MEA Finance - April 2021

April 2021

ESG, underpinning Financial Services in Saudi Arabia Ebrahim Baeshen, Office Managing Partner, Jeddah, KPMG in Saudi Arabia

April 2021

ESG, underpinning Financial Services in Saudi Arabia Ebrahim Baeshen, Office Managing Partner, Jeddah, KPMG in Saudi Arabia 12 Mergers & Acquisitions | 20 Data Security | 36 Islamic Finance | 47 Roundtable Event | 57 Special Report

26 May 2021 Armani Hotel, Burj Khalifa Dubai, United Arab Emirates

Future of Banking Innovation An exclusive gathering of the region’s leading bankers and technology professionals to debate and to learn how digitisation and new technologies are transforming banking for the new age digital consumer.

Join more than 150 top executives from leading banks, financial institutions, and technology providers from across the MEA region.

SPEAKERS

KEYNOTE Bryan Stirewalt Chief Executive Dubai Financial Services Authority

Ahmad Abu Eideh

Chief Executive Officer

United Arab Bank

Pedro Pinto Coelho

Chairman and Chief Executive Officer

Banco BNI Europa

Devid Jegerson

Ellis Wang

National Bank of Fujairah PJSC

Mashreq

Head of Customer Experience and Group Head of Technology, Transformation and Information Platform Development

Peter Smith

Head of Policy & Strategy

Dubai Financial Services Authority

Saud Al Dhawyani

Chief Technology Officer

Emirates NBD

Giselle Bou Ghanem

Senior Program Manager for Public Cloud - International CTO Office

Kokila Alagh Founder KARM Legal Consultants

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

Yan Bechet

Yuri Misnik

Limited

First Abu Dhabi Bank

Avaya

Stefan Kimmel

Chief Operating Officer

Head of Client Coverage, Dubai Group Chief Technology Officer, Commercial Banking Member of the Group Executive Commercial Bank of Dubai Committee HSBC Bank Middle East

Award Categories FINANCIAL INSTITUTIONS

TECHNOLOGY VENDORS

1. Digital Banking Innovation of the Year

1. Digital Banking Provider of the Year

2. Best Digital Innovation in Islamic Banking of the Year

2. Islamic Digital Banking Provider of the Year

3. Best Neobank

3. Best Cybersecurity Provider

4. Best Cybersecurity and Risk Management

4. Best Core Banking Solutions Provider

Implementation

5. Best User Experience Solution Provider

5. Best Core Banking Technology Implementation

6. Best Data Management Solution Provider

6. Best Islamic Banking System Implementation

7. Best Risk Management Solution Provider

7. Best Data Management

8. Best Analytics Solution Provider

8. Best Analytics System

9. Most Innovative Cloud Services Provider

9. Best Mobile Banking Services

10. Most Innovative Mobile Banking App

10. Most Innovative Emerging Technology Implementation

11. Best RegTech Solution Provider

11. Best Cloud Implementation

12. Bset Trading Infrastructure Provider

12. Best Innovation in User Experience

13. Best AML/KYC Solution Provider

13. Best Innovation in Retail Banking

14. Best Communications Infrastructure Provider

14. Best Innovation in Corporate Banking and Finance

15. Best Open Banking & API Solutions Provider

15. Best Innovation in Investment Banking

16. Most Innovative Payment Solutions Provider

16. Best Innovation in Trade Finance

17. Best Wealth and Investment Technology Provider

17. Best Regulation Technology Solution

18. Most Innovative Digital Wallet Deployment

18. Most Innovative Trading Platform

19. Best Digital Transformation Consultancy Firm

19. Best AML/KYC Solution

20. Tech CEO of the Year

20. Best FinTech Solutions Implementation

21. Financial Services Technology Leadership Award

21. Best Islamic Fintech Solutions Implementation 22. Best AI Technology Implementation 23. Best Open Banking & API implementation 24. Best Branch Digitisation Implementation 25. Best Corporate Payment Service 26. Best Risk & Compliance Implementation 27. Best Retail Payment Implementation 28. Best Treasury Management Implementation 29. Tech Leadership Awards

Submit your entries now!

Step 1: Choose your category.

It is important to review the individual descriptions and criteria before choosing your category.

Step 2: Upload relevant financial performance documents, case studies, or other relevant information.

Step 3: Confirm submission of your entry. *All nominations shall be submitted on or before 26th April deadline.

For inquiries, call +971 50 1005488 / +971 50 9313236 or email: info@mea-finance.com https://awards.mea-finance.com/2021/

In this issue...

T

he April 2021 issue of MEA Finance is packed with reflections on the current concerns of banking and finance in our region as we emerge into the so-called new normal.

As vaccination programmes progress in the MEA region and we move into the much mentioned “post-pandemic” world, one of the results we can expect, as described in our cover interview in this issue p28, with KPMG’s Mr. Ebrahim Baeshen, Office Managing Partner at their Jeddah office, is the prominence of the role that ESG will play in the Kingdom’s banks and financial institutions, mentioning, “maintaining a track record of successful ESG programmes will be vital for the health of Saudi banks”.

The absorbing and avid debate at our recently held roundtable, p48, hosted with BACKBASE and themed “Developing a Robust Customer Acquisition, Engagement & Loyalty Strategy” in Dubai, shows just how important it is to get the processes right when engaging new and existing customers in change, and how recent circumstances have focused industry minds on this.

Our special report in this issue, P57, examines Customer Data, Analysis and Segmentation and how this will help banks broaden their offerings to clients and provide better services, with contributions from Avaya and senior technology and banking executives from some of the UAE’s top banks.

More ways the post-COVID-19 environment is shaping the regions financial arenas are touched on in our look at M&A p16, with Pietro Castronovo, Managing Director with Alvarez & Marsal’s Strategy and Performance, Improvement practice in Dubai, expecting a push in consolidation across key market areas, and where Mujtaba Khalid, Head of the Islamic Finance Centre at the Bahrain Institute of Banking and Finance, p18, talks about Islamic M&A. This links nicely with our look at Islamic Finance with Ashan Ali, MD & Global Head of Islamic Origination at Standard Chartered Bank, p38, saying that the Shari'ah principles underlying Islamic Finance encourage wholesome and sustainable development and where Hassan Jarrar, CEO of Bahrain Islamic Bank, P42, feels that the ethical principles of Islamic banking go hand in hand with ESG and similar such initiatives.

On Data Security, p20, an ever present and growing concern, we look at the increase in fraud and phishing attacks through the pandemic and talk with Help AG’s Chief Technology Officer, Nicolai Solling, p24, about the core considerations that banks must have when tackling their security needs, and on Banking Technology, p44, Alaa Elshimy, Managing Director & Senior VP of Enterprise Business Group, Huawei Middle East, helps usher in the era of the “Bank of Things”.

In addition to all of this, we hear from George Hojeige, CEO of Virtuzone, p46, on the importance of start-ups to the growth of the local economy, and how tapping into the Debt Capital Markets, p32, will help with current account shortfalls.

In all, this is a packed and diverse issue with much to keep you interested absorbed.

4

Banking and Finance news in the MEA market

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29/3/2021 4:32 PM

CONTENTS

CONTENTS 28

MARKET NEWS

8

GFH Financial Group (GFH) signs agreement with Bahrain Bourse (BHB) and the Central Bank of Bahrain (CBB), which will allow the group to offer the Murabaha service to its clients

10

RAK AMI Hotel secures financing deal from RAKBANK

MERGERS & ACQUISITIONS

12

Shifting Sands: M&A in the Middle East

18

M&A in Islamic Finance

DATA SECURITY

20

Championing safe digital transformation

24

Cybersecurity in banking and financial services

COVER STORY

28

How ESG is rapidly taking over the Financial Services industry Saudi Arabia

MEA Finance (a MEA Business supplement) 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 EXECUTIVE DIRECTOR AND PUBLISHER : Kenneth Mitchen Email: ken.mitchen@mea-finance.com

6

Banking and Finance news in the MEA market

mea-finance.com

6

DEBT CAPITAL MARKETS

32 34

The balancing act A positive outlook for opportunities

ISLAMIC FINANCE

10 12

18

36 38 40

A transformative opportunity

42

A clear direction for growth

The potential for growth Islamic finance offers Middle East investors a valuable gateway to ESG investments

BANKING TECHNOLOGY

44

Ushering a new era of ‘Bank of Things’ services

ADVISORY VIEW

46

32

The role of start-ups in economic recovery and growth

ROUNDTABLE EVENT

48

Post show report

24 38

44 48 mea-finance.com

7

MARKET NEWS

GFH Financial Group (GFH) signs agreement with Bahrain Bourse (BHB) and the Central Bank of Bahrain (CBB), which will allow the group to offer the Murabaha service to its clients

GFH joins Bahrain Bourse’s Murabaha service opening new Sharia’acompliant solutions and trading opportunities

G

FH Financial Group (GFH) announced the signing of an agreement with Bahrain Bourse (BHB) and the Central Bank of Bahrain (CBB), which will allow the group to offer the Murabaha service to its clients. The service, launched in May 2020, is provided through the utilization of Sharia’a-compliant Ijara Sukuk as the underlying asset for the undertaking of Murabaha transactions. The agreement was concluded through a virtual signing ceremony attended by Mr. Salah Sharif, Chief Operating Officer of GFH, and Shaikh Khalifa bin Ebrahim Al Khalifa, Chief Executive Officer of BHB, and the CBB Executive Director of Banking Operations, Shaikh Salman bin Isa Al Khalifa.

According to the agreement, GFH will now have access to the online service,

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which offers unique Sharia’a-compliant solutions and trading opportunities that can support the continued growth of GFH’s treasury and capital markets business activities, a significant and expanding business line for the Group.

Among the other benefits of the Murabaha service are significant reductions in processing time for its clients and support for the continued expansion and position of the Kingdom of Bahrain as the global capital of the Islamic economy.

Commenting Mr. Salah Sharif, Chief Operating Officer of GFH, said, “We’re extremely pleased to sign this agreement with Bahrain Bourse for the use of its innovative Murabaha service. Access to the platform is another important step among our broader efforts to further build our trading activities and the service will

Banking and Finance news in the MEA market

provide us with new opportunities and greater efficiency as we do so. We look forward to maximizing the benefits of the service and to continue contributing to the growth of the Islamic capital markets and Bahrain’s leadership in Islamic banking and finance overall.”

Mrs. Narjes Jamal, Chief Operating Officer of Bahrain Bourse said, “We are pleased to see the growing demand for the Murabaha service since its launch last year. Bahrain Bourse is continuously seeking to offer alternative investment solutions to meet the requirements of a broader range of individual and institutional investors, as this comes in line with BHB’s effort to enhance the investment environment and develop the capital market in the Kingdom of Bahrain.”

MARKET NEWS

RAK AMI Hotel secures financing deal from RAKBANK

RAK AMI Hotel secures financing deal from RAKBANK

R

AK AMI Hotel, a Ras Al Khaimah based company focused on developing and managing hotels in the emirate, has secured financing from the National Bank of Ras Al Khaimah (RAKBANK), for a new hotel development project.

The funds will be primarily used for RAK AMI Hotel’s flagship project, Mövenpick Resort Al Marjan Island, which has a gross development value of AED 543 million (US$ 147 million). The construction of the hotel has already begun and is progressing as per schedule. The project was initiated on the back of strong fundamentals within the leisure market in Ras Al Khaimah, led by the growth in domestic and international tourism.

The financing agreement was signed

by Arch. Abdulla Al Abdooli, Chairman of RAK AMI Hotel, and the CEO of RAKBANK, Peter England, and other senior representatives of both entities.

Arch. Abdulla Al Abdooli said: “Securing the financing is further va l i d a t i o n of Ra s A l K h a i m a h ’s potential as a tourist destination and our organisation’s ability to develop

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world-class hospitality infrastructure.

Ras Al Khaimah has outperformed ot h e rs i n t h e re g i o n i n to u r i s m performance, despite the challenges of the COVID-19 pandemic. We were the first city to be certified safe and have continued to welcome tourists, underpinned by a growth in domestic tourism. We are thankful to RAKBANK for their confidence and trust in us and we will leverage the financing for the on-schedule completion of the hotel and in creating a truly iconic resort.”

Peter England commented: “As an independent ADX listed entity, RAKBANK needs to compete directly with other banks to obtain business from all clients, including those based in Ras Al Khaimah, and we are delighted that RAK AMI Hotel chose RAKBANK over a number of other banks trying to secure this deal. At RAKBANK, we believe firmly in the vision of His Highness Sheikh Saud bin Saqr Al Qasimi, Member of the UAE Supreme Council and Ruler of Ras Al Khaimah, and are very excited to play an active role in the further development of Al Marjan Island.”

Banking and Finance news in the MEA market

RAK AMI Hotel has been focusing on identifying hotel sector opportunities in Ras Al Khaimah. Its flagship project, Mövenpick Resort Al Marjan Island benefits from a spectacular location in the heart of Al Marjan Island and is scheduled to open in the fourth quarter of this year. Set in elegantly landscaped gardens with its own secluded white sandy beach, the hotel will add 418 hotel keys, all with direct sea views. Guests can choose from large-sized family rooms, suites or 28 beachfront chalets with private pools and gardens.

