February 2024

February 2024

Focused on Growth Sunil Kaushal CEO of Standard Chartered Bank, Africa and Middle East (AME)

February 2024

Focused on Growth Sunil Kaushal CEO of Standard Chartered Bank, Africa and Middle East (AME) A MEA Finance Publication

14 Climate Change|24 Retail Banking|38 Payments|50 Banking Technology Summit – Kuwait|62 Executive Breakfast Meeting - GBM

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The Course of Events

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ou are reading the February 2024 edition of MEA Finance, an activity we hope you enjoy, maybe to the extent that you feel the arrival of a new issue of our magazine to be in itself an event.

Events are ongoing, usually only earning the attention of those more directly involved.

However, there are times when they have such potential consequential mass that their gravity pulls in much wider awareness.

We seem to be experiencing a time of such events. But the year is new and as is the case at this time, there is hope and optimism that the application of smarts, hard work and enthusiastic determination will build this into an improving year for all.

Events on a more day-to-day scale are a theme coursing through this issue of your magazine with, for example, coverage of our Leaders in Banking Technology Kuwait Summit. Focused on the evolution of the local banking sector, you can read our account of this event that connected leaders from banks in Kuwait with key commentators and operators from the financial technology scene.

In this month’s cover story, we are pleased to bring you an interview with Sunil Kaushal, CEO, AME at Standard Chartered Bank where he describes what is behind their success across these regions and details their outlook for these increasingly important markets, “Our successes in Africa and the Middle East are driven by a holistic approach.”

An event from the recent past, maybe more of an advent, was the initiation of corporate tax in the UAE. In his article starting at page 32, George

Hojeige, CEO of Virtugroup, weighs up the impact of this landmark measure. At another big event, our contributor Oscar Wendal, met with David Chaum, the founder of eCash at COP28, in Dubai. Read about what inspired his innovation from page 48.

Hosting one of MEA Finance’s Executive Breakfast Briefings, Gulf Business Machines – GBM, lead a discussion titled - Autonomy of AI: Staying on the forefront of AI in Financial Services. At this event, a panel of leading bank executives and key individuals from the financial sector debated the AI driven world we will all soon be part of. Visit page 62 for more.

Using a more frequently occurring term, we have our own editorial “climate event,” focused on climate change and banking, “Financial providers like banks have a deeply vested role in facilitating capital support to the transition,” says Chuka Umunna, Head of EMEA ESG at J.P. Morgan. See page 14.

Elsewhere, we cover the changing realm of retail banking where we learn how this sector is evolving and how the centrality of the customer is becoming a main priority. Then take a read of our coverage of the region’s omnipresent payments activity, from page 38.

We hear from a wide range of active sector participants including Banque Saudi Fransi, Infosys and Gulf International Bank. Here we look at the ongoing modernisation of this vital function and get a feel for what this means for financial institutions, and all involved in the wider economies of our region.

Finally, this issue’s Market Focus is on the United Arab Emirates. Enjoying an upward trajectory, we look at the reasons behind the positive progress of this dynamic country.

So, we hope that the opening of this edition of MEA Finance, the first of this year, is an event that you are looking forward to savouring.

mea-finance.com

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CONTENTS

CONTENTS 34

MARKET NEWS

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Commercial Bank of Kuwait enters strategic partnership with Network International to transform digital banking

8

MENA witnesses 48 IPOs raising US$10.7 billion in 2023

MARKET FOCUS

10 Upward Trajectory CLIMATE CHANGE

14 Balancing Act 18 Road to Renewable Rewards 20 Money Where the Mouth Is 22 Commitments Taking Form RETAIL BANKING

30 Customer is King CORPORATE TAX the Impact of the UAE 32 Weighing Corporate Tax Law

COVER STORY

34 Focused on Growth

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

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Banking and Finance news in the MEA market

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PAYMENTS

38 Pathway for Payments 42 Progress by Payments 44 Powered by Payments 47 Points on Payments

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OPINION PIECE

48 Better Than Money LEADERS IN BANKING TECHNOLOGY - KUWAIT

38

50 A New Era of Banking in Kuwait GBM - EXECUTIVE BREAKFAST BRIEFING

62 Facing the Inevitable

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50

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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

BUSINESS DEVELOPMENT OFFICER Geri Teniozo geri.teniozo@mea-finance.com Tel: +971 50 3036879

EVENT AND CONTENT DIRECTOR Natasha Cristi natasha@mea-finance.com Tel: +971 50 303 4235

EVENTS AND MARKETING MANAGER Cris Balatbat crissyb@mea-finance.com Tel: +971 58 594 4818

SENIOR DESIGNER Florante Magsakay Tel: +971 52 570 1811 design@mea-finance.com

EVENTS & MARKETING MANAGER Joy Baldenero joy@mea-finance.com Tel: +971 56 174 7426

ADMIN AND FINANCE MANAGER Marilyn Nainque marilyn@mea-finance.com Tel: +971 58 5025836

WEB ASSISTANT Marie Orayan web@mea-finance.com EDITORIAL editorial@mea-finance.com

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

mea-finance.com

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MARKET NEWS

Commercial Bank of Kuwait enters strategic partnership with Network International to transform digital banking In a collaboration aimed to enhance payment innovation and digital transformation initiatives Commercial Bank of Kuwait (Al-Tijari) and Network International announced an intent to strategically collaborate to significantly enhance Al-Tijari’s ongoing digital transformation and payment innovation initiatives

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h e p a r t n e rs h i p m a r ks a s i g n i f i c a n t m i l e s to n e i n the digital transformation journey of Al-Tijari, the second oldest and one of the leading financial institutions in Kuwait. Al-Tijari will leverage Network’s cutting-edge technology and expertise in end-to-end issuer processing capabilities, including fraud detection and prevention, tokenisation, cardholder self-serve application, advanced authentication, and instant

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issuance, among other services, to offer its customers progressive and innovative digital experiences.

Commenting on the partnership, Sheikh Ahmad Duaij Al-Sabah, Chairman of Commercial Bank of Kuwait, said: “Commercial Bank of Kuwait has a rich history of innovation and excellence in banking services that positions us among international banking standards. The partnership with Network International strengthens our leadership in the industry

Banking and Finance news in the MEA market

and signifies our ongoing commitment to our valued customers.”

Abdulaziz Al Zaabi, General Manager, Retail Banking Division, at Commercial Bank of Kuwait, added: “With this partnership, Commercial Bank of Kuwait aims to leverage Network’s vast knowledge and global experience in creating cutting-edge Card Payment solutions. Together, with our banking expertise, we aim to provide our customers with agile, secure, innovative services that are seamlessly executed and exceed their expectations.”

Nandan Mer, Group Chief Executive Officer of Network International, commented, “We are honoured to partner with Al-Tijari, a respected leader in Kuwait’s banking sector. Our collaboration is aimed at delivering innovative digital payment solutions to Al-Tijari’s growing customer base. As a preferred partner for several diverse financial institutions in the MEA region, we are excited to contribute our proven expertise in digital payment solutions to this dynamic partnership.”

“The Kuwaiti market is undergoing significant transformation, driven by unprecedented digital payment adoption,” Mer added. “We are committed to supporting this growth and eagerly anticipate our role in Al-Tijari’s journey towards digital excellence.”

Network International’s local and regional expertise in digital payments and financial inclusion aligns perfectly with Al-Tijari’s vision. This partnership represents a substantial advancement in Kuwait’s digital banking sector and affirms the shared dedication of both institutions to providing innovative financial services in the region.

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MARKET NEWS

MENA witnesses 48 IPOs raising US$10.7 billion in 2023 According to the EY MENA IPO Eye Q4 2023 report, MENA markets saw 48 initial public offerings (IPOs) in 2023, raising US$10.7b in total. Five listings, mainly in the energy and logistics sectors, contributed 58% towards the total IPO proceeds raised

Saudi Arabia continues to dominate listings Once again, KSA reaffirmed its dominance in terms of IPO activity in the region with 14 of the 19 listings in Q4 2023. ADES Holding Company marked the highest proceeds at US$1.2b, followed by SAL Saudi Logistics Services Company at US$0.7b. Both IPOs were listed on the Tadawul Main Market. The remaining 12 IPOs, raising US$140m in total, took place on the Nomu – Parallel Market, which also witnessed the quarter’s only direct listing in the MENA region – Almujtama Alraida Medical Co. Q1 2024 kicked off with two Saudi listings on Tadawul in January – MBC Group, raising US$222m, and Avalon Pharma, raising US$437m.

UAE reports four new listings

Brad Watson

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uring Q4 2023, 19 IPOs raised US$4.9b in proceeds. ADES Holding Company raised the most funds and contributed 25% of the overall IPO proceeds in the last quarter, followed by Pure Health Holding PJSC with 20%. All Q4 listing activity took place in the GCC region, with Egypt being the only non-GCC country that reported IPOs throughout 2023.

The 2024 pipeline includes 29 companies across various sectors announcing their intention to list, with

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the Kingdom of Saudi Arabia (KSA) and the United Arab Emirates (UAE) leading the way in terms of expected volumes.

Brad Watson, EY MENA Strategy and Transactions Leader, says: “In 2023, there were a total of 48 IPOs raising US$10.7b, of which five listed companies contributed 58% toward the total IPO proceeds raised, mainly in the energy and logistics sectors. Investor confidence in the region continues with 11 out of the 19 Q4 2023 IPOs recording a first day gain in share price.”

Banking and Finance news in the MEA market

Abu Dhabi Securities Exchange (ADX) welcomed three IPOs in Q4 2023, raising a combined total of US$1.8b. These included Pure Health Holding PJSC, valued at US$987m, Investcorp Capital plc at US$451m and Phoenix Group PLC at US$371m. Pure Health Holding PJSC reported the highest first-day gain of 76%.

In addition, there was one new listing in the transportation sector on the Dubai Financial Market (DFM) – Dubai Taxi Company PJSC, worth US$315m.

Oman records its largest IPO to date The Muscat Stock Exchange (MSX) saw the largest IPO in Oman to date with OQ Gas Networks SAOC raising US$772m.

Meanwhile, Oman Investment Authority (OIA), the country’s sovereign wealth fund, is preparing to launch multiple IPOs and list state assets to strengthen its capital markets.

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MARKET FOCUS - UAE

Upward Trajectory The UAE is experiencing positive growth, bolstered by sustained reforms, numerous bilateral trade agreements and new residency and visa schemes, and is regarded as the GCC’s most competitive and diverse economy, with local banks enjoying robust performance

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he UAE enjoyed a strong finish to 2023 and the Gulf state is looking to accelerate economic growth as it seeks to double its gross domestic product (GDP) to over $800 billion by the end of the decade. GDP is forecast to increase by 5.7% in 2023, according to the Central Bank of the UAE (CBUAE), a higher figure than any of its five GCC neighbours.

“The economy continues to grow, benefitting from strong domestic activity.

Non-hydrocarbon GDP growth is expected

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to exceed 4% in 2023 and to remain at a similar pace in 2024, driven by tourism, construction and real estate-related developments,” the International Monetary Fund (IMF) forecasted in October.

The Emirates is set to host the World Trade Organisation’s (WTO) ministerial conference, the largest global gathering of trade ministers in Abu Dhabi for the week of February 26, 2024. For the UAE, hosting the meeting is part of a broader strategy to position itself as a global hub for business and finance.

Banking and Finance news in the MEA market

Over the past four years, the country has been rolling out bilateral trade deals called Comprehensive Economic Partnership Agreements (CEPA) with fastgrowing markets.

The UAE, the GCC’s most diversified economy, has introduced a series of reforms over the years to increase foreign direct investment and make itself more attractive for foreigners to live and work amid growing competition in the region.

Banks in the UAE had a strong performance in 2023 on the back of improved margins and favourable economic conditions. The IMF said in October that bank profitability has increased with higher interest rates and overall credit continues to grow, although at a slower rate.

Despite strong domestic activity and improving public finances, the fate of the UAE’s open economy is vulnerable to the health of key global peers, including its largest trading partner, China.

Financial matrix UAE banks have been among the biggest beneficiaries of the country’s recent

boom, on the back of higher oil prices and a thriving local economy. Profits are on the increase and asset quality is sound, with the banks also enjoying strong capital and liquidity levels.

The five largest UAE banks’ combined bottom-line profits rose significantly in the nine months to September 2023 compared to the corresponding period a year, mainly reflecting strong growth in both interest and noninterest income.

The four largest banks – First Abu Dhabi Bank (FAB), Emirates NBD(ENBD), Abu Dhabi Commercial Bank (ADCB Group), and Dubai Islamic Bank (DIB) and Abu Dhabi Islamic Bank (ADIB) reported a combined net profit of $12.6 billion in the first nine months of 2023.

Dubai-based Emirates NBD, the second-largest lender by assets, is enjoying a particularly stellar period of growth, with net profits soaring by 92% year-on-year (y-o-y) to reach $4.8 billion (AED 17.5 billion).

FAB, the UAE’s largest lender by assets, reported a 58% increase in 9M 2023 net profits to $3.4 billion (AED 12.4 billion), ADCB Group saw its nine-month profit jump by 24% y-on-y to $1.6 billion (AED 5.75 billion), Mashreq’s net profit rose by 73.1% to $1.52 billion (AED 5.6 billion) while DIB registered an 18% growth in net profit to nearly $1.3 billion (AED 4.8 billion).

“The uptrend in interest and noninterest income resulted from greater consumer c o n f i d e n c e a s m a c ro e c o n o m i c conditions remain strong, driven by high oil prices and strong activity in non-oil sectors in the UAE, such as trade, tourism and real estate,” said Moody’s.

The net interest income—the difference between interest revenues earned from lending activities and interest paid to depositors—at UAE’s banks has soared over the quarters as lenders are passing rate increases on to customers.

The UAE central bank followed the US Federal Reserve’s decision to keep interest rates unchanged in December to protect the Emirati dirham’s peg against the US dollar. The central bank said it would keep the base rate applicable to

the overnight deposit facility unchanged at 5.40%.

“With inflation still above the target levels, we expect rate cuts only after mid-2024. However, we believe net interest margins of the UAE banks will remain stable for the balance of 2023, before a marginal decline in 2024 post the rate cycle reversion,” said Asad Ahmed, Alvarez & Marsal (A&M) Managing Director and Head of Middle East Financial Services.

The UAE’s financial institutions have adequate capital overall and abundant liquidity while their asset quality has improved significantly over the past three years.

finance and what’s on offer. UAE banks pledged to mobilise around $270 billion (AED 1 trillion) in green finance by 2030.

Fiscally fit The UAE’s public finances are sound.

The country ’s fiscal and external surpluses remain high on the back of high oil prices.

The UAE, the Arab world’s most competitive economy, approved the federal budget for the fiscal years 20242026 last October with a total expenditure of $52.3 billion (AED192 billion).

The Emirates forecasted total revenues of $69.6 billion (AED 255.7 billion) over the period while revenue

TRADE IS NOW A CENTRAL COMPONENT OF THE UAE’S DOMESTIC SUCCESS AND, AS WE PREPARE TO HOST THE WORLD TRADE ORGANISATION’S 13TH MINISTERIAL CONFERENCE IN FEBRUARY, GROWING INTERNATIONAL INFLUENCE. – Dr. Thani bin Ahmed Al Zeyoudi, the UAE’s Minister of State for Foreign Trade

An inflow of new arrivals into the UAE over the past few years has also boosted banks’ deposits - a trend that has gathered pace since the outbreak of the war in Ukraine in February 2022.

Total deposits grew by 3.9% quarter on quarter (q-o-q) in Q3 2023, according to consultancy firm A&M. Similarly, asset quality metrics have remained solid. According to A&M, the sector’s aggregate ratio of nonperforming loans improved marginally by 14 basis points to 5.1% in the third quarter of the year.

Meanwhile, money pledges grabbed the spotlight at the COP28 summit as delegates turned their focus to the yawning gap in the need for climate

and spending for 2024 will grow by an estimated 3.3% and 1.6%, respectively.

The finance ministry said that the cabinet approved the budget for the fiscal year 2024, with a total estimated expenditure of $17.5 billion (AED 64.1 billion) while total revenues are projected at $17.3 billion (AED 65.7 billion).

The UAE allocated $626.3 million (AED 2.3 billion), 4% of the total general budget, towards the financial investments sector, including $220 million (AED 807.5 million) which will go towards federal investment projects.

The IMF said the fiscal balance is expected to be around 5% of GDP in 2023, driven by oil revenue and strong economic activity. mea-finance.com

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MARKET FOCUS - UAE

Transition economics The efforts undertaken in recent years by the UAE to diversify its economy away from heavy reliance on oil revenues are starting to position the Gulf state for strong and sustainable growth. The country’s business-first approach to international relations is bearing fruit via growing trade partnerships.

Since 2021, the UAE has initiated a raft of bilateral trade, investment and cooperation deals with several fastgrowing economies, including Turkey, Indonesia, India and Cambodia to bolster efforts aimed at diversifying income sources and economic sectors.

The programme enjoyed exponential growth in 2023, with three deals implemented, two more signed and awaiting implementation and four agreed – taking the total number of CEPA partners since the launch of the programme to 10 across four continents.

“Trade is now a central component of the UAE’s domestic success and, as we prepare to host the World Trade Organisation’s 13th ministerial conference in February, growing international influence,” Dr. Thani bin Ahmed Al Zeyoudi, UAE’s Minister of State for Foreign Trade said earlier in January.

“As we reflect on the achievements of the past year, we believe the UAE has the conviction and the credibility to help shape a new future for global trade.”

The UAE’s CEPA with India, which was signed in May 2022, is expected to increase bilateral trade by more than $100 billion in the next five years. It also comes as the two countries look to settle more of this trade using local currencies.

Devised to increase and heighten economic competitiveness CEPAs to attract $150 billion of foreign direct investment across sectors including digital economy, advanced skills, space and advanced technology and foster entrepreneurship over the next nine years.

Meanwhile, earlier in January the UAE officially joined the BRICS (Brazil, Russia, India, China and South Africa) group of countries in a sign of its growing commitment to new international partnerships.

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WITH INFLATION STILL ABOVE THE TARGET LEVELS, WE EXPECT RATE CUTS ONLY AFTER MID-2024. HOWEVER, WE BELIEVE NET INTEREST MARGINS OF THE UAE BANKS WILL REMAIN STABLE FOR THE BALANCE OF 2023, BEFORE A MARGINAL DECLINE IN 2024 POST THE RATE CYCLE REVERSION. – Asad Ahmed, Alvarez & Marsal

Despite geopolitical risks stemming from the war in Gaza and Eastern Europe, economists say the country is wellpositioned over the near to medium term.

Boosting competitiveness The UAE started levying a 9% federal corporate tax on business profits exceeding $102,110 (AED 375,000) for the first-time starting June 1, 2023, as the country moves to align itself with new international standards, particularly the move toward a global minimum tax on multinational corporations.

The ambitious plan, which will see the UAE ditching the tax-free regime that made it the Middle East’s business hub, aims to eventually set 15% as the base levy to stem international competition to offer more attractive rates.

“The phased introduction of a corporate income tax that began in June 2023 will support higher non-oil revenue over the medium term,” said the IMF. However, Fitch Ratings cautioned that the UAE’s federal corporate tax could have uneven credit implications on rated corporates, with privately-owned corporates and government-related entities rated on a bottom-up basis most affected.

Moody’s also said that although the introduction of a corporate tax will broaden the federal government’s income base, it would negatively affect the credit profiles of companies operating in the country.

Banking and Finance news in the MEA market

The UAE also revamped its Commercial Companies Law by scrapping a law that required an Emirati shareholder or agent when foreigners are opening a company in the country. The new company law came into effect last June and it is expected to boost the country’s economic competitiveness.

The government plans to offer Emirati citizenship and passport to a set group of foreigners, including investors, professionals and special talents – a first in the Gulf region as it looks to give its huge expat population a bigger stake in the economy to drive growth.

The UAE also approved regulations on the entry and residence of foreigners in April 2022 formalising a process aimed at giving expatriates a bigger stake in the economy.

The country’s residence schemes, and entry permits now include the golden residence scheme, green residence, five-year residence visa, job exploration entry visa as well as multientry business and tourist visas that do not require sponsorship.

The UAE’s sustained reform efforts support medium-term growth and a smooth energy transition, but prioritisation and sequencing remain key to ensuring effective outcomes. The IMF said the ongoing efforts to boost private sector employment, further develop the domestic capital market and leverage trade and investment in digital and green initiatives will further advance diversification and lift medium-term growth.

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CLIMATE CHANGE

Balancing Act Banks face major challenges handling transition risks, but with initiatives encouraging sustainable finance and growing issuance of sustainability-linked products, a path is being hewn for this unavoidable journey.

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he sustainability transition in the GCC region continues to reshape economies and financial systems, creating new opportunities and altering the cost of doing business for banks.

PwC said while the world has grown starkly aware of ESG practices, the GCC region included, there is a growing recognition of the importance of incorporating sustainable finance principles into financial systems, with a shared vision of promoting sustainable development.

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The United Nations Climate Change Conference (COP28) in Dubai ended with a historic deal mentioning moving away from oil and gas in a COP text for the first time. Known as the UAE Consensus, the final agreement also highlights the need for more money.

Sustainable finance pledges grabbed the spotlight again at the COP28 climate summit as delegates turned their focus to the yawning gap in the need for climate finance and what’s on offer.

The UAE, host of the climate change summit, said it will put billions of dollars

Banking and Finance news in the MEA market

into a new climate finance fund aimed at improving the flow of money into projects to reduce emissions while its banks pledged to mobilise $270 billion by 2030.

The financial system needs reorienting to meet the enormous financing demands needed to transition towards a net zero target by 2050. It is not a surprise that there is a growing interest in sustainable finance across the GCC. Government, regulators and industry are all taking exploratory measures.

Banks across in GCC region including First Abu Dhabi Bank (FAB), Mashreq Bank, Qatar National Bank and HSBC Bank Middle East have facilitated billions of dollars in sustainable finance and adaptation-related investments.

Climate hazards make the Middle East region vulnerable to high levels of desertification, loss of biodiversity, drought and water scarcity. However, GCC governments are undergoing massive economic transformation programs to put their economies on a more diversified and sustainable footing.

Shapers of sustainability The amount of cash needed for the energy transition, climate adaptation and

disaster relief is overwhelming. However, GCC countries have initiated many projects and actions – particularly within the financial sector and sustainable finance – focusing on introducing systems to deliver funds from private finance to unlock necessary infrastructure investment and meet net-zero targets.

Banks in the UAE committed to mobilise $270 billion (AED 1 trillion) in green finance at the COP28 climate talks earlier in December.

“Active engagement from the financial sector is critical to realise our collective climate ambitions, ensuring that the crucial 1.5°C target remains within reach,” Dr. Sultan Ahmed Al Jaber, COP28 President and Minister of Industry and Advanced Technology said, adding that achieving net zero emissions hinges on the strategic allocation of capital towards sustainable and climate-resilient investments.

Mashreq Bank was hailed as one of the top contributors to the UAE Banks Federation-backed (UBF) pledge, promising to facilitate $30 billion (AED 110 billion) by the end of the decade, as part of the Dubai-based lender’s Climb2Change global initiative.

FAB pledged to facilitate $135 billion (AED 500 billion) in sustainable and transition financing by 2030, a commitment that represents half of the combined AED 1 trillion green finance pledge that was made by UAE banks.

The UAE’s biggest lender by assets also unveiled the FAB Sustainable Development Goals Fund (FAB SDG Fund) in December, an ESG-oriented fund for private banking clients that will be managed by FAB Private Bank (Suisse). FAB SDG Fund will concentrate investment flows directly towards sustainable outcomes through 17 exchange-traded funds (ETFs).

Global financial market data provider Refinitiv said the Gulf region witnessed unprecedented growth in the issuance of sustainability and ESG-linked debt in 2023 whether through bonds and Sukuk or in the form of loans. “Around $14 billion in green and ESG bonds and sukuk were sold in the

first seven months of 2023, compared to $8.9 billion in 2022,” said Refinitiv.

Similarly, RAKBANK said it is a key contributor towards the UBF’s commitment to mobilise AED 1 trillion in sustainable finance by 2030. With finance playing an important role in addressing climate change issues, Abu Dhabi Islamic Bank is engaging on multiple fronts to drive the climate change agenda including facilitating as much as $2 billion worth of sustainable projects.

Most GCC banks such as Dubai Islamic Bank, Saudi National Bank, Qatar National Bank and Kuwait Financial House now have sustainable finance frameworks in place.

investors can drive innovation, support scaling, and avoid an unruly transition to a greener global economy.

Walk the talk The hosting of two consecutive COPs in the Middle East has positioned the region at the forefront of the net-zero transformation, with all Arabian Gulf countries pledging to reach net-zero carbon emissions by the middle of the century.

“Middle East economies’ green, social, sustainable and sustainable-linked bonds (GSSSB) issuance is increasing fast, from a low base, despite a weaker global economy and higher interest rates, with more than $19.4 billion GSSSB bond

THE LACK OF FINANCING HAS LONG BEEN ONE OF THE BIGGEST OBSTACLES TO ADVANCING CLIMATE ACTION GLOBALLY. THEREFORE, I AM PLEASED TO ANNOUNCE THE ESTABLISHMENT OF A $30 BILLION FUND FOR GLOBAL CLIMATE SOLUTIONS – UAE’s President Sheikh Mohamed bin Zayed Al Nahyan

The frameworks allow the banks to issue green and sustainability-linked Islamic and conventional bonds to fund projects as investor demand for ESGlinked financing is surging in the GCC and wider Middle East region.

The Bahrain Association of Banks established a permanent sustainable development committee back in 2018 to “strengthen the role of banks and their contribution to sustainable development and economic growth Banks in the GCC region will play a leading role in the transition to a netzero economy. As drivers of economic growth, financial institutions are vital contributors to the region’s climate efforts. By providing the right finance to the right place at the right time, banks and

issuance (including sustainable sukuk) in the first nine months of 2023,” according to S&P Global.

Oman unveiled its sustainable finance framework in January to help the Sultanate reduce its reliance on fossil fuels and attract ESG investments.

The country’s Ministry of Finance said the framework sets out how the government intends to allocate financing towards specific environmental and social areas to mitigate the impacts of climate change, promote socioeconomic development and ensure a just transition to a low-carbon economy.

The UAE launched ALTÉRRA, a $30 billion fund to invest in clean energy and other climate projects worldwide, at the COP28 climate change summit. mea-finance.com

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CLIMATE CHANGE

Launched in collaboration with global asset managers BlackRock, Brookfield and TPG, the fund will allocate $25 billion towards climate strategies and $5 billion specifically to incentivise investment flows into the Global South.

“The lack of financing has long been one of the biggest obstacles to advancing climate action globally. Therefore, I am pleased to announce the establishment of a $30 billion fund for global climate solutions,” the UAE’s President Sheikh Mohamed bin Zayed Al Nahyan said in a speech at COP28 following the launch of ALTÉRRA – a climate fund for global climate solutions.

ALTÉRRA’s long-term goal is to attract $250 billion in investments by 2030. The UAE authorities have been encouraging issuers to raise green debt as the country accelerates the adoption of sustainable finance.

The Dubai Financial Services Authority waived all regulatory fees for issuers listing sustainability-related debt securities in the Dubai International Financial Centre throughout 2024.

Similarly, the country’s Securities and Commodities Authority exempted companies from paying listing fees for green or sustainability-linked bonds or Sukuk in 2023.

Qatar, home to the Middle East region’s biggest bank by assets, has enacted a series of initiatives to make at least $75 billion available for sustainable investments, as explained in Invest Qatar’s ESG report.

Meanwhile, Saudi Arabia is working on several fronts to lead ambitious climate action both at the national level and within the region. The Arab world’s biggest unveiled the Saudi Green Initiative (SGI) in 2021 to oversee and unite the kingdom’s efforts to combat climate change, drive sustainable innovation and accelerate the green transition.

Under the SGI, Saudi Arabia aims to reach net zero by 2060, and the Gulf state is contributing to global action on climate change through the implementation of over 80 public and private sector

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initiatives representing an investment of more than $188 billion (SAR 705 billion).

Overall, GCC countries are well placed to become pioneers in climate action, not only because of their ability to do so but also because the potential for building new green industries can secure a strong economic future.

Navigating transition risks When it comes to transition risks, banks have an even more challenging job on their hands. Financial institutions could see their earnings decline, businesses disrupted, and funding costs increase due to policy action, technological changes as well as consumer and investor demands for alignment with sustainability policies.

increasingly in the crosshairs of wealthy investors, shareholders and climate activists over their role in funding coal, oil and gas projects—the leading causes of man-made greenhouse gas emissions.

“Transition risks materialise on the asset side of financial institutions, which could incur losses on exposure to firms with business models not built around the economics of low carbon emissions,” said the International Monetary Fund.

However, the pivot toward sustainable investing has also led to greenwashing as companies and financial institutions are purporting to be environmentally conscious for marketing purposes but they are not making any notable sustainability efforts.

ACTIVE ENGAGEMENT FROM THE FINANCIAL SECTOR IS CRITICAL TO REALISE OUR COLLECTIVE CLIMATE AMBITIONS, ENSURING THAT THE CRUCIAL 1.5°C TARGET REMAINS WITHIN REACH – Dr. Sultan Ahmed Al Jaber, COP28 President and Minister of Industry and Advanced Technology

“Financial watchdogs are stepping up their supervisory engagement with banks on climate-related efforts and this may result in punitive measures on those institutions that fail to meet expectations,” said S&P Global.

Despite the wider economic downturn last year, sustainable investments managed to weather the storm reasonably well driven by wealthy investors’ growing demand for sustainability. Capgemini said that asset and wealth managers are increasingly integrating ESG into their primary portfolios in response to growing client demand—a trend that can be attributed to a paradigm shift in client demography.

The world’s top banks including Credit Suisse, Goldman Sachs and HSBC are

Banking and Finance news in the MEA market

The scale of the problems facing humanity are too big for any organisation, sector or country to tackle alone. It is rapidly becoming clear that without adequate climate finance, it will not be possible for the world to reach net zero emissions or adapt to a changing climate – particularly for countries in the Global South.

GCC countries continue to witness coordinated leadership across the financial industry, regulation and governments and meaningful investor and shareholder participation when it comes to devising ESG financing strategies and products. With ambitious energy investment and diversification plans in place, a driver of sustainable finance growth has been sustainabilitylinked and use of proceeds financing.

CLIMATE CHANGE

Road to Renewable Rewards Describing challenges and opportunities in addressing climate change, Chuka Umunna, Head of EMEA ESG at J.P. Morgan, says that mobilisation of the objectives will be the key next step, and underlines why they are advocates for market-based solutions

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n regional banking terms, what did COP 28 achieve?

The unprecedented number of commitments from both the public and the private sector at COP28 is likely to bring both new commercial opportunities a n d i n c re a s e d s c r u t i ny f ro m a regulatory perspective.

At the same time, the event highlighted innovation in climate finance, such as the UAE’s $30B catalytic capital vehicle Alterra, putting a spotlight on the MENA region’s growing expertise in sustainable finance.

Regional banks may also have a key role to play as targets and ambitions are deployed into action, such as calls to triple renewable energy capacity and double energy efficiency improvements by 2030. These targets underscore the massive financing opportunity as governments, civil society and the private sector increase their level of focus. While renewables are already growing at 11% per year, annual growth needs to further accelerate to hit these goals.

Additional discussions with clients, policymakers and other stakeholders shed light on other themes regarding the

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in hard to abate sectors and transitioning companies.

Access to finance in emerging markets and developing economies remains one of the key concerns for policymakers.

Multilateral Development Banks (MDBs) emphasised the role of private sector mobilisation for climate finance and development.

The final agreement from COP28 and key takeaways set expectations and the road ahead for where capital providers may seize new commercial opportunities, such as clean energy, nuclear, carbon markets and many other sectors, but mobilisation to deliver on these ambitious objectives will be a key next step.

Do the wider public or commenting media understand the real-world balancing role that banks must play in the transition to cleaner commerce?

Chuka Umunna, Head of EMEA ESG at J.P. Morgan

role of the financial services industry in the transition including: Policymakers, regulators and NGOs are increasingly focused on the role of transition finance and its potential to accelerate decarbonisation

Banking and Finance news in the MEA market

A bank’s core role in the transition is to facilitate access to finance that can support the transition of the real economy At JP Morgan Chase we aim to drive inclusive, sustainable economic growth because our business thrives when the communities we serve do the same.

A successful global transition generates economic opportunity, provides affordable access to energy and mitigates the worst impacts of climate change. Because the economics are apparent, the private sector, including banks, has a commercial interest in a successful carbon transition.

We do this by providing our clients with the expertise they need to raise capital to advance their decarbonisation strategies

to help address broader challenges in the energy transition We are actively doing so by setting a Sustainable Development Target with the goal of financing and facilitating more than $2.5 trillion by the end of 2030 to advance long-term solutions that address climate change and contribute to sustainable development.

But capital alone will not be sufficient – unprecedented action from all sectors will be necessary.

Addressing climate change is complex - in order to achieve climate goals, there are key conditions related to energy security, technology, investment in innovation and appropriate climate policy that are required.

The scope of what we can do as a bank to support the transition will be limited for as long as there are significant barriers to the real economy transition.

Are you experiencing increased client or customer demand for more climate positive products?

We have the leading green investment banking business globally, and we see continued growth in sustainable finance despite challenging macro and market conditions, as well as continued client demand for sustainable investments.

We are working with clients interested in increasing their exposure to clean energy and the green transition, many of whom are investing in energy efficiency technologies, renewables, carbon capture, electric vehicles and other emerging technologies.

For the second year in a row last year, global banks made more money underwriting bonds and providing loans for green projects than they earned from financing oil, gas and coal activities, according to Bloomberg. The world’s biggest lenders generated a total of about $3 billion in fees last year from lining up debt for deals marketed as environmentally friendly, according to their data.

On the buy-side, institutions have increased engagement in sustainable

and impact investing by over 80% over the past four years, according to a survey by Cambridge Associates.

This continued expansion reflects growing recognition that these factors are material to investment decisionmaking, risk management and long-term portfolio outcomes.

In climate terms, are banks predicting new opportunities or gearing for funding mitigation of consequences?

Financial providers like banks have a deeply vested role in facilitating capital to support the transition – the potential commercial opportunities

FINANCIAL PROVIDERS LIKE BANKS HAVE A DEEPLY VESTED ROLE IN FACILITATING CAPITAL TO SUPPORT THE TRANSITION – THE POTENTIAL COMMERCIAL OPPORTUNITIES ARE MASSIVE

Institutional investors in particular are a fast-growing source of capital for impact investment managers, as they seek both sustainable outcomes and returns.

Do regional banks have the appetite and ability to back new businesses, ideas and methods that will profit from a move toward climate friendly commerce?

Banks are doing their part by applying their capital, data, expertise and other resources to help address climate change by helping clients transition to the low-carbon world, and supporting green initiatives, such as renewable energy and clean technologies.

Collaboration between policy and business leaders is also key to progress.

Market-based policy solutions are a critical component of effectively transitioning to a low-carbon economy, as is business leadership and the development of technology solutions.

Many global and regional financial services providers meanwhile are growing their capacity to serve clients and facilitate the transition.

are massive. It is estimated that we need more than $4T of annual global investment for the energy transition, with the potential to fundamentally transform energy and food systems at a level we have not seen since the first Industrial Revolution. Financing businesses poised to capitalise on this, at the intersection of opportunity and necessity, can be profitable while also potentially reinvigorating supply chains, boosting manufacturing and creating good jobs.

As one example of this, at JPMorgan Chase, we’re targeting more than $2.5 trillion over ten years to contribute to sustainable development in developed and emerging markets, including supporting climate action.

We’re helping clients navigate the challenges and to capitalise on the long-term economic and environmental benefits of transitioning to a low-carbon world. At the same time, significant changes in policy will ultimately be required to reach net-zero emissions by 2050. To that end, we have been and will continue to advocate for market-based policy solutions. mea-finance.com

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CLIMATE CHANGE

Money Where the Mouth Is With finance having been a top theme at COP28, regional banks are showing tangible commitment to sustainability goals explains Abhishek Sinha, Managing Director for Banks Coverage and ESG, Financial Institutions Group at Citi

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n regional banking terms, what did COP28 achieve?

To limit global warming to no more than 1.5°C, as called for in the Paris Agreement, global emissions need to reach net zero by 2050. The COP28 in the UAE achieved a milestone towards this transition. In a demonstration of global solidarity, negotiators from nearly 200 parties concluded on the world’s first ‘global stocktake’. This called on Parties to achieve a tripling of renewable energy capacity and to double energy efficiency improvements by 2030, at a global scale. The ‘UAE Consensus’ called for «transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner,” and in line with science, marking the first time a COP final decision has focused on fossil fuels.

Finance was a key theme during COP28. Numerous commitments by countries, public and private o rg a n i s a t i o n s d e m o n st ra te t h e significant scale of market demand and resultant climate transition business opportunity for regional banks in the Middle East. One example of this is UAE President Sheikh Mohamed Bin Zayed

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COP28 also demonstrated first-hand the appetite from regional banks, in particular those in the Gulf Cooperation Council, to mobilise capital to advance progress towards sustainability goals.

On COP28’s finance day, Abdul Aziz Al Ghurair, chair of the country’s banking federation, announced that Banks in the UAE had pledged to mobilise $270bn in green finance, evidencing the engagement of banks in the region to continue to facilitate, finance and develop new sustainable finance products. The UAE was also 1 of 13 countries who signed a Global Climate Finance Framework, setting out 10 principles to make finance available, accessible and affordable.

Do the wider public or commenting media understand the real-world balancing role that banks must play in the transition to cleaner commerce?

Abhishek Sinha, Managing Director, Banks Coverage and ESG, Financial Institutions Group, Citi

Al Nahyan’s announcement of a $30bn catalytic climate fund called ALTÉRRA, allocating $25bn to climate strategies and $5bn to incentivise investment flows in the Global South, and aiming to mobilise $250bn by 2030.

Banking and Finance news in the MEA market

Wider communities including media are key stakeholders and have a central role to play in transition to cleaner commerce.

Greater collaboration between financial Institutions and these stakeholders is critical to reaching net zero. Financial institutions, including global and regional banks, have a fundamental role to enable critical investment, and also ensure a just transition. This is delivered both through sustainable finance, and advising clients in their decarbonisation journeys. Banks also need to enhance their dialogue with civil society regarding the importance of considering social and economic impacts alongside the environmental transition. This is imperative especially for countries without sufficient renewable energy capacity.

Progress has been made over recent years, including at COP15, when developed countries committed to a collective goal of mobilising $100bn per year by 2020 for climate action in developing countries.

At COP26, developed countries pledged to double adaptive finance by 2025. This continued during COP28, when delegates agreed to the operationalisation of a fund to compensate vulnerable countries.

In addition, international financial institutions and countries made new commitments to offer climate-resilient debt clauses (CRDCs) in their lending.

We expect organisations such as the Net Zero Banking Alliance (NZBA), and the Global Financial Alliance for Net Zero (GFANZ) to further engage with communities on this vital transition to net zero.

Are you experiencing increased client or customer demand for more climate positive products?

As nations, financial institutions and corporates commit to net zero by 2050 and interim targets, there has been a rapid expansion in demand for climate positive products to meet these targets. In debt financing, during 2023 we have seen globally close to $900bn of sustainable bond issuance such as green and social bonds, growing by 8% year-on-year. In the Middle East and Africa specifically, sustainable issuance even doubled from 2022 to over $20bn. Investors’ demand for such products is buoyant. We have also seen traction for use of proceeds and sustainability-linked loans. From a trade finance perspective, green project finance and sustainable supply chain finance are key areas of focus. Products such as green repos have taken off in the Markets space.

