative ways to achieve the government’s vision to create a secure financial ecosystem, and its overall drive towards digital transformation across all sectors. Amongst all this positivity, I have also been reflecting on those who perhaps did not have the same level of digital accessibility as others during the pandemic and what impact it may have had on them. As we move to a cashless economy, those people who sit outside the financial system and are already often in a vulnerable position need careful consideration.

I believe financial inclusion is vital for economic development and all of us in a position to innovate have an opportunity to help. Accordingly, I have been exploring ideas with innovators within the fastgrowing MENA fintech ecosystem who have the flexibility and ability to explore ways to help those who are unbanked and vulnerable.

Describe how your experience of the past year has influenced the role you are in today? As a leader, it has influenced my empathy as we have all lived through a shared global experience. As challenging as it has been for so many, it has allowed us to find common ground and brokendown international barriers as we have opened up and shared our own personal experiences. As a species, human beings are instinctively social and given the physical restrictions placed on us all, in-person social interaction has been difficult. Certainly, international travel has been much reduced, limiting our ability to network and meet new people. However, what I would say is that it has shone a light on the power of technology. I was surprised by the speed of business evolution as we moved from in-person meetings to video conferencing. Meeting new people over video-link is much more normalised than it was pre-pandemic. Collaboration is the lifeblood of innovation. Through sharing ideas, we

Banking and Finance news in the MEA market

can all achieve great things. The last year has shown me that friendships can be forged across borders without needing to always travel. I have been honoured to have the opportunity to join many creative discussions in the last 12 months with incredibly smart people across MENA and other countries. Our region’s future is looking very bright if we can transform our ideas into a reality.

Which sectors or aspects of the regional financial markets will see the greatest advancements in technology this year? I think 2022 could be the year of the dawn of the multi-purpose ‘super-app’ model here. Single platforms can improve the customer user experience in terms of speed and accessibility. For businesses, they are also ‘stickier’, which can reduce customer acquisition and marketing costs. With this in mind, we could start to see rapid transformation in the retail sector in particular. In the broader financial services space, I think we will see growing technology advancements in voice commerce, reg tech, digital assets, trading apps, and fraud detection and prevention.

In the light of the past year, what are your plans for 2022? Growth and collaboration with local partners who share our bold vision for the future of payments and would benefit from accessing GPS’ award-winning APIfirst payments technology that enables innovative card programmes for the world’s leading fintechs, digital challenger banks, and embedded finance providers. Following our $400 million investment announcement in January 2022, we will soon be expanding across the MENA region and introducing our awardwinning GPS Apex platform to the MENA fintech ecosystem, giving access to next generation payments technology including expense management, B2B payments, crypto, lending and credit, including Buy Now Pay Later propositions, digital banking, FX, remittance, open banking and more.

A full service international law firm built for the Middle East

OPINION PIECE

Open to Change Open banking offers a wide range of opportunities for better service and inclusion in financial services and Amol Bahuguna Senior Vice President, Head of Corporate Technology and Change Management Section at Riyad Bank explains that Saudi Arabia is well positioned for its adoption

i t h a n i n f l u x of l a rg e number of fintechs working with new te c h n o l o g i es o n d a ta sharing and big data applications, the banking sector has witnessed the building of a competitve landspace across different geographies. While newer and smaller banks struggle to access the market and grow a customer base, larger traditional banks strive to cope with the changing technologies and to recaliberate their operating models. However, despite several

operational changes, all banks usually end up offering restricted and similar services to their customers, who do not get enough choices or control over their money or financial information. As competitiveness rises in the financial sector around innovations and customer experience, open banking is potentially the harbinger of colossal change in the financial services ecosystem, giving customers the freedom of choice to manage their finances and make informed decisions through access to the data.