Underpinned by hospitalit y investment fundamentals in Ras Al Khaimah, the emirate welcomed 803,280 visitors in 2020, a drop from 1.11 million in 2019, owing to the pandemic. Yet, the rebound was even stronger, especially from the domestic market, with over 52 per cent of the total comprised of staycation visitors, which accounted for nearly 800,000 guest nights. The average room rate (ARR) in Ras Al Khaimah gained 20.5 per cent, beating the downturn effect of the pandemic, over 2019, increasing from AED 552 to AED 665, the only Emirate in the UAE to record a double-digit growth in ARR. Among international visitors, tourists from UK, Russia, Germany, the Nordic nations, India and Egypt, among others, topped the list.

Most recently, Mövenpick Resort Al Marjan Island announced a landmark addition – the longest suspended bridge that connects two buildings of the hotel.

It not only adds to the aesthetics of the project but also creates an inspiring architectural marvel that will delight visitors to Al Marjan Island. At 36 metres long, the bridge will feature eight hotel rooms that are set to be widely soughtafter by guests.

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MERGERS & ACQUISITIONS

Shifting Sands: M&A in the Middle East 2021 kicked off with a wave of deal-making some of which have been in the making for some time as banks positions themselves for improved economic conditions post-pandemic amid vaccine optimism

T

he GCC banking sector has weathered several storms over recent years. From a plunge in oil prices in 2014 that forced governments to calibrate budgets and dip into state deposits to problem loans owing to the property and retail slump, GCC banks have been merging to remain profitable and maintain a competitive edge.

A year into the COVID-19 pandemic crisis, 2021 kicked off with a wave of

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deal-making some of which have been in the making for some time as banks positions themselves for improved economic conditions post-pandemic amid vaccine optimism.

S&P Global expects banks’ financial profiles to worsen across many jurisdictions until the economic recovery takes hold, but the rating agency said that “a widely available vaccine from mid-2021” and a strong economic rebound this year might turn the tide.

Banking and Finance news in the MEA market

It is also worth noting that growth in GCC banking assets is linked to regional GDP, which moves largely in tandem with oil prices. Gulf states are still reliant on oil which accounts for three-quarters of the six-nation bloc’s spending. Although oil prices are recovering, the instability associated with oil prices – which plunged into negative territory last April, production curbs, and tighter financial conditions pose a challenge for the region’s banking sector.

“In today’s era of significant economic change, companies continue to look for partners that can leverage their abilities for cross-selling, accessing new markets and customers and other synergies to enhance financial performance and gain competitive advantage, boosting the combined market share,” said KPMG.

Deals on the cards “ Merger and acquisition (M&A) activity has always been a leading indicator

in terms of economic recovery, and we have already started to see an uptake in this and expect the trend to continue over the coming year,” said Pietro Castronovo, Managing Director at Alvarez & Marsal.

Last October, Saudi Arabia’s National Commercial Bank (NCB) and Samba Financial Group (Samba) agreed to merge into a banking behemoth with $223 billion in assets and is expected to put the merged entity, that will be called Saudi National Bank, on equal footing with regional rivals Qatar National Bank and First Abu Dhabi Bank.

The consolidating bank, NCB, agreed to pay $7.58 for each Samba share and upon the completion of the merger, NCB shareholders will own 67.4% and Samba’s shareholders will own 32.6% of Saudi National Bank. The shareholders of the two banks approved the historic tie-up in March and the deal is expected to be closed on April 1, 2021.

Fitch expects the merger to benefit Saudi National Bank’s company profile underpinned by an expected combined market share in domestic assets of around 25% as well as a strengthening and further diversification of the business model.

The Saudi British Bank (SABB) also completed its takeover of Alawwal Bank in March, creating the third-largest lender in the kingdom with total assets of $73.7 billion after the two lenders legally merged in June 2019.

The call by the Bank of Lebanon, the central bank, for local lenders to recapitalize by the first quarter of 2021 and repatriate part of deposits transferred overseas as the country tries to rescue its economy which is in freefall, has seen local lenders including Bank Audi and Blom Bank putting their Egyptian portfolios up for grabs.

Earlier this year, UAE’s First Abu Dhabi Bank (FAB) agreed to acquire the Egyptian arm of Lebanon’s Bank Audi in a deal that is expected to make the Abu Dhabi-based bank one of the biggest foreign financial institutions in Egypt.

The deal, which is going to be FAB’s first international acquisition and is expected to be closed within the next few months, comes after the two lenders suspended merger talks last May due to the “difficult market conditions” amid the impact of the pandemic on the economy.

Similarly, Bahrain’s Arab Banking Corporation (Bank ABC) also agreed to acquire the Egyptian business of

and Bahrain’s Ahli United Bank which was announced in early 2019 but was shelved after the outbreak of COVID-19.

The driving forces overbanked Moody’s said that bank merger and acquisitions in the GCC region have so far largely involved common shareholders – normally the government and related entities – reorganizing bank assets under

M&A ACTIVITY HAS ALWAYS BEEN A LEADING INDICATOR IN TERMS OF ECONOMIC RECOVERY, AND WE HAVE ALREADY STARTED TO SEE AN UPTAKE IN THIS AND WE EXPECT THE TREND TO CONTINUE OVER THE COMING YEAR. Pietro Castronovo, Managing Director at Alvarez & Marsal

Lebanon’s Blom Bank in a deal valued at $427 million. The takeover, which is subject to regulatory approvals in Bahrain, Egypt and Lebanon, is scheduled to close in the second quarter of 2021.

Qatari lenders, Masraf Al Rayan and Al Khalij Commercial Bank agreed to a share-swap merger deal in January, a tie-up that is projected to create the country’s second-largest bank with an asset base of around $45 billion.

The tie-up will also create one of the largest Shari’ah-compliant banks in the Gulf region. Al Rayan and Al Khalij started merger talks in June 2020 and the deal is scheduled to close during the first half of this year subject to regulatory approvals.

However, the pandemic also slammed the brakes on one of the region’s most anticipated mergers. There are no new updates on the region’s only cross-border tie-up between Kuwait Finance House

a single entity in a bid to achieve a leaner cost structure and increase profits in a highly competitive and overcrowded banking market.

The merger between NCB and Samba involves a common shareholder, the Saudi government, which holds 44.29% shareholding in NCB and a 22.91% stake in Samba through the kingdom’s sovereign wealth fund. The Qatari government is also the ultimate shareholder in Al Rayan and Al Khalij – the country’s fourth and sixth largest banks – through the Qatar Investment Authorit y and other state-owned entities with stakes of 49% and 47% respectively, according to Moody’s.

According to a Bloomberg report, Qatar has 2.5 million people being served by about 20 local and international banks, leaving smaller lenders at a disadvantage unless they can find a niche or competitive edge. mea-finance.com

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MERGERS & ACQUISITIONS

“The financial ser vices sector is fundamentally a scale business. In the near future, we expect further consolidation both in the banking, insurance and asset management sectors,” said Castronovo.

The GCC region banking system is reportedly highly fragmented making competition intense, and the situation is expected to be intensified by a shrinking population in some countries as expatriates depart for their countries amid massive job losses. As of 2019, the region had more than 160 banks serving a regional population of 58 million compared with a dozen commercial banks in the UK catering for a population of 66 million.

more Islamic banks or financial entities to merge and form a more robust Shari’ah compliant financial institution as was seen in the merger of Al Salam Bank Bahrain’s merger with BMI a few years back,” said Mujtaba Khalid, Head of the Islamic Finance Centre, Bahrain Institute of Banking & Finance.

S&P Global stated that a supply glut exacerbated by coronavirus has built up even as demand faltered, feeding what the rating agency called the market’s long decline that has seen prices and rents drop by more than a third since peaking in 2014.

Sluggish growth The dual shocks of COVID-19 and prolonged low oil prices is taking its toll across the six-nation bloc GCC region and all the countries are projected to record significant contractions, with a plunge in real non-oil GDP expected to range between -3.5% and -6%.

Alvarez & Marsal’s Castronovo said ‘In the short term, COVID-19 has significantly impacted the volume of the transactions, however, it is our strong belief that in the medium term there will be a further push in consolidation across the main sectors including financial services, technology, healthcare, education, and energy / heavy industries.” “ The revenue shock will shift management attention to cost discipline and consolidation opportunities as main sources of bottom-line uplift,” said Moody’s.

GCC banks are also battling with problem loans owing to the property and retail slump. The collapse of real estate majors such as Drake & Scull International and Arabtec in the UAE and the Binladin Group in Saudi Arabia is reportedly expected to put a strain on regional banks who have exposure to these entities.

“Given the current circumstances as well as the coming global financial condition, we can build a case for two or

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$223 billion assets of Saudi National Bank

Source: National Commercial Bank

Ray of hope Meanwhile, the situation might be different in Saudi Arabia where banks are set to make a windfall from the structural reforms and Crown Prince Mohammed bin Salman’s Vision 2030, a grand vision to diversify the economy away from dependence on hydrocarbons. The kingdom is urging tie-ups in the banking sector as it vies to become the region’s financial hub and to create stronger entities that can support growth in its private sector Saudi Arabia’s Vision Realisation Programmes that underpin Vision 2030 are moving from design to implementation.

The kingdom’s economic transformation plan is being backed by government spending on large infrastructure projects that are expected to boost growth in the country’s non-oil economy.

Banking and Finance news in the MEA market

The Saudi wealth fund, Public Investment Fund (PIF), plans to double its AUM to $1.07 trillion by 2025 as well as boost the local economy by investing $40 billion annually. PIF is also financing several mega-developments including the $500 billion NEOM City, Qiddiya and the Red Sea Development Company’s mega tourism projects.

M&A 2021 The pandemic has created perfect conditions for M&A activity across the Gulf region and Bain & Company sees the following trends shaping deal-making in 2021: • A surge in domestic consolidation – rising operating costs and regulatory support will spur domestic consolidation that will give rise to local champions for example the merger between Saudi Arabia’s NCB and Samba.

• M ore divestiture of non-core businesses – as operating costs increase and scale becomes increasingly important to stay competitive, banks will continue to divest businesses and operations that are noncore for example the takeover of Blom Bank’s Egyptian business by Bank ABC. • S cope deals will deliver needed capabilities or technologies – with some fintechs facing the risk of funding shortages and sellers willing to take advantage of rising high-tech multiples, banks will seize the opportunity to acquire new capabilities or technologies that help them adapt their businesses for a digital future that has been hastened

by COVID-19.

• Cross-border deals might become a reality – cross-border deals have been in discussion for years but have not yet fully materialized in a banking industry that remains mostly local.

The merger between KFH and AUB is expected to be the first cross-border merger in the GCC, however, the deal is yet to materialize.

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MERGERS & ACQUISITIONS

Coming together Pietro Castronovo, Managing Director, Alvarez & Marsal’s Strategy and Performance Improvement

Pietro Castronovo, Managing Director with Alvarez & Marsal’s Strategy and Performance Improvement practice in Dubai expects to see a push in consolidation across key market sectors with the bulk of activity staying domestic in the near term, though with geo-political relations improving and given a supportive regulatory landscape, cross-border deals could grow

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Banking and Finance news in the MEA market

D

eal volumes decreased wo r l d w i d e i n 2 0 2 0, but the Middle East, and Africa ended the year relatively better, with deal value declines of 4% and 6%, respectively (Bain & Co. global M&A report, 2021). Do you expect regional M&A deal volumes to recover in the coming twelve months?

In the short term, Covid-19 has significantly impacted the volume of the transactions, however, it is our strong belief that in the medium term there will be

IN OUR VIEW, THE DEAL ACTIVITY HAS LARGELY FOCUSED ON DEFENSIVE STRATEGIES SUCH AS ASSET SALES VERSUS LENDER-FORCED TRANSACTIONS.

a further push in consolidation across the main sectors including financial services, technology, healthcare, education, and energy / heavy industries.

M&A activity has always been a leading indicator in terms of economic recovery, and we have already started to see an uptake in this and expect that this will continue over the coming year.

There are a lot of investors in the region and liquidity waiting to be used. These investors have learned over the last few cycles that it is better to invest now when the evaluations are more affordable and financially attractive. The market uncertainty drives prices down and that attracts investors and certainly draws distress investors.

How do you see the regional financial services sector benefiting from the coming deal making?

The financial ser vices sector is fundamentally a scale business. In the near future, we expect further consolidation both in the banking, insurance and asset management sectors. This will lead to a more resilient and stable financial services industry; significantly benefitting the final customers.

On the other hand, we also expect the Fintech sector to continue to flourish.

Across the region, we have witnessed several initiatives by the governments to support early-stage investors and young companies that are preparing for IPO’s.

This will eventually boost M&A activities in the region.

Do you foresee a growing trend for cross-border M&A or will the bulk of the action remain domestic?

Despite the recent opening to foreign investments, it is expected that over the next 12 months, the bulk of the M&A activity will mainly stay domestic.

However, this trend could change in the next 2-3 years if the regulations continue to evolve and support further crossborder activity.

Moreover, as the relationships between UAE and Israel are normalizing, and as the rift between the GCC countries and Qatar comes to an end; it is expected that this will also positively influence the deal flow in the region.

How much of the coming M&A activity do you think can be directly attributed to circumstances brought about by the Covid-19 pandemic?

The Covid-19 pandemic has added u n p re c e d e nte d r i s k , c o m p l ex i t y, and uncertainty to M&A execution.

It has heavily impacted the type of businesses that were not able to transform quickly and adapt to the digital environment, which created low business optimism and confidence.

