MEA Finance - July-August 2022 by meafinance

July-August 2022

Progress with Purpose Sunil Kaushal CEO of Standard Chartered Africa and Middle East (AME)

July-August 2022

Progress with Purpose Sunil Kaushal Regional CEO of Standard Chartered Bank, Africa and Middle East (AME)

6 Market Focus | 14 Cryptocurrency | 18 Roundtable Event | 36 Wealth & Investment |48 Trade Finance

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How does the year look for you now that we are inside Q3?

f you are a glass half-empty person, you may be fretting at current challenges and uncertainties - increasing inflation, crashing crypto currencies, shrinking productivity. If you are more inclined toward seeing the glass as half-full, you will be buoyed by swift advances in banking and finance technology, a growing market for wealth and investment in the region and projected expansion of the GCC economies for this year. To help you decide how you describe the volume of the contents of your glass, the July/August 2022 issue of MEA Finance looks at all of this for you. Starting at page 18 is coverage of our recent roundtable held in partnership with Volante Technologies at the Four Seasons Hotel, in the iconic Kingdom Tower, Riyadh. The event, with a panel of the Kingdom of Saudi Arabia’s leading individuals and businesses from their national payments scene, was started by Abdulaziz Abanmi, VP -Technology, Acting VP - Operations and Shared Services at Saudi Payments, highlighting that sustainability of innovation and talent will be the key concerns going forward. The cover story, pages 32 to 35 of this issue features Sunil Kaushal, the CEO of Standard Chartered for Africa and Middle East (AME). Among the points discussed in the article, Sunil provides an account of recent years at the bank, his thoughts for the future of Africa and the Middle East and the values the bank holds to, “we are well aware of our responsibilities and the part we play in creating a more sustainable world”. With contributors from FAB, HSBC, Jersey Finance and UBS, our look at Wealth and Investment from page 36 asks all of them about the growth in this market in the region and the changes that can be expected in it, “Many of our younger clients value the increasing integration of ESG aspects into investment decisions”, says Ali Janoudi, UBS. From page 52, in our regular coverage of the banking technology, some of the world’s leading names in technology, Backbase, Infosys and Microsoft talk with us about the Cloud, plus growth and competition in the region’s market, and on page 10 we also look at the digitisation of, and technology in the Islamic finance sector. We look at the plans for growing the digital assets market in the region, from page 14, while noting the recent sudden and steep drops in the values of crypto currencies and finally, our market focus for this issue is on Bahrain where though inflation is expected to increase, the economic outlook is improving with the local banking sector poised to benefit. Now that you have put down your glass, picked up and now reading this issue, we hope that you come away from experiencing this edition of MEA Finance with your thirst for regional banking and finance knowledge and news satisfactorily quenched.

mea-finance.com

CONTENTS

CONTENTS 32

COUNTRY FOCUS

Bahrain’s Balancing Act

ISLAMIC FINANCE TECHNOLOGY

Islamic Banking Tech: Readying For Growth

CRYPTOCURRENCY

The Wall Street of the crypto market

ROUNDTABLE: MODERNISATION OF PAYMENT LANDSCAPE

Payments at Pace

COVER STORY

Progress with Purpose

WEALTH & INVESTMENT

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

Banking and Finance news in the MEA market

36 40

Wealth of Opportunity

42 44 46

Increasing in Stature

A growing and evolving regional market

The GCC Perspective Distinguishing Features

TRADE FINANCE

Supply Chain Innovation Technology’s role in supply chain management and trade finance

BANKING TECHNOLOGY

The future of the region’s financial services sector will be written in the cloud

Five Strategies for Successful Cloud Adoption

Backing to Advance

LIFESTYLE

40 Years of Turbo Bentleys celebrated at Goodwood

18 48 36

54 56 58 mea-finance.com

MARKET FOCUS

Bahrain’s Balancing Act The current oil price outlook has created a conducive environment for Bahrain to proceed with ambitious reforms under favourable macroeconomic and financing conditions that can put debt on a firm downward path

ahrain’s economy is still in bailout territory although the authorities are optimistic that a rally in oil prices and an economic rebound from pandemicinduced recession will help replenish government coffers. Global benchmark Brent has mostly traded above the $100 mark since February, following Russia’s invasion of Ukraine. The current oil price outlook has also created an ideal environment for the Gulf

state to proceed with ambitious reforms under favourable macroeconomic and financing conditions and to put debt on a firm downward path. The International Monetary Fund (IMF) projected in April that the oil revenues in the Middle East and Central Asia this year will reach $818 billion, an increase of $320 billion from the Washington-based lender’s assessment last October. Bahrain has a relatively diversified economy, a beautifully regulated financial

Banking and Finance news in the MEA market

sector, a well-educated workforce and a low-cost environment. It also has some very useful friends. The Gulf state, which outlined plans to balance its budget by 2022, as part of a financial aid package from its oil-rich neighbours was forced to push back that target due to the unprecedented impact of the pandemic. The kingdom is also implementing several austerity measures that were introduced over the last two years including a doubling of value-added tax (VAT) to 10% to maintain the country’s access to the international debt markets. Bahrain’s banking system remains relatively resilient with regulations broadly in line with regional peers. Earlier this year, S&P Global said that the Gulf state’s banking sector is poised to benefit from expected interest rate hikes, assuming the sector adopts a pragmatic approach by not reflecting the rate increase systematically where it could cause borrowers to default.

Pinning hopes on oil The almighty Brent benchmark has mostly traded above $100 a barrel since February when Russia invaded Ukraine, pushing crude above the break-even level for most of the Middle East’s producers. Oil’s surge is raising the prospect of significant budget surpluses for even the weakest economies including Bahrain— which requires prices above $106 a barrel. Goldman Sachs projected earlier in June that it expects Brent crude to average $140 a barrel between July and September 2022. Bahrain said in April that it will resume making payments to the country’s reserve fund, doubling the amount it contributes at oil prices over $80 a barrel, in a bid to build up savings that were tapped to mitigate the fallout from the pandemic. The Gulf state will put $2 into the Future Generations Reserve Fund (FGRF) for each barrel of oil sold at over $80, $1 when oil is over $40 and pay $3 if it exceeds $120. “Growth is projected to accelerate to 3.4% in 2022, with non-oil GDP increasing by 4% driven by stronger manufacturing and the full reopening of the economy,” said the IMF. Bahrain projected total revenues of $6.5 billion (BHD 2.5 billion) in 2022 and the government is on track to reduce its annual budget expenditure to $9.5 billion (BHD 3.6 billion). The country has struggled to keep its finances in check in recent years. Although the Gulf state has accumulated a large pile of debt since the 2014-2015 oil price shock, its public debt dropped slightly to 129% of GDP last year from 130% in 2020, according to the IMF. Last October, the ministry of finance and national economy unveiled a strategic projects plan that would catalyse over $30 billion of investments and a regulatory reform package aimed at supporting $2.5 billion of foreign direct investment by 2023. The economic recovery plan is also aimed at bolstering domestic employment and attracting investments in strategic non-oil sectors including tourism, housing as well as transport and logistics and

INFLATION IS EXPECTED TO INCREASE TO 2.5% IN 2022, FUELED BY THE DOUBLING OF VAT TO 10% AND CONTINUED RECOVERY IN DOMESTIC DEMAND – The World Bank

energy. The projects include the building of five offshore cities, the country’s metro train and the expansion of Bapco’s oil refining capacity. Bahrain, which halted payments into its reserve fund in 2020 and drew down $450 million, plans to balance its budget by 2024. It secured a $10.2 billion financial lifeline from its rich Gulf neighbours, the UAE, Saudi Arabia and Kuwait in 2018 to help cope with high debt levels and budget deficits. “We estimate Bahrain received $8.2 billion over 2018-2021, with an additional $1.4 billion and $650 million to be disbursed in 2022 and 2023, respectively,” said S&P Global. The relationships between Bahrain and its GCC neighbors remain strong. The kingdom is likely to receive full disbursements under the GCC Support Package and there remains room for additional financial support beyond the program’s expiration in 2023.

WE ESTIMATE BAHRAIN RECEIVED $8.2 BILLION OVER 2018-2021, WITH AN ADDITIONAL $1.4 BILLION AND $650 MILLION TO BE DISBURSED IN 2022 AND 2023, RESPECTIVELY – S&P Global

Bahrain is still exploring options to refinance upcoming redemptions, which could include additional external or domestic market issuances or private placements. S&P Global said Bahrain faces external redemptions of about $2 billion (5% of GDP) annually from a combination of Eurobond and Sukuk issuances, including a $1.5 billion Eurobond maturing in July 2022 and a $500 million Eurobond maturing in August 2022. The Gulf state also has a $1.3 billion (BHD 500 million) government development bond due in July 2022. The favourable oil markets have improved Bahrain’s fiscal and external positions for now, while the implementation of budgetary consolidation measures has helped moderate the government’s accumulation of debt.

Structural reforms Bahrain has been implementing a series of reforms as the Gulf state seeks ways to bolster public finances and non-oil growth, balance its budget and stem government debt, including hiking VAT, offering permanent residence to some foreigners and privatising some government assets. The government doubled VAT to 10% in January, but the country is still under a one-year transition period that will end on December 31, 2022. Saudi Arabia tripled its VAT rate to 15% in 2020 while the UAE and Oman impose a 5% VAT under a common 2018 framework by the GCC. The passing of the VAT law in the country represents a positive shift to a more balanced fiscal consolidation plan. S&P Global expects the recent increase in tax to contribute receipts of about 3.3% mea-finance.com

of GDP over the medium term, up from about 1.6% in 2021. The countr y introduced a new permanent residency visa in February 2022 to attract talent and investment, part of a growing trend in the GCC region as states are offering more flexible and longer-duration visas. The Golden Residency Visa will be renewed indefinitely and gives the holder the right to work in Bahrain, unlimited entry and exit and residency for close family members. Bahrain is also pushing plans to sell stakes in government-related entities including Nogaholding, which owns the country’s oil and gas assets, as the government opens up once-closed industries to foreign investors. The Gulf state’s strategy mirrors initiatives in its neighbors Saudi Arabia and the UAE. Saudi Arabia divested a stake in Aramco in a public offering in 2019. Aramco followed the listing by selling lease-and-lease-back rights in its pipeline assets to investors raising billions of dollars just like Abu Dhabi National Oil Company (ADNOC).

Financial metrics Bahrain’s financial services sector is another dependable performer. The Central Bank of Bahrain (CBB) raised its key policy rate on its one-week deposit facility, by 75 basis points (bps) to 2.5% from 1.75% after the US Federal Reserve (Fed) raised its interest rate by 75 bps earlier in June—the most aggressive hike since 1994. CBB also hiked its overnight

GROWTH IS PROJECTED TO ACCELERATE TO 3.4% IN 2022, WITH NON-OIL GDP INCREASING BY 4% DRIVEN BY STRONGER MANUFACTURING AND THE FULL REOPENING OF THE ECONOMY – The International Monetary Fun

deposit rate and lending rates to 2.25% and 3.75% respectively, and its four-week deposit rate was raised to 3.25% S&P Global projected at least three back-to-back 50 bps hikes for the remainder of 2022 and four to five hikes in 2023 as inflationary pressures have soared to record highs with the US registering a fresh 40-year high of 8.6% in May. The increase in inflation will likely force the Fed to extend an aggressive series of interest-rate hikes which will push the CBB to take similar actions given that the Bahraini dinar is pegged to the dollar. “Inflation is expected to increase to 2.5% in 2022, fueled by the doubling of VAT to 10% and continued recovery in domestic demand,” said the World Bank. However, Bahrain’s central has introduced several initiatives over the past two years to ease financial conditions in the country including liquidity injections, loan payment deferral and relaxing macroprudential requirements on capital buffers and liquidity ratios. Banks in the region have been consolidating to improve economies

BAHRAIN’S BANKING SECTOR IS POISED TO BENEFIT FROM EXPECTED INTEREST RATE HIKES, ASSUMING THE SECTOR ADOPTS A PRAGMATIC APPROACH BY NOT REFLECTING THE RATE INCREASE SYSTEMATICALLY WHERE IT COULD CAUSE BORROWERS TO DEFAULT – S&P Global

of scale, reduce operating and funding costs as well as boost profitability and efficiency. Bahrain’s Bank ABC tripled its market share and balance sheet in Egypt last August after the lender completed the acquisition of a 99.5% stake in the local unit of Lebanon’s BLOM Bank for $425 million. Ahli United Bank’s (AUB) Bahraini unit agreed to acquire Citigroup’s consumer banking operations in the country in April and the transaction is expected to close by the second half of the year. The deal includes the Wall Street bank’s retail banking, credit card and unsecured lending businesses. Bahrain is pro-innovative and the outbreak of the pandemic in 2020 presented an opportunity for the country’s financial system to accelerate and strengthen digitalisation. “Continued support of fintech and digitalisation could provide a source of growth that needs to be balanced against possible risks,” said the IMF. The improvement in the Gulf state’s economy and corporate activity is expected to prevent further deterioration of banks’ asset-quality indicators. W h i l e B a h ra i n h a s a f r i e n d l y investment climate, the authorities perhaps need to be a little kinder with long-term reforms that will turbocharge the private sector rather than shortterm measures that will appease the Government’s creditors. The hosting of this year’s football World Cup by neighbouring Qatar is a boon for Bahrain’s tourism sector, which registered a 161% growth in 2021 revenues, due to the lack of affordable accommodation as 1.5 million fans are expected to descend upon the tiny Gulf state. mea-finance.com

ISLAMIC FINANCE TECHNOLOGY

ISLAMIC BANKING TECH:

Readying For Growth The financial services sector in core Islamic markets in the Middle East, Africa and South Asia - MEASA countries are abuzz with talk and activity on digital transformation strategies including open banking and payments

raditional core Islamic markets in the Middle East, Africa and South Asia (MEASA) are among the fastest-growing emerging markets digitally. Islamic banks are accelerating and strengthening the digitalisation of complex processes as well as end-to-end customer journeys in lockstep with their conventional peers.

The financial services sector in core Islamic countries in the MEASA region is abuzz with talk and activity on digital transformation strategies including open banking and its regulation, payments as well as how banks can develop robust customer acquisition and engagement. “Accessing bank services digitally, issuing Sukuk on a digital platform using

Banking and Finance news in the MEA market

blockchain technology and enhancing cybersecurity will be the three main factors to help improve the industry’s resilience,” said S&P Global. The market share of Islamic financing assets in core Islamic markets is set to continue outper forming their conventional peers this year. Growth will be driven by the economic recovery in Muslim majority countries in the GCC region plus Malaysia and Turkey, which in turn are expected to enhance credit growth and demand for Shariahcompliant products. Islamic industry experts expect blockchain and smart contract protocols to revolutionise the issuance of Sukuk for the better. With new applications within artificial intelligence (AI), blockchain technology and the internet of things (IoT)

being explored, the tokenisation of Islamic bonds remedies certain inefficiencies associated with Sukuk issuances, it increases the transparency of underlying Shariah-compliant assets and cash flows in addition to reducing costs. Th e u n p re c e d e nte d d i g i ta l transformation in the financial services sector is also creating some exceptional challenges for the industry including cyberattacks. However, Islamic financial institutions in the MEASA countries are bolstering their cybersecurity capabilities with technical and operational changes to mitigate the frequency and range of ransomware attacks. The last two years demonstrated how the capacity of a bank to shift its business online is critical for its continuity. Digital transformation in the Islamic banking sector together with collaboration between fintechs and incumbent banks is expected to strengthen the industry’s resilience in more volatile operating environments while opening new avenues for growth.

Sukuk tokenisation Sukuk issuance, which bans interest payments and pure monetary speculation, has been gathering steam outside of core Islamic finance centers such as in Luxembourg and London. However, the industry remains largely fragmented and plagued with several challenges including the uneven implementation of rules as well as high costs and the probability of human error due to multiple intermediaries that are involved in the issuance process. The rapid advancement in financial technologies, increasing socio-economic pressures and infrastructure investments are opening doors to disruptive innovation in Islamic capital markets. The tokenisation of Islamic bonds by leveraging blockchain technology is expected to reduce the various costs associated with the issuance process—potentially opening the field to startups and small and medium enterprises (SMEs).