Banking and Finance news in the MEA market

Open banking is a collaborative practice that builds a strong network between customers, large and small financial organizations, and third-party service providers. The regulation of open banking has created opportunities and avenues for a network of unaffiliated parties to access consumers’ banking, transaction, and other data through secured APIs. This has enabled enhanced marketplace capabilities through building robust financial applications and innovative mobile banking platforms for customers to enjoy easy and reliable cross-platform payments and direct financial transactions with businesses. Besides benefitting the customers, open banking encourages traditional banks to adopt innovation, mitigates entrance barriers for newcomers, and promotes healthy competition between large and small banks while increasing t h e f i n a n c i a l syste m’s ef f i c i e n cy and inclusion. Since the implementation of Open Banking in the UK in 2018, the ecosystem now includes over 300 fintech and innovative ser vice providers. The

customers and companies in the UK increasingly utilize open banking-enabled products to manage their finances, acquire credit, pay for goods and services, and manage and maximize their money.

Open Banking in Saudi Arabia The Kingdom of Saudi Arabia is one of the youngest countries adopting open banking to broaden its financial options as a part of the Vision 2030 plans to reduce its dependence on oil and boost the economy through fintech innovations. Since 2018, Saudi fintech start-ups have grown from ten to more than 60, with 40% focusing on payments innovation1. The Saudi Central Bank (SAMA) announced an open banking policy in January 2021, with plans to deploy the system in the first half of 2022. The Saudi market is more open to embracing open banking. Some of its reasons are: • Fewer banks: The fewer financial organizations operating in the country makes adoption and standardization easy and quick. • Young minds: The country’s relatively youthful and digitally-savvy population is open to adopting, implementing, and using new financial/payment applications that are transparent, secure and quick. • Strong support: The Saudi Arabian government and the Central Bank are highly supportive of financial innovations to revolutionize the country’s fintech ecosystem. For exa m p l e, SA DA D, t h e n a t i o n a l Electronic Bill Presentment and Payment (EBPP) system, has enabled account-to-account transactions that can serve as a stepping stone to open banking.

Benefits of Open Banking in Saudi Arabia For a country that primarily depends on oil, revolutionary changes in the fintech marketplace can usher an eclectic mix of benefits for both consumers and financial services providers while boosting the region’s economy.

Amol Bahuguna, Senior Vice President, Head of Corporate Technology and Change Management Section

SINCE 2018, SAUDI FINTECH START-UPS HAVE GROWN FROM TEN TO MORE THAN 60, WITH 40% FOCUSING ON PAYMENTS INNOVATION

• F i n a n c i a l a w a r e n e s s a m o n g customers: Open banking has the potential to disseminate financial literacy among customers, especially benefitting the low-income customers to make informed decisions in terms of expenditure and savings and have better control of finances. • Faster and smoother transaction: Open Banking can enable customers to instantly and securely share bank data with third parties who are more technologically skilled in managing financial information and enabling quicker and simpler transactions. • R e v e n u e g e n e ra t i o n : F i n t e c h innovations can lead to the design and development of new financial services applications and products, increasing the country’s value proposition and adding new sources of revenue. • Understanding customer concerns: Open banking can mitigate barriers fo r n e w e n t ra n t s , i n c re a s i n g competitiveness in the banking and finance space. Intense competition levels can drive the focus of every participant towards addressing customer concerns and meeting customer demands. • Improve financial inclusion: The expanding third-party and other fintech service networks in open banking can expand customers’ access to credit and enable direct transactions with businesses, thereby enhancing transparency. In a nutshell, open-banking systems and data sharing models via APIs have large potential for innovation in the fintech sector. Though it is difficult to predict the future of open banking, innovation will be the key to unleashing the complete potential of the system. Such innovations will revolutionize the business world. Economies with great financial data infrastructure surely can reap its benefits if implemented with caution.

1 https://www.strategyand.pwc.com/m1/en/articles/2021/how-open-banking-can-transform-payments-in-saudiarabia.htm

mea-finance.com

LIFESTYLE

LIGHTS, CAMERA AND READY FOR ACTION:

Paramount Hotel Midtown sets the stage for early 2022 opening! After a successful run in the production of Paramount Hotel Dubai and its continuous growth, DAMAC Group is thrilled to announce the expansion of the hotel chain with the opening of Paramount Hotel Midtown

aramount Hotel Midtown is set to razzle and dazzle Dubai from the first quarter of 2022. Set in the heart of Business Bay Dubai, it’s on the doorstep of Sheikh Zayed Road, Burj Khalifa and the Dubai International Financial Centre. Developed using the same bold imagination, inspiring talent and creative process that has been perfected over Paramount Pictures’ 105-year history, Paramount Hotel Midtown is synonymous with entertainment and, above all, creativity. Offering timeless Hollywood elegance and a cinematic guest experience, the hotel brings to life the contemporary Californian magic with its sophisticated design, upscale

EXECUTIVE DIRECTOR AND PUBLISHER Kenneth Mitchen ken.mitchen@mea-finance.com GROUP COMMERCIAL DIRECTOR Nap Estampador nap.estampador@mea-finance.com Tel : +971 50 100 5488 DIRECTOR Andrew Cover andrew.cover@mea-finance.com Tel: +971 50 931 3236

dining experiences and celebrity spa and fitness centre. Commenting on the second hotel launch, Jean Faivre, Senior Vice President Hospitality DAMAC Hotels & Resorts, said: “The Paramount proposition is special, with a rich history to live up to. We’ve been immensely successful with our first property, and we are now looking forward to our second opening, which will, without a doubt, be a unique addition to Dubai’s vibrant hospitality scene.” 281 contemporary rooms and suites include Scene Rooms, A-List Suites and a Paramount Suite. Designed for highlife lovers emulating the lifestyle of the rich and famous, elegantly decorated rooms are further enhanced by balconies

EVENTS AND MARKETING MANAGER Cris Balatbat crissyb@mea-finance.com Tel: +971 58 594 4818 ADMIN AND FINANCE MANAGER Marilyn Nainque marilyn@mea-finance.com Tel: +971 58 5025836

overlooking the Dubai coastline or Burj Khalifa. The hotel boasts a delicious selection of restaurants, featuring Paparazzi Tuscan, CineScope and Melrose Bar & Lounge. With panoramic skyline views, Malibu Sky Lounge and Pool Bar are set to become Dubai’s latest hotspots. Pleasure meets business in the four Business Studios ideal for corporate meetings, special events and banquets for up to 150 guests. Natural daylight, flexible spaces and the latest AV technology will ensure every event is a hit. Wellness has a new home in the celeb-worthy PAUSE Spa, exclusively collaborating with French brand Château Berger. PAUSE Fitness Centre offers a comprehensive range of state-of-the-art health and fitness equipment to delight the most ardent enthusiast. And not to forget the little ones - The Kids Studio Club will keep them enthralled and entertained with a menu of cinematic experiences.

FEATURE CONTRIBUTORS: Adrian Murdoch, Mushtak Parker, Walter Sebele editorial@mea-finance.com

WEB ASSISTANT Marie Orayan web@mea-finance.com

Banking and Finance news in the MEA market

Dubai office: #404, Building B, Al Saaha Offices, Old Town Island Burj Khalifa District PO Box 487177, Dubai, UAE Email: info@mea-finance.com

Because you promised to tick it off your bucket list We keep our promises. So you can keep yours.

Scaled Kilimanjaro? Check. Ate your way through NYC? Check. Swam with whales in Tahiti? Not yet. With our diversified range of investments across markets and sectors, we can build you a healthy investment portfolio so you can power your next adventure. Realize your promise at gfh.com

ªTap into 100+ globally managed mutual fundsº Buy, sell, access performance history and track your portfolio anytime, anywhere with our Online Mutual Funds platform. Find out how we can help you manage and grow your wealth. Scan to book an appointment with our Wealth Specialists today.

Disclaimer: This information is neither an offer to sell, purchase or subscribe for any investment nor a solicitation of such an offer. This information is general and does not take into account a person’s individual circumstances, objectives or needs. Investments carry risk and values may go up as well as down.

MEA Finance - February 2022

Articles inside

Lights, camera and ready for action: Paramount Hotel Midtown sets the stage for early 2022 opening!

A Future for All

Open to Change

The Future is Now

Core Value: Why banks should modernize without delay

Composable Future

How Digital Transformation is Empowering Banks to Deliver Better, More Competitive Customer Experiences

Part of the Solution

Enabling the Market

Girding for the headwinds

KPMG: Saudi Arabian insurance firms pursued digitalization and expected to close year-end with higher top-line

A Nuanced Challenge

Open to Change

Instrumental Changes: The Role of Finance in Climate Change

Enduring Partnership

The Evolution Revolution