We continue to offer strategic advisory to our clients to help them achieve their net zero strategies. Citi’s $1tn Sustainable Finance Goal aims to further the transition to a sustainable, equitable, low-carbon economy that supports society’s environmental, social and economic needs. As the world’s most

global bank, Citi can aid the mobilisation of capital to advance progress toward the goals, and the global market demand for these products is evident, with Citi having financed and facilitated $348.5bn towards this target since 2020.

Do regional banks have the appetite and ability to back of new businesses, ideas and methods that will profit from a move toward climate friendly commerce?

Re g i o n a l b a n ks d ef i n i te l y h a ve the appetite and ability to finance and facilitate the green transition.

constituting a substantial opportunity for banks. This will include new opportunities to finance and facilitate a range of green and transition financial products.

Examples include retail products such as green home mortgages and green deposits. It also includes further sustainable and inclusive debt finance, such as green & KPI-linked debt notably for carbon intensive industries for example the energy and transportation sectors. In addition, many banks provide advisory to support their clients in their decarbonisation and transition strategies. Overall, further innovation

REGIONAL BANKS DEFINITELY HAVE THE APPETITE AND ABILITY TO FINANCE AND FACILITATE THE GREEN TRANSITION Testament to that was the strong engagement of many regional banks in the lead up to and at COP28. Green and sustainable debt issuance has been growing rapidly in the Middle East and regional banks have an essential role in that regard.

In addition to capturing the sustainable business opportunity through sustainable finance, regional banks are also demonstrating an increasing appetite to facilitate a just transition to a low carbon future. Several banks in the region have now joined the NZBA, for example FAB and ADCB in the UAE, CIB in Egypt, Investec in South Africa and KCB in Kenya. This is a trend we expect to continue.

In climate terms, are banks predicting new opportunities or gearing for funding mitigation of consequences?

The transition to a low carbon economy needed to meet climate goals is expected to require significant global investment in excess of $5-7tn annually by 2030,

in climate finance tools will likely be stimulated by continued participation from all actors, including the public sector, and private equity.

Concurrently, banks including Citi remain focused on measuring, managing and reducing climate risk. Delaying the transition of banks’ lending portfolios could significantly increase costs for banks and the risk of being exposed to stranded assets. Measuring potential climate impacts on portfolios and stresstesting their resilience to transition and physical risks, is becoming increasingly critical and a growing focus for regulators.

Key challenges banks face in doing so include a lack of historical climate risk data, as well as a mismatch between banks’ traditional 1-year probability of default view and potential long-term impact of climate risk. Collaboration amongst banks in wide forums and bilaterally along with engagement with regulators are hence key to share industry best practices and build robust climate risk assessment frameworks. mea-finance.com

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CLIMATE CHANGE

Commitments Taking Form Adnan Anwar, Deputy CEO at National Bank of Fujairah shows that demand for sustainable financial services is a quickly forming reality in the sector

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n regional banking terms, what did COP 28 achieve?

In global terms, COP28 saw more than $80 billion in climate finance commitments from governments, development banks, philanthropists and private sources. This included agreement among the parties to make the Loss and Damage Fund operational. This will direct funding toward those developing countries most vulnerable to the effects of climate change. Nineteen countries have so far committed to the fund, with $792 million pledged.

The UAE Banks Federation, pledged Dh1 trillion ($272 billion) in sustainable financing by 2030, aimed at fulfilling the country›s ambitions of reaching its goal of net zero by 2050. National Bank of Fujairah is one of the proud participants in this commitment, which leads the way in addressing climate change in the region.

Do the wider public or commenting media understand the real-world balancing role that banks must play in the transition to cleaner commerce?

Awareness on the role of banks in the transition to cleaner commerce has certainly gone up after COP 28, especially among those larger companies who are exposed to sustainable finance and have developed appetite to invest both for commercial opportunities and to play their role in cleaner commerce.

For smaller companies and individuals, awareness of climate challenges has increased, including the linkage to sustainability and sustainable finance,

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Adnan Anwar, Deputy CEO at National Bank of Fujairah

and the role banks are playing in providing this is increasingly well understood.

Are you experiencing increased client or customer demand for more climate-positive products?

Larger corporate customers are aware of the need to act on sustainability, and are asking for products built on green principles.

SMEs tend to be at an earlier stage in the journey and they tend to seek more advice on becoming greener, to enable them to take the first steps in structuring their sustainability initiatives so that they can ultimately access climatepositive products.

Our retail business assists customers in making sustainable choices by offering innovative, greener products and services such as green personal loans and automotive loans for owners of fuel-efficient, eco-friendly cars. We see in other consumer segments there is an increasing demand for sustainable products. So, while today demand for

Banking and Finance news in the MEA market

green retail banking products is nascent, it is bound to increase going forward.

Do regional banks have the appetite and ability to back of new businesses, ideas and methods that will profit from a move toward climate friendly commerce?

Yes, there is definitely a growing appetite to back businesses, ideas and methods by regional banks for playing their part in contributing towards climate change agenda as well as growing commercial opportunities that may arise for funding the projects in this space. At the basic level, banks can provide awareness, advice and tools to support businesses in delivering their ESG strategies; NBF’s partnership with Living Business to support customers in their sustainability journey and Knowledge Series event to promote awareness are good examples of this. The governance, underwriting of green finance products and existing credit underwriting models and regulatory framework have been evolving to factor in climate change and the risks associated with it.

In climate terms, are banks predicting new opportunities or gearing for funding mitigation of consequences?

The approach of banks to green finance has initially been driven by governments, regulations and investor expectations.

Underlying consumer demand and the shift of preferences towards greener products is beginning to gradually increase and banks have accelerated adapting and developing their products. In the region banks have gained momentum in the last couple of years and COP28 further accelerated action. We are seeing growing opportunities in investing in clean energy projects, supporting the oil and gas and marine industries in their transition journeys, and offering retail customers with the green products mentioned above.

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Intelligent Growth Retail banking in the region continues on a positive path helped by the current interest rate environment, healthy retail asset quality in Islamic banking, continuing investment in digitisation and adoption of AI

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a n ks i n t h e G C C h a ve been among the biggest beneficiaries of the region’s recent economic boom, on the back of higher oil prices, contained inflation and higher for longer interest rates. Profits are on the increase and asset quality is sound, with lenders also enjoying strong capital and liquidity levels.

“Many GCC banks reported record profit in 2023 supported by higher margins from higher rates, increased business volumes and lower loan-loss provisions,” global ratings agency Moody ’s said in December while forecasting that profitability will remain strong, supported by low provisioning requirements and high margins.

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The GCC states – Saudi Arabia, the UAE, Kuwait, Bahrain, Oman and Qatar – are poised to effectively navigate through a decelerating global economy amid geopolitical tensions in the Middle East and East Europe as well as a welter of elections in more than 50 economies.

Real GDP growth in 2024 is expected to strengthen at 3.7%, aided by a loosening of OPEC+ oil production quotas and continued government investment in the economy in line with the economic diversification goals.

Digital transformation is the future of the banking sector. The GCC financial services sector continues to undergo transformation due to advancements in technology, with generative AI (GenAI) expected to accelerate the pace and scope of change.

Banking and Finance news in the MEA market

Retail banks in the Gulf region are also increasingly investing in digital banking solutions to address the everevolving needs of their customers while balancing customer experience and risk management.

Meanwhile, continued economic growth will keep GCC Islamic banks’ asset quality stable while strong capital and liquidity will enable them to capitalise on the growing demand for Islamic financial services in the region.

“GCC countries, mainly Saudi Arabia and Kuwait, spurred 92% of growth in Islamic banking assets,” said S&P Global.

The retail focus of most Islamic banks will preserve the segment’s asset quality going forward as retail asset quality is particularly resilient, thanks to the high

proportion of borrowers who work in the public sector, prudent regulations and established credit bureaus.

The GCC retail banking sector remains highly fragmented making competition intense and banks in the region are demonstrating that they are eager to merge to enhance their competitive edge, rightsize their portfolios, add scale and expand markets.

Operating environment The GCC region’s retail banking sector experienced a landmark year in 2023.

With the challenges of the COVID-19 pandemic period now in the rearview mirror, the current operating environment and the performance of the Gulf region’s top five banks are the strongest they have been in recent years.

The region’s top five lenders – Saudi National Bank (SNB), Al Rajhi Bank, Qatar National Bank (QNB), First Abu Dhabi Bank (FAB) and Kuwait Finance House (KFH) – posted $1.34 trillion in combined net assets in the nine-months to September 30, 2023.

QNB, the Gulf’s largest lender by assets, reported a profit of QAR 4.3 billion ($1.2 billion) in the three months ended September 30, SNB registered a 6% yearon-year increase in profit to SAR 5.01 billion ($1.3 billion), FAB’s group net profit soared by 43% to AED 4.3 billion ($1.2

MANY GCC BANKS REPORTED RECORD PROFIT IN 2023 SUPPORTED BY HIGHER MARGINS FROM HIGHER RATES, INCREASED BUSINESS VOLUMES AND LOWER LOAN-LOSS PROVISIONS – Moody’s

billion), KFH said its Q3 profit soared by 124% to KWD 462 million ($1.5 billion) and Al Rajhi’s Q3 net income reached $1.1 billion (SAR 4.2 billion), down 4.6%.

EY projected that banks in the Arabian Gulf region will remain resilient in 2024 while noting that the industry has gone through a fundamental transformation and has been on a growth trajectory.

Profitability in the sector will remain underpinned by higher net interest margins and non-interest revenues as assets grow and by lower loan impairment charges as economic conditions remain solid. For now, GCC banks look ready to endure a ‘higher for longer’ interest rate environment.

Central banks in the GCC including Qatar and the UAE followed the US Federal Reserve’s to keep interest rates unchanged in order to protect their currencies’ peg against the US dollar.

Monetary policy in the Gulf region is

WHEN CONSIDERING THE NEW OPPORTUNITIES OF GEN AI ALONGSIDE EXISTING PREDICTIVE AI-DRIVEN SOLUTIONS, BANKING EXECUTIVES SHOULD BEAR IN MIND THAT WELL-PROVEN AND POTENTIAL AI APPLICATIONS NOW SPAN ALMOST EVERY ASPECT OF FINANCIAL INSTITUTIONS WORKFLOWS, FROM CLIENT-FACING ROLES TO BACK-END OPERATIONS – Boston Consulting Group (BCG)

usually guided by the Federal Reserve, which held interest rates at a 22-year high for a third straight meeting in December.

“Banks in the main GCC markets – Saudi Arabia, Qatar and the UAE - are geared positively towards rising interest rates,” Fitch Ratings said, adding that most loan books reprice fairly quickly, while low-cost current and savings accounts (CASA) deposits represent a significant proportion of funding.

The net interest income – the difference between interest revenues earned from lending activities and interest paid to depositors – at UAE’s banks has soared over the quarters as lenders are passing rate increases on to customers.

The GCC banking sector is at an inflexion point. Going forward, growth in the sector will be driven by technological advancements, strong fiscal conditions, government investments, a positive outlook for oil and gas prices and an expected improvement in the global economic landscape.

Reimagine AI-enabled banking GenAI is making remarkable progress in a wide array of industries, banking included, as demonstrated by the rollout of OpenAI’s GPT-4 and Google parent Alphabet’s Bard. The use of innovative technology is not a question of “if,” but “when” and “how.”

McKinsey said in December that GenAI could boost the banking sector’s annual revenue by $200-$340 billion or 9-15% of operating profits, presenting a huge opportunity. The rise of GenAI is expected to enrich the broader AI toolkit, mea-finance.com

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RETAIL BANKING

accelerating opportunities for financial institutions to create new value with the cutting-edge technologies.

For instance, the use of GenAI in retail banking to forecast and tailor financial service and product offerings based on customer needs and behaviours is rapidly becoming table stakes in many markets.

“When considering the new opportunities of GenAI alongside existing predictive AI-driven solutions, banking executives should bear in mind that wellproven and potential AI applications now span almost every aspect of financial institutions workflows, from client-facing roles to back-end operations,” said Boston Consulting Group (BCG).

GenAI in retail banking is largely associated with customer service chatbots, but the technology’s versatility extends far beyond these applications to encompass tasks such as automated financial analysis and AI-assisted code development.

UAE’s Emirates NBD partnered with Microsoft in July to harness the power of GenAI to advance the banking group’s operations and productivity across various business functions. The bank said the collaboration seeks to unlock new opportunities for innovation, efficiency and customer experience within the banking industry.

Globally, several banks are also exploring such uses for GenAI models – either built in-house or sourced as a service – and industry giants such as Goldman Sachs, Deutsche Bank, American Express, and Wells Fargo are already starting to go live with their solutions.

GenAI runs on data and banks as well as other multiline financial institutions command vast, high-quality, customercentric gold mines of data. To take full advantage of emerging GenAI opportunities, GCC retail banks must sharpen their methods for identifying, prioritising, and incubating initiatives that are likely to have the greatest positive impact on value creation, customers and employees as well as service delivery.

Traditionally, most AI use cases in banking have aimed to either automate

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tasks or generate predictions. However, the potential for GenAI to reshape banking seems vast and the possibilities (and risks) of the new AI are thus yet to be fully tested.

Islamic banking Islamic banking accounts for the majority of the total global Islamic finance industry assets. The segment has developed at a steady pace, with non-core markets growing the fastest and is likely to see further expansion with newer services.

The Middle East continues to underpin growth in the global Islamic banking sector, with GCC countries responsible for around 90% of the growth in Shariahcompliant banking assets. Al-Rajhi Bank, Dubai Islamic Bank, Kuwait Finance

GCC over the next 12 to 18 months.

The profitability of Shariah-compliant banks operating in the region is expected to continue to exceed that of their conventional peers in 2024 due to margin advantage.

Furthermore, continued economic growth in the GCC region, governments’ commitment to promote Islamic finance as well as sustained demand for Shari’ahcompliant products and ample funding will continue to drive growth for Islamic banking assets, outpacing that of conventional peers Islamic retail banks.

“The retail-heavy portfolios of Islamic banks in the region drive higher financing yields and therefore stronger margins than conventional banks, particularly given that current and savings accounts

AMONG INDUSTRY SECTORS, BANKING IS EXPECTED TO HAVE ONE OF THE LARGEST OPPORTUNITIES: AN ANNUAL POTENTIAL OF $200-$340 BILLION – EQUIVALENT TO 9 TO 15% OF OPERATING PROFITS), LARGELY FROM INCREASED PRODUCTIVITY – McKinsey

House (KFH), Qatar Islamic Bank and Abu Dhabi Islamic Bank are some of the major players operating in the region.

The Gulf region has for many years been the heartland of the Islamic finance sector in terms of sheer size, with the weakness of currencies in Asian markets exacerbating the split between the sixnation bloc and elsewhere in 2022.

KFH’s acquisition of Ahli United Bank in 2022 accelerated the growth of the sector in Kuwait, while for Saudi Arabia, the implementation of Vision 2030 and the increase in mortgage lending supported the industry’s growth.

Moody’s projected that supportive oil prices and economic diversification agendas will sustain strong business activity for Islamic banks across the

Banking and Finance news in the MEA market

(CASA) deposits make up a large portion of their deposit bases and offer cheap cost of funds,” Moody’s.

The increasing demand for financial products that align with the norms of Islamic law, consolidations in the GCC Islamic banking sector and proactive government legislation have supported the growth of the industry.

The GCC retail banking industry is undergoing tremendous change. The sector was a fairly straightforward business a few years ago but going forward, innovative technologies such as generative AI, increasing competition from neobanks, changes in the regulatory environment, consolidation and evolving customer expectations will put immense pressure on traditional business models.

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Customer is King Amir Abdel Gawad, Head of Consumer Banking, UAE at Banque Misr, says that in a changing world, the centrality of the customer is taking shape as a leading priority in retail banking where a revival of branches will emphasise digital customer experiences

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ake two predictions a b o u t t h e n a t u re or shape of retail banking over the next three years.

Retail banking has evolved in the last decade from being ‘organisation centric’ to achieving high levels of customer centricity, helping customers connect with their banks in a more personalised manner, leading to more transactions, increased card spends, effective investments and increased portfolio movements. We need to consider the dynamic changes in technology that has led to shaping customer needs and expectations over the last decade. The entrance of Gen Z into the work force has led to an agile approach in adapting these changes, which is the main engine driving the growing banking sector.

Ac c o rd i n g to my o p i n i o n a n d considering the UAE landscape with over 85% being expatriates, and smart phone penetration over 95%, future of Retail banking will be governed by the 3C approach - Customer Centric Customisation. The concept of digital bouquet banking will lead retail banks to provide customers with products and services that will cater to their needs or will be fully customised to them.

Another concept that will change retail banking is Product Tailoring.

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Amir Abdel Gawad, Head of Consumer Banking, UAE, Banque Misr

This will provide a cutting edge to retail banks to attract targeted customers.

Banks will cease offering services ‘off the shelf,’ as customer preferences and demands have evolved with the introduction of smart banking services which has also triggered customised and tailored services.

Another important aspect that will shape retail banking will be to focus on peripheral income lines and not totally on NII- Non-Interest Income, but on providing enhanced services with simple fee structures. This will build a stronger bank and will not be affected by interest rates.

These changes will nurture a solid base for retail banks to grow into a customer focused digital unit prioritising enhanced customer experience where customers

Banking and Finance news in the MEA market

will rely more on technology to match their aspirations with more tailored products and offerings.

What do you view as having been the biggest single change in regional retail banking since 2020?

Geo-political and socio-economic changes led to a huge disruption in normality of livelihood. The pre-covid-19 era emphasised customer ‘touch and feel’ banking where customers would visit branches and feel the human touch to fulfil their daily banking needs.

Post-covid-19 era led to ‘customer touchpoint’ banking, whereby the banking eco-system evolved adapting to various customisations by providing digital and electronic services for the ease of customer banking.

These changes led customers from conventional branch banking to digital banking, triggering a paradigm change in digital banking services. Hence the majority of customers who completed their banking needs by visiting branches, started depending on remote banking channels, becoming the norm. One change was the approach to banking from a customer perspective, the other being the impact on the staff of banks, wherein pre covid-19 the banks operated fully at the premises then after the pandemic, working from home and flexible hours were introduced in the banking sector.

The quality of digital services improved bringing innovation into retail banking through AI. Digitisation is changing the banking landscape and customers are adapting very quickly to these convenient, secure and simple services.

Hence, the biggest change since 2020 is the dependency and acceptance of digital banking mainly relying on online applications and smart branches to execute customer requests through diversified and agile adapted processes.

Do you expect to see either a final end to, or a revival of branch banking services in the region?

Branch banking is an integral part of retail banking. Post covid-19, due to the emergence of digital banking, branches across the region condensed and banks believed in reducing their operational expenses to expand into the digital banking horizon.

The revival of branches will not be in the conventional way of branch banking but will emphasise digital hubs leading to digital customer experiences and focusing on electronic services with quick ‘end to end’ processes with minimalistic human interface. On the other hand, we also need to consider diversified customer needs based on age, nationality, culture and preferences with branches being the only direct customer touchpoint wherein all transactions were authenticated and

factors that are not considered in the derivation of profitability but are the biggest influencers that lead to a viable and successful retail bank.

Customers: Customer satisfaction and retention: if the customer is satisfied, the bank will attain a large share of customers wallet and retaining an existing customer can be more beneficial to the bank than acquiring a new one P roduct and services: Variety of products and services: in this c o m p et i t i ve e nv i ro n m e nt , t h e customer should be given the option to select and choose the product and service they want and the banks need to create and customise products that fit every segment being offered Adaptable infrastructure: with the correct systems and processes in place,

ANOTHER CONCEPT THAT WILL CHANGE THE SHAPE OF RETAIL BANKING IS PRODUCT TAILORING validated by a human being. There are lot of customers who prefer human interaction when it comes to their money as they feel a more psychological safety within the bank premises especially with the rise of fraudulent activities circulating online. Hence branches will be revived through a synergy of digital hubs and human interfaces.

H ow c a n b a n ks p rov i d e a satisfactory range of products and services while remaining profitable?

Bank’s profitability depends on various factors like Net Interest Margin, loanto-asset ratios, ROA and ROE across different business lines, but there are

optimum use of resources being achieved leads to reduction in expenses Process: The agility, diversification a n d o n g o i n g m o d i f i c a t i o n of processes to combat the dynamic changes will help in reducing TAT – Turn Around Time, and mitigating operational risks S taff: Staff are the major driving force in achieving all above factors.

Well-trained, innovative, agile, engaged, positive and motivated staff members will lead to a more profitable organisation Customer penetration plays a key role in this journey, the bigger share of a customer’s wallet makes the customer more profitable to the bank.

To get a bigger share of the customer’s wallet, banks need to offer a wide range of varied products and services that will allow the customer to choose and use the product that fulfill their financial needs.

Do you think that customers will recognise and be appreciative of the role of AI in retail banking?

AI impact on customer ser vices is mammoth across all industries especially retail banks. In this age, machine learning algorithms are used to analyse customer’s behaviors, get to know their interests, and understand their preferences. This can lead to identifying certain patterns which will help banks identify the customer needs and recommend products and services. Banks are using different AI tools like chatbots, virtual and voice assistants and predictive tools to analyse customer needs. These will forecast certain customer behavior and the bank would be ready to fulfil the requirement of the customer at that given point in time.

AI is also a key tool in developing agile processes. Organisations are finding ways to improve project management methodologies to stay ahead of the curve.

Key trends that are reshaping process and project management are Agile methodologies and the transformative power of AI. Agile approaches emphasise on flexibility, adaptability and iterative development. AI and Agile collaborate for enhanced decision making, intelligent automation, predictive planning and continuous improvement.

AI is facilitating enhanced customer experience by improving customer ser vice, securit y and regulator y c omplianc e. The way ban ks are embracing technology and innovation with the use of AI will change the financial landscape. AI continues to advance and deepen its relationship with the retail banking industry and ultimately will be beneficial for the banks and their customers. mea-finance.com

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CORPORATE TAX

Weighing the Impact of the UAE Corporate Tax Law With small and medium-sized enterprises making up 94% of UAE companies, industry experts anticipate the landmark corporate tax law to cause a significant, large-scale impact on the country’s start-up, micro, and SME sectors

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s the UAE heavily underpins its medium to long-term growth strategy on reducing its dependence on oil and gas by diversifying the nation’s non-oil revenue streams, the legislative shift will be pivotal in further cementing its position as a global business and financial hub.

The UAE corporate tax regime, which was officially rolled out in June 2023, holds the potential to generate revenue up to AED 47.7 billion (USD 13 billion), or approximately 15% of the country’s gross non-oil revenue, according to Marmore MENA Intelligence, a research subsidiary f u l l y- ow n e d by Ku wa i t F i n a n c i a l Centre “Markaz.”

Along with Value Added Tax (VAT), which yielded AED 9 billion (USD 2.5 billion) in 2022, the corporate tax reform is expected to boost public funds and stabilise its fiscal framework, while accelerating national economic growth and increasing its gross domestic product (GDP) to AED 3 trillion by 2031.

Deep diving into the UAE’s corporate tax framework With a corporate tax rate pegged at just 9%, the UAE has the lowest corporate tax

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George Hojeige, CEO, Virtugroup

Banking and Finance news in the MEA market

rate among Gulf Cooperation Council (GCC) countries.

Globally, the UAE remains an extremely competitive low-tax business destination, especially in comparison with other low corporate tax countries, such as Montenegro, which levies a corporate tax rate ranging from 9% to 15% depending on profits; Ireland, which has a 12.5% corporate tax; and Hong Kong and Singapore, which charge 16.5% and 17% corporate tax rates, respectively.

Furthermore, the UAE’s 9% corporate tax rate will only apply to companies that generate annual net profits higher than AED 375,000 (USD 102,000), while a 0% corporate tax rate will apply to companies generating annual net profits equal to or less than that amount.

On the other hand, multinational conglomerates that earn profits over AED 3.5 billion (USD 952.9 million) will be subject to a higher tax rate based on the Organisation for Economic Cooperation and Development (OECD) base erosion and profit shifting (BEPS) policy.

The UAE Government has also introduced the Small Business Relief programme for small businesses.

Available until the end of 2026, this tax relief grants exemption to SMEs whose total revenues are below or equal to AED 3 million for the relevant tax period.

How is corporate tax reshaping the UAE’s business ecosystem?

In addition to opening up new revenue sources and enhancing the UAE’s attractiveness as a global economic hub, corporate tax is also expected to promote transparency and drive accountability among companies incorporated and operating in the country, thus solidifying its international reputation and bringing the reporting standards of UAE-based businesses in line with global benchmarks.

These factors – and a favourable corporate tax scheme – will aid the UAE in maintaining a business-friendly environment and achieving its goal of having one million SMEs by 2030.

As of 2022, it is already home to 557,000 SMEs, around 46% of which are based in Dubai.

Lack of awareness and misinformation pose challenges to tax compliance among SMEs More than a year after the announcement of corporate tax, however, numerous businesses are still uncertain if the law applies to them, or unaware of the steps they must take to achieve tax compliance.

While the new corporate tax legislation has outlined tax exemptions and a taxfree threshold, all companies based in

AED 20,000, depending on the case of non-compliance.

While adapting to the new tax reform may be challenging for some start-ups and SMEs, the initiative is ultimately designed to further enhance the UAE’s standing as a premier business and trade destination, making it an even more attractive hub for foreign direct investment (FDI) and venture capital.

The latest statistics show the UAE ranks first in the Middle East and North Africa region in terms of FDI inflows, and was the top FDI destination in the GCC economic bloc in 2022. During the same

ESSENTIALLY, BUSINESSES ARE REQUIRED TO RECORD THEIR TRANSACTIONS AND PROVE THEIR TAX POSITION, EVEN IF THEY ARE EXEMPT OR UNDER THE TAXABLE THRESHOLD the UAE must still register for corporate tax, keep correct accounting records and complete their annual corporate tax filings with the Federal Tax Authority (FTA).

These mandatory steps apply to both mainland and free zone companies, as well as to companies with a single shareholder, businesses with zero revenues and even those that qualify for exemptions.

Essentially, businesses are required to record their transactions and prove their tax position, even if they are exempt or under the taxable threshold.

The launch of corporate tax law in the UAE has also highlighted the critical role of corporate service providers in guiding entrepreneurs and small business owners into tax compliance and helping them navigate the new rules and requirements, enabling them to avoid penalties that range from AED 500 to

year, the UAE was also the only MENA country to cross the USD 1 billion mark in venture capital funding, reinforcing its lead in the region.

F u e l l i n g ex p o n e n t i a l a n d sustainable growth in the future Though the full effects of corporate tax are yet to be seen, market analysts are optimistic that corporate tax will help boost local infrastructure development and spur investment in megaprojects that will drastically elevate the country’s competitive edge, thereby benefitting UAE-based businesses in the long run.

Additionally, it can create new markets and business opportunities that can further promote long-term and sustainable economic growth, while advancing and refining local business practices to meet international standards for quality, excellence and transparency. mea-finance.com

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COVER INTERVIEW

Focused on Growth Sunil Kaushal, CEO, AME at Standard Chartered Bank, describes the background to their successes across the regions he covers for the bank, and provides insights into their outlook for and plans in these increasingly important markets

Sunil Kaushal, CEO, Africa and Middle East, Standard Chartered Bank

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Banking and Finance news in the MEA market

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escribe Standard Chartered Bank’s recent performance in Africa and the Middle East?

Our operations within Africa and Middle East have delivered continued outperformance and we have recorded a very strong set of results. In the first three quarters of 2023, our income has grown by 30% to USD 2,118 million and our operating profit has increased 54% to USD 926 million. Whilst higher interest rates helped, the underlying performance was broad-based and robust.

Our return on tangible equit y (RoTE) is 15%, 470bps higher than the corresponding period in 2022. Regional performance has been broad-based, with 12 of our AME markets achieving above 10% income growth led by UAE, Pakistan, Mauritius, Saudi and Zambia and 13 markets delivering RoTE of more than 12%.

As a Group, we are committed to deliver positive income-to-cost jaws of around 4% and in AME we overperformed at 18%. Whilst this is a very positive outcome, we remain highly focused on cost discipline to ensure healthy jaws are maintained even when interest rates start moderating.

We have also had some great achievements over the past year, particularly relating to a number of green finance transactions across the region. This year, we proudly announced that Standard Chartered issued Saudi Arabia’s first-ever green guarantee for Larsen and Toubro (L&T), a global leader in engineering, procurement and construction (EPC) projects. This green guarantee is specifically directed towards the green hydrogen project development at NEOM, where L&T Saudi Arabia will oversee the design, local supplies, construction and commissioning of the renewable and grid packages.

We served as Bapco Energies’ ESG advisor, helping them to achieve a historic feat by becoming the world›s first national energy company to publish a sustainability-linked finance framework.

In partnership with Siemens Energy, we jointly announced the issuance of the first Green Guarantee in the state of Qatar.

This ground-breaking initiative stands as a noteworthy milestone in promoting sustainable and responsible banking practices within Qatar, setting a new industry standard.

Looking to Africa, we partnered with the Islamic Corporation for the Insurance of Investment and Export Credits (ICIEC) to support the funding of a transformative solar electrification project in Senegal, valued at EUR 103 million. The project will see the installation of solar-powered streetlamps which will uplift the lives of local communities while supporting the Senegalese government’s climate goals.

Furthermore, we extended our support by providing EUR 415 million in financing, backed by UK Export Finance, to the Angolan Ministry of Public Works and Spatial Planning in West Africa. In Ghana, we secured a €280 million social loan financing for the Ministry of Finance. This funding is allocated for the development of a section of the Eastern Corridor, aiming to connect southern seaports to the hinterland and landlocked neighbours in the north.

What factors are driving Standard Chartered Bank’s successes in these regions?

Our successes in Africa and the Middle East are driven by a holistic approach that aligns with the dynamic needs of the complex global economy.

As the leading international cross-border bank, we are committed to facilitating sustainable, inclusive growth by leveraging our extensive network, capabilities, heritage, and local expertise.

One key factor contributing to our success i s our c ommitment to connecting the Africa and Middle East markets, bridging them to global opportunities.

We actively support the development of the AME region by identifying and financing key infrastructure projects across diverse sectors. Through our unique geographical footprint, we facilitate the flow of money, trade, wealth and ideas, fostering connectivity not only within the region but also linking Asia, Africa and the Middle East to Europe and the Americas.

Our success is underpinned by the combination of deep local expertise and global capabilities. With the right scale, we excel in unlocking opportunities and managing complexity across growing markets, diverse sectors and in the realm of sustainability. We remain a trusted partner, empowering businesses, individuals and communities to unlock exciting possibilities for wealth growth and driving progress and prosperity for generations to come.

At Standard Chartered, we challenge the status quo and embrace agility, choosing to disrupt for a reason. Through innovative partnerships, we aim to transform banking and the economy,

OUR SUCCESSES IN AFRICA AND THE MIDDLE EAST ARE DRIVEN BY A HOLISTIC APPROACH THAT ALIGNS WITH THE DYNAMIC NEEDS OF THE COMPLEX GLOBAL ECONOMY

introducing novel concepts to the market and supporting clients in executing ground-breaking deals. Sustainability considerations are central to our growth ambitions, shaping the future of banking.

We take pride in pioneering sustainable practices and supporting clients in navigating the evolving landscape.

Which Middle Eastern and African markets are the main drivers of growth in these regions?

Standard Chartered’s growth strategy in Africa and the Middle East is anchored in key markets that demonstrate substantial potential and resilience. For us, the bigger growth markets have been Saudi, UAE, Pakistan, Kenya and Mauritius. Our focus on these markets aligns with our commitment to delivering a mid-single digit growth trajectory over the next five years.

The UAE stands prominently as one of the primary drivers of growth for Standard Chartered in AME. As the Arab world’s second-largest economy, the UAE remains a stronghold for our operations, and continues to exhibit robust performance. mea-finance.com

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COVER INTERVIEW

We continue to make significant investments in the UAE, such as establishing a wealth management centre, which will be the third largest in the world after Hong Kong and Singapore.

Saudi Arabia is another key market contributing significantly to our growth strategy. Despite the regional economic slowdown, Saudi Arabia remains a focal point for us. Investment in large infrastructure projects continues under the Vision 2030 programme, driving economic activity on the ground. We are also keen to capitalise on the opportunities created by the comprehensive economic overhaul taking place in the Kingdom in a bid to drive foreign direct investment to the country.

Egypt also emerges as a strategic market for Standard Chartered’s expansion efforts, and we maintain a bullish outlook on Egypt›s long-term growth prospects. Our recent launch of operations in Egypt demonstrates our commitment to the market and ambitions to contribute fruitfully to its transformative journey for years to come.

We also see tremendous potential in Africa, especially in the context of the African Continental Free Trade Area (AfCFTA), whereby intra-African trade is set to skyrocket in the next decade. We expect Africa’s total exports to reach $952 billion by 2035 and AfCFTA will increase that number by 29 per cent.

This is also true in the context of Africa’s role in facilitating global trade. With this in mind, we are optimistic about the expansion of our trade finance business across the continent.

What are your near- and mediumterm outlooks for the region?

The AME region is poised for dynamic economic developments in the near- and medium-term. For Standard Chartered, this region represents a large part of our global presence and continues to play a vital role in our growth.

Focusing on the Middle East, the Gulf Cooperation Council (GCC) is expected to remain a standout performer in the global

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economy. This resilience is attributed to robust non-hydrocarbon growth, compensating for the gradual slowdown in headline growth due to successive OPEC+ oil output cuts.

One of the key drivers of economic growth in the Middle East is the emphasis on non-oil sectors. While oil output

A NOTEWORTHY TREND IS THE DIVERSIFICATION OF MIDDLE EAST MARKETS reductions may impact overall growth, the non-oil sector is anticipated to be the primary engine of economic expansion in 2024. Infrastructure investment underpins our medium- to long-term growth prospects, with a diverse set of priorities seen across the region from hydrogen in Oman to gas output expansion in Qatar

Banking and Finance news in the MEA market

and social infrastructure and tourism investment in Saudi Arabia.

A n otewo r t hy t re n d i s t h e diversification of Middle East markets.

In the UAE, there is a concerted effort to transform the industrial sector into a global manufacturing hub. Saudi Arabia›s Vision 2030 continues to open up the market, encouraging private sector participation in sectors like healthcare, education, entertainment and infrastructure. This diversification strategy not only enhances economic resilience but will lead to the attraction of further foreign direct investment.

Another key component to reference is the growing global influence of Middle Eastern markets including the UAE and Saudi Arabia. The entry of these countries into the BRICS group, along with Egypt, presents opportunities for stronger economic collaboration with countries like China and India. This move provides access to new markets and enhances the potential for greater economic diversification.

This is in addition to the establishment of the new India-Middle East-Europe Economic Corridor (IMEC), which underlines a shift in global trade centres.

According to our Future of Trade 2023 report, Asia, Africa and the Middle East are set to anchor global trade by the end of this decade, with the combined exports from these regions accounting for 44% of global trade by 2030.

Looking at Africa, the economic outlook varies. In Kenya, growth is expected to slow in 2024. Similarly, in Nigeria, we revised our forecast downward due to constrained oil production and incomplete reforms. In South Africa, on the other hand, we anticipate improved growth in 2024, driven by eased power sector constraints.

Here, the AfCFTA emerges as a critical factor for the entire continent›s economic development, with intra-African trade set to grow 3.9 per cent per annum and reach $140 billion by 2035, according to our research. With most African states ratifying AfCFTA, it is poised to enhance

intra-Africa trade, fostering crosscontinental cooperation and sustainable economic development.

What are Standard Chartered Bank’s plans for Africa and the Middle East and which sectors are set to drive the Bank’s growth in this region?

The Africa and Middle East region presents vast opportunities that we are keen to capitalise on. The UAE is among the top three global markets for Standard Chartered and the broader Africa and Middle East region accounts for about 20 per cent of the bank’s total global revenue. We remain focused on growing our business in the region, which is vital for the emerging market-focused lenders’ global growth agenda. Leveraging our international network, we are uniquely positioned to facilitate inward and outward investments from the regions into overseas markets and vice versa.

The growth we are envisaging in the Africa and Middle East region in the next five years is significantly higher than the growth we have had in the past five years. We are well-positioned to tap into these growth opportunities while accelerating our commitment to digitisation and sustainability.

Saudi Arabia, for example, is a large, attractive market and one that we have always been interested in, and has huge capital requirements to drive its Vision 2030.

Over the course of the next few years, we are aiming to double our growth in the Kingdom, driven by capital raising in the Kingdom.

Sustainability is at the top of the agenda for many governments and businesses in the region meaning that there is potential for exponential growth in the sustainable financing business as both government and private sector clients push for green funding options.

The demand for investment for transition finance and sustainable projects is significant to enable governments reach their climate goals.

Africa faces tough transitionfinancing and climate challenges.

Many of these markets are reliant on carbon-intensive industries, and many developed economies are also reliant on the products that these industries create. Our studies show that emerging markets need to find an additional $94.8 trillion of transition finance, to successfully transition to net zero by 2060. Funding this themselves would be a huge setback to development.

We understand the critical role that banks, and other financial institutions,

have to play in accelerating the transition to a low-carbon economy by financing activities aligned with the Paris Agreement. We will continue to accelerate the deployment of sustainability-linked finance, with propositions such as our Sustainable Trade Finance and Sustainable Account designed to help companies to implement more sustainable practices across their ecosystems, and reach our goal of providing $300 billion in sustainable finance by 2030.

Inadequate infrastructure remains a major obstacle to Africa achieving its full economic growth potential. Most of the African continent lags behind the rest of the world in coverage of key infrastructure classes. Estimates by the African Development Bank highlight that the continent’s infrastructure needs amount to $130 to $170 billion a year, with a financing gap currently in the range of $68 to $108 billion.

Closing the gap matters and Standard Chartered will work to make a difference here, given our unique footprint as a bridge connecting pools of capital in our network to infrastructure needs in Africa.

Additionally, as more people turn to digital payment and e-commerce platforms, we are investing in more digital capabilities, alliances and partnerships.

This includes providing a standard platform for global core digital services across our footprint. In the AME region, for instance, we’ve increased our consumer base by half a million through digital-only banks, representing 50% of our legacy base and we will continue to build upon this success.

Finally, following the success of our Women in Tech accelerator programme, we are looking to roll out this transformative initiative to more of our markets in the region, helping even more women entrepreneurs to unleash their potential, overcome barriers and accelerate their business ventures by providing support, mentorship and access to seed capital. mea-finance.com

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DATA SECURITY PAYMENTS

Pathway for Payments The GCC countries are well along the path to providing modernised payments systems for domestic and cross-border services, putting in place facilities and options to enable faster payments between consumers and businesses and benefitting economies

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h e p e r fo r m a n c e of t h e payments sector in the GCC shows ongoing change with opportunities for growth and margin improvement across the region and products. The region’s payments space has evolved over the years, driven by the digitalisation in the financial services sector, which is expected to continue fuelling disruptive business models in the sector.

“The shifting interest rate environment had the greatest impact on the Middle East region, where net interest margins jumped markedly, reversing a trend of the last decade,” McKinsey said in a report last October. The global consultancy firm said revenue growth in the region’s

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payments industry came from rising interest rates, interrupting a long-standing trend in which fees were the main source of growth.

The modernisation of the payments sector is an important journey that economies around the world are either embarking on or experiencing right now.

Globally, more than 85 jurisdictions on six continents support real-time payments, allowing for immediate fund availability to beneficiaries and can be used on a 24/7/365 basis.

The GCC region is following suit with FAWRI+ in Bahrain, SARIE in Saudi Arabia and Aani in the UAE while Kuwait, Qatar and Oman are expected to come up with real-time payment schemes.

Banking and Finance news in the MEA market

“In the GCC region, especially in Saudi Arabia, payments have undergone a major revamp and re-structure, and is currently under process of being developed to keep up and match with the needs and demands of the public,” said Abdulrahman M. Khan, Products & Innovation, Liquidity and Cash Management at Banque Saudi Fransi.

C o m p a re d to s o m e l e g a cy alternatives, which can take days to reach a recipient, real-time payments offer a faster and more predictable means of payment, potentially creating a range of economic and social impacts that affect consumers, businesses and governments.

“By allowing for the transfer of money between businesses and consumers within seconds rather than days, realtime payments improve overall market efficiencies in the economy,” payments solutions firm ACI Worldwide said in a report.

The International Organization for Standardization (ISO) 20022 standard – a globally developed methodology for transmitting data that provides a consistent messaging standard for payments – has become the reality in several markets and the GCC has been no exception.

The adoption of ISO 20022 is expected to bolster the acceleration of cross-border, cross-currency instant and business-tobusiness payments in the next five years.

Meanwhile, the payment landscape is one of the areas where artificial intelligence (AI) can be applied to many services, by automating complex processes and improving customer service and the value of the service.

The adoption of AI within the payments industry cannot be ignored. It offers a wealth of benefits for businesses, helping you boost efficiency while reducing fraud rates.

“Real-time AI-powered payments can empower the unbanked and underbanked by facilitating microfinance, microinsurance and digital wallets. AI-powered fraud detection shields both consumers and businesses, fostering trust and confidence in the digital ecosystem,” said Sriranga Sampathkumar, VP and General Manager, Middle East and Africa at Infosys.

AI is, inevitably, going to continue to be a topic of considerable interest and discussion in 2024. The shift towards digitisation of a traditionally paper-reliant payments market has already made significant strides.

Payments modernisation Payments modernisation is an ongoing process and one that will continue to evolve in line with technology and changing customer demands.

The payments chessboard is being rearranged and understanding these market innovations and acting is critical for financial institutions seeking to grow and prevent disruption.

“The GCC holds a prominent position in payments modernisation in many aspects. However, the region faces challenges, including concentrated markets hindering innovation and cash reliance in segments such as migrant workers,” said Sampathkumar.

Sampathkumar highlighted that addressing competition and ensuring financial inclusion will be crucial for the

GCC to solidify its global leadership in the evolving payments landscape.

The Middle East region is positioned as one of the fastest-growing real-time payments markets, with transactions expected to surge from $675 million in 2022 to $2.6 billion by 2027, showcasing an impressive CAGR of 30.6%.

The industry stands at the edge of significant returns as the pace of fintech disruption moves at a relentless speed.

“The GCC’s success is propelled by a young, tech-savvy consumer base, with 70% of millennials and Gen Z favouring digital payments over traditional methods.

M e a nw h i l e, f ro m a c o r p o ra te perspective, real-time payments are aimed at solving the pain points problems that businesses face in moving money across borders.

The payments industry is rapidly transforming driven by new innovative technologies, evolving customer needs and expectations, the shift in the regulatory environment and the adoption of ISO 20022.

The accelerated pace of payment modernisation globally, including real-time payments and straight-through processes and platforms, are clear opportunities for

IN THE GCC REGION, ESPECIALLY IN SAUDI ARABIA, PAYMENTS HAVE UNDERGONE A MAJOR REVAMP AND RE-STRUCTURE, AND IS CURRENTLY UNDER PROCESS OF BEING DEVELOPED TO KEEP UP AND MATCH WITH THE NEEDS AND DEMANDS OF THE PUBLIC – Abdulrahman M. Khan

Instant payment frameworks such as Saudi Arabia’s SARIE and UAE’s Instant Payment Platform (IPP) drive this adoption,” he added.

Technological innovation and a shift in customer behaviour and expectations have fuelled this disruption, shattered the status quo and opened the window for new players that are challenging incumbent banks.

Today’s customer demands more efficient, automated and robust payment capabilities, which is forcing traditional banks to make tough choices on prioritisation initiatives to meet these demands.

The goal is to make payments less costly while providing full information to the consumer about the end-to-end charges. Customer experience is at the heart of payment modernisation as all companies look for ways to make transacting for their products and services more seamless.

all banking segments as companies seek to build a better customer experience.

“While specific rankings may vary based on criteria, the GCC region is generally recognised for adopting cutting-edge technologies in the financial sector,” said Gurumurthy Palani, Head of Global Transaction Banking at Gulf International Bank.

“Initiatives such as the implementation of real-time payment systems and advancements in digital infrastructure contribute to a competitive standing, although continuous efforts are needed to align with evolving global standards.”

Payments as a service operating models, next-gen cryptocurrencies, buy-now-pay-later innovations and ubiquitous real-time payments are enabling money to move in new ways, sending shockwaves through traditional payment systems. mea-finance.com mea-finance.com

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DATA SECURITY PAYMENTS

Abdulrahman M. Khan

The payments space continuously reinvests itself to meet the ever-changing expectations and a confluence of geopolitical and economic resets. It is also supporting the growth of digital economies and fuelling innovation—all while functioning as a stable backbone for the global economy.

Real-time payments Real-time payments have now been adopted in more than 85 countries with more countries and services expected to join. A study by ACI Worldwide and GlobalData revealed that the Middle East is the fastest-growing real-time payment market globally, with transactions expected to grow at a CAGR of 30.6% from 675 million in 2022 to 2.6 billion by 2027.

Deloitte said that real-time payments will add more transparency to the otherwise fragmented and unpredictable b u s i n e s s- to - b u s i n e s s p a y m e n t s landscape, in addition to driving business growth across borders.

Saudi Arabia is currently the biggest real-time payment market in the Middle East, Bahrain is the global leader in consumer adoption while the UAE, Qatar, Kuwait and Oman – are expected to launch domestic real-time payment schemes soon – with innovative features and overlay services high on the agenda.

Real-time payments are transforming the payment landscape for use cases served inefficiently with existing payment

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Sriranga Sampathkumar

Gurumurthy Palani

infrastructures, but more importantly, providing the infrastructure for brand new use cases and business models that could not have been imagined without the payments system.

Many real-time payment systems use ISO 20022 messaging standards that enable two-way communication such as ‘request for payment’, ‘request for information’ and ‘confirmation of payment’.

Real-time payment removes the gap and the friction points from this settlement process. Companies can receive remuneration with immediate availability within seconds, and more importantly, it allows the companies to pay their employees faster.

“For banks globally, their revenues from payments, despite regional headwinds, have remained a growth factor. Now, given the ease and convenience of real-time payments, its adoption is accelerating worldwide,” Sampathkumar said, adding that the GCC is not left behind and is making significant headway in adopting real-time payment.

Global corporates move nearly $23.5 trillion across countries annually, equivalent to about 25% of global GDP. To achieve this, they predominantly rely on the wholesale cross-border payment processes of correspondent banking networks, according to Oliver Wyman.

This process costs around $120 billion in transaction charges per year.

Cross-border payments are an integral feature of today’s world. They play a vital role in keeping the economy healthy and stable. The payments typically require three to five days of end-to-end processing before reaching the intended recipient and the shortcomings are compounded by high costs, lengthy settlement times and opaque processes.

Sampathkumar said the introduction of Buna in the GCC financial services sector signals a pivotal shift in crossb o rd e r p a y m e n t s , t ra n s c e n d i n g traditional models.

“The platform streamlines multicurrency transactions, offering instant settlements that redefine how businesses and individuals transfer money globally,” he added while noting that the use of a direct settlement system eliminates the need for multiple correspondent banks, ensuring faster and cost-effective transactions.

However, the cross-border payment space is being jolted by several trends that could fundamentally change competitive dynamics. The introduction of ISO 20022 has already displaced many legacy payment messaging schemes and this process is accelerating.

“Value-added services are something that will give you a competitive edge in today’s era of payments. Everyone wants fast and everyone wants secure, this means that it has now become the standard and no longer a value-added service,” said Khan.

Banking and Finance news in the MEA market

The updated scheme has been embraced, thanks to the way it facilitates the fast, standardised and robust exchange of financial messages across borders. This change is just a glimpse of a new real-time vision for the payments industry.

The move to ISO 20022, meanwhile, is more than just a mandatory exercise.

Instead, it’s a key factor in driving innovation and building a frictionless future – offering new opportunities and the chance to enhance services all along a transaction’s lifecycle.

AI payments While earlier forms of the technology have long been widespread for industry applications in areas such as fraud prevention and Know Your Customer regulations, generative AI (GenAI) represent a new potential frontier.

Just as the AI industry is facing upheaval as it develops and grows, the use of the technology is still finding its way into the payments space, and the potential, limitations and opportunities are being slowly uncovered by iterative processes and experimentation.

“The GCC region’s advancements in payments modernisation, coupled with the myriad benefits and the integration of AI, position it as a dynamic player in the global financial landscape,” said Palani.

GenAI is making remarkable progress in a wide array of industries, payments included, as demonstrated by the rollout of OpenAI’s GPT-4 and Google parent Alphabet’s Bard.

Boston Consulting Group (BCG) projected that the total revenue for the UAE payments industry grew at a compound annual growth rate (CAGR) of 9.7 per cent between 2018 and 2022 to $12.8 billion.

Infosys’ Sampathkumar said to build a payments ecosystem for today’s evolving landscape, banks should start from the ground up by recomposing payments – moving individual blocks in their payments infrastructure to recompose the elements and derive value.

“Such a composable platform gives banks the needed flexibility to mix and

INITIATIVES SUCH AS THE IMPLEMENTATION OF REAL-TIME PAYMENT SYSTEMS AND ADVANCEMENTS IN DIGITAL INFRASTRUCTURE CONTRIBUTE TO A COMPETITIVE STANDING, ALTHOUGH CONTINUOUS EFFORTS ARE NEEDED TO ALIGN WITH EVOLVING GLOBAL STANDARDS – Gurumurthy Palani

match components such as Lego blocks, to build the infrastructure necessary for their business needs, often reducing the time-to-market for launch of new products, lowering their total cost of ownership and overall enhancing system resilience,” he added.

Banks can start by building solid foundations with their architecture and embracing cloud-native, microservicesdriven constructs. A composable payments platform will also make a banks’ architecture amenable to technologies like artificial intelligence (AI), Gen AI and machine learning, powering enhancements in customer engagement, operational efficiency and fraud and risk management.

The total revenue of the UAE payments industry is expected to grow by 55% to reach a record $19.8 billion in the next five years, BCG said in its Global Payments Report 2023. Growth in the Gulf state’s payments space is being fuelled by a surge in digital transactions and technological advancements driven by the emergence of GenAI. Most of GenAI’s potential in the payments space rests on the operations side because the industry has many aspects for which the new technology is applicable including high-volume, high-frequency, data-rich operations that involve human-intensive workloads, according to BCG. Though the technology is still nascent, its impact on specific payment operations could be profound.

“GenAI could become a major source of competitive differentiation in the years to

come, but strong governance is essential,” BCG said in a report last September while urging payment leaders to establish effective collaboration models to validate use cases and manage pilot projects.

The impact of GenAI on specific payments operations could be profound and industry experts expect the new technology to boost productivity by more than 20% at different stages of the coding journey.

Globally, some payment process giants have already started experimenting with cutting-edge technology. American Express is employing GenAI to speed product development time while Visa and Mastercard are using it to augment fraud detection capabilities.

Swedish payments firm Klarna is working with OpenAI to launch a new personal shopping assistant while Stripe is leveraging GenAI to create a support documentation guide on its developer portal. The payments landscape is one of the areas where AI, and in particular GenAI, can be applied to many services, by automating complex processes and enhancing customer service and the value of the service.

Sampathkumar underscored that payments are not simply metrics of speed, but they are the arteries of economic activity. “By making them smarter and more inclusive, we can unlock real and sustainable economic growth,” he added.

Payments C-suites should approach GenAI not as a collection of individual use cases but as an opportunity for companywide transformation throughout the value chain, leading to the implementation of GenAI at scale. mea-finance.com mea-finance.com

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Progress by Payments Describing the recent development of payments systems in the Kingdon of Saudi Arabia and the wider region, Abdulrahman M. Khan, Products & Innovation, Liquidity and Cash Management, Banque Saudi Fransi shows how this progress brings clear all-round benefits

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here does our region rank in payments modernisation when compared with the rest of the world?

In GCC region, especially in Saudi Arabia, payments have undergone a major revamp and re-structure, and is currently under process of being developed to keep up and match with the needs and demands of the public. As of today, there are 3 major strong points in payments (Retail) in Saudi Arabia: 1. Internal Transfers: With the addition of Wallet solutions, and banking applications, clients are able to use unique services, such as: Instant Payment Service (IPS) a service provided and mandated by our payments regulator (Saudi Payments). This service allows individuals and companies to transfer instantly (Up to a certain amount) to their beneficiaries using certain proxies (Mobile number, ID, etc…)

2. International Transfers: Using various MTO (money transfer operators) and partnering with them, we as banks are able to allow additional offerings to our partners and our clients by allowing them to use these gateways to transfer money internationally.

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Abdulrahman M. Khan, Products & Innovation, Liquidity and Cash Management, Banque Saudi Fransi

3. Open Banking: With the introduction of Open banking payment initiation that is aimed to go live in Saudi Arabia by 2024, we will be able to utilise Payment Service Providers and open APIs in order to conduct payment on behalf of the client using their consent.

However, when we look at it from the corporate side, there are other aspects that we can find, such as: Payment Gateway providers (PTSPs) and merchant payment options. These consist of the following:

Banking and Finance news in the MEA market

1. POS (Point of Sale): Currently there are many POS (Point of Sale) providers in the market, and they all provide various services in order to enhance the offering to the clients.

Partnering with banks to help with the reconciliation and settlement.

Banks today work with these Fintechs and service providers to quickly settle the payments and ensure that the merchants are able to receive their payments quicker.

2. Payment Gateway: Online payment gateway in the KSA region utilises over 80% to almost 90% via MPGS (MasterCard Payment Gateway Service), and there are many PTSP (Payment Technology Service Providers) in the region that provide value-added services to help merchants enhance their offerings to clients, by having a faster settlement period to help with cash flow, in addition to adding additional payment service to help clients with different options (such as: Buy now pay later).

3. B2B: Business 2 Business or Host 2 Host allows us to integrate with corporate clients and support t h e m w i t h t h e i r d a y-to - d a y business transactions and needs by providing them with APIs to allow the companies to make direct payments from their ERP systems and will help enhance the business speed and allow efficiencies.

Beyond the convenience and helpfulness of settlement speed, what other notable benefits of the payment›s revolution have there been?

The security and efficiency that the roles plays in banks as well as for the clients. The Region had noticed a spike of challenges related to fraud and due to this, the central

bank has urged and provided guidelines to all banks and fintechs to follow a list of requirements in order to initiate secure and reliable transfers, whilst maintaining the speed and efficiency of such. For example: Ensuring the client has an authenticated session, in addition to a limit of 2 authenticated devices, and various OTPs and criteria of approval to submit such payment requests, most of which are one-time requests, but ensure the security of the user before any payment.

Regarding the corporate side, the service providers conduct due diligence on the client’s by ensuring all items and security concerns are covered, and also ensure that the latest certifications and processes are onboarded.

What important roles will AI come to play in the payments arena?

AI can help from 3 different key areas: Efficiency, Forecasting and Safety.

Efficiency/Customer Experience/ Virtual Assistance: By ensuring that the user is able to pay for his services (bills and credit cards) without the need to actually make the transactions manually.

In addition to ensuring that the customer feels heard and obtains the correct services they need in order to complete their day-to-day activities. Using a virtual assistant, the clients will be able to look into a new segment of items that were probably hidden to them, such as certain offers or payment methods that will reduce their cost and enhance their loyalty.

Risk Management/Credit Scoring/ Predictive Analytics: By providing such a service, we will be able to use our technical capabilities and criteria’s to detect fraudulent transactions and be able to highlight accounts ahead of time, that if transferred to, are flagged and money is blocked in client’s account, then released only when proper checks have been made by the team (Example: A fraudulent

p e r s o n re q u e s t s p a y m e n t from a victim for a service to a certain account. This account has received random transfers from all over and is not in line with the KYC. The account is blocked from sending or receiving, until we validate why the transactions occur and have updated the KYC accordingly so that this doesn’t happen in the future).

Algorithm/Forecasting: Using such algorithms will help our clients properly utilise their payments to make room for a successful future.

For example: Utilising PFM tools in order to understand how the

maintain our client base and potentially acquire additional clients over time.

Failure to do so may lead to a loss of clients over time to better service providers and banks that allow for the client to receive better services to make their journey more enjoyable and beneficial.

Will more agility and speedier payments in themselves add to economic growth in the region?

In my opinion I believe payments have reached roughly the peak of speed and agility when it comes to within region payments (local banks), and to some extent the other banks within other

VALUE-ADDED SERVICES ARE SOMETHING THAT WILL GIVE YOU A COMPETITIVE EDGE IN TODAY’S ERA OF PAYMENTS client makes payments over time, and help save or divert to different products that will help them in the long term. In addition to other smart services, such as: Round up program - where clients have their transactions with fractions rounded up to the next round number and transfer the remaining to a saving account in order to grow that over time.

How can institutions gain and keep a competitive edge in the era of real-time payments?

Value-added services are something that will give you a competitive edge in today’s era of payments. Everyone wants fast and everyone wants secure, this means that it has now become the standard and no longer a value-added service.

However, providing certain offers, deals, options, reporting, tools, analytics and partnerships, this allows us to be able to

regions (international banks), using various payment methods provided by various providers. However, this may not be directly related to economic growth, as in order to such, we need to look into other aspects that are more important, such as establishing partnerships with international companies, supporting government institutions with mega and giga-projects, such as: Expo 2030 (which will be hosted in KSA). This will allow us to accept and make payments to vendors locally and internationally and enhance payroll offerings for labourers, in addition to creating wallet solution for retail clients and increase number of transactions overall.

In short, the focus should not be on speed and agility, more than it should be on enhancing surrounding offerings, easing the business availability and creating new projects which will directly increase the coverage of payments on a larger scale. mea-finance.com mea-finance.com

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Powered by Payments Sriranga Sampathkumar, VP and General Manager – Middle East and Africa, Infosys provides a compelling account of the transformative power of the modernisation of payments in the region, and the role that Infosys Finacle in playing in this

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here does our region rank in payments modernisation when compared with the rest of the world?

The GCC holds a prominent position in payments modernisation in many aspects.

The Middle East region is positioned as one of the fastest-growing real-time payments markets, with transactions expected to surge from $675 million in 2022 to $2.6 billion by 2027, showcasing an impressive CAGR of 30.6%.

The GCC’s success is propelled by a young, tech-savvy consumer base, with 70% of millennials and Gen Z favouring digital payments over traditional methods. Instant payment frameworks like Saudi Arabia’s “Sarie” and UAE’s Instant Payment Platform (IPP) drive this adoption. The vibrant fintech ecosystem plays a pivotal role in advancing instant payments, fostering innovation through API-driven developments.

However, the region faces challenges, i n c l u d i n g c o n c e nt ra te d m a r kets hindering innovation and cash reliance in segments like migrant workers.

Addressing competition and ensuring financial inclusion will be crucial for the

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Sriranga Sampathkumar, VP and General Manager – Middle East and Africa, Infosys

GCC to solidify its global leadership in the evolving payments landscape.

How do you see Gen AI shaping t h e p a y m e nt i n d u st r y a n d i n f l u e n c i n g t h e p a y m e nt s ecosystem in the region?

Gen AI is poised to revolutionise the payments industry, weaving its transformative threads into the very fabric of the payments ecosystem.

Banking and Finance news in the MEA market

Its potential to personalise, streamline and secure transactions promises a future of frictionless and intelligent financial interactions. Gen AI›s impact spans various dimensions: 1. Frictionless Payments: By analysing past behavior, Gen AI can ensure intuitive and personalised payment journeys, enabling automatic selection of preferred methods. Gen AI-powered chatbots for support can enhance customer satisfaction and reduce operational costs.

2. Enhanced Security: Gen AI can provide Adaptive Fraud Identification with real-time analysis of transaction data detecting anomalies, thwarting fraudulent activities proactively. It will also push the boundaries of biometric authentication beyond fingerprints fo r s e c u re a n d c o nve n i e n t payment verification.

3. Operations Streamlining: Gen AI can elevate Automated Reconciliation and Insightful Re por ting ac ross disparate systems with unprecedented speed and accuracy. The dynamic approach of Gen AI will also enable a more efficient and personalised payments risk management framework that works in real time.

4. New Product Frontiers: Gen AI can craft personalised financial products and services, providing personalised loan offers or investment recommendations based on individual payments transaction history. The future promises a revolutionised innovation landscape, marked by personalisation, security and efficiency.

What work is Infosys Finacle doing in this space?

Infosys Finacle offers an AI Platform that simplifies the process of integrating AI into businesses, making it easier to develop, initiate and apply contemporary AI use cases. The Finacle AI platform brings forth a unique yet powerful combinatorial approach that harnesses the power of emergent generative AI technologies, offering nuanced propositions across a host of use-cases and business applications, creating contextual value.

This platform is designed to be flexible and scalable, allowing data scientists with varying skill levels to use it, whether on a cloud-based or on-site infrastructure.

Built on open-source technologies, the Finacle AI platform continually evolves and improves with input from a large user community. The platform provides prebuilt AI models for tasks like classification, regression, clustering and forecasting.

Finacle AI platform aims to bridge the gap between development and business decisions, ensuring transparency and explainability throughout the entire ML lifecycle. Banks can tailor AI solutions with different models and features to find the most impactful outcomes.

How should banks go about building a robust payments ecosystem that not only meets the current demands but also is future-proof?

As the payments landscape continues to evolve, banks need to stay relevant with new payment rails and fend of competition from emerging players.

However, most banks are not ready, or equipped, to change. Many still operate disparate payment systems, siloed products and inefficient manual processes. This unpreparedness hampers growth in open payments and ecosystem innovation, posing security risks and compromising customer experience. To thrive, banks must swiftly address these challenges and adopt agile, integrated solutions for the evolving payments landscape.

To excel in the digital economy, banks must promptly overhaul their payment technology foundations. This necessitates an enterprise approach guided by five essential virtues: Open Platform: Bringing together a host of APIs to foster collaboration, facilitate participation in open p a y m e nt s e c o syste m s , a n d drive innovation.

Scalable Platform: Empowering banks for prepare for burgeoning digital payments

components like Lego blocks, to build the infra necessary for their business needs, often reducing the time-to-market for launch of new products, lowering their total cost of ownership (TCO), and overall enhancing system resilience.

Banks can start by building solid foundations with their architecture and embracing cloud-native, microservicesdriven constructs. A composable payments platform will also make a banks’ architecture amenable to technologies like artificial intelligence (AI), generative

TO EXCEL IN THE DIGITAL ECONOMY, BANKS MUST PROMPTLY OVERHAUL THEIR PAYMENT TECHNOLOGY FOUNDATIONS volumes and accelerating the development of complementary payment capabilities.

Unified Platform: Processing payments from various business divisions, agnostic to instruments, channels, hosting modules and payment networks.

Real-time Platform: Offering c o m p re h e n s i ve re a l -t i m e processing and out-of-the-box connectivity to leading real-time rails for agile adoption.

Cloud-native Platform: Supporting limitless scaling, providing robust data processing and delivering realtime insights-driven capabilities for customer-centric innovations.

Swift adoption of these virtues is crucial for banks to remain relevant and prosper in the evolving digital landscape.

To build a payments ecosystem for today’s evolving landscape, banks need to start from the ground up by recomposing payments, i.e., moving individual blocks in their payments infra to recompose the elements and derive value. Such a composable platform gives banks the needed flexibility to mix and match

AI (Gen AI) and machine learning, powering enhancements in customer engagement, operational efficiency and fraud and risk management.

With the availability of BUNA payments in the region, what are the tangible impacts of crossborder payments and trade and economic integration within the region?

Buna’s introduction to the GCC financial scene signals a pivotal shift in crossb o rd e r p a y m e n t s , t ra n s c e n d i n g traditional models. The platform streamlines multi-currency transactions, offering instant settlements that redefine how businesses and individuals transfer money globally. By employing a direct settlement system, Buna eliminates the need for multiple correspondent banks, ensuring faster and cost-effective transactions. The platform’s real-time processing capabilities and transparency enhance trust and reduce fraud risks.

Buna facilitates direct trading in Arab currencies, saving on conversion fees and easing access to foreign currencies.

Its transformative impact is evident in cost savings, enhanced speed, inclusivity mea-finance.com mea-finance.com

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DATA SECURITY PAYMENTS

for SMEs and a thriving ecosystem. The collaboration with UPI further promises substantial benefits, reflecting Buna›s role as an architect of a more connected and prosperous GCC. The platform›s journey has just commenced, promising a significant impact on the Arab world’s economic landscape.

As the world moves to real-time payments (RTPs), from a GCC perspective, how do you see banks leveraging RTP to drive value across the board?

For banks globally, their revenues from payments, despite regional headwinds, have remained a growth factor. Now, given the ease and convenience of RTPs, its adoption is accelerating worldwide.

Estimates suggest in the next five years, RTPs in developing economies that are heavily dependent on cash will expand the share of RTPs to approximately half of overall payment transactions.

The GCC is not left behind and is making significant headway in adopting RTPs. The UAE leads the way with significant proportion of retail payments processed through the country’s Instant Payments Platform (IPP) launched in Q4 2022.

Some potential ways that banks in the GCC can leverage models of RTPs to drive value across the board in different areas:

Reta i l c o n s u m e rs ex p e ct immediate settlements, especially with e-commerce. RTPs enable instant order fulfillment and improve customer satisfaction. In subscription models, consumers’ recurring payments can be instantly processed, minimising churn and improving revenue predictability.

As for micro-donations and crowdfunding, donors can support causes instantly, making the process more impactful and transparent.

For its business customers B2B, banks can help them have improved supplier relationships.

Imagine a manufacturer instantly releasing payment to a supplier

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upon delivery confirmation. This can boost trust, foster timely deliveries and optimise inventory management for the business.

RTPs can reduce clearance times and transaction costs compared to traditional correspondent banking networks, streamlining global trade. Businesses can also further leverage real-time data to offer personalised pricing adjustments or enable instant access to content

robust regulatory frameworks, it can ensure responsible and secure participation for all.

Transformative innovation: While real-time transactions offer undeniable convenience, true innovation lies in harnessing technology to address deeper challenges. BUNA can catalyse cross-border commerce, bolstering re g i o n a l c o m p et i t i ve n e s s .

A I - p owe re d f ra u d d ete ct i o n

PAYMENTS ARE NOT SIMPLY METRICS OF SPEED; THEY ARE THE ARTERIES OF ECONOMIC ACTIVITY and services on payment. With instant refunds and chargebacks, customer disputes are quickly and seamlessly resolved, building trust and loyalty.

In the gig economy and freelance payments, banks can enable payments to independent contractors in real-time after completing tasks, enhancing engagement and attracting talent.

As the payments landscape continues to evolve globally, what is your strategic vision for the future of payments in the GCC region?

The burgeoning payments landscape is an opportunity for the GCC. My vision for the region’s payments future rests on: I n c l u s i ve a c c es s : Re a l -t i m e A I - p o w e re d p a y m e n t s c a n empower the unbanked and u n d e r b a n ke d by fa c i l i ta t i n g microfinance, micro-insurance and digital wallets. Imagine Hajj pilgrims accessing personalised travel insurance seamlessly or Yemeni farmers receiving agricultural subsidies directly through their mobile phones. With

Banking and Finance news in the MEA market

can shield both consumers and businesses, fostering trust and confidence in the digital ecosystem. Open banking has the potential to unlock value from fintech, tailoring financial solutions to the unique needs of the GCC›s diverse population.

Will more agility and speedier payments in themselves add to economic growth in the region?

There will be Impactful outcomes.

Payments are not simply metrics of speed; they are the arteries of economic activity. By making them smarter and more inclusive, we can unlock real and sustainable economic growth. For example, streamlining e-commerce transactions can empower SMEs and entrepreneurs, while targeted digital subsidies delivered through real-time payments can directly enhance social welfare programs. The possibilities are vast, but the overarching goal remains the same: building a more equitable and prosperous future for the GCC. So, while agility and speedier payments have a role to play, they are instruments to accelerate economic growth.

Points on Payments With a series of clear points, Gurumurthy Palani, Head of Global Transaction Banking at Gulf International Bank, highlights the advancement and benefits of payments systems in our region

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here does our region rank in payments modernisation when compared with the rest of the world?

The GCC is recognised for adopting cutting-edge technologies in the financial sector. The implementation of real-time payment systems and advancements in digital infrastructure contribute to a competitive standing, although continuous efforts are needed to align with evolving global standards. Countries across the region have made proactive moves in the modernisation of payments including: S audi Arabia – The Saudi Arabian Monetary Authority (SAMA) launched SARIE (Saudi Arabian Riyal Instant Exchange), allowing individuals and businesses to make real-time payments around the clock.

The UAE – The Central Bank has been exploring the possibility of introducing a CBDC. CBDCs are considered a significant step in modernising payment systems.

Bahrain – Have been exploring and implementing open banking initiatives to enhance competition, innovation and customer-centric services, including in payments.

Beyond the convenience and helpfulness of settlement speed, what other notable benefits of the payment’srevolutionhavetherebeen?

E nhanced Security: Advanced

Gurumurthy Palani, Head of Global Transaction Banking, Gulf International Bank

encryption and biometric authentication technologies have bolstered the security of transactions.

Financial Inclusion: Digital payments h a ve b r i d g e d g a ps , p rov i d i n g financial services to previously underserved populations.

Cost Efficiency: Automated processes and reduced reliance on physical infrastructure lead to cost savings.

Innovation and Agility: The ecosystem encourages innovation, fostering the development of new financial products and services.

What important roles will AI come to play in the payments arena?

raud Detection: AI algorithms analyse F patterns to identify and prevent fraudulent transactions in real-time.

Personalisation: AI-driven analytics offer personalised customer experiences and targeted product offerings.

Automation: Chatbots and virtual

assistants powered by AI streamline customer support and routine tasks.

Predictive Analytics: AI models provide insights into payment trends, aiding strategic decision-making.

How can institutions gain and keep a competitive edge in the era of real-time payments?

Institutions can gain and maintain a competitive edge in the era of real-time payments through: Technological Innovation: Embracing emerging technologies, such as blockchain and AI, to enhance services and improve efficiency.

Customer-Centric Solutions: Prioritising user experience and offering tailored solutions to meet customer needs.

Collaboration: Forging partnerships with Fintechs and other stakeholders to leverage complementary strengths and foster innovation.

Regulatory Compliance: Staying abreast of regulatory changes and ensuring compliance with evolving standards.

Will more agility and speedier payments in themselves add to economic growth in the region?

Yes, by: Facilitating Trade: Faster settlement times promote cross-border trade and reduce transactional friction.

Encouraging Business Innovation: Rapid payment processes enable businesses to innovate and respond swiftly to market demands.

B oosting Consumer Confidence: Efficient payments systems enhance consumer confidence and encourage spending.

Attracting Investment: A robust payment ecosystem attracts foreign investment, supporting economic development.

The region’s payments modernisation, coupled with the benefits and integration of AI, position it as a dynamic player in the global financial landscape. Continued efforts in innovation, collaboration and regulatory compliance will be crucial for sustained success. mea-finance.com mea-finance.com

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OPINION PIECE

Better Than Money David Chaum inventor of the first electronic cash, eCash, and often hailed as the godfather of cryptocurrency, joined Oscar Wendel for an interview at COP28 to share his journey and inspiration for his new breakthrough invention ‘Better than Money’ (BTM), revealing a breakthrough replacement for the payments industry

B

T M i s a n ew t ra n s a ct i o n platform that removes cost and friction in global payments and remittances and critically helps evade the risks and depreciations of fiat currencies by instead using any form of asset-based value for instant transactions.

The platform interfaces with portfolios holding essentially any type of tokenised asset; the cryptography is quantumsafe and protects against forgery of the underlying digital instruments while protecting privacy. It combines security with transparency, mitigates systemic risk of a liquidity crisis and improves the market efficiency of assets.

The current money system contributes to income inequality in that it imposes high transaction costs, particularly affecting less affluent individuals. Holding money in its traditional form leads to a loss in value due to inflation and high costs for global transactions.

“I had this epiphany, forty years after inventing electronic money, I realised how important it is for the poor to have good money. You can trace a lot of strife, division and struggle to income inequality.

It is not a healthy thing for the world. Not only for the global poor, but actually for everybody, because a rising tide will lift all boats,” David said.

David elaborated on the inefficiencies of traditional monetary systems, where individuals hold assets in money without accruing interest. BTM addresses this by allowing users to retain all the value they hold invested where they choose, providing a hedge against market fluctuations and accruing value. Such an innovative approach benefits individuals and SMEs, empowering them to manage their assets even more effectively.

“When I was a graduate student at Berkeley, I realised how critically important David Chaum and Oscar Wendel

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Banking and Finance news in the MEA market

cryptography was for the survival of humanity and democracy. It’s the only way for people to protect themselves in the information age. I realised that in 1982. I organised a conference, and the paper I presented there was how to use blind signatures to make a digital bearer instrument. Blockchain technology can be traced back to that. If you go back and look at my dissertation at Berkeley, which came out the same year, it has a full specification for a blockchain in it that is executable and has all the elements of blockchain except for proof of work,” said David. eC ash, D avid’s brainchild, was developed by his company Digicash in the late 1990s. It faced challenges during the dotcom collapse due to the unpreparedness of platforms to handle the intricate cryptography required on personal computers of that era. However, the core concept of eCash, representing a form of digital currency, persisted. It has now resurfaced in a more advanced form as eCash 2.0, which was recently implemented and proven out by IBM for the Bank for International Settlement (BIS) and the Swiss National Bank Speaking about the fundamental differences between eCash and its upgraded version, David highlighted a key innovation—a public ready-to-spend list of all valid serial numbers. This list, unlike the ‘spent coin list’ of the original eCash, is not linked to individuals but undergoes encryption through a mix network, making sure it’s un-linkable to the withdrawal before being published.

This advance ensures the prevention of double spending without the need to maintain a list of previously spent serial numbers, allows for auditability of all outstanding coins, and thwarts c o u nte r fe i te rs eve n w i t h i n f i n i te computing power.

D a v i d a rg u es t h a t t h e c u r re nt payment industry, representing a $2 trillion annual tax on global transactions, disproportionately impacts the poor. By enabling individuals to hold and invest their assets directly, BTM could contribute to reducing this regressive burden.

WHEN I WAS A GRADUATE STUDENT AT BERKELEY, I REALISED HOW CRITICALLY IMPORTANT CRYPTOGRAPHY WAS FOR THE SURVIVAL OF HUMANITY AND DEMOCRACY “Money is not the answer to anything.

It is a misdirection, and we have to get over it because it is the problem. It is not something that we can improve. If you hold money, you are going to stay poor.

You are paying around 7% for remittances globally. It is unconscionable. Even the World Bank was against it and forced companies to go to 5%. They all agreed but now they’re back up to 7%.”

David continued: “BTM is, simply put, a system that interfaces portfolios of all types of assets and settles the transactions by value coming out of my portfolio in proportion to my holdings.

No one can see what the counterparty has in their portfolio; and neither the government, nor anyone else, can see the transaction. That is the basic idea of the direct asset portfolio and asset-portfolio

MONEY IS NOT THE ANSWER TO ANYTHING value transfer. You do not want to hold money; you want to hold assets that stay invested all the time and don’t depreciate in value due to inflation,” David explained.

The unveiling of eCash 2.0 took place earlier this year around the Point Zero Forum hosted by Elevandi and the Bank of International Settlements in July. David expressed his excitement about the demonstration and the transformative potential of the upgraded system.

The enhanced security features and

public ready-to-spend-list make eCash 2.0 a robust contender in the digital currency arena.

Addressing the participants of the Elevandi Insights Forum roundtable on CBDCs in Singapore, Chaum made his case for privacy. “The contest, or cooperation, between public-sectorissued money versus non-publicsector-issued money may potentially be completely changed by one getting the ‘unfair’ advantage of offering privacy, and that is the elephant in the room.”

At the Point Zero forum in Zurich in July, David presented eCash 2.0, a concept and pilot for a payment system built by the Bank of International Settlements (BIS), Swiss National Bank (SNB), and IBM. David explained: “What that system has, which other systems do not, is real user-controlled privacy. If the private sector provides privacy and the public sector does not, I think it will be game over in the [digital currency] competition. This is the secret weapon, and it is available now! That’s how to take the moral high ground in this whole contest.”

David elaborated: “There are a lot of very angry people concerned with the privacy issue [around CBDC] and I do not think they are going to go away.

I would, moreover, like to suggest that maybe money is not the ultimate thing for consummating transactions between counterparties. What if two parties could each just exchange value between their asset portfolios directly, and with privacy?

I was shocked when I realised that this can be built with a very similar kind of technology [to eCash 2.0], which has already been demonstrated as possible in the very near term.” mea-finance.com

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LEADERS IN BANKING TECHNOLOGY - KUWAIT

A New Era of Banking in Kuwait Banking technology infrastructures in Kuwait are undergoing full redesigns and financial institutions are making fundamental adjustments to their core banking and payments systems. In October 2023, MEA Finance and Swift brought together leaders in banking and financial technology for a day of debate and conversation on the evolution of the sector in this important GCC nation

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Banking and Finance news in the MEA market

K

uwait’s economic recovery is ongoing, supported by the relaxation of oil production quotas by OPEC+ in 2024 and the country’s non-oil sector – which is projected to grow by 5.2% supported by private consumption and loose fiscal policy.

The economic windfall is a boon for Kuwaiti banks, which recorded their strongest credit growth in 2023, a l o n g s i d e h e a l t hy d e p os i ts a n d strong profitability.

“Financial soundness indicators and the authorities’ stress tests suggest the banking system is stable and resilient

to severe shocks,” the International Monetary Fund said last October.

Banks in Kuwait are well-capitalised, non-performing loans remain sufficiently provisioned and profitability has recovered to recover pre-pandemic levels.

Digital transformation is the future of Kuwait’s banking sector. AI is revolutionising the country’s banking sector, bringing faster and more personalised banking services through chatbots.

Meanwhile, facilitating transactions sits at the centre of the customer relationship and bank profitability, according to EY, accounting for as much as 30% of some banks’ income.

For banks, the dynamic shift in payments is both a threat and an opportunity. Kuwaiti banks are setting themselves apart by investing in compelling new value propositions that focus on innovative payment methods to meet customers’ evolving needs and expectations.

On the 23rd of October 2023, MEA Finance, in partnership with SWIFT, hosted The Leaders in Banking Technology and Finance in Kuwait Summit. The event attracted senior representatives from across the banking, finance and technology sectors who shared insights on the trends that are shaping the future of the financial services landscape in the Gulf state.

Kuwait stands at the dawn of a new banking era. While the pace of digitalisation in Kuwait’s banking sector has been more modest than that of other regional centres, such as Riyadh and Abu Dhabi, the country has taken significant strides towards licensing new digital banks and establishing a national payments system.

The push to make end-to-end money movement more instant, secure and

Kuwaiti banks have made headway in expanding their services and are exploring how the new innovative technologies can better support business models while partnering with other financial institutions to enhance the cross-border payment experience and cut costs for end customers.

Onur Ozan, Head of Middle East, North Africa and Turkey at SWIFT, said in his welcome remarks, said SWIFT has been

DIGITAL PAYMENTS ARE GROWING GLOBALLY AT A CAGR OF 16% WHILE IN THE MIDDLE EAST, NONCASH TRANSACTIONS ARE GROWING AT A CAGR OF 11% – Esam Alkheshnam

transparent across borders is driving the payments industry to continuously look to advance customer experience.

Financial institutions are leveraging partnerships, innovative technologies, multilateral approaches and multi-rail interoperability to make payments f a s t e r, m o r e t r a n s p a r e n t a n d less costly.

facilitating the movement of money at a global scale since its inception in 1973.

He highlighted that the global payments space is unrecognisable today and that “if you check the emerging market trends, the changes have dramatically increased in recent years.”

From an innovation perspective, Ozan said the payments industry has evolved over the years and both customers and regulators now demand modernised payment systems.

He further underscored that SWIFT GPI has become a norm in the industry when it comes to cross-border payments offering speed, traceability and transparency.

Today more than 85 countries on six continents support real-time payments, allowing for immediate fund availability to beneficiaries and can be used on a 24/7/365 basis.

SWIFT’s Ozan said the Gulf region is following suit with FAWRI+ in Bahrain, SARIE in Saudi Arabia, Aani in the UAE and Kuwait, Qatar and Oman expected to come up with real-time payment schemes. mea-finance.com

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Growth of digital payments in Kuwait The emergence of new technologies and evolving customer needs are driving major innovations in the payments industry while offering financial institutions a window to be more innovative and efficient in delivering services.

Panel 1 - Payments in Kuwait Moderated by SWIFT’s Onur Ozan, the panel entitled Payments in Kuwait – The

Development of Payments and Role of Banking Technology in Kuwait, discussed Kuwait’s payments industry, exploring the development of the payments sector and the adoption of banking technology in the country.

The Central Bank of Kuwait (CBK) is developing the national real-time payment scheme, the Kuwait National Payments System (KNPS). KNPS includes a package of projects that are expected to contribute significantly to

THE REGULATORS ARE PROVIDING A ROADMAP FOR DIGITAL PAYMENTS GROWTH IN KUWAIT. THEY ARE FOSTERING GROWTH BY ENACTING RULES AND REGULATIONS THAT ARE AIMED AT ACCELERATING INDUSTRY GROWTH WHILE PAVING THE WAY FOR SEAMLESS AND REAL-TIME PAYMENTS – Bushra Al Wazzan

the development of payment system services in the Gulf state.

The discussion included Bushra Al Wazzan, Group Chief Internal Auditor at Boubyan Bank; Esam Alkheshnam, Chief Executive Officer of KNET and Mohammad Al Kharafi, Chief Operating Officer of National Bank of Kuwait (NBK).

Asked how KNET is adapting to the changes in Kuwait’s payments landscape, Alkheshnam said the company has made significant strides in digitalising payments as it is at the core of Kuwait’s payments industry.

He highlighted that the KNET plans to accelerate the growth of Kuwait’s payments landscape by investing in the latest technology innovations that are fueling the adoption of digital payments.

“Digital payments are growing globally at a CAGR of 16% while in the Middle East, noncash transactions are growing at a CAGR OF 11%,” said Alkheshnam.

“E-commerce transaction volumes in Kuwait are witnessing a rapid growth, which is projected to be between 22 and 5%,” he explained, adding that if anything, mea-finance.com

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the growth of e-commerce in the Gulf state points to an exponential growth in digital payments.

The growth of the digital payments sector in Kuwait and the entire GCC can be attributed to the sustained cash-tononcash conversion, the ongoing growth of e-commerce and the increasing integration of payments into retail and corporate customer journeys.

It is also being fuelled by regulatory support that is driving both retail and commercial banks to leverage these adoption rates to advance their digital transformation strategies.

Al Kharafi said regulatory bodies are playing a significant role in driving innovation in the payments sector.

“We are very fortunate to have a proinnovation regulator in Kuwait. We have seen them lead multiple countrywide projects such as the regulatory sandbox, the Kuwait Electronic Cheque Clearing System, the modernisation of Real Time Gross Settlement System (RTGS) and the remaining models of the KNPS,” he said, adding that these are industry developments that are set to deliver real value for customers.

Ozan said, that on top of fostering the innovation and modernisation of payments as well as cheque clearing, the regulator’s core function is also to help protect the industry and its customers.

Boubyan Bank’s Al Wazzan added that financial regulators in Kuwait are leading

the market, saying there is a collaboration between regulators in the country – CBK, the Capital Markets Authority and the different ministries – which share regulations, guidelines and frameworks.

Meanwhile, Kuwait ’s payments industry is projected to be valued at a projected $123.5 billion in 2023, growing at a CAGR of more than 12% during 2023/27, according to GlobalData.

“The regulators are providing a roadmap for digital payment growth in Kuwait. They are fostering growth by enacting rules and regulations that are aimed at accelerating industry growth while paving the way for seamless and real-time payments,” added Al Wazzan.

Post-pandemic growth is spurring the expansion of the digital payments sector in the GCC, having shown resilience both to COVID-19 and some major macroeconomic shocks that are affecting other regions such as high inflation.

Multiple factors will drive the growth of payments revenue in Kuwait and the GCC at large. The astronomical growth is evident not only in the adoption of digital payments but of consumers’ expressed preferences.

GCC countries are exploring the prospect of developing further domestic payments infrastructure, along with cross-border links to enable faster payments between consumers and businesses across the region.

In Conversation Followng the panel discussion, Abdulla Al-Qattan, Executive M a n a g e r of t h e Operations Division - Retail & Payments at Al Ahli Bank Kuwait and Alaa AlRousan, Senior Account Director at SWIFT hosted the morning I n C o nve rs a t i o n With session that explored the

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evolution of Kuwait’s retail payments landscape.

Al-Qattan identified four trends that are shaping the future of the payments landscape in Kuwait ranging from digital experience, instant and seamless transactions, fees and commissions and competition between banks.

“During and post-pandemic, we are witnessing an increase in the usage of mobile banking, online banking and other digital channels including Chatbots. So, instead of the customers going to the branches, queuing for their turn to receive service, we noticed that customers are migrating to digital channels,” Al-Qattan added.

Al Rousan wrapped up the discussion by underscoring that the payments industry is diverse and evolving, supporting the development of digital economies and functioning as a stable backbone for economies in the Gulf region.

Panel 2 - Cross-Border Payments W i t h g l o b a l p a y m e nts ex p e cte d to skyrocket from $190 trillion in 2023 to a staggering $290 trillion by 2030, growth in the industry is being driven by changing behaviours and heightened expectations.

The discussion panel - The Evolution of Cross-Border Payments – balancing enhancement, regulation and security focused on the evolution of cross-border payments and was moderated by Cem Soydemir, Senior Payments Expert | GTM - MENAT, Swift.

The panel included the participation of Tuncay Coruh, Product Development Director at Fineksus; Anand Sampath, Managing Director, Head - Payments, Collections & Client Implementation at First Abu Dhabi Bank (FAB); Pritesh Kotecha, SVP, MEASA from Smartstream; Finali Fernando, Managing Director, Regional Head of Products, Business Management and Risk at HSBC; Fahad Al Bader, General Manager – Operations at Kuwait International Bank (KIB) and Abdulaziz Al Duwailah, Head of Banking

Operations Group at Boubyan Bank.

C o n s u m e rs a re d e m a n d i n g a streamlined, transparent, 24x7 real-time experience, both domestically and across borders. Cross-border payments can be slow, expensive and risky.

F ro m a c u s to m e r ’s b e h a v i o r perspective, Sampath said that client behavior has changed significantly over the years while noting that the trend is being witnessed across both retail and corporate clients.

“We are moving away from accountbased transfers towards alias-based payments, transferring money to mobile numbers, national IDs, QR codes, request to pay and so forth,” he added.

Multilateral platforms to facilitate cross-border transactions, currency exchange and financial contracting such as the International Monetary Fund’s ‘X-C platform’ are expected to create a centralised and multi-currency foreign exchange trading environment.

Quoting Onur Ozan, Soydemir said the global cross-border payment landscape is at the center of many trends that could fundamentally change competitive dynamics ranging from pressure from emerging technologies, shifting

regulatory and sanctions frameworks and changing customer demands.

“The G20 has made enhancing crossborder payments a priority with the target to augment transaction speed, cost, access and transparency for wholesale payments, retail payments and remittances end-2027,” said Soydemir.

From a global banking perspective, Fernando said when it comes to the role of treasurer, the industry expects the bank to ensure that there is enough cash at the right place and at the right time in addition to ensuring that the risk, cost and liquidity, are also met.

“Today we are witnessing a trend whereby everything is instant, and 24/7 treasury is a common phenomenon. The trend is driving customers’ expectations to demand real-time round-the-clock services while driving companies to optimise their treasury functions to ensure faster decision-making,” Fernando added.

She highlighted that as treasury APIs are becoming a regular feature in the payments industry, HSBC has been piloting a 24/7 solution with a select group of corporate customers to fulfil their justin-time liquidity needs.

Asked about the growth of panregional cross-border payment schemes, Al Duwailah, said that the financial industry is witnessing the emergence of de-globalised payment solutions such as BUNA and AFAQ – cross-border payments schemes that are “revolutionising the way we can conduct business.”

However, the challenges emanating f ro m p a n - re g i o n a l c ro s s- b o rd e r payment systems range from regulatory complexity to cybersecurity risks to technology adaptation and exchange rate fluctuation.

Going forward, Al Duwailah expects further enhancement of pan-regional crossborder payment schemes in the GCC and the integration of the region’s payments ecosystem is expected to “automatically increase the trade in the six-nation bloc.”

Interconnectedness is an important part of the global financial landscape and holds the potential to increase financial connectivity for GCC countries as well as enhance payments, clearing and settlement services.

Kotecha said before the financial services sector considers the technology that is driving the growth of the payments sector, what is the cross-border business case? mea-finance.com

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“The cross-border payments industry is a sizable market and the two biggest corridors are the USA-Levant and GCCSouth Asia corridors. What does that mean in terms of revenues?” he posed a question.

Kotecha explained that inefficient players in the global cross-border payments landscape are probably taking between 1.4% and 1.6% in revenues while the efficient ones are getting as much as 4.5% - that is roundabout $2 to $6 trillion in revenues annually.

Citi mentioned in a report that interlinked payment systems, particularly instant payments, across two or more jurisdictions, may be the first step toward achieving 24/7 cross-border payments.

From an interoperability perspective, Alkheshnam said banking customers are clamouring for faster, seamless and enhanced user experience when it comes to cross-border.

“GCC countries are currently working on a prototype or proof of concept of how they can link their domestic payment infrastructures to deliver instant payments,” he added while noting that KNET is currently talking to several countries in Asia to adopt instant payments and augment crossborder remittances.

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Soydemir said the payments industry has grown significantly over the years, it has rapidly embraced new technologies while opening new avenues to serve customers.

He said several financial institutions are experimenting with different technologies such as AI and blockchain and at SWIFT, “we have been doing the same.”

SWIFT is expecting the migration to ISO 20022 to be a game changer. Fineksus’ Coruh said the evolution from Telex to ISO 20022 standards shows that technology is advancing business and regulatory requirements while reducing the cost of doing business.

“ISO 20022 is important because it is richer, better defined and more granular than its predecessor SWIFT MT, and it improves the quality and consistency of data across messages and financial processes as well as the automation of its processing,” said Coruh.

The standardisation of cross-border payments is expected to help the global financial services sector to eliminate many of the factors causing friction and the shift to the richer file format of ISO 20022 will enhance cross-border payments for banks and their correspondents.

The use of AI reduces manual intervention in payment processing and enhances straight-through processing

Banking and Finance news in the MEA market

(STP) rates while also mitigating fraud. KIB’s Al Bader said to achieve full STP, financial institutions should provide streamlined processes while ensuring that customers’ data goes through validation.

Meanwhile, blockchain technology is one of the newest payment rails that is helping to streamline cross-border payment processes and support SMEs by speeding up the transaction process and increasing efficiency and transparency.

The technology leverages distributed ledger technology where transactions are recorded with a fixed cryptographic signature called a ‘hash.’ An integrated ecosystem such as ‘the greenfield approach’ is expected to simplify doing business and reduce risk.

In Conversation Faisal Alhijawi, Chief Strategy & Development Officer at BUNA and SWIFT’s Onur Ozan hosted the second In Conversation With session that explored the emergence of multilateral payment systems.

Alhijawi said BUNA was an initiative that was founded by Arab central banks in 2020. The task of setting up a common centralised payment system in the Arab world was given to the Arab Monetary Fund (AMF).

“BUNA means structure in Arabic and this is because the nature of the crossborder and multi-currency payment system is its infrastructure, which is designed according to the principles for payments infrastructure, introduced by the Bank of International Settlement (BIS),” he said.

The payment system is operated by the Arab Regional Payments Clearing and Settlement Organisation (ARPCSO), which is owned by the AMF. It enables financial institutions and central banks in the Arab world and beyond to send and receive payments in local currencies as well as key international currencies.

BUNA’s private sector partners include JP Morgan, Standard Chartered, Visa, Mastercard and SWIFT. Case Study - Cybersecurity in banking Financial institutions are a prime target for cyberattacks due not only to the money they have and manage, but also the valuable data their systems house.

With cyber-attacks becoming more frequent and increasingly sophisticated, the Cybersecurity in Banking and Finance Case Study highlighted how financial institutions are leveraging advanced analytical solutions and tools to analyse and mitigate cyber threats.

The case study was presented by Adrien Sicoli, Chief Growth Officer at

DURING AND POST-PANDEMIC, WE ARE WITNESSING AN INCREASE IN THE USAGE OF MOBILE BANKING, ONLINE BANKING AND OTHER DIGITAL CHANNELS INCLUDING CHATBOTS. INSTEAD OF THE CUSTOMERS GOING TO THE BRANCHES, QUEUING FOR THEIR TURN TO RECEIVE SERVICE, WE NOTICED THAT CUSTOMERS ARE MIGRATING TO DIGITAL CHANNELS – Abdulla Al-Qattan

Dixio and Guy Aoun, Senior Business Development Executive at Dixio.

“Cyber resilience continues to be a top priority for the financial services industry and a key area of attention for financial authorities,” said the BIS (Bank for International Settlements).

This is not surprising given that cyber-attacks pose a significant threat to the stability of the financial system and the global economy. The financial services sector performs several key activities that support the global economy such as lending, payments and settlement services.

A cyber-attack can knock out the i n fo r m a t i o n a n d c o m m u n i c a t i o n

technologies that support these activities and can lead to the misuse and abuse of data that such technologies process or store.

EY 2023 Global Cybersecurit y Leadership Insights Study revealed that the known number of cyber-attacks has increased by approximately 75% over the past five years and ransomware costs are forecast to reach $265 billion by 2031.

Meanwhile, ransomware gangs are retooling to dodge increased scrutiny after an unrelenting year of fighting off cyber threats in 2022.

The wave of digitalisation in the banking sector across the GCC region is a prime example of how financial institutions are leveraging customer data, analytics and segmentation to improve their products and services as well as build a ‘bank of the future.’

Though digital transformation in the financial services sector is creating some unique opportunities, it is also creating some exceptional challenges for the industry including cyberattacks.

Aoun concurred with Sicoli that as the digital financial landscape is expanding, so are the threats that are around it.

He underscored that cybersecurity measures are not just a defensive strategy but a crucial part of a business strategy that requires adequate investment.

Citing SWIFT, Aoun said a record $3.4 billion was involved in institutional cyber fraud between 2016 and 2020 while mea-finance.com

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the US Federal Bureau of Investigation FBI reported that fraud losses in USDdominated payments in 2021 reached $6.9 billion compared to $1.4 billion in 2017.

“These eyewatering losses are [so] huge that both financial institutions and corporates need to work on to decrease,” he added. To counteract cybercrimes, SWIFT introduced the Customer Security Program (CSP), an initiative that ensures that financial institutions’ defences against cyberattacks are up-to-date and effective.

“CSP helps SWIFT users to improve basic security hygiene, promote financial transparency in the financial services sector and enable businesses to grow while dealing with a cybersecurity reality nowadays,” Aoun added.

On CSP assessments, Sicoli highlighted that there are two ways to conduct CSP assessments that are allowed by SWIFT – external or internal CSP assessment.

“If CSP assessment is conducted internally, SWIFT requires it done by an independent party not by the SWIFT users,” Sicoli said. However, he highlighted that many financial institutions usually conduct CSP assessments via an external

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WE ARE MOVING AWAY FROM ACCOUNTBASED TRANSFERS TOWARDS ALIAS-BASED PAYMENTS, TRANSFERRING MONEY TO MOBILE NUMBERS, NATIONAL IDS, QR CODES, REQUEST TO PAY AND SO FORTH – Anand Sampath

party because they require SWIFT expertise to analyse the architecture.

Aoun weighed in saying if a bank or corporate organisation does not conduct a CSP assessment they risk breaching the SWIFT contract, suffering reputational damage, raising partnership concerns or regulatory penalties.

Meanwhile, despite cyber risks being a growing threat to the operations and credit profiles of financial institutions, there have not been any major interruptions to the operations of banks in the Middle East.

“GCC banks laid the foundation for success over several years by investing in infrastructure and systems, including

Banking and Finance news in the MEA market

equipment and software, to minimise their exposure to cyber risk, while also benefiting from supportive regulatory frameworks and cyber risk requirements,” said S&P Global.

Banks spend nearly 11% of their budgets on defending themselves against cybercrime, according to Deloitte. For very large banks, which can mean spending more than a billion dollars a year.

E f fe c t i v e c y b e r s e c u r i t y r i s k management is critical to protect banking institutions from cyberattacks and minimise the risk of data breaches.

Panel 3 - Competitors, Vendors & Partners The proliferation of new technologies is reshaping the financial service sector and banks are facing a stark choice – lead the way by offering personalised, customer-focused products and services, or get left behind.

Moderated by Saad Ansari, Co-founder and CEO of Xpence, the Competitors, Vendors, and Partners – The line continues to blur, panel spotlighted the growth of family offices in the Middle East.

The discussion had the participation of Omar Amireh, CEO of Kuwait, Citi; Hamad Alfouzan, Chief Strategy Officer at Warba Bank; Talib Sanad, Head of AEG Bahrain, Allied Engineering Group (AEG); Abdullah Al-Mutawaa, Assistant General Manager - Head of Funds Transfer & Wealth Management, NBK and Mohammad Al Zayed, General Manager – Operations at Burgan Bank.

Ansari opened the panel by highlighting that the banking cards that fintechs issue

and the safeguarded money of their customers are all held with banks. “We do not see banks as competitors and our survival depends on them,” he said.

From a competition perspective, NBK’s Al-Mutawaa said the smart way to look at the relationship between banks and fintechs is from a strategic angle – meaning, the two should work together.

“The power of moving together, pointing in the same direction toward the favourable outcomes that we all share is the desired outcome, rather than competing against each other and wasting resources in the process,” added Al-Mutawaa.

He further highlighted that the vendor relationship starts with both banks and fintechs trying to test each other’s capabilities. “Once proven with a high level of commitment, quality of the deliveries and quality of the outputs, the relationship starts to evolve and elevated to a partnership level with more commitment and more quality of work,” said Al-Mutawaa.

The competition between incumbents and new entrants has given way for

direct collaboration across the fintech ecosystem. Potential opportunities span from product design and development by startups to distribution and infrastructure capabilities by banks.

From a strategic standpoint, Al Fouzan there are several things to consider including the regulatory landscape, operating environment and market segmentation. Ansari concurred with Al Fouzan that the regulator can set the tone of how the relationship between banks and vendors works.

To thrive in the new digital environment, banks must push ahead with their transition to an agile culture, removing barriers to cross-functional collaboration and creating semiautonomous teams that can deliver solutions quickly.

From an operation perspective, Al Zayed said incumbents view the relationship with vendors as an opportunity for innovation that offers a window to explore new products and services.

“When we talk about the relationship with the competitors then it’s a healthy environment to spin up the wheel, to speed up the processes and not to be

left behind and to catch up the market,” Al Zayed said adding that the rapport with competitors need to evolve to enhance services.

Financial technology is shaking up the financial services industry in big ways. The unbundling of financial services and embedded finance has created opportunities for big technology companies to enter the banking sector.

Sanad said it is difficult for incumbents to find a vendor/partner that provides all the latest innovative technologies such as big data, cloud computing and blockchain. Hence, he urged banking executives not to rely on one partner who if they fail, “the whole objective behind customer engagement fails.”

“It is better to deal with maybe more than one partner to achieve one business objective,” Sanad said. “It is at this stage that the lines are blurred because once a vendor commits to a project, they have to forget that they are dealing with a competitor but instead a client.”

Banks and fintech startups initially sought to compete, but these days, they are thinking differently about each other. mea-finance.com

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Citi’s Amireh said from the perspective of a global bank with a presence in more than 95 countries, the technology firms, fintechs and vendors will continue to grow, evolve and be part of the financial services ecosystem.

The positive impact of the partnership b et we e n b a n ks a n d ve n d o rs i s supporting new business models and better ways of doing business, with far-reaching implications for clients and markets.

“As vendors and fintechs are growing, there’s a massive opportunity for global banking institutions to collaborate with them and the collaboration usually starts with banks being clients and the relationship evolves into a partnership,” said Amireh.

The first thing that a bank needs to consider when partnering with a fintech is the use case that the institutions seek to address.

Market Study Presentations Before the start of the next and final panel of the summit, were two special presentations from businesses working at within key sectors of the realm of digitisation and banking technology.

Providing perspectives and describing their experiences, Balaji Muthu, Executive Director - MENA, Mindgate gave a presentation that highlighted the growth of banking as a service (BaaS). Muthu said BaaS is a great opportunity for incumbents to reach a greater number of customers at a lower cost by teaming up with vendors, and Serkan Arslan, Director

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of Sales And Business Development at Fineksus highlighted, in his presentation, that the public and private sectors have work to do to reach the targets outlined by the G20’s cross-border payments roadmap. He further underscored that the G20 aims to limit the global average cost of a cross-border payment for retail users at 1% of a given transaction by 2027 and to cap the average cost for remittances at 3% by 2030.

Panel 4 - How Can Technology Provide an Edge in Banking? – Honing your effectiveness Banks in Kuwait and the broader Arabian Gulf region should seize opportunities to use emerging technologies to reduce risk, streamline operations and build trust with customers by offering new safeguards from fraud.

The discussion around how technology can provide an edge in banking was moderated by Saad Ansari, Co-founder and CEO of Xpence.

The panel had the participation of Balaji Muthu, the Executive Director for MENA at Mindgate Solutions; Philip Koshy, General Manager at Al Mulla Exchange and Barrak Al Mattar, CIO at Burgan Bank.

Koshy said technology is playing a major role in the financial market while noting that customers’ demand for instant real-time remittances and seamless experience boils down to one key factor – how financial institutions are leveraging the latest technologies.

Banking and Finance news in the MEA market

Asked whether cloud adoption is giving banks a competitive edge, Al Mattar said the cloud gives financial institutions scalability and flexibility.

“Cloud solutions allow incumbents to augment the accessibility of their services and products from multiple locations and streamline their operations while creating an opportunity to deliver new and enhanced digital products,” added Al Mattar.

Banks that can effectively leverage these technologies will be best positioned to meet the demands of a digital-first consumer and stay ahead of the curve in an increasingly competitive marketplace.

Mindgate’s Muthu said the challenge that cloud solution providers are facing includes convincing banks about data security, cybersecurity, compliance and regulation. However, through effective planning and execution, these common cloud adoption concerns can be addressed.

Kuwait’s payments industry has grown significantly over the last few decades and it has rapidly embraced new technologies, in the process opening new avenues to serve customers.

Industry experts who attended the MEA Finance- SWIFT Kuwait Banking Technology Summit expect the trend to continue to dominate the financial services sector, driven by changing customer needs and regulatory initiatives such as regulatory sandboxes by the country’s central bank.

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GBM - EXECUTIVE BREAKFAST BRIEFING

Facing the Inevitable GBM and MEA Finance, hosting an Executive Breakfast Briefing, last November, were joined by senior bankers and key individuals working in, and guiding the regional financial services market, to discuss how the sector will adapt as the adoption of AI gathers pace

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D

igitalisation and innovative technologies are creating unprecedented disruption in the financial service sector and the rate of change is unprecedented.

Banks in the GCC region face crucial decisions as technology is shifting customer expectations and changing the regulatory landscape. Artificial intelligence (AI) is reshaping banking as banks shift from being reactive to proactively serving customer needs.

“AI is reshaping the financial services industry in the Middle East, bringing faster and more personalised banking services through chatbots,” EY said in a report

while noting that digital transformation is the future of the region’s banking sector.

MEA Finance in partnership with GBM hosted, in Dubai, an Executive Breakfast Briefing themed Autonomy of AI: Staying on the forefront of AI in financial services.

The briefing, which was attended by senior representatives from across the UAE’s financial services sector, spotlighted how banks need to find ways to adjust and adapt to the changing operating environment to stay at the forefront of technology-led transformation.

“With the power of AI and machine learning (ML), financial institutions can leverage predictive analytics, anomaly detection and shared learning models to enhance system stability, detect fraud and drive superior customer-centric experiences,” Ossama El Samadaoni, General Manager at GBM said in his welcome remarks.

“I would like you to think of AI as a circle and the circle has four corners,” El Samadaoni said, adding that new entrants to the financial services sector are coming in the age of embedded finance or open banking – offering new services and products that are different from what incumbents are offering While many banks have used predictive AI for over a decade, generative AI (GenAI) is expected to complement these traditional strategies while allowing banks to build upon existing success.

“Like it or not, embrace it or not, ChatGPT – which is a set in the bigger umbrella of GenAI has cracked previous technology records,” said Joy Paul, Regional Leader – Analytics, AI, Risk & ESG – GCC at GBM. The combined use of predictive and generative AI has the potential to produce large-scale transformations in the banking sector. As GenAI makes great inroads into many industries, the question for banks is not whether the advanced technology will profoundly impact their industry, but how.

The way businesses – banks included - are infusing AI to enhance IT offers

WITH THE POWER OF AI AND MACHINE LEARNING, FINANCIAL INSTITUTIONS CAN LEVERAGE PREDICTIVE ANALYTICS, ANOMALY DETECTION AND SHARED LEARNING MODELS TO ENHANCE SYSTEM STABILITY, DETECT FRAUD AND DRIVE SUPERIOR CUSTOMERCENTRIC EXPERIENCES – Ossama El Samadaoni

an opportunity to augment operations.

From this opportunity comes the high availability and responsiveness, agility, scalability and cost-effectiveness and recently, sustainability.

Post-COP28, there is huge interest in sustainability from different sectors including the financial services industry.

While citing US consultancy firm Gartner, he identified AIOps – the combination of the software solution and the culture practice – as the part where AI is infused with IT operations and embedded into one single set of a solution.

Technology firms are investing billions of dollars around their strategy for AIOps with many investing billions of dollars in AIOps. Technology has increasingly become a competitive advantage in the financial

services sector, with the most digitally advanced banks often performing the best.

With digital transformation initiatives underway for most of the GCC’s largest financial institutions, incumbents have proven that they will not be ceding any more of their market share to fintech and digital challengers anytime soon.

AI-bank of the future Over the decades, banks have continually adopted the latest technology innovations to redefine how customers interact with them.

McKinsey said banks introduced ATMs in the 1960s, electronic, card-based payments in the 1970s and 24/7 online banking in 2020 followed by mobilebased “banking on the go” in the 2010s.

While the banking sector has long been technology-dependent and dataintensive, new data-enabled AI technology can drive innovation further and faster than ever before.

From a regulatory perspective, Ken Coghill, Director, Innovation & Technology Risk Supervision at DFSA said that he doesn’t know how regulators are going to keep up with the growth in AI – which is expected to contribute up to $15.7 trillion to the global economy in 2030, according to PwC. “The question is, do we need to keep up with the growth in AI or is there a different obligation that falls to the banks?,” Coghill posed the question. He stressed that banks are the masters of innovation in mea-finance.com

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GBM - EXECUTIVE BREAKFAST BRIEFING

the financial services sector and “you’re deciding the most efficient way to deliver services and engage with clients. It’s not up to regulators.”

“If the banking sector is always waiting for regulators to catch up and understand the technology fully to issue every possible piece of guidance or regulation we can, then banks will never advance their business,” Coghill added.

AI can lead to higher automation and when deployed after controlling for risks, the innovative technology can improve upon human decision-making in terms of both speed and accuracy.

Viplav Rathore, the Managing Director and head of Products at Standard Chartered Bank said banks need the regulation around AI technology.

He said AI use cases include enhancing customer experience, advancing the resilience of banking platforms, helping with risk management processes and augmenting effectiveness.

“As long as AI is an enabler of enhanced customer experience, efficient service delivery, operational efficiency and promises advanced decision-making then I would say the regulators do not have to keep pace as much but need to be aware and stay engaged,” added Rathore.

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Furthermore, innovative technologies can help banks lower costs and boost profitability, maintain a competitive edge in a rapidly changing financial ecosystem and improve operational efficiency across front-to-back-office functions.

Conversations are currently quite transactional but will evolve to be a more partnership-like conversation over the next decade. The role of banks could change to enable customers to grow and focus more on what they need to do, and will be more embedded within customers’ business rather than them being embedded with banks.

AI can also help uncover new and previously unrealised opportunities – across more than 25 use cases – based

on an improved ability to process and generate insights from vast troves of data.

From an implementation perspective, Santosh Vaidhya, SVP, Head of Payments and Digital Services at Mashreq highlighted that the challenges that the industry is facing when it comes to adopting AI require banks to bring the entire ecosystem – front-to-back – to understand what AI is, what the management seeks to achieve and how it will benefit the bank.

“So that’s where I feel regulators and the entire banking ecosystem can introduce some kind of education to create awareness around AI for employees with less understanding of the advancement in technology,” added Vaidhya.

IF THE BANKING SECTOR IS ALWAYS WAITING FOR REGULATORS TO CATCH UP AND UNDERSTAND THE TECHNOLOGY FULLY TO ISSUE EVERY POSSIBLE PIECE OF GUIDANCE OR REGULATION, THEN BANKS WILL NEVER ADVANCE THEIR BUSINESSES – Ken Coghill

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More broadly, innovative technologies can dramatically improve banks’ ability to achieve four key outcomes: higher profits, at-scale personalisation, distinctive omnichannel experiences and rapid innovation cycles.

“Financial institutions are making targeted investments in areas such as the cloud, big data platforms and data applications that use updated

Gyan Srivastava, the CDO, Head of Data & Analytics at Mashreq said any new service, product or innovation that a bank introduces into the market, is aimed at serving the customers. Furthermore, he highlighted that customer trust is very important in the financial sector.

“To gain customers’ trust we should be very open and transparent about the best and ethical ways to leverage data and

Emirates at First Abu Dhabi Bank (FAB) concurred with Rathore that at the end of the day, banks are looking for ways to maximise their revenue streams.

He explained that the main objective of the bank is to understand the customer and their banking requirements by analysing customer data using AI to enhance experience and advance product development.

architecture while eliminating up-front capital investment needed specifically to develop, deploy and scale AI solutions,” said Deloitte.

The AI-first banks enjoy the speed and agility that today characterise digital-native companies. For banks in the GCC region, ensuring the adoption of AI technologies across the enterprise is no longer a choice, but a strategic imperative.

“The implementation of AI in the banking sector involves the aspects – one is the customer in the forefront, the second is the technology and third is regulator,” Pratikk Dalal, Chief Financial Officer at Al Maryah Community Bank said, adding that it is important that all these three are nicely blended.

To m e et c u sto m e rs’ evo l v i n g expectations and beat competitive threats in the AI-powered digital era, banks must offer propositions and experiences that are intelligent, personalised and blend banking capabilities with relevant products and services beyond banking.

how banks are generating ethical output using AI,” added Srivastava.

The financial service sector is in the middle of an AI-powered digital age, facilitated by low data storage and processing costs, increasing access and connectivity and rapid advances in AI technologies.

From a sales perspective, Mohammed Al Ali, the Managing Director & Head of GTB Corporate – Dubai & Northern

“Of all the digital tools now available, data analytics using provides the means to enhance the customer experience, identify opportunities for revenue growth and remain competitive in this increasingly volatile market,” Al Ali added.

Most banks in the Gulf region are coming to recognise the changes that advanced technologies can foster, and more importantly, they are embracing them.

AI is transforming the financial services

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AS LONG AS AI IS AN ENABLER OF ENHANCED CUSTOMER EXPERIENCE, EFFICIENT SERVICE DELIVERY, OPERATIONAL EFFICIENCY AND PROMISES ADVANCED DECISION-MAKING THEN I WOULD SAY THE REGULATORS DO NOT HAVE TO KEEP PACE AS MUCH BUT NEED TO BE AWARE AND STAY ENGAGED – Viplav Rathore

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industry, and industry analysts expect the widespread adoption to continue.

Harnessing the power of GenAI GenAI is revolutionary. The most immediate impact that innovative technology is expected to have on banks, much like digital transformation b efo re i t , i s f u r t h e r a d va n c i n g customer experience and personalised product offerings.

The innovative technology is making remarkable progress in a wide array of industries, banking included, as demonstrated by the rollout of AI Ops from IBM and the Watson Gen AI, and

their potential to benefit the banking sector, more so than other sectors, comes from its ability to understand so-called natural language.

“GenAI is a game-changer,the technology is going to bring in a lot of efficiency in the banking processes and we expect it to take the entire operational ecosystem to the next level,” said Abhishek Jajodia, Acting Head of GTB Digital Experience, Channel Onboarding & Channel Support at FAB. He stressed that GenAI will augment the transactional life of banking customers. “A banking customer will now get into the channel and automatically execute a transaction without assistance

GENAI IS A GAME-CHANGER, THE TECHNOLOGY IS GOING TO BRING IN A LOT OF EFFICIENCY IN THE BANKING PROCESSES AND WE EXPECT IT TO TAKE THE ENTIRE OPERATIONAL ECOSYSTEM TO THE NEXT LEVEL – Abhishek Jajodia

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Banking and Finance news in the MEA market

from a bank agent or without the need to visit the bank,” said Jajodia.

Banks are adopting GenAI, which promises earnings growth, improvements to d e c i s i o n - m a k i n g a n d b e t te r risk management.

Ashish Rewani, the Head of GTB Business Management at FAB said the global transaction banking (GTB) division is embracing the adoption of AI in multiple aspects. “Financial institutions need to be very cautious about their implementation of innovative technologies because involves dealing with customers’ sensitive information,” added Rewani.

From a GTB perspective, concurred with Rathore while highlighting the use of GenAI to supply chain solutions where a discount is offered to a supplier that is ESG-compliant.

He explained that there are ESG norms in the market, which help companies to assess a supplier’s sustainability credentials. However, Rathore said bankers are not the best people to access a supplier’s alignment with sustainable practices, but they are leveraging thirdparty engines, which are GenAI-enabled

and pull in all the data and analyse it to generate the desired information to help in decision-making.

A leading UAE based bank has recently harnessed the power of GenAI to advance the banking group’s operations and productivity across various business functions with the collaboration seeking to unlock new opportunities for innovation, efficiency and customer experience within the banking industry.

Sandeep Shrivastava, the Technical Manager – Digital Business Solutions at GBM said AIOps makes bank operations more efficient. “Now what

we are witnessing as we discuss with customers beyond banks, government and enterprises, is that it is impossible to operate and scale without AIOps because you are running beyond data centres,” added Shrivastava.

“There are many large language models (LLM) available in the market some with more than 175 billion parameters but what we have seen practically is that banks don’t need many LLMs to do practical things,” Shrivastava added while highlighting that banks can bring down the LLMs “to what you need and can meet your goals.”

THERE ARE MANY LARGE LANGUAGE MODELS (LLMS) AVAILABLE IN THE MARKET SOME WITH MORE THAN 175 BILLION PARAMETERS BUT WHAT WE HAVE SEEN PRACTICALLY IS THAT BANKS DON’T NEED MANY LLMS TO DO PRACTICAL THINGS – Sandeep Shrivastava

GenAI is expected to create ‘focused financial offerings’ for individuals within retail and private banking channels and for corporate banking tailored to their specific needs and interests is a differentiator that can drive new forms of competitive advantage.

From a banking perspective, Al Ali explained that GenAI and other innovative technologies will make banking easier for customers. However, he highlighted that in as much as banks can implement GenAI and other innovative technologies, there is a need to preser ve the human touch.

“Leveraging GenAI for data analytics and insights will play an important role in decision-making but overall, the supervision of this data analysis from a human perspective – bank employees – is equally important to address customers’ needs,” added Al Ali. British consultancy firm Pierre Audoin Consultants (PAC) said banks can leverage GenAI service in combination with conversational AI solutions to deliver new or augment existing chatbot or virtual assistant interfaces. mea-finance.com

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“The first question is what was the AI deployed to do and what objectives will it accomplish? Regulators do not have to engage your banking customers and regulations to govern how the industry engages clients are already there,” Coghill said while noting that overall, the objective is providing the customers with products and services that meet their requirements.

However, the launch of ChatGPT generated concerns over the potential risks that GenAI poses. The advanced technology promises significant benefits in the banking industry but there are also potential pitfalls that should be considered.

“The introduction of GPT-4 was a significant leap from GPT 3.5. GPT4’s significant parameter increase, more vital problem-solving ability, improved accuracy and more natural conversational flow represent substantial advancements over GPT-3.5,” said Sasi Nair, the Head of Technology Service Delivery at Commercial Bank of Dubai.

GenAI may not be a silver bullet, but in the next few years, we will be able to differentiate or separate the hype from

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the reality of what AI can do in a way that allows banks to embed GenAI in their operations and generate business leads from customer data.

Arun Mehta, CDAO, Head of Data Analytics & Artificial Intelligence at FAB said GenAI is here and it’s a reality whether we believe it or not.

“What is going to distinguish whether GenAI will be a hype or a reality, is the trust that we put in these innovative technologies just like we trust Google Maps and Amazon recommendations.

“Similarly, what will enhance trust in GenAI is going to be how we are going to avoid bias in these LLMs and how the banking industry is going to be making innovative changes explainable,” he added.

Earlier in 2023, several global financial institutions including Bank of America, Citigroup, Deutsche Bank, Wells Fargo and Goldman Sachs reportedly restricted their employees from using ChatGPT. The biggest of the concerns voiced by the banks is that these advanced and innovative technologies make it much easier – and harder to detect – for financial criminals to engage in

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money laundering, terrorism financing and fraud.

While GenAI is in its early days, several financial institutions are moving forward with applications, including answering customer questions about loans and financial topics through AI-powered chatbots and reducing mid-to-back-office operational expenses.

Rahul Otawat, VP of strategy, Analytics & Data Science – Wealth at Neobiz and Business Banking at Mashreq said that conversational AI has already taken the human side of the sales pitch, which interacts with the customer, at most global financial institutions.

To seize the GenAI opportunity, GCC banks should reimagine their future business models based on the new capabilities GenAI enables and then work backwards to prioritise near-term use cases.

Experts who attended the MEA FinanceGBM Executive Breakfast Briefing said the portfolio of AI investments should accelerate broader bank strategic objectives while capitalising on nearterm quick wins that offer clear value with minimal risk.

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