Abu Dhabi’s Al Hilal Bank was the first financial institution in the world to leverage blockchain technology in November 2018 to issue $500 million Sukuk. S&P Global expects digital Sukuk to generate significant investor interest in the future once the necessary prerequisites are implemented. Similarly, blockchain has the potential to accelerate and unlock the long-term potential of the Islamic finance sector while enhancing its appeal beyond its traditional borders. Blockchain technology allows for all transactions to be unalterably timestamped and uniquely cryptographically signed— increasing operational efficiency, cost reduction and enhancing transparency. Transparency, which is one of the primary characteristics of blockchain, is also one

S&P Global projected in June that total global Sukuk issuance will plunge this year compared with stabilisation at $147.4 billion in 2021 and $148.4 billion in 2020. Meanwhile, Moody’s sees soaring crude oil prices reducing the funding needs of oil-rich GCC countries leading to low Islamic bond issuances throughout 2022. Smart Sukuk can help generate more secure and immutable data while reducing the number of intermediaries involved and facilitating smaller denominations in Islamic bond issuances potentially extending the benefits of the structure to SMEs (Nida Khana et al, 2020).

Digital banking The current operating environment is putting to test Islamic banks’ digital transformation journeys and, in some

MILLENNIALS AND THEIR YOUNGER COHORT WILL RESHAPE THE FINANCIAL INDUSTRY IN THEIR TECH-SAVVY, MOBILEFIRST IMAGE, WITH RAMIFICATIONS FOR ALL CONSUMERS, COMPANIES AND INVESTORS – Morgan Stanley

of the essential attributes that will serve as validation of Shariah compliance for the masses. GCC countries have grown in relevance for emerging market investors and several trends in the region such as economic diversification signal continued growth for Sukuk markets. Sharjah-based property developer Arada raised $350 million in its debut foray into the debt market earlier in June while Islamic Development Bank (IsDB), a regular issuer in the capital markets, raised $1.6 billion in five-year Islamic bonds in April—the Saudi-based multilateral development lender’s first public Sukuk issuance this year.

cases, forcing the c-suite level to revisit their strategies and make customers the focal point of their digitalisation drive. “Many Islamic banks have made significant strides in digitalisation, such as those in the GCC and Malaysia, but players in other core Islamic finance countries are yet to follow,” said S&P Global. Like their conventional peers, Islamic banks in the GCC region are pro-innovative and industry experts expect them to continue to dominate the financial services industry as the sector goes more digital. Though Islamic banks’ digitalisation drive is partly self-motivated, the emergence of challenger Shariahmea-finance.com

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compliant banks such as Zand and the changing demands from tech-savvy Gen Z customers are also accelerating banks’ digital transformation. Zand, the UAE’s first Shariah-compliant neobank, is expected to open its doors for business soon. It’s shareholders acquired the majority of shares in Dubai Bank from Emirates NBD last December. The digital lender secured the backing of investors such as Franklin Templeton, Al Hail Holding, Yusuff Ali of Lulu Group and Aditya Birla Group in February as it seeks to seize on opportunities thrown up by fintech. The neobank will be competing with the offshoots of traditional banks such as Dubai Islamic Bank (DIB), Al

with ramifications for all consumers, c o m p a n i es a n d i nvesto rs ,” s a i d Morgan Stanley. ADIB launched “Amwali”, the Shariahcompliant bank’s digital offering targeting the growing segment of tech-savvy youths, last August. Amwali brings together an entire suite of banking products and technology to enable young customers to enjoy a whole new way of banking that is paperless, signatureless and branchless. Meanwhile, in Southeast Asia, Malaysia’s Bank Islam, Al Rajhi Bank and AEON Credit Service have been working with financial technology solution providers including Mambu and Codebase as they enter the more

SMART SUKUK CAN HELP GENERATE MORE SECURE AND IMMUTABLE DATA WHILE REDUCING THE NUMBER OF INTERMEDIARIES INVOLVED AND FACILITATING SMALLER DENOMINATIONS IN ISLAMIC BOND ISSUANCES POTENTIALLY EXTENDING THE BENEFITS OF THE STRUCTURE TO SMALL AND MEDIUM ENTERPRISES – Nida Khana et al, 2020

Hilal Bank and Abu Dhabi Islamic Bank (ADIB). DIB unveiled its digital offering, rabbit, in December 2021—a digital app that is aimed at tech-savvy customers. rabbit offers a current account, globally accepted debit card, payments and money transfer services. The digital banking platform is on track to establish new standards for innovation in the financial services sector as part of DIB’s broader strategy to make banking effortless and fun for its customers. “Millennials and their younger cohort will reshape the financial industry in their tech-savvy, mobile-first image,

competitive digital banking landscape. Dubai’s financial hub, DIFC, has also been investing heavily in fintech through its DIFC FinTech Accelerator Programme. Shariah-compliant startups that have benefited from the program in the past include Malaysia-based HelloGold, IslamiChain—which leverages blockchain to enhance philanthropy and compassionate giving, Hakbah and Wethaq.

Customer onboarding The Islamic finance sector has evolved over the year and so too have the product

structures as the industry moves to offer tailored features to meet the needs of a growing investor base. The importance of the Middle East to Islamic finance continues to be clear as the region is home to the world’s largest Islamic banks by assets including Al Rajhi Bank, Saudi National Bank, Dubai Islamic Bank, Bahrain Islamic Bank and Kuwait Finance House. Islamic banks are putting customer experience at the center of nextgeneration operating models and digital onboarding is an essential feature that determines whether they can easily acquire new customers, especially the tech-savvy millennials. Digital customer onboarding is the first contact that a new customer has with the bank and the process should be intuitive, seamless, responsive and efficient. “The onboarding journey is so important in creating a great first customer experience, setting the tone for the ongoing relationship and acting as a key control point,” said Deloitte. An automated onboarding process is a mutually beneficial situation offering speed, efficiency and convenience for the customers and bank professionals for more value-added tasks. Customer onboarding entails the guidance of a new user in the first steps of platform accessibility. The process is a critical step in a customer’s journey with a financial institution as it leaves a long-lasting impression in the clients’ minds about how they perceive a financial institution. Digitalisation in the Islamic banking sector is customer-driven as financial institutions seek to enhance services and products as well as tap into new market and customer segments. The Islamic finance sector has evolved over the years and banks continue to build on the digital banking momentum to tap into the growing millennial and Gen Z tech-savvy customer segment. Having seamless onboarding and origination processes is pivotal in accelerating digital-first executions and increasing cross-sell opportunities. mea-finance.com

CRYPTOCURRENCY

The Wall Street of the crypto market The Middle East’s crypto footprint is relatively small in global terms but the initiatives that are being implemented by the authorities underscore how digital assets are making inroads into the region

he Middle East is one of the fastest-growing cryptocurrency markets in the world, making up 7% of global trading volumes. Research suggests that investors in the region have turned to cryptocurrency to preserve their savings against currency devaluation, a trend that is common in other emerging markets like Africa and Latin America. This phenomenon is more prevalent in countries such as Turkey and Lebanon where the currency’s dramatic slump is fuelling a surge in crypto mining and trading activities—with investors hoping to shield their savings against inflation. Though the region’s crypto footprint is relatively small in global terms, it grew by about 1,500% from the prior year, between July 2020 to June 2021. Considering the growing interest in

REGULATION IS A STUMBLING BLOCK, BUT REGULATORS HAVE SHOWN THAT THEY SEE THE VALUE OF BLOCKCHAIN AND CRYPTOCURRENCIES, AND ARE WORKING TO SUPPORT THESE TECHNOLOGIES, WHICH BODES WELL FOR FUTURE ADOPTION – Accenture

Banking and Finance news in the MEA market

digital assets from institutional and individual investors alike, the Middle East’s openness and willingness to build a regulatory environment for virtual assets make the region “the Wall Street of the crypto market”. Meanwhile, the global cryptocurrency market value has plunged below $1 trillion as the world’s largest digital currencies, Bitcoin and Ethereum, remain under pressure from macroeconomic concerns as well as a liquidity crisis among highprofile crypto companies. The current operating environment has exposed the highly leveraged nature of the crypto industry and caused a liquidity issue across companies except for Binance, which opened 2,000 positions for hiring in June in sharp contrast to a slew of job cuts in the crypto ecosystem.

Cryptocurrency users leverage blockchain technology, a decentralised ledger system of all transactions across a peer-to-peer network that enables participants to confirm transactions without a need for a central clearing authority. Unlike the traditional financial systems which use a centralised database with a single point of authority, blockchain technology allows for a distributed database that holds a growing number of records, said KPMG.

Middle East crypto market Crypto is growing fast with total global transaction volumes soaring by over 500% to $15.8 trillion in 2021 although the majority of Western and Asian regulators detest the decentralised digital money creating an opportunity for ambitious Middle East— where governments are building regulatory architecture around the sector. The region has emerged as a crypto hub as consultancy firm Knight Frank’s latest wealth report showed that around 25% of millionaires in the region already invest in some kind of crypto. The UAE is the Middle East’s third-largest crypto market, trailing Turkey and Lebanon, with a transaction volume of about $26 billion between June 2020 and June 2021, according to data compiled by Chainalysis. A global YouGov survey that was released in March also showed that trust in cryptocurrencies was highest among adults in the UAE. Dubai and Abu Dhabi are making a play for the cryptocurrency crown. Over the few months, Dubai and Abu Dhabi, have issued more than 30 licences and passed a raft of laws for crypto exchanges to operate in their respective financial centres. Meanwhile, the UAE’s Securities and Commodities Authority is reportedly considering legislation to allow virtual asset service providers (VASPs). A federal licensing system will likely put the UAE on equal footing with rival financial centers such as Singapore and Hong Kong. “Regulation is a stumbling block, but regulators have shown that they see the value of blockchain and cryptocurrencies,

and are working to support these technologies, which bodes well for future adoption,” said Accenture. Binance, the world’s largest crypto exchange by trading volume, received licenses to operate in Dubai, Abu Dhabi and Bahrain earlier this year as the company deepened its presence in the Middle East. The exchange’s CEO Changpeng Zhao has since relocated to Dubai from Singapore. Dubai adopted its first law governing virtual assets and established a regulator, Virtual Assets Regulatory Authority (VARA), to oversee the sector in March as the Middle East’s tourism and commercial hub aims to position itself and the UAE as a regional and global destination for the virtual assets sector. Other exchanges that answered the UAE’s call include Kraken and FTX, who received full license to operate regulated

money easily. CBB’s approach contrasts with other regional central banks, the Central Bank of the United Arab Emirates included, which have not recognised crypto as a means of payment.

Shariah-compliant Rain, which secured its Shariahcompliance certification from Shariyah Review Bureau in December 2019, is not alone in Bahrain. CoinMENA, a Shariahcompliant digital asset exchange company licensed by CBB, obtained a provisional virtual assets licence from Dubai’s VARA in June allowing the firm to continue its operations while it applies for a full licence. However, the Indonesian Ulema Council, a top body of Islamic scholars, said last November that cryptocurrencies do not follow Shariah principles and they are haram as the clerical body challenged

THE MIDDLE EAST IS THE SECONDSMALLEST CRYPTOCURRENCY ECONOMY, HAVING RECEIVED $272 BILLION WORTH OF CRYPTOCURRENCY BETWEEN JULY 2020 AND JUNE 2021, WHICH REPRESENTS 6.6% OF GLOBAL ACTIVITY – Chainalysis

trading platforms in the country while BitOasis, Rain as well as Bybit and Crypto.com secured provisional approval from regulators. Though the UAE is positioning itself as a hub for digital assets, Bahrain has banking regulation for cryptocurrencies in place. The small Gulf state joined the crypto frenzy in August 2019 when the central bank granted Rain a license that allows the exchange to buy, sell and store digital assets. Moreover, the Central Bank of Bahrain (CBB) recognise cryptocurrencies as an official method of payment allowing banks to work with exchanges so that customers can withdraw and deposit their

the future of digital coins in the country that is home to the world’s largest Muslim population.

Regulatory hurdles Though Turkey has by far the highest transaction volume in the Middle East region with $132.4 billion between July 2020 and June 2021, according to Chainalysis, regulators in the country have sounded alarm bells saying trading in digital coins exposes individuals to digital breaches, cyberattacks and it is unsustainable. The Central Bank of Kuwait also cautioned financial institutions operating in the Gulf state against dealing or trading in bitcoin, ethereum, or other crypto assets mea-finance.com

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in May 2021. The apex lender said dealing in digital coins leaves room for illegal uses of funds, unauthorised transactions and money laundering given that the assets are not regulated by any central authority in the country. Accenture said that some countries in the Middle East region view cryptocurrencies with caution due to their lack of a central authority and are beyond the control of monetary policy. Meanwhile, Turkish authorities included cryptocurrency exchange firms operating in the country on a list of organisations that are regulated by its anti-money laundering and counterterrorist financing rules after the closure of two crypto exchange platforms, Vebitcoin and Thodex last year. Speaking at Bloomberg’s Qatar Economic Forum in June 2022, Qatar Investment Authority (QIA) chief Mansoor Bin Ebrahim Al Mahmoud cautioned that cryptocurrencies “need a bit of maturity before we make our view about investing” though the fund believes in the underlying blockchain technology. On a global scale, China has been particularly strong in cracking down on financial institutions trading in digital assets and cryptocurrency mining. Earlier this year, the world’s second-biggest economy expanded its criminal law to encompass fundraising with digital tokens, giving authorities additional firepower to stamp out a sector they declared illegal last year by using heavy sentences. China’s supreme court released its latest interpretation of the criminal law on illegal fundraising in February and the amended legislation lists cryptocurrency sales among illegal ways to raise money from the public. Last year, the State Council’s Financial Stability and Development Committee vowed to clamp down on cryptocurrency mining and trading activities to fend off financial risks. Since then, several regions in China including Inner Mongolia, Sichuan, Yunnan and Yunnan have declared war on crypto mining and trading activities. In the Western hemisphere, crypto companies are increasingly turning to

THE UAE GOVERNMENT’S RECENT ENACTMENT OF THE COUNTRY’S FIRST LAW GOVERNING VIRTUAL ASSETS MAY HAVE PLAYED A ROLE IN INSTALLING DEEPER TRUST AMONG PEOPLE IN THIS ASSET CLASS – YouGov

friendlier and less bureaucratic jurisdictions including Bermuda to grow their businesses and test new products amid growing scrutiny from policymakers in the US. US lawmakers introduced the Responsible Financial Innovation Act, dubbed the Lummis-Gillibrand bill, in June that would redefine the government’s relationship with bitcoin and other cryptocurrencies. Lawmakers in New York also passed a bill that bans some types of cryptocurrency mining that rely on carbon-based fuel in the same month as part of the state’s broader strategies to

policy to combat surging global inflation. Since the beginning of the year, major cryptocurrencies including bitcoin, which soared to an all-time high of more than $63,000 in April 2021, have plunged to record lows due to macroeconomic pressures, the collapse of the algorithmic stablecoin terraUSD and sister token luna, the pausing of withdrawals by crypto lender Celsius and the liquidation of cryptofocused hedge fund Three Arrows Capital. Bitcoin just had its worst quarter since 2011 and its worst month plunging by around 58% to $19,048 as of July 3,

SOME COUNTRIES IN THE MIDDLE EAST REGION VIEW CRYPTOCURRENCIES WITH CAUTION DUE TO THEIR LACK OF A CENTRAL AUTHORITY AND ARE BEYOND THE CONTROL OF MONETARY POLICY – Accenture

address the growing concerns about the environmental impact of energy-intensive blockchain operations.

Crypto mayhem Once a potential rival of gold as a safehaven store of value, cryptocurrencies have largely lost their lustre among institutional investors after a volatile plunge from record-highs as global central banks are tightening monetary

2022, according to crypto-data website CoinGecko.com. Regulators in the UAE are trying to strike a delicate balance as they promote the business-friendly environment that made the region an attractive base for some of the world’s biggest financial firms and tech companies while also seeking to navigate volatility, financial crime and environmental concerns that keep dogging the crypto industry. mea-finance.com

ROUNDTABLE: MODERNISATION OF PAYMENT LANDSCAPE

Payments at Pace Saudi Arabia’s payments sector is changing faster than any other area of the financial services sector driven by advancements in financial technology and evolving customer expectations

Banking and Finance news in the MEA market

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he global payments landscape is undergoing significant and disruptive change two and half years since the outbreak of the pandemic, which saw the volume of digital payments soaring to record highs and generating as much as 10 years’ worth of growth in just 30 months. The payments space is changing faster than any other area of the financial services sector driven by advancements in financial technology and evolving customer expectations that have shattered the status quo and opened the window for new players that are challenging incumbent banks. Amit Sharma, the Head of Payment Operations at SABB said that the wave of change that is being witnessed in Saudi Arabia’s payments sector over the last one and a half years is unprecedented and it has not been seen “probably in other countries in the region.” According to KPMG, for companies, new technologies, products and communication channels as well as increased competition between banks, fintechs and service providers, are opening up ever new ways of making and orchestrating payments. However, these developments are also forcing regulators and governments to keep pace with this rapid change and enact corresponding sets of rules and laws. The growth of non-banking players such as super-apps, e-commerce firms, merchants and social media platforms that are offering instant payment services is disrupting and driving rapid changes in the sector. Industry experts say for incumbent banks, the traditional main providers of payments services, to maintain a competitive edge in the evolving payments industry, success will depend on how they assess capabilities, determine the role of the service in market strategies and align operations to achieve the required performance improvements. MEA Finance, in partnership with Volante Technologies, hosted an exclusive roundtable themed Modernization of the Payment Landscape in Riyadh,

Saudi Arabia, where industry experts from the financial services sector shed some insight on how financial services providers can leverage the cloud, payment infrastructure, data and open banking to broaden their payments services. Volante, a US-based cloud payments and financial messaging solutions provider works with more than 100 banks, financial institutions, market infrastructures, clearinghouses, and corporate treasuries to accelerate their digital transformation. The company counts Citibank, Qatar Islamic Bank UK, BNY Mellon, Bank Leumi UK and FIMBank among its customers. Abdulaziz Abanmi, VP -Technology, Acting VP - Operations and Shared Services at Saudi Payments said, in his opening remarks, that the growth

Abanmi also identified innovation in products and services as well as talent strategy as two elements that are crucial to ensure sustainable growth in the payments space. Growth in the payments sector is receiving a boost from the ongoing shift towards subscription-based billing—a boon for the region’s paymentsas-a-service (PaaS) and software-asa-service solution (SaaS) providers. McKinsey said that open source software, serverless architecture and SaaS have become must-haves for technology players and legacy banks launching new fintech businesses. The booming e-commerce industry is also critical to the success of digital payments because it directly enhances the customer’s checkout experience.

THE WAVE OF CHANGE THAT IS BEING WITNESSED IN SAUDI ARABIA’S PAYMENTS SECTOR OVER THE LAST ONE AND A HALF YEARS IS UNPRECEDENTED AND IT HAS NOT BEEN SEEN PROBABLY IN OTHER COUNTRIES IN THE REGION – Amit Sharma

in the payments industry in 2021 “was remarkable by all means if compared to the achievements in 2018. “If we take mada for example, in 2018 we celebrated one billion transactions a year. While in 2021 we crossed more than five billion transactions only in medallions, not to mention other payment players,” said Abanmi. The remarkable growth in Saudi Arabia’s payments sector, thanks to the collaborative efforts of all the players in the industry with the supervision of the Saudi Central Bank (SAMA), is something that “we all actually feel proud about,” he added.

The prolonged pandemic pushed more shoppers online and together with evolving customer preferences as well as demands among the young tech-savvy customer base, it is driving a surge in global payments volumes.

Payments modernisation Global financial institutions have undergone various efforts to modernise their payment systems over the past decade, driven by the technological innovations in the industry that are expected to continue driving disruptive business models in the payments space globally. mea-finance.com

ROUNDTABLE: MODERNISATION OF PAYMENT LANDSCAPE

The changing customer behaviours and reimagined customer experiences, intense regulatory environment as well as payments innovators who are backing open and standardised platforms such as Square and its peers are driving the biggest disruptions in the payments ecosystem. Domenico Scaffidi, the Vice President of Global Industry & Regulatory Affairs at Volante in his opening remarks highlighted on the modernisation of the payments ecosystem, the standardisation of the industry as well as the benefits of Independent Sales Organisation (ISO) and how industry partners such as SWIFT are supporting the growth of the sector.

Scaffidi said that one of the pain points for larger banks in cross-border payments is high costs as an average transaction cost as much as $40. He also identified limited access or lack of visibility as another challenge while noting that not all financial institutions can offer the service to their clients such as private, multinational corporates and big conglomerates. Other drawbacks for banks are lack of speed and transparency in crossborder payments, given that on average a transaction takes between three and seven days let alone the unavailability of tracking messages as well as information to give an institution’s clients. However, SWIFT unveiled SWIFT Go in July 2021—a new service that enables small businesses and consumers to send

IF WE TAKE MADA FOR EXAMPLE, IN 2018 WE CELEBRATED ONE BILLION TRANSACTIONS A YEAR. WHILE IN 2021 WE CROSSED MORE THAN FIVE BILLION TRANSACTIONS ONLY IN MEDALLIONS, NOT TO MENTION OTHER PAYMENT PLAYERS – Abdulaziz Abanmi

fast, predictable, secure and competitively priced low-value cross-border payments anywhere in the world, direct from their bank accounts. Together with SWIFT Global Payments Innovation (GPI), the service enables financial institutions and their clients with tracking messages to understand the status of payment as well as when the payment has been credited to the beneficiary account. Volante said through partnerships it seeks to understand a client’s new business model, how to get fresh revenue as well as formulate a new strategy and new added-value services built on the technology that it offers. Scaffidi said a survey of the global payments sector by Finastra showed that the cost of cross-border payments is high due to a lot of manual intervention.

Banking and Finance news in the MEA market

“Cross-border payments are very costly, very expensive, it’s not a good deal for the bank,” he said. The first phase of modernisation in the payments space saw financial institutions consolidating channel and payment client-facing applications and the next phase is currently underway in which institutions are aligning to various global standards including ISO20022 and open banking. The traction and the migration to ISO 20022—the new payments messaging choice for real-time systems—are evident in the payments industry but then, the reality is what a bank can build on top of that technology such as creating new value services, said Scaffidi. Volante’s Scaffidi said that around 8 0 % of C EO s i n t h e p a y m e nt s

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industry are really worried about the transformation currently underway in the market while citing PwC—one of the company’s advisors that are supporting it in understanding the changes in the financial services sector. Omar M AlMarek, Senior Manager FCC OPS at SABB, said that the number of instant payments in Saudi Arabia has significantly increased. “Within the Vision 2030 framework, I have realised that there’s a lot of changes, not only on the payments fronts, but the digitalisation of all the government services and payments, enhancement internet speed and upgrading of payments infrastructure

the financial services sector needs to look out for is preventing assisting the ecosystem of fraudsters. Shaikh said that preventing the vulnerability of the systems is key to the success of the payments ecosystem and “I think as an organization, we have to focus there a lot.” Focusing on efficiency, Sachin Puthran, SABB’s Sr Payments Product Manager Global Liquidity & Cash Management said that the industry has seen unprecedented evolution starting with cheques—wherein payments are cleared in a few days and electronic fund transfers used to take few hours. However, with the advent of solutions such as IPS, “we have raised

that there has been a lot of innovation in the financial sector over the years driven by the advancements in financial technologies and as we live in a globalised world, the focus in the future will be on interoperability and interlinkages of all the systems. Onur Ozan, Regional Head - Middle East, North Africa and Turkey at SWIFT weighed in saying that payment modernisation is taking place on the traditional systems such as real-time gross settlement (RTGS) and automated clearing house (ACH) across the Middle East region and “one thing that is common that we observed is that most of these

to make sure it is ready for the future of the industry,” AlMarek said. He said the kingdom previously used to have only two service providers but now it has IBS, from BUNA and AFAQ. S&P Global said that it expects key lessons from the pandemic to spark an enhanced focus on payments infrastructure modernisation in 2022 as merchants look to accommodate operational shifts such as accelerated e-commerce growth as well as new customer demands including contactless payments that have continued to accelerate over the past 30 months. Gulfan Shaikh, the Senior Payments Manager at SABB concurred with AlMarek saying that while we are focusing more on the growth of the payments industry in Saudi Arabia, one aspect that

the bar to records not seen before for customers to receive payments in seconds and that’s exactly the requests we are getting from clients.” However, considering these use cases Puthran said that there is a need for quick implementation of payments verification and account verification to build confidence with our customers. “What is happening and what we’ve seen towards the beginning when IPS was launched, customers were a little bit hesitant that their transaction will take more time,” he said. From a modernisation point of view, Sido Bestani, the Managing Director, Middle East Africa India Sub Continent at SWIFT said that the modernisation of the fragmented payment landscape remains a top priority. Bestani said

new systems being introduced or being modernised are on ISO 20022.” “We also have a good number of IPS systems in some payment schemes being introduced in the region. Globally, I think the number is around 80’s and Saudi Arabia is an excellent example where the infrastructure is currently being used and even overlay services are being discussed,” Ozan added. From a challenger bank perspective, Saeed Albuhairi, the CEO of Tweeq said that there are two factors driving growth in the country’s payments sector including Saudi Arabia’s youthful population, which makes up a third of the Gulf state’s entire population. Albuhairi said this techsavvy customer base’s demands and expectations are ever-changing and “they are underserved a little bit and basically mea-finance.com

ROUNDTABLE: MODERNISATION OF PAYMENT LANDSCAPE

as an e-wallet service platform we can address their requirements much better.”

Driving innovation The payments industr y was rife with activity last year and 2022 is promising to be another busy year with continuing transformation underway in the payments market and an array of strategic opportunities coming into focus. For, Houssam Chaker, Regional Head of the Middle East at Volante Technologies, no matter how much digitisation is happening all players in the region’s payments ecosystem including

there is a starting point and there is an endpoint, but the whole transaction has to be open in place because clients have the right to know. And they brought ISO to the whole ecosystem of their 10,000 customers and beyond touch points,” said Gaur. From a growth perspective, Faisal AlYousef, the Chief Business Officer at Alinma Bank, noted that sustainability is one of the most important points to ensure that the industry will grow while remaining innovative in the future. Al Yousef, who is overseeing the building of a fintech and payments

“WITHIN THE VISION 2030 FRAMEWORK, I HAVE REALISED THAT THERE’S A LOT OF CHANGES, NOT ONLY ON THE PAYMENTS FRONTS BUT THE DIGITALISATION OF ALL THE GOVERNMENT SERVICES AND PAYMENTS, ENHANCEMENT INTERNET SPEED AND UPGRADING OF PAYMENTS INFRASTRUCTURE TO MAKE SURE IT IS READY FOR THE FUTURE OF THE INDUSTRY. – Omar M AlMarek

Saudi Payments, SWIFT, Mastercard and Accenture are working towards delivering the needs and expectations of the client. Tushar Gaur, Sales Director, Middle East and North Africa at Volante, weighed in saying the future of payments is already here although it is not evenly distributed. However, “we are going on the journey because of the whole ecosystem in place,” he said. Gaur gave an example of how SWIFT is also learning from the developments in payments saying the Belgian firm said ISO is important because clients know where their money was going. “They understand

c o m p a ny fo r A l i n m a , s a i d t h a t establishing a fintech company and ensuring financial sustainabilit y considering the expenses and costs to establish such a company is not an easy task. Ensuring sustainability, not only from the regulator and the operational backbone of payments in Saudi Arabia but also from the private sector, entrepreneurs as well as big techs, fintechs and incumbent financial institutions is of great importance. “We have to come up with innovative ideas, not just incremental innovation, such as what we are seeing at the

Banking and Finance news in the MEA market

moment, but leapfrog where we are formulating business models that can unlock new revenue streams and change the cost structure of payment companies,” he added. M a r i a M e d ve d eva , t h e V P & Country Lead, Saudi Arabia & Bahrain weighed in saying sustainabilit y means “tackling cash and it’s tackling the commercialisation aspect for all ecosystem players.” “We are a $1 trillion cash industry here, but the flow company consists of $310 billion, another $310 billion goes into the personal consumption expenditures, $350 billion is the government and $250 billion is for business to business,” Medvedeva said. Ad d i n g to t h e g row t h a n d modernisation perspective, Yagoub Yousef AlSulaiman, Alinma’s Head of Transformation Management said that the Gulf state has made significant strides with the Saudi Arabian Riyal Interbank Express (SARIE) system being the core member of the payments space. The system is also being extended to the growing fintech ecosystem allowing them to manage payment schemes. AlSulaiman added that fintechs are not taking away business from banks, incumbent financial institutions remain in the loop as all payments are directed somehow to the bank. When asked about his opinion on change and innovation in the industry, Omar AlHamda, the Head of Cards & Retail Payments at Arab National Bank, said payments enablers are driving significant innovation in the sector and Saudi Arabia’s youthful population is getting all the services through the enablement of fintech companies and all the banks operating in the country. “We have seen the young generation looking for better and better services, which until now, we believe we have provided a good part but they look for much more,” said AlHamda. Abdulrahman Al-Khereji, Bank Al Jazira’s Senior Program Manager, said that banks mandate to educate their customers about the digital payments systems as part of their strategy to

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Banking and Finance news in the MEA market

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ROUNDTABLE: MODERNISATION OF PAYMENT LANDSCAPE

eliminate the use of cash and paperwork in settling payments. Jim Mortimer, Senior Consultant, Real-Time Payment at MasterCard acknowledged that Saudi Arabia now has a fantastic asset that can transform the country ’s payments industry. However, Mortimer said to transform the country, some challenges lie ahead while noting that the most friction still exists in business-to-business and crossborder payments. “That’s where the most challenges lie in terms of coming together and developing solutions that will address those challenges and move the country forward,” said Mortimer.

Fatima Alabdulkareem, Enterprise Applications & Payments Transformation Leader said that the enablement of instant payments in Saudi Arabia is a game-changer adding, “even if clients want to transfer huge amounts of money, they can do it frictionless and it will reach instantly.” She called on players in the payment ecosystem including banks, regulators as well as payments enablers and fintechs to ensure that sustainability and innovation remain a top priority. Saudi Payments’ Abanmi said that previous when a nationwide initiative such as Saudi Payment was introduced it came complete with a playbook that all players in the ecosystem would follow. However, the ready-made end-to-end products era is long gone. Mohammad Bawazir, the Chief Product Officer at Tweeq, concurred saying that

there has been a lot of innovation in banking as well as the fintech landscape is supported by the regulatory framework and the infrastructure in the region.

Software as a service (SaaS) platforms such as UAE-based InstaShop and Careem leverage data to solve customer pain points like offering e-commerce ser vices, managing finances, or scheduling home services and charge a monthly fee to access that service. Meanwhile, financial institutions create revenue streams by charging clients for payments and payment-

monetise payments and paymentrelated features including charging customers a fee to access payments, marking up each transaction, introducing fees for advanced payment features as well as adding a fee in cases where customers use other payment gateways and charging for advanced, customized reporting. Irfan Bhatti, the Head of Enterprise Transformation & Delivery at Banque Saudi Fransi said that the adoption of digital payments in Saudi Arabia is phenomenal, adding that considering the demography of the Gulf state, where twothirds of the population is under the age

related features or entering revenuesharing agreements with service providers. The combined purchasing power and influence of millennials and Gen Z is reshaping the future of the financial services sector. American digital payments platform Stripe identified five primary ways to

of 30 and the penetration of technology it is effectively safe to say that banks are in everybody’s pocket. However, the million-dollar question becomes how can financial institutions in Saudi Arabia leverage the country’s demography ? Bhatti said that is something for each bank to consider.

Creating revenue streams

WE HAVE SEEN THE YOUNG GENERATION LOOKING FOR BETTER AND BETTER SERVICES, WHICH UNTIL NOW, WE BELIEVE WE HAVE PROVIDED A GOOD PART BUT THEY LOOK FOR MUCH MORE – Omar AlHamda

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Abdul Haye Ahmad, Banque Saudi Fransi’s Payments Programs Manager, said that the events of the last 24 months together with Saudi Arabia’s demographics have played a crucial role in the unprecedented adoption of digital payments in the country. Haye said Banque Saudi Fransi is delivering services to its clients and customers in a way that meets their requirements as many services and products including real-time payments (RTPs) are being implemented. “The next goal for the bank is how to sustain these phenomenal changes,” he said. Yogesh Kapoor, the Head of Enterprise Transformation at SABB said that the

financial service sector is driving transformation in the country’s payments space and “serve the customers, whether the needs are local or international.” Coming from a bank such as SABB, which is part of HSBC, Kapoor said serving clients who have international needs is an integral part of the financial services sector through cross-border payments. He said the bigger question remains how banks transform a country through ease of doing payments in a low-cost, safer and transparent way while adding that these challenges need a collaborative approach to solve them. Naim Alame, Client Account Leadership Middle East at Accenture, said that the payments division is a great opportunity for financial institutions to extend the revenue stream and scale

WE HAVE TO COME UP WITH INNOVATIVE IDEAS, NOT JUST INCREMENTAL INNOVATION, SUCH AS WHAT WE ARE SEEING AT THE MOMENT, BUT LEAPFROG WHERE WE ARE FORMULATING BUSINESS MODELS THAT CAN UNLOCK NEW REVENUE STREAMS AND CHANGE THE COST STRUCTURE OF PAYMENT COMPANIES – Faisal AlYousef

their product offerings. For banks to reap the real benefits of payment, Alame said the first thing is to innovate the whole experience to make it seamless from a payment perspective. He also urged banks to transform their core operations to be able to scale up their services as well as collaborate with key players in the payments ecosystem such as e - commerce platforms, e-wallets and neobanks to enhance that seamless experience.