H oweve r, t h e g e n e ro s i t y of t h e government support and subsidies during these times led to the number of distressed M&A opportunities being lower than expected in the region. In our view, the deal activity has largely focused on defensive strategies such as asset sales versus lender-forced transactions. Once the government

support reduces or fades, we expect much more distressed deals to take place in the future.

How much M&A action will the regional banking and financial services sectors experience in the coming years?

In the recent years we have seen an increased consolidation in the banking sector in the GCC. For instance, in 2017, the merger of National Bank of Abu Dhabi and First Gulf bank to form UAE’s largest bank – First Abu Dhabi Bank; and more recently, the agreement of National Commercial Bank and Samba Financial Group to merge to create the Kingdom’s largest bank.

Broadly speaking, even globally there is a trend towards larger banks, due to the cost of compliance, the cost of investing in technology and the investment that is going to be required for banks to maintain an operating model which can compete with the neo-banks and which can compete with the challenger banks.

Furthermore, as referenced in our Q4 2020 issue of UAE Banking Pulse, the recent FAB’s acquisition of Bank Audi Egypt reinstated the M&A wave in the region and other banks could follow the trend to consolidate their position.

Having said that, we expect this to continue in the coming years and lead to an increased M&A activity in the region given the GCC market is still fragmented considering the size of the economy.

Moreover, further consolidation is in the customers’ interest and will surely enhance financial stability in the region. mea-finance.com

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MERGERS & ACQUISITIONS

M&A in Islamic Finance Islamic Banks and Financial institutions can face vulnerabilities specific to their nature and locations. Mujtaba Khalid, Head of the Islamic Finance Centre, BIBF explains where some of these concerns arise and how M&A’s can help to strengthen the sector Mujtaba Khalid, Head of the Islamic Finance Centre, Bahrain Institute of Banking & Finance (BIBF)

T

he terms merger and acquisition (M&A) although often used as though they were synonymous, mean slightly different things.

A merger implies the combination of two companies into one larger company for some economic or other strategic reasons. Acquisition is gaining effective control over the management and ownership of another company, from a legal point of view, the target company ceases to exist.

Given the current circumstances as well as the coming global financial condition, we can build a case for two or more Islamic banks or financial entities to merge and form a more robust Shariah compliant financial institution as was seen in the merger of Al Salam Bank Bahrain’s merger with BMI a few years back. Similarly, we can also build an equally appealing case for a conventional bank to acquire an Islamic bank, as was seen in the recent acquisition by The National Bank of Bahrain (NBB)’s of Bahrain Islamic Bank (BIsB).

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Spurred by Commodities Before moving on to the mergers and acquisitions, we need to zoom out and look at the Islamic finance industry as a whole and its prospects – the Islamic finance industry in the past has seen considerable growth. Over the past decade, it has averaged double digit growth. However, we did see this growth slow down to single digit in the past two or so years. Going forward, according to different reports including the Islamic Finance Development Report 2020, the industry is poised to grow by at least 50% in the next 5 years. I believe that there is a case for the Islamic finance industry to see more than 100% growth over the next 5 years - The last time the Islamic Finance industry was at its peak was around 2009, just at the culmination of last the global commodity super-cycle. Many countries the feed the growth of Islamic finance are dependent on commodities - be it the GCC with crude oil, Malaysia with Palm oil or countries like Pakistan and Indonesia with agriculture. There

Banking and Finance news in the MEA market

has always been a strong correlation between commodity prices and the growth of the Islamic finance industry.

Some can argue that the correlation might not be as strong, non the less, it is very much there. Given the COVID19 pandemic, once nations start to vaccinate and economic activity starts (as has started in some countries), there will be a huge demand in commodities and raw material just to get back to the previous normal. This I strongly believe will result in a significant increase in the prices of commodities, thereby having a positive spillover onto the Islamic finance industry. If we look at the YTD increase of the S&P Commodities index, it will show that the prices of commodities have already increased significantly in 2020.

The Case for Mergers and Acquisitions From an operational perspective, there are certain challenges faced especially

by Islamic banks in the region that could act as a catalyst for increased merger activity –

As a re s p o n s e to t h e C OV I D situation, all regional regulators responded to lessen the impact on the public. There were many stimulus packages announced, Regulator y Capital requirements were reduced, and financial consumers were allowed to reschedule their interest/profit payments. This was a well-received measure from the perspective of bank customers, however, it leaves the challenge of uncertainty for banks. Even though many banks have increased their loan provisioning ratios, there is no sure way for banks to know the level of Non-Performing Loans (NPLs) on their books. This will be apparent once customers start making their interest/ profit payments. Coupled with the fact that Islamic banks will not be able to “benefit” from late payment charges (as all such fees have to be written off to charity), Islamic banks do face uphill operational challenges.

There is also an issue of the quality of financing assets on the books of Islamic banks in the region; if we assess

THROUGH MERGERS AND CONSOLIDATING RESOURCES, ISLAMIC BANKS CAN REACH OUT TO YOUNGER MORE TECH-ORIENTED CONSUMERS. the books of Islamic banks, we see that there is an over exposure of real estate financing – this can be in the form of Musharakah (equity) investments, Sukuks etc. mostly in residential projects or shopping Malls.

The success of these projects is ver y much dependent on the number of expatriates that enter the region or rather that do not leave.

GCC: Potential peak-to-trough declines in population 0 -2 -4 -6 -8 -10

May estimate Latest estimate

-12

Bahrain

Source: Oxford Economics

Kuwait

Oman

Qatar

Saudi Arabia

UAE

The past year has seen a considerable exodus of expatriates as can be seen from the latest report by Oxford Economics: This deterioration of assets will have an added negative spillover – the calculation of Expected Credit Loss (ECL) under IFRS 9. This deterioration might see assets move to Stage 2 or Stage 3 impaired assets. The definition of both stages and their treatment are: Stage 2 – If a loan’s credit risk has increased significantly since initial recognition and is not considered low, lifetime ECLs are recognized. The calculation of interest revenue is the same as for Stage 1.

Stage 3 – If the loan’s credit risk increases to the point where it is considered credit-impaired, interest revenue is calculated based on the loan’s amortized cost (that is, the gross carrying amount less the loss allowance). Lifetime ECLs are recognized, as in Stage 2.

Given these issues, a merger between Islamic financial entities to help shore up capital adequacy as well as consolidate resources to have sufficient buffers to weather storm. Bigger entities could potentially serve a larger client base (especially cross border regional mergers) diversifying country exposure of certain Islamic banks.

The region and many other parts of the world are experiencing a big shift towards digitalization and FinTech. There are many potential benefits that can be reaped by a first mover advantage.

Many Islamic banks, partly due to the reasons mentioned above might not have the luxury to afford expensive capital expenditures in this space.

Through mergers and consolidating resources, Islamic banks can reach out to younger more tech-oriented consumers. This can also potentially be a case for conventional banks acquiring Islamic banks – given most Islamic banks are undervalued given the upcoming challenges, conventional banks who want access to a new set of Shariah adherent customer base, can potentially acquire an Islamic bank. mea-finance.com

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DATA SECURITY

Championing safe digital transformation Cybercriminal activities which include fraud, e-commerce data seizure and phishing attacks have increased as regional banks swung to digital-only models amid new models of operations such as remote working

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hough the outbreak of the coronavirus pandemic has had a devastating impact on the global economy, it has also accelerated digital transformation across business models, channels, and touchpoints. Before COVID-19 was declared a pandemic, financial service providers across the Gulf region had

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long made considerable progress in digitizing their products and services compared to their peers in other emerging markets regions.

“Digital transformation is no longer a luxury, but a necessity. Banks that are agile, flexible, and willing to transform their business models will be the ones that succeed, and secure their

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financial strength for future growth,” said KPMG. When the pandemic made landfall on the shores of the Arabian Gulf almost a year ago, all regional banks swung to digital-only models moving nearly all their interactions with customers online to build solutions that better suit clients’ needs at that time.

However, the recent cyberattack on Microsoft’s widely used business email software shows that banks are presented with the difficult task of balancing the traditional approach to risk management with the need to respond quickly to a crisis that has created massive changes to their operating environment.

Cybercriminal activities which include fraud, e-commerce data seizure and phishing attacks have increased

as regional banks swung to digital-only models amid new models of operations such as remote working. The cyberattack on the central bank of Bangladesh in February 2016, in which the hackers got away with $101 million, is also a wake-up call for the financial service sector that systemic cyber risks cannot be underestimated.

A data-driven approach to digital transformation can help banks’ security systems through the detection of fraud signals and analyze them in real-time using artificial intelligence (AI) and machine learning (ML) to flag suspicious activities before they corrupt the entire banking system.

GCC states seek to be leaders in digital innovation, however, the adoption of new technologies leaves them vulnerable to an increasing range of cyberthreats.

According to Chatham House, “There is an inherent correlation between the ambition to become a leader in the digital world and the apparent vulnerability to a wide range of cyber threats.”

Emerging risks As C-suite executives are transitioning from an emergency mode which saw the implementation of COVID-19 mitigation measures, they also need to address new emerging risks such as video and voice communication surveillance, data security controls for the use of personal equipment, and cases of third and fourth parties falling victim to cyberattacks.

The coronavirus crisis prompted several banks to implement new digital features, such as fully digital processes (e.g. account opening, remote identification and verification, and contactless payments), said Deloitte.

Given how payments and transaction banking services are a core feature of a financial institution, the recent digitalization is driving massive adoption of contactless payments methods across the Gulf region amid the growth of e-commerce and changing preferences among banks’ young tech-sav v y customers base.

Hackers are exploiting the fear around the pandemic to get malware onto clients’ devices and this trend has hit the banking sector most hard, said Nicolai Solling, the Chief Technology Officer, Help AG. But it is worth noting that just like any other financial service or department, cashless transactions expose both customers and banks to new variations of cybercrime. The increased adoption of digital payment platforms in the wake of the pandemic has also increased customers’ exposure to cyber-criminal activities.

According to the INTERPOL, during the first four months of 2020, 907,000 spam messages, 737 incidents related

Similarly, with more customers social distancing and retailers shifting to costeffective models, the use of e-commerce has become paramount. KPMG said that customers are spending on average 10 to 30% more online with e-commerce consumer sales jumping 28% at the height of the pandemic.

However, INTERPOL weighed in saying e-commerce data interception poses an emerging and imminent threat to online shoppers, undermining trust in online payment systems.

The increase in cyber-criminal activities has also heightened the need for both customers and businesses to

THE RAPID DIGITALIZATION IN GCC COUNTRIES, LIKE THE UAE AND SAUDI ARABIA, HAS TRIGGERED THE NUMBER OF CONNECTED DEVICES BY OPENING NEW GATEWAYS FOR CYBERATTACKS. ResearchAndMarkets.com

to malware and 48,000 malicious URLs – all related to COVID-19 – were detected by one of the organization’s private sector partners.

As such, global financial institutions are finding themselves a step behind as their existing approaches to combat cybercrime cannot adequately handle the many threats and burdens, they encounter. Cyberattacks are getting more sophisticated by the day. The evolution of fraud and financial crime moves in tandem with the developments in the domains they plunder.

Cybercriminals have also become more imaginative during the pandemic.

Hence, GCC banks should leverage new technologies and constantly change their operating models to obtain a holistic view of the evolving landscape of financial crime.

consider the cybersecurity protocols of their suppliers and other third parties.

A risk assessment is essential before giving any third parties access to your business networks, said KPMG. The assessment should also be extended to the access your suppliers give to their third parties including their handling of customer data and their organization’s security policies.

Cybercriminals are adopting the latest emerging technology and are forever changing techniques to make their cybercrimes more effective, faster, and adaptable to current safety measures. In the GCC financial services sector, banks that effectively leverage their digital assets, strengthen their cyber resilience and manage third-party risk are poised to reap the benefits of mea-finance.com mea-finance.com

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DATA SECURITY

increased revenue streams, regulatory compliance as well as enhanced operational efficiency.

identifying previously undiscovered patterns, which is critical for flagging potentially suspicious behavior.

Staying vigilant

Across the GCC

As regional government and corporates – especially banks and the retail sector – swing more towards digitized economies, exponentially more data is generated and shared among organizations, stakeholders, and customers said PwC. The more corporates and governments digitize, the more they are exposed to new digital vulnerabilities, making an effective approach to cybersecurity and privacy more important than ever.

Data breaches have grown in intensity and frequency globally in recent months as cybercriminals take advantage of the pandemic upheaval. Cyberattacks are a global phenomenon and are continually developing in sophistication and impact, despite the advances in cybersecurity technologies and practice. Over the years, cybercriminal activities have also evolved into well-organized networks with advanced capabilities and specialized divisions of labor.

However, PwC stated that the new cybersecurity legislation, both globally and across the Middle East is driving customers’ demands around trustworthiness and safeguarding of personal data.

KPMG stated that in an era of dizzying technological innovation, most banks are modernizing every facet of their operations and working on becoming more trusted by their customers. “There is a massive evaluation process underway, of various aspects of SASE, beginning with something as simple as web security, for example, to make sure the right security policies are enforced when customers and employees are browsing the web, at home, without having to send all of that traffic back to the enterprise,” said Solling.

Artificial intelligence (AI), machine learning (ML), and cloud computing can help firms to manage and understand ever-growing data sets while effectively

According to ResearchAndMarkets.com, the rapid digitalization in countries, like the UAE and Saudi Arabia, has triggered the number of connected devices thereby opening new gateways for cyberattacks.

However, these two Arab neighbors are also revered for their extraordinarily s t ro n g re g u l a t o r y c o m p l i a n c e requirements across all businesses, which further acknowledges data as a key asset and reinforces their commitment

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MENA Cybersecurity market will hit the $2,893.4 million mark by 2026, registering a CAGR of 7.92%.

Source: Research And Markets

to ensuring that cybersecurity is not only best in the region but globally.

GCC governments and corporates operating in the region are also aware of the heightened cyber threats associated with digitization especially following the outbreak of the pandemic.

GCC region has embarked on policies to unlock the possibilities offered by Big Data. According to Castlereagh Associates, the effectiveness of the steps taken by the GCC countries to develop the resilience of state institutions and business sectors is reflected in their ranking in the Global Cybersecurity Index.

The index, which assesses the preparedness of countries to combat cyberattacks under five pillars including legislation, technical and organizational capabilities, capacity building and

Banking and Finance news in the MEA market

cooperation, ranks GCC countries top in the Middle East and highly on a global scale due to their commitment to cybersecurity.

Gulf states have been stepping up their cybersecurity capabilities long before the pandemic hit in a bid to bolster their national cyber-security capabilities as well as improve the protection level of their critical national infrastructures and companies.

In the UAE, the Dubai Financial Services Authority (DFSA) recently launched the DFSA Cyber Threat Intelligence Platform which offers enriched cyber threat intelligence information to users and financial institutions. The platforms also allow other firms to share information about current cyber threats in a bid to stay one step ahead of cybercriminals.

Under Saudi Arabia’s Vision 2030, the kingdom seeks to transform 10 cities into smart cities including Makkah, Riyadh, Jeddah, Al Madinah, and Al Ahsa, the UAE set a goal to conduct 50% of government’s transactions via blockchain platforms within the next three years while the other Gulf states have embarked on policies to unlock the possibilities offered

by Big Data.

As regulatory bodies such as the DFSA are prioritizing cybersecurity measures, progressive institutions recognize that it is not merely a ‘technology problem’ but a wider business challenge that requires business ownership and strategic development. Regional banks are also tapping third parties to facilitate technology implementation, to decrease costs, enhance customer experience, and boost their competitive edge.

Help AG’s Solling said that new regulations continue to be rolled out, which brings to the forefront the importance of understanding the data that a bank is hosting, the owner of the data and how to deal with it.

ResearchAndMarkets.com said that the cybersecurity market in the Middle East and Africa was valued at $1903.59 million in 2020 and it is expected to hit the $2,893.4 million mark by 2026, registering a CAGR of 7.92% between 2021 and 2026.

36 FORTUNE

GLOBAL 500 FINANCE COMPANIES DIGITALLY TRANSFORM WITH HUAWEI.

TOGETHER

DATA SECURITY

Cybersecurity in banking and financial services From cybersecurity threats to cloud native platforms, Nicolai Solling, Chief Technology Officer, Help AG gives a detailed account of the front and centre considerations that banks and financial institutions must have when tackling their security and digital needs

H

ow has the pandemic changed cybersecurity requirements for the banking sector? How are financial institutions coping? Are they being confronted with any new kinds of challenges?

The pandemic and ensuing shift to remote work has amplified the cybersecurity threats across multiple industries, and the BFSI sector has not been immune either.

According to VMware Carbon Black , cyber-attacks on financial institutions increased by 238% from February to April 2020.

The sector has encountered a worrying growth in the compromise of credit card information, as our Digital Risk Protection report showed that Q2 2020 saw a 500% increase in carding fraud. The same period also witnessed a staggering 3-time (183%) jump in threat alerts related to data leakage.

Attackers have exploited the fear around the COVID-19 pandemic to get malware onto clients’ devices. This trend has hit the banking sector especially hard. An attacker could send a client a link that seemingly contains information about COVID-19 but in fact downloads

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malware onto the device once it is clicked. This could constitute the first step of the cyber-attack campaign. This is particularly concerning as the pandemic has caused many banks to build and expand their electronic channels, like most organizations. Banking moved online, and while it is okay for most of us, it has created a new group of users (e.g. senior citizens, blue collar workers, etc.) who are not aware of the nuances of digital technology, let alone safe online practices. This instantly meant a much broader risk surface.

In addition, the bank as an enterprise has also been impacted by COVID-19. Due to the pandemic, many bank employees began working from home, and the home network has a very different security posture than the enterprise network that they would normally be utilizing. Although most banks have been operating remote access solutions for a long time, the scale was fairly limited earlier and overnight the situation had to be changed. This added extra pressure to both security and connectivity requirements, causing banks to rethink how they implement secure internet connectivity for remote users, while maintaining data security.

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Nicolai Solling, Chief Technology Officer, Help AG

BFSI forms a major chunk of Help AG’s customer base. Have you seen a change in banks’ cybersecurity requirements over the past 12-18 months?

In the beginning of the pandemic, of course, we had a lot of requirements when it came to the connectivity aspect of how we securely connect to the bank, how we connect those who work at the bank efficiently to the bank environment, etc. While remote access was not a new feature for most banks, the scale was limited prior to the pandemic, and almost overnight, a massive scale up was needed.

Another requirement that we have been seeing is in terms of rethinking how banks address secure connectivity to the internet for their users. The traditional castle-andmoat model had to be transformed to make way for zero trust and security on the edge. Banks are increasingly looking at Secure Access Service Edge (SASE) based services. There is a

massive evaluation process underway, of various aspects of SASE, beginning with something as simple as web security, for example, to make sure the right security policies are enforced when customers and employees are browsing the web, at home, without having to send all that traffic back to the enterprise.

Has Help AG recently brought some new technologies on-board that especially add value to cybersecurity for the BFSI sector?

We have strategically partnered with several innovative vendors that have further expanded our capabilities in the BFSI sector. One such partner is Zscaler, which delivers cybersecurity in the cloud.

We work very closely with them to deliver cybersecurity services that are in line with not only organizational but also governmental requirements, in terms of ensuring data is maintained locally in compliance with regulatory regimes of the region. Another of our standout partners in this arena is Netskope, who has made the necessary investments to ensure that the SASE services they provide are in line with local regulations. Beyond web traffic, SASE also covers managed SaaS, unmanaged SaaS, public cloud services, and custom apps in the public cloud.

Illumio is another of our important partners for the banking sector, among many other verticals. Most banks have the requirement of segmenting their services.

This means they need to create technical controls for enforcing traffic between systems. One driver for the microsegmentation process is the fact that most banks have a mandate to maintain Payment Card Industry (PCI) compliance.

Additionally, many banks that are already PCI certified are under the pressure of maintaining the kind of segmentation required for this compliance. That is where Illumio comes in with a unique solution for banks to help them deal with this issue in an efficient, economical, and flexible way. The solution can be implemented within days instead of the months and years that organizations

sometimes spend on addressing microsegmentation requirements.

Another interesting feature of Illumio is that the segmentation solution is agnostic to where you host your data and applications, and as a result, as banks move to the cloud, they can maintain the same set of capabilities as they did on-prem.

Another key partner helping us add value to the BFSI sector and support our secure cloud enablement strategy is Aviatrix.

Banks will always have applications that are challenging to move into the cloud, either because of technological or governance requirements. As a result, they always tend to be hybrid when it comes to cloud adoption. Connecting an on-prem data center to a cloud-based data center with the right levels of security and performance is a challenge. And it is not only about establishing a connection between on-prem and cloud, but also about maintaining communication between different cloud platforms in a secure way as an organization moves toward multicloud. Another challenge is maintaining the right kind of segmentation between those environments. Aviatrix addresses all these issues through its cloud platform and capabilities.

Securiti enables organizations to readily provide information to the client on what kind of data the organization stores about them. This is important as many data privacy regulator y frameworks stipulate that users have a right to this knowledge. Securiti also manages the life cycle of customer data, which is related to ensuring that the data is redacted from the organization’s systems after the customer leaves. Data redaction can be challenging, as data can vary widely in nature (e.g., structured and unstructured data).

Moreover, a key aspect of data management is that it must be an automated process, because a manual process is too cumbersome and expensive. This is another arena where our partnership with Securiti plays a vital role, providing data protection through automation and AI technologies. Securiti deploys big data analytics and machine learning capabilities to ensure data is managed and cleared securely with minimal human intervention.

The financial sector has been witnessing prominent changes in data privacy regulations. How are banks dealing with these changes?

Help AG has always taken the role of a market evangelist when it comes to pioneering new technologies, be it secure cloud enablement, OT security, or the utilization of machine learning for enhanced agility and efficiency in dealing with cyber threats, as well as advanced cybersecurity services like world-class penetration testing services, Incident Response, Breach Investigation and Forensics, Cyber Insurance, Governance, Risk and Compliance, 24X7 Managed Detection and Response, and Managed Threat Intelligence among others.

We have always been known to be very pragmatic in our approach and have planned our strategies after a lot of thought and careful consideration, in addition, to leveraging the extremely successful market experience of our

When it comes to data privacy, banks deal with different types of regulations on a local and global scale, such as the GDPR in Europe and the CCPA in California. New regulations continue to be rolled out, which brings to the forefront the importance of understanding the data you are hosting about a user and how to deal with it. Specifically, the life cycle management of data is becoming extremely crucial for banks. To address these issues, we have partnered with Securiti, which provides an AI-powered platform focused on identifying sensitive data and managing its life cycle.

We are living in times when innovation and threat landscape are both evolving at light speed.

How is Help AG making sure to keep pace?

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DATA SECURITY

leadership team. We constantly finetune our vendor strategy in line with the industry trends as well as with an expert understanding of what is to come, and accordingly, we do our due diligence in identifying the right kind of vendor partners and enabling our teams to make sure we position the technologies in the best manner in the marketplace.

This pragmatism is also reflected in our hiring practices. For example, keeping pace with the requirements of the industry, we have been increasingly hiring experts with skills in cloud security, IoT/OT security, product development and management, digital risk management, CSOC analysis, data science, cybersecurity architecture, incident response, DevOps architecture, etc.

Another USP that makes us stand out is our ability to think like hackers.

This empowers Help AG to adopt both a proactive and a predictive approach to cybersecurity unlike traditional approaches of tackling threats and vulnerabilities. The analysis team in Help AG comprise the region’s most qualified ethical hackers capable of uncovering loopholes that automated tools generally miss and accordingly penetrating defenses of any nature. Our advisory consultants adopt a business-oriented approach and propose risk-oriented recommendations for informed decisions.

Help AG’s implementation team ensures fully compliant deployment, migration and integration of security architecture as per security policies, security baselines, standards and recommendations from technology vendors. Our analysts and subject matter experts in our state-ofthe-art Security Operations Center (SOC) offer round-the-clock expert services in areas of protection, detection, response and recovery.

Being the cybersecurity arm of Etisalat Digital, we are very well placed as the digital transformation powerhouse. The next 12-18 months will witness a service centric evolution, with an overarching ambition of Help AG-as-a-Service. Three years from now, our portfolio will be

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Help AG-as-a-Service. From being a cybersecurity solutions and services provider, we are transforming into a managed cybersecurity services and solutions provider.

D i g i ta l t ra n sfo r m a t i o n a c ros s technology domains is widespread in the Gulf region. Where do you see opportunities for your business in 2021?

The broad shift towards using cloudnative platforms is undeniable. This move to the cloud presents an opportunity for us, as we provide innovative cloud-native security capabilities to businesses.

Organizations are rethinking the entire process of application development

continuing focus on security automation together with strategic partnerships enables us to deliver the automation capabilities businesses need to save time and cut costs.

According to recent IDC reports, the cybersecurity spending is increasing in META region, growing at a CAGR of 7.3% and more and more shifting from solutions to services. This is where Help AG is extremely well placed, with its service centric business evolution.

Our Managed Security Services saw a massive increase in demand and uptake in 2020 and continues to be on the northward journey.

NEW REGULATIONS CONTINUE TO BE ROLLED OUT, WHICH BRINGS TO THE FOREFRONT THE IMPORTANCE OF UNDERSTANDING THE DATA YOU ARE HOSTING ABOUT A USER AND HOW TO DEAL WITH IT. as well as how the application should look in the future. Moreover, a lot of the technology that organizations have in place today will not be able to withstand the requirements of the new cloud platforms and will thus need to be revamped or replaced. Being able to secure cloud-native computer platforms and cloud-native technologies will be an extremely important capability moving forward.

COVID-19 has led to new digital habits and trends, such as an increase in online banking and application development.

This is another opportunity for Help AG, as we are frontrunners in ensuring security is a day-zero consideration while new applications are developed and released for large scale usage.

Moreover, automation has significantly moved from being something ‘good to have’ to becoming a vital component of business resilience and productivity. Our

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If you had to focus on three things that matter the most for banks’ cybersecurity, what would your advice be?

1. C onsider security as a day-zero component of your application building process. If you build a system without considering the potential for fraud, you are building an inefficient system prone to attack.

2. A lways assume that you will be breached and stay prepared with a proactive approach to cybersecurity.

3.

F o re s e e p ote n t i a l r i s ks w h e n creating securit y policies and educate employees correctly. The security policy of a bank or financial institution should address what the organization does to ensure the security of customer data, explain employee best practices, and outline the organization’s action plan in case a cyber-attack happens.

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COVER INTERVIEW

Ebrahim Baeshen, Office Managing Partner, Jeddah, KPMG in Saudi Arabia

How ESG is rapidly taking over the Financial Services industry Saudi Arabia Ebrahim Baeshen, Office Managing Partner, Jeddah, KPMG, talks with MEA Finance about how the pandemic heightened ESG practices in the Kingdom of Saudi Arabia and explains why it is a vital component in the success of banks

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Banking and Finance news in the MEA market

T

o what extent did SAMA’s interventions to support the economy through the pandemic act as an exemplar to Saudi’s banks?

Amid the pandemic related financial depression, the Saudi Central Bank (SAMA), stepped in to support banks and businesses. Tasked with keeping the economy afloat during the perfect storm of lockdowns, record-low oil prices, and a near global economic collapse, the Saudi Central Bank proved itself capable.

SAMA allocations across sectors ensured government dues to the private sector are paid in a timely manner, a wage subsidy of 60% of Saudi employees’ salaries in the private sector, generous assistance to SMEs and measures that promote halting layoffs and sustaining employment despite the restrictive work environment Work-From-Home (WFH) and 30% staff presence in offices.

SAMA’s measures set a tone in the Kingdom that banks picked up on – the pandemic is a societal crisis that can only be eased through direct support to people. The stimulus packages also ensured the continued operability – and profitability – of the banking system and may have proved instrumental in allowing banks to continue their Environmental, Social, and Corporate Governance (ESG) programmes which were under pressure from the pandemic and under the spotlight of investors who themselves are pivotal as measures of the and health and sustainability of banks and, hence, the economy.

An overview of Saudi economy shows it is weathering and absorbing the pandemic shocks with the government stimulus.

Planned expenditure for fiscal year 2021 stands at SAR 990 billion, with a continued focus on promoting economic growth and improving spending efficiency. I view the government’s decision to maintain a similar level of public expenditure as last year, despite the volatility in the oil market, as a testament of its commitment towards achieving fiscal, social, and economic targets.

According to Saudi Ministry of Finance (MoF), real GDP growth contracted by 3.7% in fiscal year 2020, driven by a combination of COVID-19- related containment measures within Saudi Arabia and the negative global impact of the pandemic on international oil demand and prices.

An easing of domestic pandemic-related restrictions, an oil price recovery from the lows seen in April 2020 and improvements

MAINTAINING A TRACK-RECORD OF SUCCESSFUL ESG PROGRAMMES WILL BE VITAL FOR THE HEALTH OF SAUDI BANKS in several leading demand indicators support the Saudi MoF’s expectation of a broad-based rebound in real GDP growth of 3.2% in 2021. KPMG, however, notes that the economy in nominal terms will not return to its 2019 size until 2022.

How vital will successful ESG programmes become to the growth and the health of Banks in Saudi Arabia?

In just a matter of weeks, COVID-19 changed the dynamics of the global economy. As the crisis unfolded, many businesses and investors shifted their focus from profits to people; human impact became more important than economic impact.

Issues related to human equality, access to health services and societal welfare topped the agenda. It quickly became clear that the environment and social issues have a deep and direct influence on economic stability.

While the pandemic may have slowed ESG progress initially, it is clear that banks

across the globe now recognize that their ESG agendas are a tool for returning to prosperity, as well as a deciding factor for many would-be customers and investors. New ESG-tied products and models are being developed, tested and commercialized. The bottom line is that banks can no longer afford to overlook ESG and must embrace it to avoid constrained growth and increased regulatory and public scrutiny.

Euromoney, in its January 2021 survey has found the outperformance of ESG assets during the COVID-19 crisis vindicated proponents’ claims for the sector and encouraged record inflows into funds with sustainability characteristics.

The big question now is whether the momentum can be maintained in 2021.

Keeping up with the new global trend, Tadawul’s planned ESG-themed Index is a landmark move which reflects ESG is gaining importance as a strategic metric for investing in the Kingdom.

So, maintaining a track-record of successful ESG programmes will be vital for the health of Saudi banks, maintaining sustainability credentials, keeping the investors aware of it and building the most sustainable banks in the future.

How can ESG programmes help banks with investors, in their regularity obligations and with their reputational risk concerns?

Among many pandemic triggered uncertainties, one thing is certain; that pressure from regulators, investors and the public for greater adoption of ESG will increase. Regulators recognize that moving towards a low-carbon economy will create additional complexities for financial services firms.

Regulators are concerned that banks are ill-prepared for these types of credentials and conduct risks that could arise, both in terms of the direct risks. For example, the physical impact of climate change on assets and the transition risks which is the challenges inherent in a wholesale move towards a low-carbon economy. mea-finance.com

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COVER INTERVIEW

Nonetheless, governments will prioritize the effectiveness of ESGrelated regulations in reaching climate change goals over the difficulties faced by banks.

What role do you see KPMG taking in assisting the Saudi banking sector formulate appropriate and effective ESG programmes?

Now, as we realize the role of the ESG as a new necessity in contemporary financial ecosystem, financial organisations need to develop ESG methodologies and its best practices.

KPMG member firms’ work with banks and other organizations across the financial services ecosystem suggests that there are four key actions that bank executives should be addressing today for strengthening and achieving ESG ratings.

Understand your current baseline.

More than simply quantifying the financial risks and probabilities, banks should create an understanding of common ESG expectations of key stakeholders and build awareness of leading ESG practices, in particular amongst senior management and board members. This includes taking time to understand their current practices and exposures, including whether they have the right data, the right capabilities and the right processes to monitor and manage ESG appropriately going forward.

I. K n o w w h a t i s ex p e c t e d .

While regulatory and supervisory a u t h o r i t i e s a re ex p l o r i n g approaches as to how they might provide specific targets or expectations, bank executives should be talking to their regulatory authorities to understand what is expected of them and how those expectations may change over the short to medium-term. They should also be working proactively with their regulators and authorities to seek out facts, develop standards and identify solutions.

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II. P ut it on your risk radar. For many banks, ESG factors remain a reputational risk. But they need to be more than that. Bank executives, and particularly boards, should be ensuring that ESG risks are a lens through which all decisions are made, especially in relation to credit and valuation risks in their portfolios, reflecting the strategic nature of these risks.

III. Develop a strategy. ESG risks cannot be managed off the side of a desk. It requires banks to develop a robust strategy that is integrated into the overall business strategy for the organization. While the strategy must retain a level of flexibility, it must also be actionable and measurable.

Are there ESG activities that are culturally unique to Saudi Arabia and the wider Gulf and what could these be?

ESG-compatible investments standards in Saudi Arabia have significantly improved in recent times. Social reforms, lowering the dependence on oil and diversifying the economy, launch of new mega projects and improved governance mechanism are levelling the ground for FDI, creating new jobs for Saudis and attracting the top foreign talent.

Banking and Finance news in the MEA market

One example of the changing nature of ESG programmes in Saudi Arabia during the pandemic was the cancellation of Hajj in 2020. In previous years, many organizations in the Kingdom funded Hajj for their employees or customers – a unique aspect of ESG in the Kingdom.

With this expenditure removed from their 2020 ESG budgets, organizations either diverted the funds to other ESG programmes or simply spared other parts of their ESG budgets from pandemic-related cuts.

Banks in Saudi Arabia have long been at the forefront of the national ESG conversation. Some of the Kingdom’s international institutions and banks have been exposed to the global trends shaping ESG agendas, such as climate action, diversity, and the rise of the activist investor. Also, as one the world’s largest oil producers, Saudi Arabia itself has a particularly important role to play in the ‘E’, or environment, part of the equation.

Environmental Saudi Arabia being the largest oil producer in the world has a greater responsibility and Vision 2030 translates it with stress on lowering dependence on fossil fuel, reducing the carbon footprint, habitat protection and air emissions.

The renewable programme and the use of advanced technologies to produce blue and green hydrogen are just two examples to prove that case.

Social Sweeping social reforms in Saudi Arabia have paved the way for stronger ESG standards in the Kingdom. Moving beyond Gulf and towards international best practices are attracting global stakeholders to review their strategies for the Kingdom.

Governance Drastic reshuffle in ministries for transparency, Saudi Arabia’s anticorruption authority (Nazaha) started a crackdown on corruption which sets the pace for Saudi Arabia to align the public and private governance with best practices. It will set the stage for Saudi Arabia to present its case for a mature governance agenda.

W h a t i s yo u r v i ew o n t h e implementation of ESG activities across the financial sector in the Gulf region?

The pandemic, in general, has created a paradigm shift and accelerated the implantation of ESG programmes for sustainable agendas at financial institutions. ESG is currently being factored as a metric for investment decisions. Health and e-commerce companies are at the top of investment considerations. The movement towards renewable energy has also gained momentum in the Middle East.

Investors are the main drivers behind the growth and implementation of ESG programmes moving forward. In 2019, more than 2,300 world investment management firms representing SAR 322 trillion ($86 trillion) in assets under management have pledged to integrate ESG factors in their investment decisions by becoming signatories to the United Nations backed Principles for Responsible Investment (PRI). This represents an astronomical growth of 309% in assets under management since 2010 when signatories represented $21 trillion in assets under management.

Gulf states, as a result of falling oil prices, are focusing ESG programmes which are pushing regulators to prepare

and implement ESG strategies and standards. ESG programmes and their implementation has been on the agenda of Gulf states and they have developed metrics based on local regulatory systems.

Saudi Arabia in 2019 implemented a SR 105 billion ($28 billion) renewable energy programme which offers loans for clean energy projects and the manufacturers of renewable energy components.

Dubai, in line with its commitment to drive market growth and sustainability in financial markets, introduced its ESG reporting guide to assist its stock listed (DFM) companies to incorporate Environmental, Social and Governance information into their reporting processes.

There are several other recent efforts in the UAE and the wider region that have sought to tackle the broad range of ESGs. KPMG helps companies to develop ESG services to match the differing needs of asset managers at various levels of ESG maturity. KPMG covers ESG areas such as: Developing and implementing ESG strategy, monitoring and reporting on performance, review processes and assure disclosures.

How much more time do you think KPMG will be devoting to ESG advisory for the banking sector in 2021?

Designing an ESG strategy can build actionable guidelines to help banks and institutions create a value-chain of responsible and sustainable operations. At this point, seamless customer experience becomes a core of ESG for banks. One example, it has been noted that during the pandemic, customers need quick, contactless and protected services.

For setting ESG strategy, banks need to start working on formulating a crossfunctional internal team, sifting and gathering relevant data, data analysis and feedback to establish a strategy framework, seeking banks’ feedback and specific requirements, and establishing a governance committee.

Since the COVID-19 pandemic has amplified the need for ESG; so will KPMG’s

Ebrahim Oboud Baeshen is the Office Managing Partner in KPMGs Jeddah office. He is a seasoned professional with over 20 years of experience in accounting, audit and Zakat advisory. His current role involves providing a wide range of services, including due diligence, corporate finance and accounting advisory to family-owned businesses, corporates and public sector clients in the infrastructure, consumer and industrial markets sectors. In addition, Ebrahim has significant experience in organization design, diagnostic reviews and making recommendations for organizational governance structure.

He has a bachelor’s degree in Accounting from King Abdulaziz University, Saudi Arabia, Certified Public Accountant, Executive MBA from The University of Detroit – Michigan, USA, Master’s Degree in Computer Information Systems from The University of Detroit – Michigan, USA, Certified Arbitrator by the Ministry of Justice of the Kingdom of Saudi Arabia.

Ebrahim holds positions of Chairman of the Committee of Chartered Accountants at the Industrial Chamber of Commerce in Jeddah, Board member of the Saudi Organization of Certified Public Accountant (SOCPA), Member of several committees in the Saudi Organization of Certified Public Accountant (SOCPA), and is member of the Municipal Council in Jeddah, Saudi Arabia.

future time be spent on designing ESG strategies, especially in the Gulf region, as these states lack the future-ready practices, so that when the need arises they can present a case to investors.

KPMG predicts that for those banks that do not pursue a strong ESG agenda, the consequences could be severe. Banks risk negative reactions from investors, customer defections, adverse ratings, and a rise in the cost of capital. An ESG strategy at banks, just like all other strategies, needs to be carefully reviewed and regularly updated to ensure it remains aligned to stakeholder expectations. mea-finance.com

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DEBT CAPITAL MARKETS

The balancing act Tapping the international debt markets will help the GCC countries to plug their budget deficits as well as current account shortfalls without having to draw from their sovereign wealth funds

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he outbreak of the COVID-19 pandemic and its impact on the price of oil, which is the backbone of the GCC countries’ revenues, forced regional governments and corporates to calibrate their budgets in line with the current conditions. Given the importance of hydrocarbons as a component of GDP, exports and revenues for Gulf countries, the high correlation between oil prices and GCC financial markets will remain a permanent fixture for now.

According to S&P Global, “Normally, issuance and GDP are positively correlated – as GDP rises (or falls), so does bond issuance.” But this relationship was reversed throughout 2020 and changes are expected to be seen through 2021.

The stimulus packages that Gulf central banks unveiled at the height of the pandemic last year are available through most part of 2021 making a significant difference, especially in rejuvenating market confidence by providing a backstop. After a record issuance in 2020, industry experts do not expect

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Gulf states to tap international debt markets as much in 2021 amid economic recovery on the back of rebounding o i l p r i c es a n d we l l - c o o rd i n a te d inoculation programmes.

Despite the recovery of the economy, GCC countries and regional corporates still needs to borrow, and countries in the region will continue to issue bonds through December 2021. Tapping international debt markets will help the GCC countries to plug their budget deficits as well as current account shortfall without having to draw from their sovereign wealth funds.

Saudi Arabia projected a budget deficit of $37.6 billion (SAR 141 billion) in 2021, Oman foresees a budget deficit of $5.7 billion (OMR 2.2 billion) while Bahrain expects to post a deficit of $3.20 billion (BHD 1.2 billion).

Though a decline in debt issuance is expected in 2021, other supporting factors include still-favourable financing conditions, corporates’ CAPEX needs, increasing amounts of sovereign debt with negative yields and a rejuvenated

Banking and Finance news in the MEA market

merger and acquisition pipeline for corporations, said S&P Global.

Enabling conditions In 2020, international debt markets conditions were favourable to the extent that some of the corporate sectors that saw a surge in bond issuance compared to the previous five years were those most negatively affected by the economic fallout from the coronavirus pandemic.

Last year’s conditions did not only allow many issuers to issue new debt, but the markets were also receptive that yields continue hitting all-time lows on new issuances for both corporates and sovereigns. Similarly, alongside very low yields, debt maturities have been lengthening, particularly for investment-grade - rated ‘BBB-‘or higher – corporations in developed countries as well as emerging markets.

S&P Global said that these conditions have raised leverage for many, which will likely act as a headwind to issuance in 2021 as corporates try to lower leverage but these favourable conditions could

see some reversal given that GCC countries are on track with their vaccines rollouts campaigns and macroeconomic conditions are starting to improve.

“Middle East bond markets have outperformed wider emerging bond markets over the last few years, and we expect the trend to continue for this year amid favourable macroeconomic conditions and improving credit profiles of issuers,” said Christophe Lalandre, Senior executive officer at Lombard Odier ADGM Branch.

Despite these enabling conditions, GCC central banks availed record economic stimulus packages in response to low oil prices and the impact of the pandemic on the economy in a bid to support corporates and preserve the productive capacity. As such, regional banks can meet most of the economies’ financing needs. Fitch Ratings expects banks’ lending capacity to increase by low- to mid-single digits across the Gulf region this year and for some loans to be at subsidized rates hence there’s little incentive for corporates to issue bonds.

Additionally, several GCC corporates’ postponed projects and investments which also reduced their financing needs and capital expenditure amid changing operating environment.

Sovereign issuances According to First Abu Dhabi Bank, the GCC Eurobond market got off to a strong start this year and the improvement in the general external environment across the region should bode well to support investors’ sentiment for GCC credits.

Lombard Odier’s Lalandre said, “Middle East debt markets across both sovereign and corporates have structurally changed and grown exponentially since the oil crisis of 2015, as the region recognized the need to develop sovereign and corporate bond curves across tenures as well as to invest for non-petroleum industry growth.”

Around $11 billion of bonds were issued in the GCC region in Q1 2021, led by high yield sovereigns like Oman and Bahrain,

along with blue-chips financials. In February, Saudi Arabia issued $1.8 billion (EUR 1.5 billion) bonds following its $5 billion deal at the end of January. Oman and Bahrain also raised a combined $5.25 billion earlier in Q1 2021.

Structural reforms GCC sovereigns have for long relied on their large oil reserves which accounts for around three-quarters of the six-nation bloc’s spending. However, Oliver Wyman said that the emergence of sustainable clean sources of alternative energy and electric vehicles, the drop in oil prices due to a slump in demand and production cuts in line with the OPEC pledge mean this model will have to come to end at some point.

The structural reforms that are being implemented across the Gulf countries are beginning to have a positive impact on the economy as the regional governments seek to diversify their economies away from reliance on hydrocarbons.

In 2017, the Gulf governments agreed to introduce a 5% value-added tax (VAT) to boost their revenues. The UAE and Saudi Arabia implemented a 5% VAT on most goods and services in January 2018, while Bahrain came on board a year later with Oman scheduled to introduce VAT this month.

“We believe various governments across the Middle East are bringing wide-ranging, structural and long-term reforms to transform the respective countries GDP growth profile, fiscal metrics and business environment,” said Love Sharma, Head of India and Middle East Credit Research at Lombard Odier ADGM Branch.

Last month, Saudi Arabia also enacted changes to its labour regulations to allow greater job mobility for expatriates, which according to Emirates NDB is expected to result in better alignment of salaries for expats and citizens as well as improve the attractiveness of the kingdom for more highly skilled employees.

Similarly, the kingdom also said that from 2024, the government and stateowned entities will stop signing contracts

with foreign companies that base their Middle East headquarters in any other country in the region, a move that is aimed at curbing “economic leakage” and boost job creation, according to Bloomberg.

Across the border, the UAE, the Middle East’s trade and business hub, is leading the strongest overall reform momentum in the region. The UAE eased foreign ownership limit restrictions in 2019 and several banks and entities in the Arab world’s secondbiggest economy, have increased foreign ownership limits on their securities in a bid to attract more external investors.

Similarly, the introduction of legislation allowing 100% foreign ownership of onshore companies and several new and expanded visa schemes as well as the recently introduced Emirati citizen scheme for foreigners are a key component of the recently announced industrial development strategy, which aims to double the size of the UAE’s manufacturing sector over the next decade by attracting and retain investment and talent.

“UAE’s recent decision to allow qualified foreigners to get an Emirati nationality is one such step that was perhaps unthinkable few years back, said Dhiraj Bajaj, Head of Asia Fixed Income at Lombard Odier ADGM Branch.

“Such steps establish confidence in the government and significantly improve the business sentiment,” he added.

In the Sultanate of Oman, the government plans to reform labour laws, introduce new taxation, and end some “long-standing” subsidies as part of the country’s medium-term fiscal balance plan which runs through 2024.

Political bickering in Kuwait has stalled reform as the government and parliament remain at loggerheads over how best to cut spending and secure alternative sources of income. In January, the country forecasted a $40 billion (KWD 12.1 billion), its eighth consecutive budget deficit for the year starting April 1, 2021. Kuwait is expected to emerge as the biggest sovereign issuer in the Gulf region due to its funding requirement if the country’s debt law makes it through the parliament. mea-finance.com

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DEBT CAPITAL MARKETS

A Positive Outlook for Opportunities Christophe Lalandre, Senior Executive Officer at Lombard Odier ADGM Branch, Dhiraj Bajaj, Head of Asia Fixed Income and Love Sharma, Head of India and Middle East Credit Research come together with MEA Finance to give us their perspectives on the regional debt capital markets and their prospects in the near and medium term

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hat are your views on the debt markets landscape across the Middle East this year and how does Lombard Odier play a role in it?

Middle East debt markets across both sovereign and corporates have structurally changed and grown exponentially since the oil crisis of 2015, as the region recognized the need to develop sovereign and corporate bond curves across tenures as well as to invest for non-petroleum industry growth. At Lombard Odier, we like the region for its diversity, low fundamental correlation to Asia and relatively strong sovereigns and corporates. For our Asian and Emerging bond market portfolios, Middle East debt has become an increasing part especially in the Investment Grade space.

A large part of issuances in recent years have stemmed from widening fiscal deficits across the region. However, since 2H 2020, we expect some of the structural reforms adopted over the recent years to start to pay-off for the sovereigns. For the corporates, we are expecting a profitability

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revival across many individual names and sectors. Most corporates have focused on conserving liquidity during the Covid19 pandemic and going forward many will increasingly increase capex or undertake opportunistic mergers & acquisitions to benefit from improving economy. We believe this should not lead to rise in leverage meaningfully considering the greater longer term cashflow increases that we are expecting.

We expect issuances from some of the higher quality corporates to grow in the debt mix this year. This will help to bring more diversity in the debt market and for us to help in finding attractive investment opportunities. At the same time, for sovereign issuers the higher oil prices will certainly provide more cushion on the fiscal deficit and hence issuances from sovereigns should largely be lower vs prior years.

How do you see the GCC/Middle East fare amongst its emerging market peers this year considering the economic fallout due to the pandemic?

We consider that emerging markets

Banking and Finance news in the MEA market

that could show better progress on vaccination, ability to cope with future waves of COVID-19 mutations (with better health infrastructure), and take the opportunity to usher in structural economic reforms will stand to benefit most not only this year but even over medium to longer term. We believe various governments across Middle East are bringing wide-ranging, structural and long-term reforms to transform the respective countries GDP growth profile, fiscal metrics and business environment.

UAE’s recent decision to allow qualified foreigners to get an Emirati nationality is one such step that was perhaps unthinkable few years back.

Such steps establish confidence in the government and significantly improve the business sentiment. Combining with this largely long-term positive backdrop is the strong oil price environment, good progress on vaccination in countries like UAE, as well as improvement in geopolitical ties with the recently announced Abraham Accords. While sectors like tourism and in turn hospitality could see more muted recovery but improving pace of vaccination could also fast track such recovery.

Elsewhere in rest of the emerging markets, we have significant reservations around some regions like Latin America and South Africa around their structurally impaired economic and political scenario, and such markets could lag during the recovery phase of the pandemic. We believe overall this should lead GCC/ Middle East to largely fare better than wider emerging markets, as in fact has been the case in past few years too.

As Islamic bond markets appear to have embraced the trend towards sustainable investing, what will be Lombard Odier’s areas of focus this year?

Sustainable Investing is deeply integrated within our investment process. We believe in taking a holistic and forward-looking view of the issuers’ sustainability metrics

Christophe Lalandre, Senior Executive Officer at Lombard Odier ADGM Branch

trajectory than just a point-in-time scoring assessment. By doing so, we can focus on the gaps that various issuers need to fill going forward. This not only helps us to provide stewardship to such issuers but also aids in providing a much-needed transition support for companies or issuers that want to be sustainable in their business models.

Within Middle East as well, we have seen strong focus increasingly from corporates and governments alike to incorporate sustainability. The UAE for example, has committed to increase the share of clean energy in its energy mix to 50% by 2050. This will likely provide a strong boost for renewable energy companies to invest in the sector, most of which will inevitably need to be funded through debt markets. While the green bond market is still small within Middle East at close to USD5bn outstanding, we believe such issuances from the region are likely to see substantial growth over the coming years versus the past. We strongly support the sustainable energy transition of various emerging market countries through our investments and will look to take part in Middle East’s energy transition as well.

What is the nexus between the bank’s Shari’ah-compliant offerings and its focus on sustainable investment?

The Islamic bond market follows a clear legal framework, it follows certain rules.

Sustainable investing is an investment

Dhiraj Bajaj, Head of Asia Fixed Income

conviction aiming to have a positive impact on the environment and society.

Shariah investments share those beliefs and values. Over its two-century history, Lombard Odier has focussed on values such as sustainability, independence and social responsibility, to the benefit of its clients and over the past twenty years, we have built a powerful track record in sustainable investing. In parallel, we have been offering investors solutions in line with the principles of Islamic finance since 2012. These solutions are founded on a moral and ethical code, which seeks to protect investors from speculation and excessive risk.

In 2018, our discretionary mandate was officially certified as “Shariah Compliant” by the Shariah supervisory Board of Amanie Advisors, an eminent Shariah Advisory Firm. It is a strong recognition of the Bank’s capability to manage international assets with an Islamic approach and offer diversification to our clients such as Sukuks selected from the entire Sukuk universe, or international equities from a strict selective process combining our expertise and the Dow Jones Islamic Market Index.

Lombard Odier’s objective is not to offer only a Shariah compliant product or fund, but rather a bespoke and fully customisable investment portfolio, which gives clients seeking Islamic solutions access to the full capabilities of a global wealth manager, on a truly personalised basis. We are experiencing strong client

Love Sharma, Head of India and Middle East Credit Research

demand for these types of solutions, which encourages us to continuously enhance our Islamic offering.

What are your projections on the bond market in this region for the next 12 months?

We find attractive opportunities within Middle East bond markets especially for intermediate duration high quality corporate/quasi-sovereign issuers.

Middle East bond markets have outperformed wider emerging bond markets over the last few years, and we expect the trend to continue for this year amid favourable macroeconomic conditions and improving credit profiles of issuers. We also consider on the technical side, increased investor participation from both traditional developed market focused investors as well as Asian/ Emerging Market investors.

This will mainly be driven by few factors: 1) Access to high quality corporates/issuers in the region, 2) Ability to take advantage of availability of longer duration debt assets, 3) Increasing liquidity in domestic markets with significant local investor base, 4) Stable ratings trajectory driven by economic recovery, and 5) Increasing geo-political sanction risks associated with various good quality issuers from China.

Overall, all these factors point to a favourable investment outlook for Middle East bond market in general for this year as well as in near to medium term. mea-finance.com

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ISLAMIC FINANCE

A transformative opportunity Standardized supervision of Islamic finance is expected to lead to greater market confidence and restoration of its attractiveness to issuers

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he Islamic finance sector continues to demonstrate modest growth globally however at a slower rate compared to 2019/20 because of the economic fallout due to the outbreak of the COVID19 pandemic and low oil prices owing to plunging demand amid measures to contain the virus in core Islamic economies.

In 2021, narrowing fiscal deficits across the GCC region will likely drive a plunge in new Sukuk issuance. But despite the decline, Islamic bond issuance is expected to remain above the prepandemic annual averages mainly due to governments financing requirements due to the prolonged pandemic.

Moody’s estimated that the gross longterm global sovereign Sukuk issuance will hit the $96 billion mark this year compared to $109 billion issued in 2020.

However, the current economic challenges have created opportunities to accelerate and unlock the long-term potential of the Islamic finance sector, S&P Global said in its report, Islamic Finance Outlook 2021 Edition. These pandemicinduced challenges are expected to put the Islamic finance industry back on environmental, social and governance (ESG) investors’ radar, streamline Sukuk issuance to encourage the industry’s

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attractiveness and leverage technology to create a nimbler finance industry.

Sustainable finance The twin shocks of COVID-19 and plunging oil prices are expected to enhance the appetite for sustainable instruments as governments and corporates in the Gulf region seek to revive their economies amid diversification from hydrocarbonbased economies and transition to sustainable financing.

“Islamic finance social instruments can help core countries, banks, companies and individuals economically affected by the pandemic navigate current conditions, with market participants eyeing Qard Hassan, Zakat, Waqf, and Social Sukuk,” said S&P Global.

As GCC countries are tapping debt markets – taking advantage of low borrowing costs and investor demand for higher returns – to finance projects and plug their budget deficits, analysts expect Islamic finance social instruments to widen the appeal of Islamic bonds beyond traditional markets in the Middle East and South Asia to include ethical investors in Western countries.

“The Sukuk instrument overall remains attractive to issuers because it provides investor diversification and access to the

Banking and Finance news in the MEA market

Islamic pool of liquidity, which is growing in line with the market share of Islamic finance in the core Islamic countries,” said Ahsan Ali, Managing Director, Global Head of Islamic Origination, Standard Chartered Bank.

Gulf region Islamic lenders are seeing a growing frenzy for green bonds although the appetite is still in its infancy as more investors are committing to responsible investment. Last year, the overall green bond market was worth over $230 billion, and it reached $2 billion in the Middle East region with the potential to grow further.

“Whilst not mutually exclusive, Shari’ah finance offers a framework that embodies the social and ethical values of ESG investing, providing Middle East investors with an attractive opportunity to adopt more sustainable, responsible investment strategies – and, ultimately, the ability to tap into the significant value potential from ESG and the global shift towards sustainability,” said Soumaya Hissoussi, Senior Vice President, Lombard Odier Abu Dhabi Branch.

The Gulf region’s first $587 million green bond was issued by First Abu Dhabi Bank (FAB) in March 2017. The Abu Dhabibased lender also issued a five-year Hong Kong dollar-denominated green bond

worth $96.77 million through a private placement last June.

Last October, Abu Dhabi’s Etihad Airways issued a five-year “transition” $600 million green Sukuk to support its shift to a greener future. Having issued its $1.2 billion (EUR 1 billion) debut green Sukuk in November 2019, Saudi-based Islamic Development Bank also issued a five-year $1.5 billion debut sustainability Sukuk to support its members revive their economies post-COVID. Finance raised from green Sukuk typically supports investments in renewable energy or other environmental assets such as solar parks, biogas plants, wind energy projects, as well as renewable transmission and infrastructure projects, according to S&P. Although overall Sukuk issuance is gathering steam in some of the world’s largest financial hubs like London, the market for green Islamic bonds remains small compared to the conventional Sukuk market.

Harmonizing Islamic finance Regulation of Islamic finance differs from one country to the other and the conceptual regulatory framework of the Basel Committee on Banking Supervision is the default framework, said Moody’s.

However, there is a push towards the standardization of Islamic finance.

Standardized supervision of Islamic finance is expected to lead to greater market confidence and restoration of its attractiveness to issuers. But standardization poses challenges in terms of implementation and adoption, particularly in realigning existing products.

S&P Global stated that Sukuk issuance remains more complex and timeconsuming than conventional bonds, hence when Islamic finance issuers need swift access to capital markets, they typically use conventional instruments.

In 2018, Bahrain-based Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and Malaysia’s Islamic Financial Service Board (IFSB), two institutions that have

traditionally worked independently on their respective mandates in the past, signed an MoU to create a level playing field and foster harmonization and standardization of regulations.

Last May, the UAE set an example in the region towards much-needed standardization in the Islamic finance sector by launching the Higher Shari’ah

Islamic Banking Act, a legislation that is seen as the foundation of Islamic banking and financial inclusion in the country.

Hassan Jarrar, Chief Executive Officer of Bahrain Islamic Bank, said, “A global set of standards that would be acceptable to all stakeholders is still lacking although the Accounting and Auditing Organization for Islamic Financial Institutions, the

ISLAMIC FINANCE SOCIAL INSTRUMENTS CAN HELP CORE COUNTRIES, BANKS, COMPANIES AND INDIVIDUALS ECONOMICALLY AFFECTED BY THE PANDEMIC NAVIGATE CURRENT CONDITIONS, WITH MARKET PARTICIPANTS EYEING QARD HASSAN, ZAKAT, WAQF, AND SOCIAL SUKUK. – S&P Global

Authority. Overseen by the central bank, the Higher Shari’ah Authority is a national regulator entrusted with overseeing the Islamic financial sector, approve financial products, and set rules and principles for banking transactions per Islamic jurisprudence.

Moody’s said that the initiative by the UAE is credit positive for Islamic finance institutions because it addresses the sector’s main impediment to growth – the complexity and diversity of legislative frameworks and practices across regions and geographies, which creates additional risks and uncertainty in case of litigation.

Since its inception, the Higher Shari’ah Authority ordered the Shari’ah boards of financial institutions in the UAE to apply the Shari’ah Standards issued by AAOIFI as of September 2018.

Elsewhere, Bank Negara Malaysia issued a revised Shari’ah Governance Framework which was to be implemented in April 2020 to strengthen board oversight and the responsibilities of Shari’ah governance. In January 2020, the central bank of the Philippines, Bangko Sentral ng Pilipinas implemented the

Islamic Financial Service Board and the International Islamic Financial Market are working together to drive this agenda.”

Sukuk issuance Q1 2021 Moody’s projected that Sukuk issuance this year will likely stabilize after a record in 2020 and five consecutive years of growth. Last year, Islamic issuance surged by 15% to hit the $205 billion mark driven by large sovereign funding needs due to the economic fallout caused by the pandemic and a plunging oil price.

“We expect issuance to consolidate around $190-$200 billion in 2021, supported by GCC sovereigns’ high financing needs as oil prices remain moderate and fiscal deficits remain wide and as the sovereigns raise the share of Sukuk in overall debt,” Moody’s added.

Saudi Arabia, the Middle East region’s biggest economy, projected a deficit of $79.4 billion (SAR 141 billion) in 2021 (4.9% of GDP), while the UAE’s budget deficit – including consolidated accounts of the federal government and the emirates of Abu Dhabi, Dubai and Sharjah is estimated to be 9.9% of this year’s GDP. mea-finance.com

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ISLAMIC FINANCE

The potential for growth While Shariah principles align well with contemporary considerations and Islamic banking and finance’s market share continues its global expansion, Ahsan Ali, Managing Director, Global Head of Islamic Origination at Standard Chartered Bank explains that harmonisation will be a catalyst for further growth

Ahsan Ali, Managing Director, Global Head of Islamic Origination, Standard Chartered Bank

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Banking and Finance news in the MEA market

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ukuk instruments remain more complex and time consuming for issuers when compared with conventional bonds, so do you expect to see meaningful moves toward streamlining of Sukuk issuance to heighten attractiveness?

In the early stages of Sukuk market development, they were certainly viewed as complex structures that required additional time for structuring, documentation and execution. However, over the past decade the Sukuk issuance process and documentation has become much more streamlined as the parties involved (such as legal counsels, rating agencies, Shariah scholars, arrangers, issuers and investors) have come up the learning curve in terms of their knowledge and understanding of this product. I believe that currently the process is quite streamlined and manageable, however, moves to further standardize are always welcome.

The Sukuk instrument overall remains attractive to issuers because it provides investor diversification and access to the Islamic pool of liquidity, which is growing in line with the market share of Islamic finance in the core Islamic countries.

Do you see the GCC/Middle East taking a lead over other Islamic finance centres in Islamic financial activity and innovation as the world emerges from the pandemic?

As a leading international bank with an Islamic business spread over multiple markets, we have had the privilege to work with policy makers and regulators across the globe in helping develop the regulatory infrastructure. Our experience has been that all centres of Islamic finance both collaborate and compete in a healthy way, with a common goal

of boosting the overall Islamic market share. As we know, the GCC countries and Malaysia have long been considered the two hubs of Islamic finance, not surprisingly as both have large domestic markets to support their growth ambitions. We have also seen traditional centres of conventional finance such as London, Hong Kong, Singapore etc. create regulatory infrastructure to enable and promote Islamic financial services in their jurisdictions. Significant policy and regulatory initiatives are also underway in markets such as Pakistan, Bangladesh and Indonesia, and many African countries.

In the GCC, the large and strong Islamic banks coupled with supportive government and regulatory initiatives are paving the way for a robust growth.

The UAE in particular is making a major push to be the centre of Islamic economy, reflected in the world’s first Islamic trade finance bank to be established in Dubai and the launching of a new initiative for the creation of a unified global legal and legislative framework for the Islamic finance sector. These developments bode well for the growth of Islamic finance.

Do you think that the principles of Islamic finance are better suited to the economic recovery of nations post -pandemic?

In principal, Islamic finance is closely aligned with the real economy, as many of its products are structured around trade and asset flows. Hence, the integration of Islamic finance into economies as they recover from the pandemic will most probably result in a solid and sustainable impact and growth in real economic activity.

In the light of the rise of ESG considerations and socially responsible business and investments, do you predict a burgeoning role for Islamic Finance in global financial activities?

The Shariah principles which underline Islamic economics and finance encourage wholesome and sustainable development of communities, countries

and the world. This is pretty much aligned with the goals of sustainable, green and social financing, and therefore provides a natural fit between Islamic and sustainable financing.

However, it is true that green and sustainable financing within Islamic finance is still at an early stage and has not yet been explored to its full potential.

One challenge has been the availability of suitable green assets or of projects big enough to be used in structuring a green sukuk. But this should ease soon as governments, quasi-sovereign entities and large corporates are increasingly embedding green and sustainability principles as their core objectives. Also, while we haven’t seen many dedicated Islamic green investors, the awareness

sukuk and Etihad Airways issued the first ever sustainability-linked transition Sukuk – a US$600 million issuance in October 2020 Would global common standards be a boost for the wider uptake of Islamic financial services and the financial markets of Islamic nations?

The standardization of Islamic structures and legal documentation and having one common understanding of the Islamic Banking principles across the industry would certainly be a catalyst for growth and expansion across markets.

While it is true that differing Shariah principles across jurisdictions have muted standardisation efforts in the past, there is now a concerted effort

THE SHARIAH PRINCIPLES WHICH UNDERLINE ISLAMIC ECONOMICS AND FINANCE ENCOURAGE WHOLESOME AND SUSTAINABLE DEVELOPMENT OF COMMUNITIES, COUNTRIES AND THE WORLD is certainly increasing on that front too.

N o n e t h e l e s s , t h e g re e n a n d sustainable sukuk market has seen many landmark transactions, led by sovereigns such as the Republic of Indonesia, which issued its first sovereign green sukuk, worth US$1.25 billion, in 2018, followed

by US$750 million in 2019 and a US$750 million green sukuk in June 2020. Also there have been multilateral institutions such as the Islamic Development Bank, which issued its first-ever green sukuk, worth EUR 1 billion, in 2019 and followed this with the first-ever COVID-19 response sustainability sukuk in June 2020, worth US$1.5 billion. We have also witnessed a few corporates riding the green wave.

Majid Al Futtaim issued a US$600 million green sukuk – the world’s first corporate green sukuk, Saudi Electricity Company issued a dual-tranche US$ 1.3 billion green

by central banks and regulatory bodies to adopt common Islamic standards across their markets. Industry bodies such as AAOIFI and IIFM (International Islamic Financial Market) are also significantly contributing to these efforts by publishing standards and creating documentation for commonly used products and structures.

W ith standardisation and harmonisation, we can also start seeing the digitization of the industry and the wider adoption of technologies which would help in automating and streamlining the processes of Islamic banking products and specifically sukuk issuance, especially for retail issuance. This would certainly help bring down the cost of issuance, as well as help the sukuk market move away from the currently largely institutional market to the retail space. mea-finance.com

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ISLAMIC FINANCE

Islamic finance offers Middle East investors a valuable gateway to ESG investments Among the reverberations of the global pandemic came the growth of Islamic Finance and heightened appreciation of the importance of ESG investing. Soumaya Hissoussi, Senior Vice President, Lombard Odier explains to MEA Finance why both are on the ascent and are naturally well suited, with the social “S” component set to gain increasing prominence Soumaya Hissoussi, Senior Vice President, Lombard Odier Abu Dhabi Branch

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s the shockwaves of the p a n d e m i c reve r b e ra te d through the global capital markets, 2020 marked a year of prolonged uncertainty, volatility and, at times, unprecedented change.

However, amidst the turbulence, two key trends have stood out showing signs of resilience and major growth – these were Islamic finance and ESG investing, respectively. As we look ahead to the Middle East’s economic roadmap post pandemic, Islamic finance assets will not only play a key role in supporting future economic stability but will also offer investors a crucial entry point into ESG investment strategies, unlocking significant opportunities for sustainable, long term value creation.

Considering first, the key catalysts emerging which are accelerating the

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rise of Islamic finance, and second, its role in facilitating more sustainable, ethical investment opportunities more broadly, as we rear our heads from the lockdown and look to the future, there exists an exciting opportunity for the Middle East – an opportunity which our future generations of young investors will play a key part in delivering.

Despite challenging macroeconomic conditions, Islamic finance is on the ascent Whilst the equity markets fluctuated throughout 2020, and traditional fixed income suffered sharp selloffs at the onset of the pandemic, as many countries struggled to contend with the economic impact of COVID-19, Islamic banking assets offered a far more positive picture for investors, buoyed by increasing demand and supportive relief and state aid policies from governments.

Banking and Finance news in the MEA market

Nasdaq Dubai saw a significant number of sukuk listings in 2020, culminating in a $1 billion sukuk by Dubai Islamic Bank, listed in November. Data from a recent Moody’s report revealed Sukuk issuances grew by 15% in 2020 to a record annual high of $205 billion, marking a fifth consecutive year of growth. Whilst these highs are estimated to stabilise in 2021, Moody’s estimates continue strong growth in global Islamic funds under management, rising at an annual rate of 4-5% in 2021-2022.

At a time when many asset classes have underperformed and buckled under the strain of pandemic-induced economic pressures, investors have sought safety in Islamic banking, which has provided much needed stability and risk mitigation.

However beyond just wealth preservation, looking forwards, Shari’ah compliant strategies offer the potential for investors to tap into more diverse, and at the same time

more responsible investment opportunities – and as the global markets become increasingly challenging to navigate, it is the duty of active wealth managers to provide investors with solutions that are tailored to their specific needs and objectives, creating the opportunity for sustainable value generation.

At Lombard Odier, our solutions are fully customisable to each client’s individual demands. There is no such thing as an “off-the-shelf” or “one size fits all” product. In today’s climate of constant change, for investors to realise value from their investments we need remain nimble and agile, constantly developing our proposition in line with evolving investor demands. Our solutions are multi-asset class, offering clients everything from global investments, sukuks, equities from the Dow Jones Islamic index, as well as thematic funds, right through to ETFs and commodities. Responsible investing requires a balanced portfolio, underpinned by risk management, security and diversification, and Islamic finance provides investors with a compelling vehicle to achieve this.

Even greater than the demand for Islamic strategies, the pandemic has accelerated markedly the rise in ESG investing. Environmentally conscious and socially responsible investments have grown exponentially since COVID-19, and the trend will only continue to gather pace in the years to come. Bloomberg data suggests ESG assets may top as much as $53 trillion by 2025. Whilst some may have initially perceived the ESG wave as a temporary product of a bull-market, the reality is that ESG and sustainability will be the cornerstone of future investing – not only for the strategies adopted by retail and institutional investors, but also operationally for the investment management industry more broadly.

Whereas the “E” and the “G” have been occupying more of the headlines – spanning green assets, net zero commitments and greater scrutiny on governance protocols – the social (or “S”) component of ESG gain increasing

THE SOCIETAL ELEMENT OF ESG WILL ONLY CONTINUE TO BECOME INCREASINGLY IMPORTANT prominence as a critical priority for investors looking for more sustainable wealth creation. This is where there Shari’ah compliant assets offer Middle East investors with a very attractive opportunity, as an effective, reliable vehicle to more socially responsible investing. As a trusted advisor to our clients, sustainability sits right at the top of our agenda, and Islamic banking will be integral in offering investors ESGcompliant investment strategies.

Islamic finance goes hand-in-hand with ESG investing Shari’ah compliant assets inherently must adhere to certain rules and values, in line with social and religious codes of conduct. As a results in many areas Shari’ah investing shares common practices with requirements of traditional ethical investing models, making Islamic finance a valuable conduit to more socially responsible investing – in turn, an integral component of ESG. Our Shari’ah discretionary mandate represents the bank’s long tradition of social responsibility and commitment to develop sustainable and responsible investment solutions. An ethos which ESG investing is also built on, working in the same direction.

As industry standards for equality and transparency continue to increase, and the pandemic reveals the need for greater diversity and inclusion, both investment managers and investors will need to assess the impact their investment decisions are making on societies and communities around the world. To be able to do so effectively, sustainability and social responsibility will be two core pillars in this process, both of which speak to many of the same principles as Shari’ah compliant investing.

What does this mean? Whilst not mutually exclusive, Shari’ah finance offers a framework which embodies the social and ethical values of ESG investing, providing Middle East investors with an attractive opportunity to adopt more sustainable, responsible investment strategies – and, ultimately, the ability to tap into the significant value potential from ESG and the global shift towards sustainability. We are embedding sustainability into every facet of our investment processes, and we feel strongly industry must continue do the same, to allow Middle East investors to capitalise on the significant opportunity ahead.

Looking to the future, forecasts project global Islamic finance assets to reach $3.69 trillion by 2024. Simultaneously, the societal element of ESG will only continue to become increasingly important. With both sharing the common goal of social responsibility, there exists a compelling opportunity for the Middle East’s economy and investments markets post pandemic and in the long term.

Lombard Odier has been offering investment solutions in line with the principles of Islamic finance since 2012. Recognised by industry as a leading provider of first class, best-in-market Islamic finance services, Lombard Odier was awarded Best Shari’ah-Compliant Wealth Management Offering at the WealthBriefing MENA Awards for Excellence 2020, the ninth consecutive year the bank has won top honours in these awards.

mea-finance.com

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ISLAMIC FINANCE

A clear direction for growth Chief Executive Officer of Bahrain Islamic Bank (BisB), Hassan Jarrar points out that while there remain sectors where Islamic Finance can grow, there are areas of concern in today’s world where it has a distinct lead, and that creating the right stewardship directives and with good insights, it can be more robust in the face of uncertainty

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ukuk instruments remain more complex and time consuming for issuers when compared with conventional bonds, so do you expect to see meaningful moves toward streamlining of Sukuk issuance to heighten attractiveness?

Hassan Jarrar, Chief Executive Officer, BisB

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Banking and Finance news in the MEA market

Despite the overall developments we have witnessed within the Islamic capital market space, tapping into Sukuk instruments still remains both challenging and time consuming c o m p a re d to t h e i r c o u n te r p a r t conventional bonds.

The fact is, although the ongoing pandemic COVID-19 is a force to be reckoned with and unlike anything the world at large has had to deal with in terms of the sheer consequences and the breadth of its economic impact that reverberated around the world, it has further cemented what we had learned and had historically established from previous crises, in the likes of the collapse of oil prices back in 2014.

What the pandemic has further cemented, is that when issuers need faster access to capital markets they typically use conventional instruments - the first half of 2020 saw total volume of Sukuk issuances drop 38% compared with the same period in 2019; exceptions include issuers that have already established programs or can tap a recent issuance.

Do you see the GCC/Middle East taking a lead over other Islamic finance centres in Islamic financial activity and innovation as the world emerges from the pandemic?

We have yet to emerge unscathed from the ongoing COVID-19 pandemic, which has had an unprecedented effect on banks, industries, countries, and individuals around the world. Moreover, we have all had to deal with headwinds, and this overarching climate of uncertainty can be expected to persist throughout the first half 2021, and possibly beyond, bringing significant challenges for the banking industry.

In terms of size, in light of the recent wave of mergers sweeping across the GCC, particularly in the Kingdom of Saudi Arabia (KSA), I do foresee the GCC taking the lead.

However, on the innovation and digitisation front, leadership and competitive advantage is expected to remain with Islamic institutions in Southeast Asia, mainly Malaysia. With that said, competition remains robust among the likes of Bahrain, Dubai and KSA, each vying to become the Islamic banking hub of the region.

Do you think that the principles of Islamic finance are better suited to the economic recovery of nations post -pandemic?

I think the very principles of Islamic finance, if adhered to properly, are suitable for any economic cycle. We have observed back in the 2008 global financial crisis, that what happened to

institutions as a result of some leverage related practices, would not have happened had those instruments been Islamic in nature.

The challenge for Islamic banks is that they must continue to adhere to prudent risk practices while balancing charitable and donation activities aimed at supporting small businesses and charitable organisations.

If there is anything to be learned in a post COVID-19 world, it is that we have to start creating stewardship directives that have a purposeful combination of insights – that come not only from

Several Islamic banks have already launched ESG related finance programs.

That said, we are from reaching the finish line and much more work needs to be done for us to witness any sizeable activities of substantial scale.

Would global common standards be a boost for the wider uptake of Islamic financial services and the financial markets of Islamic nations?

A global set of standards that would be acceptable to all stakeholders is still lacking while the Accounting and

I THINK THE VERY PRINCIPLES OF ISLAMIC FINANCE, IF ADHERED TO PROPERLY, ARE SUITABLE FOR ANY ECONOMIC CYCLE

historical data and resilience research, but in anticipating the unexpected in order to create an ecosystem of services that are more robust against future uncertainty.

In the light of the rise of ESG considerations and socially res p o n s i b l e b u s i n es s a n d investments, do you predict a burgeoning role for Islamic Finance in global financial activities?

In my view, the basic principles of Islamic banking, or as it should be referred to more accurately as ethical banking, go hand in hand with initiatives such as ESG. The whole idea of conservation, discouragement of excessive waste, community involvement, cleanliness and care for earth and the environment are all ideas, which Islamic teachings continue to stress at its very core.

Auditing Organization for Islamic Financial Institutions (AAOIFI), the Islamic Financial Service Board (IFSB), and the International Islamic Financial Market (IIFM)-are working together to drive this agenda.

Such critical reviews of existing standards and the adoption of an inclusive approach taking on board the views of all stakeholders would ultimately lead to standardization of the full spectrum of Sukuk (from fixedincome-like instruments to equitylike) factoring the requirements of regulators, sukuk issuers, and investors in addition to the legal aspects of it. When Sukuk issuance become comparable with conventional instruments, from both a cost and effort perspective, naturally they will then find a more prominent place on the books of issuers and investors. mea-finance.com

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BANKING TECHNOLOGY

Ushering a new era of ‘Bank of Things’ services Alaa Elshimy, Managing Director & Senior VP of Enterprise Business Group, Huawei Middle East introduces us to the concept of the “Bank of Things” and describes how this new level of intelligent interactions will take banking and finance to the next level

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iven the new socio-economic p a ra d i g m s h i f t , d i g i ta l economy has become an important driver of global economic growth. Digital technologies enable high-quality economic development, marking a mature digital economy. The Coronavirus crisis has further accelerated the development of the digital economy in the Middle East and worldwide as digital transformation occurs within financial services. Legacy systems, siloed data and slow routes to market have plagued large banks for some time now, but the pandemic has seemingly freed up budgets and projects that might have taken years have now been completed in months.

Having been involved in the banking sector for more than a decade, Huawei has helped and supported widescale cloud transformation, building new connectivity capabilities and working to drive agility and innovation. We have provided our technology expertise to trusted banking brands and financial institutions in the Middle East, such as the Dubai International Financial Centre (DIFC) – the leading financial hub in the Middle East, Africa and South Asia (MEASA) region.

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Introducing Bank of Things At our flagship event, Huawei Connect 2020, we launched a white paper, in partnership with Shanghai Pudong Development Bank (SPD Bank) proposing a brand-new financial service model and design system for “intelligent things” in the industry, ushering in a new era of “bank of things” (BoT) services.

Emerging technologies such as 5G, IoT, and AI are evolving rapidly, resulting in hundreds of billions of “intelligent things” being connected. This has huge ramifications on business and daily life, forming a basis for cars with intelligent sensing and autonomous services, smart homes, smart factories, smart logistics and other innovative applications.

In this context, SPD Bank and Huawei propose a brand-new concept — BoT or Bank of Things. This concept extends direct service targets from people to “intelligent things”, builds a scenariocentered business model and establishes a risk management model based on an objective credit system.

BoT is a business form in which “things” become one of the core production materials of future banks, and a component of the next-generation financial infrastructure with pan-financial service capabilities.

Banking and Finance news in the MEA market

Alaa Elshimy, Managing Director & Senior VP of Enterprise Business Group, Huawei Middle East

“Things” here refer to physical entities that directly engage in financial activities. By connecting physical and digital spaces, “things” become business data, intelligence, scenarios and customers.

Information of “things” is the increment of data elements; intelligence of “things” is the increment of technical elements; interaction of “things” is the increment of scenario elements. By improving these three key elements, BoT can discover more financial and non-financial requirements of enterprises and individuals, thereby generating customer profiles with greater accuracy. This can expand service receivers, enrich business models, and enhance risk management capabilities.

Features of BoT With AI development, “things” will become more intelligent. They will obtain autonomous decision-making capabilities and participate more in the social activities of humans. In the future, “things” will help people process

a large number of common and financial affairs, serving as important carriers of all human activities. Therefore, “things” is defined here as “intelligent things” that are capable of environment awareness (sensing), information interaction (expression), information processing (thinking), information storage (memory), and ownership proving (identity).

“Things” can independently own bank accounts and become direct banking service receivers, i.e. customers. For example, with an independent account, a self-driving car is capable of autonomous refueling/charging, maintenance, parking, repair, and insurance services, as well as processing all corresponding financial activities. