18 minute read
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
What is BNY Mellon’s overarching philosophy around Open Banking?
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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 transformed the 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
In 2021, The Financial Services Regulatory Authority 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
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.
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
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.
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 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.
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
What do you think make the Middle East and Africa such a promising and 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
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.
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 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
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 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
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.
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 every 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 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.
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
Will investment banking grow to take a larger share of overall financial activity in the region?
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.
Today, there is a stream 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.