Leveraging the cloud The rapid growth of cloud-based financial services is offering banks a window to be more innovative and efficient in service delivery, but it is also opening up the industry to new entrants such as fintechs, global retail giants as well as card networks and neobanks.

Al-Khereji projected that the use of cloud-based solutions will help banks serve more clients while eliminating the legacy systems that have been in use for decades. He said that in as much as banks have made significant strides in modernising the payments space, “I think we can improve ourselves from customers and services perspective, by striving to meet clients’ demands using available payment solutions rather than other alternative solutions. Cloud computing offers a dynamic platform to develop, trial and offer innovative services in the financial service industry—payments included while driving operating and business model transformation. Krishnaswamy Sriganth, the Senior Consultant at Saudi Payments, said that as the major payment system in the country, mada mea-finance.com

ROUNDTABLE: MODERNISATION OF PAYMENT LANDSCAPE

is building the market infrastructure, which is the backbone of the monetary system and is key to the growth of the country’s economy. Sriganth encouraged cooperation between banking partners, financial technology solution providers and other partners in the ecosystem “to run along with us at the same speed and ensure that we complete the marathon at the speed of the sprint.” Meanwhile, Eyad Sawaqued, SAIB’s IT Section Head - Risk, Treasury & Payments, said that Saudi Arabia’s

in the payment service sector—which is forcing several financial institutions to carve out their payments portfolios to allow a more flexible approach to growth. Open banking is playing a significant role in the rise of the open data economy as it makes payments easier and more transparent while loosening incumbent banks’ tight control of customer data and their near-monopoly over payment services. S a u d i A ra b i a i s o n e exa m p l e of a n e m e rg i n g re g i o n a l o p e n banking microcosm. The Gulf state is

requiring the opening up of Application Programming Interfaces (APIs)—which facilitate data sharing, or in mandating security standards. Bhatti said that considering the open banking and banking as a service (BaaS) advancements in the country, the financial services sector has reached a junction where banks are now concerned about how they can sustain the new changes and what needs to happen next. “I feel, how do we accelerate to that next point is really around the cloud offering,”

payments sector started at a very slow pace 20 years ago, but the events of the last two years have accelerated the innovation in the industry. Hariraj Subramanian, the Head of Cash Management at Gulf International Bank, said that the way financial institutions deliver the core services is going to change in the future, “so banks need to have a bit of a more complex algorithm that works to respond a lot faster to your customers.”

implementing a market-driven strategy, but its approach is inclined towards a more formal regulatory framework though its regulations do not follow Bahrain in

Bhatti said adding that customers will determine how banks keep up with progress and innovation to remain competitive in a highly competitive market.

Opening banking With unprecedented adoption of open banking across the Middle East, legacy banks are slowly losing their tight control of customer data and total dominancy

THE REGULATOR IS WAY AHEAD OF US AND ALL THE LEGACY ORGANISATIONS ARE NOW TRAILING. WE ARE TRYING TO FOLLOW UP AND GET TO KEEP UP WITH THE PACE OF NEW PAYMENT REGULATIONS AND NEW PAYMENT INNOVATIONS – Ayman Abu-Mowis

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“The customer base is now demanding something different,” he added. “The mindset is different. And the challenge for any financial institution organisation is how do we look at that twofold?” Other GCC jurisdictions are also adopting different approaches to payments and open banking as regional regulators are introducing a range of measures to promote and accelerate the take-up of data sharing frameworks in banking. Ayman Abu-Mowis, the Head of IT Strategy and Governance at the Saudi Investment Bank, said that the

weighed in saying regulators have been very active. Under Saudi Arabia’s G20 Presidency, the country focused on enhancing cross-border payments across the globe, Garg said while adding that SWIFT GPI and SWIFT Go serve the essential need to enhance faster, instant, frictionless payments across borders. Garg said that as an international payments system, SWIFT strives to meet the needs of corporate treasurers while at the same time considering the growing demand for mobile banking from techsavvy customers.

market is not yet mature for the APIs that are required to enhance the payments ecosystem—a lot of standardisation work needs to be completed within the corporate banking sector. Raheem Abdul Alshuaibi, the Director of Business Development at Mastercard, said that the financial sector development is the main part of Saudi Arabia’s economic reform agenda Vision 2030 and is being driven by the enablement of a regulated central bank as well as the support of the ecosystem players, including local banks, domestic switch

financial services sector is used to bugging regulators with new products and services all the time, except for the banks more recently. “The regulator is way ahead of us and all the legacy organisations are now trailing. We are trying to follow up and get to keep up with the pace of new payment regulations and new payment innovations,” Abu-Mowis said. He added that regulators in the Gulf state are encouraging banks to collaborate with fintechs and not depend on their legacy systems “because they do not think big organizations can catch up with fintechs’ innovative business models. Huny Garg, Executive Director & Country Head - KSA & Bahrain at SWIFT,

Meanwhile, Rasheed Alshaikh, the Head of Wholesale Payments Country Head for Saudi Arabia at J.P. Morgan Chase noted that when the Wall Street bank started running the payments business in the country it faced regulatory hurdles, but now, “we are trying to catch up.” From a corporate bank perspective, Alshaikh said their view of the payments space is different and corporate clients are keen to have instant payments. Saudi Payments rolled out its Instant Payment System (IPS) last year and they started working on the corporate offering this year, he said. However, Alshaikh noted that the challenge is with the technology that is being used, adding that the Saudi Arabian

Saudi Payments, different schemes like MasterCard as well as different fintechs. S audi Arabia is spearheading different instant payments initiatives such as mada, Esal and Sarie—all of which are meant to enable service providers and government entities to offer payment facilities around the clock. The surge in technological innovations and the Gulf state’s youthful population are driving unprecedented growth in the payments industry. Volante’s Scaffidi urged Saudi banks to stop investing in black boxes that make the banks compliant with the requirements of the current operating environment, at the tactical level, “but rather what is happening in the long-term strategies, mea-finance.com

ROUNDTABLE: MODERNISATION OF PAYMENT LANDSCAPE

knowing that the payment ecosystem is changing every day.” Participants Included: Abdulaziz Abanmi, VP -Technology, Acting VP Operations and Shared Services, Saudi Payments; Naim Alame, Senior Payments Expert, Accenture Middle East; Faisal AlYousef, Chief Business O f f i c e r, A l i n m a ; Ya g o u b Yo u s ef AlSulaiman, Head of Transformation Management, Alinma; Omar Alhamda, Head of Cards & Retail Payments, Arab National Bank; Abdulrahman Al-Khereji, Senior Program Manager, Bank Al Jazira; Irfan Bhatti, Head of Enterprise Transformation & Delivery, Banque Saudi Fransi; Abdul Haye, Payments Programs Manager, Banque Saudi Fransi; Hariraj Subramanian, Head of Cash Management, Gulf International Bank; Rasheed Alshaikh, Head of Wholesale Payments, JP Morgan Chase Bank - Riyadh Branch; Maria Medvedeva, VP & Country Lead, Saudi Arabia & Bahrain, Mastercard; Abdulraheem AlShuaibi, Director of Business Development, Mastercard; Jim Mortimer, Senior Consultant, Real Time Payment, Mastercard; Amit Sharma, Head of Payment Operations, SABB;

Omar M AlMarek, Senior Payments Manager, SABB; Gulfan Shaikh, Senior Payments Manager, SABB; Yogesh Kapoor, Head of Enterprise Transformation, SABB; Sachin Puthran, Sr Payments Product Manager - Global Liquidity & Cash Management, SABB;

Director, Middle East, Africa and Indian Subcontinent, SWIFT; Huny Garg, Countr y Manager, SWIFT; Saeed Albuhairi, CEO, Tweeq; Mohammad Bawazir, Chief Product and Payment Officer, Tweeq; Ayman Abu-Mowis, Head of IT Strategy and

WE EXPECT KEY LESSONS FROM THE PANDEMIC TO SPARK AN ENHANCED FOCUS ON PAYMENTS INFRASTRUCTURE MODERNISATION IN 2022 AS MERCHANTS LOOK TO ACCOMMODATE OPERATIONAL SHIFTS AND NEW CUSTOMER DEMANDS THAT HAVE CONTINUED TO ACCELERATE OVER THE PAST 18 MONTHS – S&P Global

Fatima Alabdulkareem, Senior Manager IT Development, SABB; Krishnaswamy Sriganth, Senior Consultant, Saudi Payments; Onur Ozan, Regional Head, Middle East, North Africa & Turkey, SWIFT; Sido Bestani, Regional

Banking and Finance news in the MEA market

Governance, SAIB; Houssam Chaker, Regional Sales Director, Volante; Tushar Guar, Sales Director Volante; Domenico Scaffidi, Vice President, Global Industry & Regulatory Affairs, Volante; Andrew Cover, Director, MEA Finance

COVER INTERVIEW

Progress with Purpose Of his more than thirty years in banking, Sunil Kaushal Regional CEO of Standard Chartered Bank, Africa and Middle East (AME), views the past five as the most transformative and rewarding, as he continues to lead the bank through modernisation of services, purposes and principles in these most important and promising regions

o u h a ve b e e n w i t h Standard Char tered Bank for close to 25 years. How would you define the past five when compared with your previous twenty?

I have spent, as you say, over three decades in banking and nearly a quarter of a century with Standard Chartered. The past five years have been the most transformative and rewarding period at the Bank. There have been several key defining moments for me the last couple years – from navigating the Covid-19 pandemic to accelerating our commitment to digitisation and sustainability. It is safe to say we are currently living and working at an extraordinary and important moment in time. At Standard Chartered, we have spent the last five years strengthening our foundations and demonstrating that we can be a profitable, purpose-led company that is ‘Here for Good’. Throughout the Covid-19 pandemic, we have been able to act upon this for our clients, colleagues and communities. For our clients, we have provided financial flexibility and support measures that will aid in their continued stability and growth. For our colleagues, we looked to safeguard their wellbeing during this time of crisis through mental health programmes and inclusion initiatives.

Sunil Kaushal, Regional CEO of Standard Chartered Bank, Africa and Middle East (AME)

And, for our communities, we have launched numerous charitable initiatives, including the donation of medical equipment and financial aid, that aimed to directly support the ongoing efforts of local authorities and philanthropic entities in the fight against COVID-19. Another key highlight in the last five years was when we launched our digital only banks. To meet changing consumer needs and demands, we sought to address this by charting a journey towards digitisation and self-disruption in Africa.

Banking and Finance news in the MEA market

After successfully piloting a digital bank in Côte d’Ivoire in 2018, Standard Chartered rolled out digital banking platforms across nine additional African markets. We have also made a substantial effort towards our commitment to sustainability. In 2020, we committed to USD75bn in sustainable financing by 2024, to support our clients as they transition to net zero. In May 2021, we shared the Transition Finance Imperative to lay out how we’ll support specific sectors to transition. And in October 2021, we pledged new targets

to reach net-zero carbon emissions from financed activity by 2050, including interim 2030 targets for the most carbonintensive sectors. As we look ahead, we are redirecting our priorities on the most significant opportunities for growth while also focusing on simplifying the business. We remain committed to the region as we continue to accelerate our digital transformation, proudly expanding our digital banking network across several markets. As we move forward, the region is focused on executing swiftly against the strategy to drive growth and we are determined to support our clients achieve prosperity whilst being the most responsible and sustainable bank.

Digital transformation is now fundamental to operating as a bank. How have you led Standard Chartered across the diverse regions of Africa and the Middle East in this important journey? The global pandemic caused a significant shift in the banking sector, accelerating the drive towards digital adoption. In this post pandemic economy, we are increasingly seeing more and more people turn to digital payment and e-commerce platforms, and as a result we are investing more in our digital capabilities, alliances and partnerships - redoubling our digital efforts that include providing a standard platform for global core digital services across all our markets. This allows our clients to access core services through a single globally consistent digital experience, which is fundamental to our move towards a digital future that grows, defends and differentiates our business, which also delivers better outcomes for our clients. Our focus is to continue building and enhancing our capabilities for digital onboarding and online servicing, while digitising the core client journey across in cash, trade and financial markets services. We are closely looking at the regions that will deliver maximum efficiencies and rolling out these capabilities. For instance,

in our 150+ years of experience in the AME region, one of our most prominent a c h i eve m e nts wa s s u c c es sf u l l y introducing Standard Chartered’s digitalonly banks across our African operations -- whereby since 2018, our fully digital African banks have acquired 1m new accounts, with 98% of our customers now being acquired digitally. We also focused on accelerating our digital agenda and transforming our Retail Banking business, which also proved successful. Partnerships continue to play a critical role in building our network and offering our clients a better experience while capitalising on more commercial opportunities. As such, we aim to continue to partner with leading global and regional companies, with a focus on fintechs, telecommunications and e-commerce platforms. Across the AME region, adopting a digitally led partnershipdriven business approach enables us to acquire and serve clients in a costefficient manner that offers us scale. We can also leverage these partnerships to create products that improve access to financial services; be it with the launch of digital only banks in nine markets in Africa and real-time onboarding in the UAE to provide clients with instant digital credit cards and issuance solutions - these digital initiatives will continue to be our

focus across the region. Furthermore, we see that customers are increasingly demanding a digital experience where they enjoy simple, secure and affordable banking anytime, anywhere. Our digital banks have allowed us to attract a new audience of futureready consumers, comprising a younger, digital-savvy demographic, with more than two-thirds of accounts being opened by consumers below the age of 35 and women representing a much larger share than normal. In addition, we are also proudly expanding our digital banking network in Saudi Arabia, Egypt and Pakistan, and are excited to further strengthen our digital banking story across the region.

In the coming years, which sections of the banking and finance world in Africa and the Middle East are now likely to experience an intensification of digital transformation activity? The greatest potential lies in disruptive technologies that make banking more accessible, efficient and convenient. Keeping services in silos is no longer feasible, with consumers demanding allinclusive experiences from their banks. Open banking, for instance, allows the financial services sector to seamlessly mea-finance.com

COVER INTERVIEW

integrate with that of the retail and lifestyle sector, providing consumers with a dynamic blend of services through a singular platform. Both wealth management and personal banking will see a significant shift to digital for years. It was a conscious choice for Standard Chartered to adopt a mobile-led digital strategy and to invest in an affordable, easy to roll out end to end digital bank offering, but that choice was also largely driven by changing consumer behaviour and preferences. The pandemic served as a large-scale, abrupt test drive of these technologies, further confirming the importance of championing digital transformation.

How have the wealth management and investments offerings of Standard Chartered Bank evolved to meet the needs of your clients? The COVID-19 pandemic accelerated a shift in behaviour from both clients and their advisors – placing a greater emphasis on digital solutions that enable remote engagement rather than face to face interactions. Looking specifically at the Middle East, a change in the trajectory of the wealth management model has been evident for quite some time. It is becoming clearer that firms that can provide an automated platform with periodic access to a human advisor is the most preferred scenario across a range of investor profiles - combining the best of both worlds for clients. At Standard Chartered, we curate the most diverse market research and combine this with our own expertise to help clients navigate financial markets and maximise the return on their investments. The adoption rate for digital wealth management solutions has also increased dramatically during the pandemic. In the beginning of 2020, Standard Chartered launched a mobile fixed income platform in select African markets. By July, up to 50% of fixed income transactions were completed using the mobile app. The diversification of digital product offerings in investments has given clients the

option to choose where to invest during the pandemic. However, customers still care for an experienced professional who will translate and explain the strategies proposed by the systems, while offering support in the decision-making process. The classic, relationship-driven business model with its communication channels such as telephone, email and face-toface meetings will not become obsolete, but there will be a shift from personal interaction to digitally enabled client interactions via intelligent solutions and social media.[1]

Given the rapidly ongoing changes in and around the banking sector across our region, how does this affect or even change the values of the bank? The changes experienced on multiple fronts by the financial industry is a reality for us all. However, as banks we have a choice in terms of how we approach and address this change. One of the most important principles to master this evolution is to move from managing people and processes to managing purposes and principles with an entrepreneurial mindset. Our purpose is and will continue to be, to drive commerce and prosperity through our unique diversity. This sets a single direction for everything the Bank does, connecting our strategy to our growth and the ambitions we have in the societies that we operate in. It is unique to us because of our history, our global footprint, and our ambitions. These values define who we are, and how we operate. They sit at the heart of everything we do. We a re we l l a wa re of o u r responsibilities and the part we play in creating a more sustainable world. Our focus is to provide our customers and communities with the opportunity to grow financially, while also improving their wellbeing and quality of life across our unique footprint in the region. We are proud to be the bank for the new economy - of people and ideas, of technology and trade, and our heritage

Banking and Finance news in the MEA market

and values that are expressed in our brand promise - here for good. And while being ‘Here for good’ may have gotten harder, due to a plethora of changes the industry continues to witness, we are a bank that takes a stand, setting long-term ambitions for our role on issues that matter most. This stretches our thinking, our actions and our leadership, it’s how we will accelerate our growth. These are big ambitions for our business and in society. So big we can’t get there alone. That’s why we’re collaborating across our network and with a huge variety of partners. From start-ups to multinationals, fintechs to NGOs, each being at the forefront of emerging trends and market forces.

SINCE 2018, OUR FULLY DIGITAL AFRICAN BANKS HAVE ACQUIRED 1M NEW ACCOUNTS, WITH 98% OF OUR CUSTOMERS NOW BEING ACQUIRED DIGITALLY Finally, we understand that embracing transformation is no longer an option; it’s a necessity, and everyone in the business has an important part to play in this journey. Across the region, we’ve built a bank with diverse experience, capabilities and culture that set us apart, and is a source of our competitive advantage. To make the most of our diversity, we’re challenging everyone in the Bank to be restless and ‘intrapreneurial’, solve problems and bring fresh ideas. That’s how we can do things better, and make a difference for our clients, our business

and in the world as things rapidly change. We’re building a culture of learning while empowering colleagues to grow, follow their aspirations and embrace the skills needed for the future.

What would you say have been the leading motivations that brought you to the place you now are in your career? Having led the Bank’s operations in Africa and the Middle East (AME) since 2015, as well as having been with the Standard Chartered family for over 20 years, I have seen first-hand that change is the only constant in nature. As it is commonly known, it is not the ones who are the strongest, fastest or fittest that survive, but rather the ones who adapt most quickly. Relying simply on how business was done, or on the existing tools in your arsenal will only get you so far. However constantly seeking new ways of doing business, generating fresh ideas, and staying hungry for knowledge and development is key to seeing personal or professional success in my opinion. When you take digital transformation for example, as mentioned before - a key moment in my career was when we decided to open a digital bank in Cote d’Ivoire – and we accelerated that strategy across our markets in Africa. Our purpose remained the same, however it was important for us to challenge the way we operated, to ensure we drive commerce and prosperity to the areas that need it the most. Such change is only realised when you have a strong, diverse team that shares the same passion for challenging the status quo and is not afraid of adopting exponential thinking to help turn ambition into action.

How do you feel about the future for Africa and the Middle East and what advantages, or opportunities do these areas have over other parts of the world? Africa is closely watched as the next big growth market – a description that has persisted for a while. The continent

THE ADOPTION RATE FOR DIGITAL WEALTH MANAGEMENT SOLUTIONS HAS ALSO INCREASED DRAMATICALLY DURING THE PANDEMIC boasts the world’s largest free trade area (a 1.2-billion-person market), is the fastest urbanising continent, and is home to some of the youngest populations in the world. It is already a global leader in mobile money, with the sub-Saharan region alone being responsible for over 45 per cent[2] of mobile money payments in the world. The continent continues to create a digital ecosystem which particularly serves as a multiplier of growth, given the access to smart phones and other devices that enhance consumer information, networking, job-creating resources and even financial inclusion. Probably unknown to many, Kenya and Uganda were the first countries to introduce mobile payments in the mid-2000s. And it is the continent’s early history with mobile payments that is paving the way for it to become a frontrunner in e-commerce, with the market estimated to double in size to USD75 billion by 2025[3]. We expect this trend in digitisation to continue across the continent. T h e re a re a l s o s i g n i f i c a nt opportunities in terms of agriculture, with the continent possessing 60% of the world’s uncultivated arable land, and valuable investment opportunities across Africa’s abundant natural resources such as oil, gold, and platinum. At the same time, we are also seeing a move away from extractive industries to areas such as energy and telecommunications, with a plethora of markets being seen as emerging financial-technology hubs. These are promising signs that demonstrate the gradual move of the content towards a maturing economy with greater reliance on skill-based labour. However, for Africa to be seriously considered as a continent of opportunity,

it is key that it comes together to address deep and structural reforms in the form of political stability and policy coordination, in addition to improving ease of doing business, attracting foreign direct investment, and the progress on making the African Continental Free Trade Area a functioning regional economic bloc. The Middle East m ar kets are increasingly diversifying their sectors, with the UAE’s ‘Make it in the Emirates’ initiative accelerating the country’s industrial sector transformation into a global manufacturing hub – aiming to push the industrial’s sector contribution to Dh300 billion by 2031 across 11 priority sectors in the country[4]. Moreover, Saudi Arabia, as part of its Vision 2030 – is a large and attractive market that will continue to open up, and encourage private sector participation, which will mean our global and regional customers will have the opportunity to participate in sectors like healthcare, education, entertainment and infrastructure. Across these markets, we also see significant opportunities for collaboration and innovation, through digital banking, ecosystem banking and blended finance, to attract and direct additional capital to our markets. Digitisation of business and digital transformation of supply chains in the Middle East are under way and intend to improve data accuracy and transparency, help businesses anticipate risk and prevent loss, and improve supply chain efficiencies. The UAE, Qatar, KSA and Bahrain for example are leading the way to adopting digital banking and are also collaborating with Fintechs to capture this segment of digital-first services to customers, with strong government support to set up favourable regulatory environments. mea-finance.com

WEALTH & INVESTMENT

Wealth of Opportunity High Net Worth families in the Middle East are adopting protocols to regulate succession, conflict resolution, business valuations and other key issues to preserve wealth

he Middle East, one of the world’s hotbeds of wealth creation, has seen an acceleration in trends relating to succession planning, alternate investment vehicles, wealth preservation, digitisation in wealth management and growing interest in sustainable investing. The changes in demographics, technology, environment and social behaviours have set the ground for rapid transformation in wealth management and investment. “With the proliferation of investment products, digitalisation, the heterogeneous nature of client bases and the need to integrate strong sustainability criteria into their business, the wealth manager’s role has become even more complex,” said BNP Paribas.

The outbreak of COVID-19 created some exceptional challenges for all industries and in wealth management and investment, the pandemic is driving pre-existing trends as wealth managers are changing the way they deliver advice and serve clients. “The wealth management industry is in the midst of significant change as a new generation of investors, whose expectations and preferences have been shaped by new technologies, have brought new standards to the industry in terms of how advice and investment products are being delivered,” said Deloitte. Julius Baer said that there’s an emergence of the next generation of clients—a generation that looks beyond the traditional ways of wealth preservation,

Banking and Finance news in the MEA market

especially in the GCC region. The Swiss wealth manager expanded its regional footprint by setting up an advisory office in Qatar in June to tap into emerging opportunities in the region. M e a n w h i l e, we a l t h m a n a g e rs are being confronted by the task of balancing the traditional approach to risk management with the need to respond quickly to the prolonged pandemic that has created massive changes to their operating environment. Over the past two years, business ethics have moved to the forefront as metrics to identify how well a company is performing amid growing demands from investors that environmental, social and governance (ESG) issues be factored into their portfolios. PwC said that ESG trends are converging and driving rapid social and economic change in the Middle East including the regional government’s recent net-zero pledges in response to climate change—that companies are still digesting their implications. The regulatory environment in the Middle East is fast evolving leaving wealth management firms grappling with a deluge of requirements and expectations

from both regulators and investors. The UAE securities regulator, which is tasked with structuring the legislative policy that promotes the organisational and supervisory framework of companies operating in the securities field, cautioned investors against engaging with unlicensed entities in May. Wealth management is one of the most attractive sectors within the financial services sector, thanks to the business’ greater growth prospects, lower capital requirements and a higher return on equity (ROE) compared to most other retail banking businesses. The business’ offerings are also essential to attracting and retaining profitable retail customers.

A hotbed of wealth creation Family wealth in the Middle East makes up a sizeable proportion of the region’s non-oil economy and in these challenging times the need for adaptability and action to ensure that potential isn’t wasted, and the future is secured has never been more paramount. “As HNW business families in the Middle East are quite young (led by first/ second generation), succession planning will become increasingly important as these families grow,” said KPMG. Middle East high net worth (HNW) families are adopting protocols to regulate succession, conflict resolution, business valuations and other key issues to preserve wealth and ensure a smooth transition between generations. However, these policies and procedures do not necessarily include key documents such as family constitutions or conflict resolution mechanisms, hence there is still much work to be done. Abu Dhabi issued a new family business ownership governance law in January that prevents selling shares or dividends of family-owned businesses to individuals or companies outside the family. The law requires prior approval from family partners before a shareholder sells an equity stake to a non-family member. Family-owned companies are also turning to foundations owing to how

AS HNW BUSINESS FAMILIES IN THE MIDDLE EAST ARE QUITE YOUNG (LED BY FIRST/SECOND GENERATION), SUCCESSION PLANNING WILL BECOME INCREASINGLY IMPORTANT AS THESE FAMILIES GROW – KPMG

they provide a dynamic option that can accommodate a family’s transformation priorities and values. Nina Auchoybur, the Managing Director at Ocorian said that foundations were first introduced in the UAE in 2017 and they have since grown to become an integral part of the Gulf state’s wealth management offering. There are currently more than 170 foundations registered in the UAE. Meanwhile, the UAE will lead the world in attracting private wealth to its economy this year as Russian and Ukrainian millionaires seek new homes, Henley & Partners projected in June. The Gulf state is poised to welcome 4,000 millionaires as Russia and Ukraine are likely to suffer a net outflow of 15,000 and 2,800 high net worth individuals (HNWIs), respectively. “The UAE is the largest wealth management center in the region, with approximately 83,000 millionaires living in the country and assets under management (AuM) of around $110 billion,” said KPMG. The succession problems have been around for the last five years and are expected to remain a challenge for the next 10 years. However, to ensure that wealth is being preserved and that there is a smooth transition between generations, establishing family protocols to regulate succession and conflict resolution is critical.

The client of tomorrow The shift to digitisation in the financial services sector is inevitable and industry experts expect it to radically transform wealth management in the coming decade. Once a laggard in the adoption of technology, the sector is accelerating digital transformation, deploying artificial

intelligence (AI), robotics and other financial technologies to enhance clients’ experience and trust. McKinsey said that the wealth management industry is typically seen as embodying old-fashioned values and providing discrete as well as tailored services. However, these attributes remain valuable parts of the business, but for many clients, they are no longer sufficient. The digital transformation in the industry is being driven in part by changes among clients. Though the typical client in a developed market today is around the age of 65 years and is comfortable with digital technology, shifting demographics, evolving client behaviours, the rise in new innovative technologies and emerging disruptive competition are all reshaping the wealth management industry. “Regardless of how the models shape up. What all wealth managers are doing, and they continue to do is to ensure that they are there for the client in the shape and in the form that the consumer prefers,” Ayesha Abbas, Managing Director and Head of Affluent Priority & Premium Banking, Standard Chartered UAE said at MEA Finance’s Banking Technology Summit & Awards 2022 in May.

Digitalisation trends Although most incumbents banks in the region are working on strengthening their wealth management businesses, they’re likely to face growing competition from wealth technology platforms that are developing advanced business-tobusiness (B2B) and business-to-consumer (B2C) digital solutions and challenger banks—neobanks and payments firms. mea-finance.com

WEALTH & INVESTMENT

“The client experience has been the prompt for the digital transformation j o u r n ey of we a l t h m a n a g e m e nt companies,” said Deloitte. The growth of “automated wealth managers” or Robo - advisors is revolutionising wealth management with unprecedented force. By leveraging algorithms to offer financial advice for a fraction of the price of a real-life client advisor, Robo-advisors are growing at a rapid pace, doubling their assets under management every few months. The Middle East market had undergone a dramatic shift long before the pandemic hit as regulators embraced Roboadvisors or digital financial advisories. Bahrain’s central bank issued directives on Robo-advisory in 2019 as the small Gulf state affirmed its position itself as a leading digital financial hub. The Saudi market regulator also allowed two firms, Wahed Capital and Haseed Investing Company, to test their digital financial advisory services the same year. “Robo-advisors translate client input into investment logic such as risk or liquidity factors and propose adequate investment opportunities well beyond simply highlighting a handful of ETFs out of a few thousand possibilities,” said Deloitte. Commercial Bank of Dubai unveiled its Robo-advisory app CBD Investr in April 2021. The platform offers the bank’s clients access to globally diversified and personalised portfolios of stocks, bonds, and other asset classes using low-cost exchange-traded funds. Meanwhile, the regulatory push for open API infrastructures across the Middle East is expected to make it easier for wealth managers to deliver consolidated client views of multiple relationships.

Responsible investment The pandemic accelerated digitisation of processes and client propositions, a shift towards centralised portfolio and risk management amid increasing focus on responsible investing while emphasizing the role of wealth managers in supporting socio-economic ecosystems.

HNWIs AND FAMILY WEALTH ARE UNIQUELY POSITIONED TO LEVERAGE PRIVATE CAPITAL TO DRIVE GROWTH IN THE ESG SECTOR BY SUPPORTING LONG-TERM SOCIETAL GOALS AND AMBITIONS – The World Economic Forum

The growing demand for sustainable investing from investors is driving some wealth management firms to develop sustainable investing strategies as public attention towards the global sustainability agenda is also on the rise. Speaking at the Banking Technology Summit & Awards 2020, Daniel Robinson, Head of Wealth & Personal Banking, HSBC said that ESG is a massive trend in the Middle East not because corporates want to talk about it but because of the growth in clients’ interest. The investment theme is increasingly attracting attention in wealth management due to the strategy’s promise of utilising a range of non-financial information to better align finance with long-term value and societal values. The World Economic Forum (WEF) said in a report in January that HNWIs and family wealth are uniquely positioned to leverage private capital to drive growth in the ESG sector by supporting long-term societal goals and ambitions. Wealthy individuals and family offices are ideally suited to the kind of approach that the investment theme requires owing to the group’s large pools of capital and multi-generational objectives that support a long-term strategy. Compared to institutional investors that may be subject to commercial policies or have limited decision-making due to mandated trusts, HNWIs and family offices can be flexible in how they approach investments in terms of size, geographies and asset classes. McKinsey said that for sustainable investment strategies to succeed in this dynamic operating environment, ESG objectives or considerations must be

Banking and Finance news in the MEA market

derived from a financial institution’s overall mandate. The overwhelming majority of studies in the field of sustainable investing show that the outbreak of COVID-19 boosted interest in sustainable investments. Banking juggernauts including JPMorgan Chase & Co., Rothschild & Co. and UBS Group have carbon reduction strategies for clients in place in line with the Paris financing commitments as the wealth management banks face mounting pressure from shareholder activists to align funding activities with climate change commitments. Last October, Standard Chartered set new targets for reducing its exposure to carbon-intensive sectors by 2030, including plans to mobilise $300 billion in green and transition finance as part of its broader strategies to reach net-zero emissions for itself and its clients by 2050. However, sustainable investing is subjective because there are as many clients as there are sustainability preferences and for impact investments to inject new capital to help solve social and environmental challenges, the wealth management industry is the most effective option. Wealth management in the Middle East is a growth industry and mounting hopes of post-pandemic recovery signal an imperative to prepare for the changes in technology, consumer needs, and society that will shape the future of the sector. The real estate sector is one of the most publicly recognised asset classes and the industry is offering investment opportunities buoyed by a rebound in the UAE property market, thanks to wealthy Asians escaping lockdowns to Russians running away from sanctions imposed on Moscow’s financial system by the US and its allies.

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WEALTH & INVESTMENT

A growing and evolving regional market Recent world events, the widening concerns of clients, current growth in the sector and the consequent hastening of digitisation has led to a new approach in the provision of wealth and investment services in the region, and the talent needed to service it. Basit Sajid Saiyed Head of IWS UAE & MENAT, HSBC Bank Middle East talks with MEA Finance about these developments

Banking and Finance news in the MEA market

hat is driving the growth of wealth management and investment services in the GCC and the Middle East?

Local and global factors are at play in the region. Locally, economies in the region have been liberalising and their economic diversification plans – which are some of the most ambitious economic transformation programmes in the world today, have and continue to gain additional traction. Across the world, the recovery from the global pandemic has had a clearly obvious impact on oil prices, which has in turn has strengthened public finances. This mood music has definitely influenced our customers, who are seeing the region as a safe and reliable area in which to invest.

the wealth management sphere may start to take shape too, especially within the private banking sector. As the markets across the region deepen and broaden, futures and options as well as other derivatives may well start to become more prominent, and digital assets are also gaining more attention.

Fixed income and dividends are becoming one of the largest drivers of wealth products across our offering. We have also seen that the technology sector has become increasingly popular with customers in the region. Over 50% of our portfolio is in multi assets, which our customers hold as their primary investment while using single asset funds or securities as satellite holdings.

What are the current challenges in recruiting wealth and relationship managers and how are these roles changing?

How can private banking, wealth management and investment be successfully transitioned to a platform-based service and retain its bespoke appeal? Relationships are at the heart of our business, and I don’t see that changing. The way we conduct and nurture those relationships has obviously changed from, say, five years ago. The impact of the pandemic on the growth of virtual communications and increased digitisation has fundamentally altered standard relationship management practices. We are digitising at scale across our international network - using technology to create excellent customer experiences, to become more efficient and to open up new growth opportunities. We’re putting the global power of HSBC into every customer’s pocket with simpler, smarter and more secure digital banking.

How are the values of upcoming generations of high-net-worth clients in the region influencing the ESG policies of your institution? We are increasing the number of ESG products available to our customers, and we are expanding training for our relationship managers on the range of ESG products that we offer. We know our clients want meaningful dialogue about sustainable finance products and ESG

Basit Sajid Saiyed Head of IWS UAE & MENAT, HSBC Bank Middle East

issues and so we are fully committed to having those impactful conversations with them. We also offer our clients regular webinars on ESG topics, to help them in their sustainable investment decision making and product choices. And we are also bringing leading global experts on ESG into our relationship management teams, working alongside our relationship managers (RMs) to embed the best ESG practices in our product offering.

In terms of asset classes, how will the regional investment landscape will look for high-networth customers in five years from now? We have seen significant interest and investment in the Middle East region from across our customer and client base, and it is also true in our wealth management business too. I think that we can expect to see private equity holdings grow, along with SPAC opportunities, and it is certainly possible that current ideas about venture capital funding entering

I THINK WE CAN EXPECT TO SEE PRIVATE EQUITY HOLDINGS GROW, ALONG WITH SPAC OPPORTUNITIES

At HSBC we are always the looking out for the best talent across our business, and that is certainly also the case here in the Middle East. It is important for us to maintain our competitiveness as an employer, which means offering meaningful career and development opportunities, alongside competitive benefits packages and salaries. It is not just numbers on a pay

RELATIONSHIPS ARE AT THE HEART OF OUR BUSINESS, AND I DON’T SEE THAT CHANGING cheque, it is also an environment where you are encouraged to think, to learn and to develop. That is why at HSBC we invest in our learning and career development offering. With the business of wealth management growing across the markets in this region, relationship managers are clearly now in greater demand than ever before. The nature of relationship management is also evolving towards long term financial planning and bespoke product advice. We know that the relationships our colleagues have with our customers is at the very heart of our business, and so protecting those relationships means matching high levels of customer satisfaction with our colleagues’ job satisfaction. mea-finance.com

WEALTH & INVESTMENT

Increasing in Stature Samira Zakour Managing Director & Head of Global Head of Private Banking & Key Client Group, at FAB explains what is making the region become one of the leading centres of wealth management, and that while generational changes are reshaping methods and the way business is done, there are some things in this market that will not change

Banking and Finance news in the MEA market

hat is driving the growth of wealth management and investment services in the GCC and the Middle East?

MENA is quickly becoming one of the most important destinations for wealth management clients. In fact, a recent report by Henley & Partners indicated that the UAE was expected to attract about 4,000 millionaires this year, becoming the main destination for the wealthy and the ultra-wealthy. It is understandable too. The UAE has stood out first for its management of the pandemic, which was one of the best in the world, and its safety and stability. Global wealthy

of investments slightly. Foreign clients have shown, naturally, more interest for global investments than the regional clients, which understand and are more comfortable with the local markets and so who tend to have slightly higher allocations to this market. That said, the GCC markets are going through positive secular changes that are making them even more attractive to global investors. For example, higher foreign ownership limits and single-stock futures for some securities in the Abu Dhabi Securities Market has massively increased the liquidity of that market and global institutional investors have recently increased their allocation to the GCC.

clients are increasingly realizing that the UAE is more predictable and reliable than many of the more traditional wealth management destinations. On top of that, the UAE is at the forefront when it comes to financial innovation, but our central bank has managed to keep improving the oversight and regulation of customer rights, so that such innovation is not coming to the detriment of governance.

How can private banking, wealth management and investment be successfully transitioned to a platform-based service and retain its bespoke appeal? The platform-based approach simply makes it easier for clients to sift through the offerings and understand the roster of options. It does not, and will never, replace the high-touch approach of private banking. Wealth management is all about relationships. Clients may get to know what is available more easily with a platform-based approach, but they continue to trust their bank and their relationship managers to steer them through those products. This can never be replaced by a platform or even by robo-advisory. Our clients are usually busy people who know they can trust us to ensure their ‘nest egg’ is safe and growing. This will not change.

How are the values of upcoming generations of high-net-worth clients in the region influencing the ESG policies of your institution? There definitely is more awareness of environmental, social and governance factors among younger wealthy clients. However, ESG is part of the DNA of FAB. We were the first bank (then as NBAD) to issue a green bond in the entire Middle East and Africa region. We were also

Samira Zakour, Managing Director & Head of Global Head of Private Banking & Key Client Group, FAB

trailblazers in terms of green loans, with a ground breaking deal with Etihad Airways. Furthermore, we were among the first banks to have a comprehensive ESG report in the region. That said, even our clients from slightly earlier generations have started to request more ESG information, and we have seen increased interest in our ESG-focused investment offerings. This should not be a surprise because many of our clients have been following Islamic principles to investment for their entire lives and many of the tenets of ESG stem from ethical investing, of which Islamic investing can be seen as one expression.

In terms of asset classes, how will the regional investment landscape look for high-net-worth customers in five years from now? The large influx of foreign clients to the region (many of whom came here during the pandemic and found it so nice that they just never left!) has changed the focus

WE WERE THE FIRST BANK (THEN AS NBAD) TO ISSUE A GREEN BOND IN THE ENTIRE MIDDLE EAST AND AFRICA REGION

What are the current challenges in recruiting wealth and relationship managers and how are these roles changing? We are quite fortunate to be the safest bank in the region, a perception that many of our employees have as well. Furthermore, our global footprint (on the Private Banking side we have branches

IT DOES NOT, AND WILL NEVER, REPLACE THE HIGHTOUCH APPROACH OF PRIVATE BANKING or full-blown subsidiaries in Switzerland, Singapore, the UK, Saudi Arabia, the US and France, just to mention a few), allows employees and prospective hires to see the possibility of a global career, something that can be quite attractive, particularly for younger talent. Naturally, we are not immune to some of the issues facing other banks, such as higher pay and benefits requirements from stakeholders – but we have always been competitive on both counts. mea-finance.com

WEALTH & INVESTMENT

The GCC Perspective Faizal Bhana Director, Middle East, Africa and India and An Kelles Director, GCC, at Jersey Finance discuss todays’ appetites, requirements and the developing considerations of GCC based investors as newer generations come to the fore

Faizal Bhana, Director, Middle East, Africa and India, Jersey Finance

ave investment figures emanating from the GCC grown in recent years, both in terms of individual investors and size of commitments?

Faizal Bhana (FB): Jersey’s long-standing relationship with the GCC means that business flows have grown steadily, but also diversified. Jersey, for instance, has long been a centre for supporting private and family wealth strategies for families in the GCC. However, in recent years, we’ve seen a growing appetite to engage

An Kelles, Director, GCC, Jersey Finance

in alternative funds – particularly real estate, private equity and infrastructure. A good example of that was the Jerseydomiciled Ethos Invest Fund – a £1bn fund that became the first Shari’a compliant tech focused private equity fund on launch last year.

What are the main factors motivating investors from the GCC to locate investments in nonregional IFCs?

FB: First, GCC investors are looking to diversify into new geographies, such as

Banking and Finance news in the MEA market

Europe and the US, and emerging sectors, such as alternative assets and digital assets. To do that, they need specialist expertise, the sort of expertise offered in other IFCs like Jersey. In addition, investors in the GCC look to other jurisdictions to avail themselves of the stability they offer, in particular in cases where their foremost objectives are asset protection and long-term succession and legacy planning. An Kelles (AK): Such requirements have further accelerated due to the impact of Covid whereby the ability to transact seamlessly remotely became imperative while the outlook towards investment priorities shifted further towards socially conscious principles. In most cases, strategies involving non-regional IFCs are complementary to their domestic arrangements.

Do investors from the Middle East into IFCs such as Jersey, request any unique investment requirements or trends, distinguishing them from those from other regions?

FB: With an estimated $1 trillion in assets expected to be transferred between generations globally in the coming decade, it is fair to say that one distinct trend we are seeing is a shift in attitudes and priorities as the Nextgen comes to the fore. This assertion was recently borne out in a study we commissioned, ‘Global Attitudes to Islamic Wealth Management’ which set out to understand the views of Muslim family offices and high net worth individuals on Shari’a compliant and ethical wealth management services. That report highlighted that while fundamental principles such as philanthropy remain incredibly important,

some attitudes toward Islamic finance wealth management are evolving across the generations; different generations within a family sometimes have conflicting motivations, interests, and ideas on how to resolve problems. AK: That provides some interesting challenges and considerations for advisers. Religious injunctions, for instance, are never far from Muslim thinking. Notably 96% of respondents to that study stated they would always choose a Shari’a compliant investment - even if the performance was inferior to an equivalent conventional investment How one interprets those requirements in the modern era can often vary enormously - even within families and indeed in IFCs supporting those families.

Are you witnessing considerations such as ESG influencing the investment decisions coming from Middle Eastern investors? FB: In recent years our services in the GCC have certainly diversified and we are seeing an increase in ESG considerations. It’s something that particularly resonates with the next generation of millennials and female business leaders who are making more and more business decisions regarding GCC corporate and family wealth management. AK: Certainly, the pandemic has accelerated this trend, but it’s one that was in train before too. In this respect, we like to think Jersey is ahead of the curve. Last year we rolled out an ambitious sustainable finance strategy with the aim of positioning Jersey as the leading IFC for sustainable finance in the markets it operates in by 2030. Combined with our deep history of supporting business in the region, we

DIFFERENT GENERATIONS WITHIN A FAMILY SOMETIMES HAVE CONFLICTING MOTIVATIONS, INTERESTS, AND IDEAS ON HOW TO RESOLVE PROBLEMS see ourselves as having a pivotal role to play in enabling GCC wealthy families and investors to realise their sustainable investment goals and ultimately make a difference in a broader sense to society.

How do Shariah compliant investment options in other IFCs compare to those available in the Middle East?

FB: Jersey has been working closely with countries in the region for many years and, in fact, just last year celebrated a decade of having a presence in the GCC. As such, we have long been alive to the need to provide expertise in Shari’a compliant services and have developed Islamic finance expertise to complement that found in the GCC region itself. Interestingly, though, what came across strongly in our latest research was that Muslims are not homogenous in their attitudes towards non-Shari’a compliant products. Many see Shari’a compliance as a framework for investing but not always exclusively. Investments that are not certified Shari’a compliant are often seen as acceptable to investors as long as they do not actively contravene Shari’a principles. Jersey has taken this on board, to offer optionality to GCC investors and enable them to pursue a strategy that they are comfortable with and that meets their values.

IN MOST CASES, STRATEGIES INVOLVING NON-REGIONAL IFCS ARE COMPLEMENTARY TO THEIR DOMESTIC ARRANGEMENTS

It’s significant that over half of respondents to our study stated it was important for jurisdictions to develop their own codified approach to ethical finance as a way to support the expansion of their product exposure beyond Shari’a compliance alone. In this respect, Jersey’s Shari’a compliant offering combined with its standing as an international hub for cross-border investment should stand it in good stead and is in no small part why the jurisdiction remains attractive.

What should Middle East based investors look for when deciding to work with any particular IFC?

FB: While Middle East based investors still place value on the cornerstones of reliability and stability backed up by a comprehensive infrastructure in the IFCs they work with, they will also increasingly look to jurisdictions with a forwardthinking approach when it comes to ESG and digital innovation. Jersey can answer well on all scores. There are few, if any, IFCs of our stature that can offer a dedicated workforce of almost 14,000 professionals and the depth and breadth of experience and expertise that Jersey has developed. AK: We are proud, for example, that we have been able to provide international investors with cuttingedge secure, remote, digital services throughout the pandemic, backed up by what is now officially the fastest broadband in the world. When combined with our forward-focused approach to ESG and our firmly established ties to the region, we hope investors will continue to see Jersey as a jurisdiction of choice that can complement their domestic structures. mea-finance.com

WEALTH & INVESTMENT

Distinguishing Features Describing where GCC countries distinguish themselves in wealth creation, how digital solutions increase options, and the demand for talent, Ali Janoudi Head of Wealth Management Middle East & Africa at UBS Global Wealth Management talks with MEA Finance about wealth and investment services in the Middle East

hat is driving the growth of wealth management and investment services in the GCC and the Middle East?

Like in any other part of the world, the demand for wealth management services and investment advice is correlated with the creation of new wealth. Where GCC countries differ, is that this wealth creation has been more accentuated over the past decade than elsewhere. And this trend will continue in the near future, supported by energy prices leading to a projected GDP growth for the GCC countries of 5.9% in 2022 vs 2.6% for the world economies. Over that same period, we have seen an emergence of entrepreneurs, some in new world economies, in line with the governments’ stated program to diversify the region away from fossil energies. It is worth noting that the amount of startup funding in Saudi Arabia for the whole year of 2016 was surpassed every month in 2021, and that the number of IPO applications on the Saudi bourse have doubled to date compared to last year. Qatar noteworthily innovated in 2021 through several transactions on the newly created Qatar Equities Venture Market

Ali Janoudi Head of Wealth Management Middle East & Africa at UBS Global Wealth Management

enabling a direct listing method, without an IPO process prior to listing. The demand for wealth management services has also grown in parallel with local investors becoming more global in their thinking, as well as more demanding with respect to the solutions required for their individual needs. UBS’s scale is a major advantage here, as it enables us to

Banking and Finance news in the MEA market

develop an unparalleled offering, reflecting the views of our Chief Investment Office, whose thought leadership comes from 200 investments specialists around the world in 11 key financial hubs.

How can private banking, wealth management and investment be successfully transitioned to a platform-based service and retain its bespoke appeal? D i g i ta l i s of te n u n d e rsto o d a s standardization. We believe that the key benefit of digital solutions is the convenience it brings in a very personalized way. At UBS, our vision is to convene the global ecosystem for investing where thought leadership is impactful, people and ideas are connected, and opportunities are brought to life. There are several initiatives underway to bring our vision to life, for example the recent acquisition of Wealthfront, an industry-leading, digital wealth management provider. Let me pick another one, Circle One, an app we recently launched in APAC before a global rollout which will include the Middle East. UBS Circle One is a new digital platform that brings the best of UBS’ global ecosystem to clients. This leadingedge innovation connects clients to experts and thought leaders with tailored actionable ideas. With this innovation, UBS will deliver research and solutions in an engaging and convenient way. Clients get new daily content based on the latest UBS CIO House Views through short videos, podcasts and interactive live webinars, complementing traditional investment reports and physical events. Clients will also be offered timely actionable ideas and investment opportunities at their fingertips, where they can then choose to invest or trade through our mobile banking app.

There will be new features added to the app regularly. In the next phase, clients will be able to connect with each other and to experts across the globe in “circles” of interest groups on topics they are passionate about from investing, wealth planning, family advisory to sustainability, art and philanthropy, among others. More generally, we will give our clients the choice of how digital they would like our wealth management services to be, according to their personal preferences. And the choice is very broad, from digitally led advisory all the way to a service model where digital is combined with human interactions.

How are the values of upcoming generations of high-net-worth clients in the region influencing the ESG policies of your institution? We want to be the financial provider of choice for clients who wish to mobilize capital towards the achievement of the UN Sustainable Development Goals (SDG) and the transition to a low-carbon economy. As a result, we made sustainable investing the preferred solution for our wealth management clients. In total, UBS manages USD 251 billion of sustainabilityfocused and impact investments. We are a global leader in SI and in integrating ESG aspects into our investment processes, with a global footprint and a network of resources to deliver a wide range of research, advisory and product capabilities. We are gladly taking these steps because they are equivalent to what many institutional but also private investors consider a license to operate. We are also deeply convinced that embedding ESG aspects are essential to optimizing risk-adjusted returns in a world that is increasingly exposed to ESG trends. This happens to coincide with values of the younger generation. Many of our younger clients value the increasing integration of ESG aspects into investment decisions, and our priorities are naturally aligned to serve the needs of this generation. For the Middle East, it is also relevant to highlight that sharia-friendly finance and SI share several similarities, yet the

two approaches are rarely combined in practice. Sustainable and Sharia-friendly investing are a natural match, and an area that we address regularly with our clients. Both investment schools go beyond a pure economic or financial approach to investing by considering the impact a company or activity might have on society and the environment. Applying sustainable investing scores to a Sharia-friendly portfolio helps identifying companies that have a positive impact on society and the environment and enhances the performance of the overall portfolio on ESG metrics.

In terms of asset classes, how will the regional investment landscape will look for high-networth customers in five years from now? We are fortunately witnessing very positive developments in the region, such as, Saudi Arabia’s Vision 2030 as a

For local GCC investors, the conclusion should not be to increase exposure to local markets, rather to continue focusing on achieving an optimal global diversification of their assets.

What are the current challenges in recruiting wealth and relationship managers and how are these roles changing? The Middle East is home to several of the fastest growing financial centers. The DIFC for example achieved its 2024 strategic growth targets three years ahead, during the first half of 2021. The Centre attracted 996 company registrations last year, the highest ever recorded in a single year and a 36% increase from 2020. As a result, the demand for talent coming from both international and local wealth managers has often exceeded the talent pool. One can truly speak of a “war for talent” whose logical consequence is to

MANY OF OUR YOUNGER CLIENTS VALUE THE INCREASING INTEGRATION OF ESG ASPECTS INTO INVESTMENT DECISIONS pathway to the country’s future. Should these developments prove successful – which we are confident they will – this will meaningfully help increase the presence of regional assets in global investment portfolios. Moreover, a greater presence from global investors should help to boost liquidity in local stock and bond markets and allow for better, and likely cheaper, access to capital for local companies. Lastly, a successful transition toward an economic growth model that relies less on fossil fuels should also improve the sector diversification of local markets, making them more appealing for investors from a diversification, and hence, expected risk-adjusted returns perspective. In other words: the region’s markets will likely play a more crucial role in globally diversified portfolios.

push compensation levels to above market norms in the most established financial centers. And this phenomenon may be here to stay given that FDI in MEA was 10 % higher (during the COVID-19 period) vs a 33% decrease in the rest of the world. Moreover, regulatory requirements are influencing the profile of the ideal wealth manager. Whilst the ability to develop a strong personal relationship with clients remains central, bankers must also combine strong technical expertise with irreproachable ethical behavioral. Their role has evolved accordingly. In that challenging context, UBS has managed to consistently hire new talents in the region, doubling our local work force in Dubai over 5 years to 120 persons. We plan to reach a comparable level in our Qatar office in the course of next year. mea-finance.com

TRADE FINANCE

Supply Chain Innovation Technology’s role in supply chain management and trade finance Devid Jegerson Head of Customer Experience & Platform Development, National Bank of Fujairah, makes a compelling case for the adoption of distributed ledger and blockchain technology in trade finance

Devid Jegerson

Table 1: List of essential banking services that can be disrupted by Blockchain technology

nternational trade and global value chains are essential both for the prosperity of nations and for reducing geopolitical tensions. The distribution of production worldwide has driven globalization while gradually narrowing the gap between developed and developing countries. As a result, international trade has made the world more economically balanced and inclusive. However, more remains to be done, and the poorest nations continue to have a minimal share of world trade. Participation in international markets and value chains requires breaking down trade barriers and establishing seamless processes at the core of an effective and efficient cross-border ecosystem. Improving border processes and systems has become even more critical as trade growth has slowed from historical highs, limiting its potential contribution to jobs, opportunities, and economic development. Nevertheless, experiments have shown that the current situation could significantly improve at many borders.

PROCESS

DESCRIPTION

Payments

By setting up a decentralized ledger for payments (e.g., Bitcoin), blockchain technology could enable faster payments with lower fees than banks

Clearance and Settlement Distributed ledgers can reduce operational costs and bring us closer to real-time Systems transactions between financial institutions Fundraising

Initial Coin Offerings (ICOs) are experimenting with a new funding model that unbundles access to capital from traditional fundraising services and firms

Securities

By tokenizing traditional securities such as stocks, bonds, and alternative assets and placing them on public blockchains, blockchain technology could create more efficient, interoperable capital markets

Loans and Credit

By eliminating the need for gatekeepers in the credit and lending industry, blockchain technology can make borrowing safer and offer lower interest rates

Bill issuing

By replacing the cumbersome, paper-heavy bill of lading process in the trade finance industry, blockchain technology can create greater transparency, security and trust between trading parties worldwide

By storing customer information on decentralized blocks, blockchain technology Customer KYC and Fraud can make information sharing between financial institutions more accessible and Prevention more secure

Distributed ledger and blockchain technology guarantee to have farreaching implications for global trade and supply chains. Providing increased transparency, effectiveness and combination throughout supply chains has been one of the most fruitful areas for blockchain testing. There is a high

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probability that most supply chains will be influenced by blockchain technology.

The trade finance disruption Blockchain technology ensures a way for untrusted parties to agree on the state of a database without using an intermediary. By giving a ledger that no one manages

Table 2: pain points of today›s trade finance processes. PROCESS

DESCRIPTION

Contract creation

The creation of the contract is manual. The importing bank manually checks the financial agreement provided by the importer and sends financial data to the correspondent bank in case the delivery of goods fails

Invoice factoring

Exporters use invoices to obtain short-term financing from multiple banks, adding risk if the delivery of goods fails

Scheduling of the phases

The schedule of the trade is delayed. The goods shipment is delayed due to multiple checks by intermediaries, and numerous communication points must perform AML checks manually by using the financial data provided by the import bank

The software platform used Multiple parts of the trade use different platforms. Since each party operates on to support the trade different platforms in all countries, misunderstandings are common, and the possibility of fraud is high. Financial data is sent from one entity to another; there are significant version control challenges when changes are made Bill issuing

Duplicate bills of lading. Bills of lading are financed multiple times because the banks cannot verify their authenticity. Multiple versions of the truth: As financial data is sent from one entity to another, there are significant version control challenges when changes are made

Payments

Delayed payment: Several intermediaries need to verify that funds have been delivered to the importer as agreed before disbursing funds to the exporting bank

centrally, a blockchain can provide certain financial services, such as payments or securitizations, without needing a central bank. For use cases that do not require high levels of decentralization, distributed ledger technology could benefit from better coordination. Blockchain technology and DLT have a tremendous opportunity to disrupt the global $5+trillion banking industry by disintermediating critical banking.

Banks typically facilitate international trade by financing buyers and sellers in trade finance. As Trade finance exists to mitigate risk, provide credit and ensure exporters and importers can participate in international trade. Like many industries, the trade finance market has suffered logistical setbacks due to old, obsolete and inefficient manual documentation processes. One of the most significant risks for trading parties is the risk of fraud

Table 3: Benefits of blockchain in the trading system. BENEFIT

DESCRIPTION

Real-time verification

Financial documents linked and accessible via blockchain are verified and approved in real-time, reducing the time to initiate shipment

Transparent factoring

Invoices accessed via blockchain provide real-time and transparent insight into subsequent short-term financing

Disintermediation

Banks facilitating trade finance via blockchain do not require a trusted intermediary to assume risk, eliminating the need for correspondent banks

Reduced counterparty risk

Waybills are tracked via blockchain, eliminating the potential for double-spend and potential fraud

Decentralized Contract Processing

When contract terms are met, the status on the blockchain is updated in real-time, reducing the time and number of staff required to monitor the delivery of goods

Proof of Ownership

The available title within the blockchain provides transparency on the location and ownership of the goods

Automated Settlement and Reduced Transaction Fees

Contract terms executed via Smart Contract eliminate the need for correspondent banks and additional transaction fees

Regulatory Visibility

Regulators get a real-time view of critical documents to assist with enforcement and AML activities

which is more critical due to a lack of confidentiality and little oversight of the flow of goods and documents. Blockchain represents an opportunity to streamline and simplify the complex world of trade finance. Around 80-90% of world trade relies on trade finance, which could be streamlined using the technology. The use of blockchain and distributed ledger technology can support cross-border trade transactions that would otherwise be uneconomical. In contrast, the impact of blockchain on the market would be felt globally across all industries utilizing cross-border trade. Bl o c kc h a i n te c h n o l o g y a l l ows companies to prove country of origin, product and transaction details securely and digitally. This could help exporters and importers give each other more insight into shipments moving through their pipelines. Through smart contracts, importers and exporters could set up rules that would ensure automatic verifications. Banks can reduce their reliance on outdated manual processes and digitize critical business documents like letters of credit (LOCs) to reduce costs and improve efficiency. Others are trying to replace the process entirely with longerterm applications of distributed ledger technologies (DLTs). The introduction of blockchain technology in trade finance could mean greater trust between trading parties. The technology could hide sensitive information such as prices and trade secrets when needed. It would also give shoppers better insight into where their goods came from and when they were shipped. With conventional systems, this information is often incomplete. The introduction of blockchain technology in trade finance could mean greater trust between trading parties, increasing global business while hiding sensitive information such as prices and trade secrets when needed. Nevertheless, a blockchain could allow consumers to stay informed of every trade step, increasing trust and transparency. mea-finance.com

TRADE FINANCE

Blockchain-enabled trade networks can benefit all stakeholders by reducing friction from logistical and operational inefficiencies across the trade finance value chain. The long-term implications of blockchain technology in trade finance would be more profound and could lead the way, according to researchers at the University of Bristol. Trade finance has recently seen more successful blockchain pilots than other use cases. The starting point for developing a distributed ledger network is the DLT platform provided by DLT startups. One of the most common is Corda which is an Open source blockchain platform developed by R3, an enterprise blockchain software firm based in the US. Standard Chartered and DBS are two banks that have joined coalitions committed to using blockchain technology to process trade finance. One such consortium is Voltron, operated by R3 and CryptoBLK, which runs a blockchain platform for digitizing paper letters of credit. In addition, DBS and Standard Chartered announced they were working on a blockchain-based trade finance platform called the Trade Finance Registry. For example, standard Chartered and HSBC are two banks that have joined coalitions committed to using blockchain technology to process trade finance.

UAE Trade Connect UAE is located at the crossroads of the East and the West and is well recognized as a key player in global trade connecting importers and exporters across the globe. In addition to UAE being a key trading hub, it is also at the forefront of implementing new technological solutions to tackle issues faced globally. One such initiative is the implementation of ‘blockchain’ based solutions to confront fraud risks plaguing the Trade Finance market. e& (formerly Etisalat Group) in collaboration with along with 7 leading banks of UAE launched ‘UAE Trade Connect’ (UTC) in April 2021 to address one such problem of double financing via invoice de-duplication.

The USP of the UTC platform is its ability to offer real-time invoice de-duplication engine which connects participant banks over a private permissioned blockchain network while ensuring complete transparency and confidentiality. About e& enterprise (formerly Etisalat Digital): e& enterprise is a business unit of e& group (formerly Etisalat group) helping to drive digital transformation. The unit focuses on providing digital solutions in various domains including Cloud, cybersecurity, digital marketing, mobile commerce, Internet of Things (IoT), and big data and analytics. e& enterprise has the best industry digital experts, solutions architects, project managers and digital engineers as well as key digital assets and platforms including datacentre’s, cloud platforms, big data and analytics engines, digital and mobile payments platforms, security operations centres, Internet of Things Platforms and command and control centres. Regional telco e& enterprise›s unique value lies in combining the scale, strength and robust network of the leading regional telco with the agility, skills and platforms of a digital player. The company has been working on offering solutions powered by blockchain technology to government and enterprise customers since 2017. Evolution of UAE Trade Connect (UTC): e& enterprise along with 7 leading banks of UAE under the guidance of the Central Bank of the UAE, came together in 2019 to create UAE Trade Connect (UTC). The banks played a crucial role in bringing Trade Finance expertise which enabled the consortium to develop a tailor-made solution for invoice de-duplication. The collaboration aimed to provide a platform to detect genuine and non-genuine (tampered) documents in the banking and financial industry. Journey of the platform so far: The UTC platform has successfully processed over 150,000 invoices totalling to over ~USD 9 billion up till April 2022. In addition, the platform has evolved from being just a platform to prevent duplicate financing,

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into a full-scale de-risking registry where all the participant banks play an active role in not just de-risking their portfolio but the whole banking ecosystem. Key challenges addressed by UTC: UTC through its platform has successfully addressed the below challenges plaguing the invoice financing ecosystem in UAE, • Creating a common interface linking banks to collaborate and share information without compromising the client confidentiality. • E n a b l i n g re a l - t i m e i n v o i c e de-duplication checks which in turn has helped the banks to de-risk their trade financing portfolio. • Creating a registry to store, validate and analyse invoices for common red flags which in turn has enhanced the invoice financing process. The road ahead: The success of first use case on invoice de-duplicate has enabled UTC to embark on new journeys with an aim to de-risk the trade finance ecosystem. These include, • Enhancing the current use case to maximize its potential in undertaking de-duplication checks. • Development of new use cases on other aspects of SME financing. • Building a registry at the country level to undertake de-risking initiatives by all banks operating in the region, • And many more…

Conclusion In the longer term, DLT could enrich the trade finance market as it lowers barriers to entry and replaces outdated intermediaries. Before DLT can be deployed at scale, broader scalability, security and regulatory issues need to be addressed. DLT could enrich the trade finance market as it lowers barriers to entry and replaces intermediaries. If there is market fragmentation, the system will not work. As challenges could arise related to the interoperability of DLT projects. The early success of trade finance pilots coupled with the evident appetites of banks and regulators mean further investment and innovation are likely.

BANKING TECHNOLOGY

The future of the region’s financial services sector will be written in the cloud The way that financial services are accessed and used today, plus the high levels of innovation in our region, make the cloud the natural home for the banks and financial services providers, says Naim Yazbeck Regional Director, Enterprise and Partner Group (EPG), Microsoft UAE

he Middle East and Africa is home to one of the world’s most innovative financial services industries. This reputation dates to before the pandemic. A 2018 study from The Economist Intelligence Unit showed how regional bankers, concerned about new industry entrants’ ability to build market share, had started to develop new differentiating offerings. Nearly two thirds (65%) of those polled said this was their strategy. And 57% said they were now viewing their services as a “digital ecosystem” with more than half prepared to engage in open banking, where FSIs expose their services to thirdparty developers through APIs. Around the same time, Microsoft conducted a cross-industry survey to assess the relative maturity of MEA businesses regarding artificial intelligence. We found that the FSI sector was ahead of others, with 44% of organizations found to be in the two most mature stages of adoption.

Few of these advances can occur without the cloud. It is the toolbox of innovators, host to a vast array of technologies that allow any business to behave as a large-scale enterprise in the digital arena. Barriers to entry, in terms of skills, capital, and geography, are lowered and the scope for collaboration, productivity and cost-cutting is raised. Cost-cutting is of particular interest to regional FSI entities, the stakeholders of which are deeply concerned about financial sustainability. McKinsey research on the African banking segment from 2021 showed that less than 10% of IT budgets was available for value-adding business functionality, with 70% of technology capacity dedicated to maintenance of legacy infrastructure, troubleshooting and daily operations. However, the study suggested that banks could cut costs by more than 20% through cloud migration, and by “pulling on modern levers” they could double the productivity of the IT function.

The COVID factor

Naim Yazbeck, Regional Director, Enterprise and Partner Group (EPG), Microsoft UAE

Banking and Finance news in the MEA market

As with most industries, FSI was upended by the pandemic. Aware that regulators were becoming increasingly tolerant of cloud models, banks migrated in large numbers over the past two years. But their attraction to the cloud went beyond mere business continuity and cost-cutting. They saw the cloud as a foundation for innovation and for unlocking value creation. Beset on all sides by new entrants, including fintech firms and neo-banks,

they saw an opportunity to build more convenient, always-on, responsive, and engaging customer experiences. This race to capture consumers’ hearts and minds in an overbanked region is a tough proposition. Banks must differentiate themselves at a service level, with convenience and individualisation being important benchmarks. They must offer the right products at the right time for the customer and provide a full range of engagement channels – digital, mobile, phone – while ensuring consistent service across all of them. Regional banks enjoy a strong financial position. A McKinsey study concentrating on the Middle East shows corporate banks here to have average returns on equity of more than 12%, significantly outpacing European institutions, which average around 7%. But this does not mean that banks across MEA have become complacent. The rise of nontraditional players and FinTech, especially in Arab Gulf nations such as the UAE and Saudi, is forcing FSI players to embrace new business models that blend thirdparty products and capabilities with their own, especially since evidence suggests this is what customers want.

Service ecosystems A Deloitte study shows 82% of Middle Eastern banking customers are willing to leverage FinTech to address their banking needs. Financial institutions have an opportunity, through the cloud, to build entire suites of services around core offerings. Consider the home loan. What if a bank could offer access to services such as property search, relocation, decorating and maintenance to every customer who sought a mortgage? Examples such as this become easier to imagine in the digital era with cloud services at our disposal. Another realm that is simplified and strengthened by the cloud is that of security – a critical concern for FSIs and their regulators. As COVID and its associated lockdowns amplified the online spending of millions of the region’s shoppers, banks and their CISO’s have become inordinately

occupied with the protection of proprietary and customer data. Identity compromise and fraud are commonplace. And on top of increased consumer activity, the attack surface has swelled under the influence of video conferencing, chat, and collaboration tools, not to mention the escalation of shadow IT, all of which were brought about by remote work. Any compromised user constitutes a risk to their bank, and this is where the cloud becomes a boon. Its architecture allows hyperscale providers such as Microsoft to leverage signal, intelligence and operational experience at scale to harden endpoints, applications and

errors, and oversights constitute the potential for material damage to the business. And when COVID forced a hasty migration to new work models, checks and balances were often neglected in favour of business continuity. Once again, the cloud can help. The Microsoft Cloud for Financial Services accommodates a range of complex control frameworks and regulatory requirements. It houses the industry’s largest compliance portfolio, including external certifications covering more than 75 compliance jurisdictions. We address the most rigorous security, regulatory and privacy demands in partnership with the

AWARE THAT REGULATORS WERE BECOMING INCREASINGLY TOLERANT OF CLOUD MODELS, BANKS MIGRATED IN LARGE NUMBERS OVER THE PAST TWO YEARS services. Microsoft Security solutions are trained on 8 trillion daily threat signals and the insights of 3, 500 security experts. Custom algorithms and machine learning models make and learn from billions of queries each day. This leads to faster identification of threats and more efficient responses.

Compliance and risk The region’s regulatory labyrinth is growing. The UAE’s recently enacted Personal Data Protection Law, which o u t l i n e s “g ove r n a n c e fo r d a ta management and protection and defines the rights and duties of all parties concerned”, is just one example of regulation with which every UAE business must comply. The Consumer Protection Law of 2020, which requires responsible entities to ensure that consumers have access to a “safe environment when purchasing a good or receiving a service”, is another. Along with compliance goes risk management – a central tenet within the FSI industry, where misconduct,

financial services industry and through engagement with regulators. While it is true that risk is becoming increasingly difficult to predict, financial institutions are still under enormous pressure to foresee and mitigate it. Beyond the threat actor and the risk to data, climate-related challenges and the rise of environmental, social and governance (ESG) require financial institutions to leverage data and technology to improve their risk management.

The silver lining The cloud is now the natural home for regional FSI organisations. Its scalability ensures business continuity. Its architecture paves the way for cost efficiencies and enhanced productivity. Its flexibility allows the development of niche offerings that enhance customer ex p e r i e n c e s . A n d i t s a d va n c e d technologies provide security and allow tighter risk management. The future of the regional FSI industry will be written in the cloud. mea-finance.com

BANKING TECHNOLOGY

Five Strategies for Successful Cloud Adoption While detailing the benefits of the cloud and its use options, Puneet Chhahira Head of Marketing and Platform Strategy, Infosys Finacle suggests that Hybrid Cloud is the approach suited to the current level of development

ust a few years ago, several banks were questioning why they should move to cloud; today, the typical question is how and how soon we can go to cloud. Of the several reasons for adoption, scale, resilience, analytics and competitiveness rank right at the top. Unlike on-premises infrastructure, cloud can support rapidly growing transaction volumes with resilience; it can scale up to meet a demand spike on one day and go right back the next; it can flexibly offer massive computing resources needed for advanced analytics and innovation; and finally, it enables banks to compete with cloud-native competitors on equal terms. But it will take some time before banks attain cloud critical mass – when 60

percent of their workload has migrated to cloud and is unlocking its full value. Our research, Infosys Cloud Radar 2021, found that only 14 percent of banks have achieved this. The industry is still working through some issues, such as a need for more regulatory clarity on cloud adoption. The good news, however, is that a growing number of regulators are supporting cloud, subject to banks meeting data residency conditions. For banks planning their cloud journeys, we recommend five strategies fo r a c c e l e ra t i n g m i g ra t i o n a n d maximizing value.

Progress to the right

Puneet Chhahira, Head of Marketing and Platform Strategy, Infosys Finacle

Banking and Finance news in the MEA market

The cloud journey progresses along a continuum that has Infrastructure as a Service (IaaS) at the left end, Software as a Service (SaaS) at the right, and Platform as a Service (PaaS) in between. The way applications are deployed, and the stack is managed, is different in each case. A traditional bank running on on-premises infrastructure will likely pass-through IaaS and PaaS before arriving at the Software as a Service stage, where there is maximum value. But for cloud-native, digital-born entities, this is certainly an option, one that they are

exercising by favouring the SaaS model above all others. As far as banks are concerned, the tilt is towards leveraging PaaS as well as SaaS for non-mission critical, non-core applications such as CRM and marketing automation. Banks should capitalize on their success in these areas to migrate critical applications like core banking and digital banking to cloud, with the awareness that the farther right they reach on the cloud continuum, the more value they get from the deployment.

One transformation, many approaches Banks have accumulated a variety of legacy applications over decades, a vast majority of which are not suited for cloud “as is”. They need to plan the migration wisely, taking care to pick the best approach among several for each application based on its characteristics – size, customization level, mission criticality, and requirement of transformation skills. The popular transformation approaches include: Lift and shift traditional, non-cloud applications as they are and run them in a cloud environment Lift, and optimize traditional, noncloud applications by making a few modifications, and run them on cloud Refactor traditional, non-cloud applications with the help of cloud APIs and middleware Replace traditional, non-cloud applications with new cloud-native apps that are either composed in-house or subscribed from SaaS providers The effort as well as the risk involved increase as one goes down the order, but so do the returns. A bank has to find the best multi-pronged approach for its context, since there is no single approach that will work for all applications.

The forecast is hybrid cloud Banks are divided about which cloud is

best, public or private. Public cloud has several advantages, but when there are limitations, such as latency or regulatory vagueness, it takes a back seat to private cloud. On the other hand, private cloud is costly, and takes effort to maintain. So, the answer to the “public or private?” question is actually “hybrid cloud approach”. When one considers factors such as risk, return, scale and security, one may choose different cloud approaches for different applications and workloads. Hence for the foreseeable future at least, hybrid approach will be the optimal solution for the majority of banks undergoing transformation. But hybrid adoption has only just begun. In our survey, only 31 percent of respondent banks were using hybrid cloud; 41 percent

Our view is that as providers increase in number, they compete harder by offering services, security, and more innovation enablers. Banks should therefore leverage multi-cloud to avail the best offerings. But even as they work with multiple clouds, most banks are likely to have a preferred vendor. It is imperative to define the operating model, including the tech stack, processes, and talent required, for this hybrid multi-cloud environment early in the planning process to maximize the chances of success.

Go the distance While the value of cloud is undeniable, extracting it can be tricky. Returns on cloud investment increase not only with cloud footprint but also with the quality

BANKS HAVE ACCUMULATED A VARIETY OF LEGACY APPLICATIONS OVER DECADES, A VAST MAJORITY OF WHICH ARE NOT SUITED FOR CLOUD “AS IS”

were in a private cloud, while 28 percent had migrated to a public one. Banks should accelerate the move to hybrid cloud and create the conditions for success by redesigning organizational processes and culture that enable this flexibility.

More cloud, the better One of the cloud concerns being typically debated is vendor lock-in. As the ranks of providers grows, and efforts to introduce standardization and interoperability succeed, it’s opening doors to multicloud. Today, banks have the freedom to distribute their workloads on the clouds of multiple providers, such as hyperscalers, specialists, and regional players.

of business innovation. On the flip side, patchy efforts yield weak results. The critical mass of 60% referred to earlier, is a big factor in value realization; unfortunately, only a slender minority of banks have achieved it. Banks are convinced about the need for cloud; now they must show urgency in adoption. We have seen from experience that cloud-mature organizations with significant migrated workloads have not only achieved defensive objectives – cost control, remote access, resilience and security – but also offensive goals, such as innovation and quick time to market. The journey to cloud is highly rewarding. But only for those who go all the way. mea-finance.com

BANKING TECHNOLOGY

Backing to Advance Matthijs Eijpe Regional Vice President EMEA at Backbase, the Amsterdam based global fintech company, sat down with MEA Finance to talk about their recent growth equity funding of 120 million euros, what this says about them and the future of banking and their plans for operating in a region that provides a fertile landscape for banking technology, yet comes with the industry competition that such conditions foster

oes the growth equity funding of 120 million euros raised from motive partners represent an endorsement of your engagement banking strategy?

Yes, I think it does. It is a testament that we, at least to our view, are definitely on the right track. I think our investment over the last few years has been fully on this engagement banking vision. So basically, a platform model which we believe is to be the only viable business model for any bank. So, I think it’s a testament that together with Motive Partners, we can only put more body weight into the long-term vision we have as a company.

Motive Partners are a FinTech specialist private equity firm. So, what might their investment with Backbase be saying about the future of banking? I think that it showcases that if

Banking and Finance news in the MEA market

you have the right focus, the right vision, that there’s still a lot of opportunity momentum and that banks also need to fortify their technology with the right partner in order to be still relevant for their, let’s say, target audience. Because they’re being attacked via different means, large tech and NEO banks, so with the Backbase platform, they will be enabled to also compete in that digital space. So, I think it’s a testament that banks are definitely there for the long term and that they are getting equipped to fight those battles.

Do the demographics of the Middle East provide a more accepting or betters u i te d e nv i ro n m e nt fo r p l a t fo r m - b a s e d engagement banking activities than other regions? I think it does because the Matthijs Eijpe, Regional Vice President EMEA, Backbase

demographics typically in most, let’s say, GCC markets is a relatively young population. So, they are even more, I think, familiar with instant gratification of services, whether that’s watching TV, ordering foods, ordering a taxi. Compared to, let’s say, Europe that are typically the demographics of a typical bank in terms of total portfolio, it’s more of a mixed nature. So, there you typically also still have non-digital users who still prefer to walk into a branch because that’s how they’ve been doing banking for years and years. So, I do think the GCC, in particular, is an even better-suited market for this more digitally enabled way of servicing their customers. It doesn’t mean that there’s not necessarily a place for the branch, I think it’s just the nature of the branch will probably be slightly different than perhaps how it is reflected in Europe or some of the other markets.

Are you noticing an increase in competition in the regional banking and financial services industry technology markets? I think yes and no. I think our competition is typically two or threefold. So, one, it’s sometimes still the internal IT organization of a bank, which also has a desire or appetite to build up their own competence and therefore build up their own platform. So, I think there, you still have that, sometimes friction or competition, if you will. I think the second one is, in the GCC you have a lot of established players, so people or companies like Oracle or Temenos who have a very big install base and they capitalize on that install base to also position their digital platforms. But fundamentally they’re more oriented and coming from a different background. And what you also see more recently is more specialized players. So, in the GCC you have a company like Aon or Codebase, so there are these more Backbase type of companies that are more focused on the GCC, which brings an advantage. They have more proximity sometimes and they invest so heavily

for more market-specific assets. So that is definitely a competitor group of companies that we see in the market.

What are your short- to mediumterm plans for that base in the Middle East? Short-medium term for this year is to get more proximity in the region. So,

to eight FTE to do more program project support. Because a lot of the clients that we are already having and hopefully will soon on board, they’re quite in favor of having some proximity from, let’s say, people that can really guide and coach them in the initial stages of the journey. So, the current plans are focusing on Dubai, expanding the current hub, but

I DO THINK THE GCC, IN PARTICULAR, IS AN EVEN BETTER-SUITED MARKET FOR THIS MORE DIGITALLY ENABLED WAY OF SERVICING THEIR CUSTOMERS we’re actually expanding the Dubai hub substantially because of the demand we see in the market. That demand is predominantly in KSA at the moment. So, the strategy there is just to have both proximity from Dubai for the larger region. And then in KSA, we have opened up a small entity recently, and we’re thinking of hiring probably at least four

also the one that we have in KSA. So probably we’re looking at 30 to 50 people hopefully towards the end of the year that operates from those two main locations. And then a lot of the capacity to do projects will still also be from more remote delivery centers, which are both in India, Poland, or the Latin American office. mea-finance.com

LIFESTYLE

evolved and the 6¾-litre V8 only shared its key internal dimensions and layout with its forebears. Variable valve timing and cylinder deactivation ensured that it was up to 99% cleaner and far more fuelefficient than a 1950s Bentley V8.

40 Years of Turbo Bentleys celebrated at Goodwood

entley celebrated four decades of handcrafting turbocharged grand tourers with a ten-car parade at the Goodwood Festival of Speed. In the forty years since the first turbocharged Bentley, the immense reserves of power and effortless torque that characterise Bentley engines have become inseparably associated with turbocharging. Bentley Motors displayed seven turbocharged Bentley models from its Heritage Collection at the Goodwood Festival of Speed, alongside key models from the current range. Today the advantages of turbocharging have seen its universal adoption from city cars to supercars. But it was a bold step in 1982 for Bentley to adopt the technology and one that paid off handsomely. In the words of automotive historian Eric Dymock, it was a decision that ‘recaptured Bentley’s soul’. That soul can be experienced today in Bentleys W12, 4.0 V8 and V6 models; the tidal wave

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

of torque that is integral to Bentley’s appeal owes much to the turbocharger.

Grand Touring – The Continental R With a top speed of over 150 mph the Continental R, launched at Geneva in 1991, was a true high-performance grand tourer, and the first Bentley with its own unique body since the R Type Continental of 1952. Its turbocharged 6.75-litre V8 developed 355bhp; 0-62mph took just 6.6 seconds.

Re-Introducing Crewe’s V8 – Arnage Red Label When the Arnage was first launched in 1998, it was powered by a 4.4-litre BMW V8 but shortly after the company became part of the VW Group, Bentley announced a new ‘Red Label’ Arnage with the beloved Jack Phillips-derived 6.75-litre V8 back under the bonnet.

The Mulsanne By the time of the new Mulsanne in 2010, every component of the engine had

2003: The W12 Era Begins The Continental GT, launched in 2003, was the first all-new Bentley since the original 3.0-litre of 1919, with no components carried over from a previous generation. The new Bentley featured a 6.0-litre twinturbocharged 48-valve W12 engine. This design had multiple advantages; it was compact, it was immensely smooth, and it gave the new Bentley a power output of 560 PS (552 bhp) and 650 Nm of torque.

A More Efficient Bentley V8 The first new Bentley V8 engine in over 50 years made its debut in 2012 as the Continental GT V8. Its 4.0-litre V8 featured cylinder deactivation technology, ‘hot side inside’ turbo mounting, power recuperation, and engine management. With a new eight-speed automatic transmission, the new V8 delivered a forty percent improvement in fuel efficiency compared with the 6.0-litre W12, while producing 500 bhp and 660 Nm of torque

Adding Further Emotion Continental GT S At this year’s Festival of Speed, Bentley’s new S range of models made their global debut – the Continental GT S, the Continental GTC S and the Flying Spur S. All are powered by the latest 4.0-litre V8.

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

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

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

WEB ASSISTANT Marie Orayan web@mea-finance.com

SENIOR DESIGNER Florante Magsakay Tel: +971 52 570 1811

Banking and Finance news in the MEA market

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

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

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MEA Finance - July-August 2022

Articles inside

40 Years of Turbo Bentleys celebrated at Goodwood

Backing to Advance

Five Strategies for Successful Cloud Adoption

The future of the region’s financial services sector will be written in the cloud

Distinguishing Features

Supply Chain Innovation - Technology’s role in supply chain management and trade finance

The GCC Perspective

Islamic Banking Tech Readying For Growth

Increasing in Stature

Payments at Pace

Progress with Purpose

A growing and evolving regional market

Bahrain’s Balancing Act

The Wall Street of the crypto market

Wealth of Opportunity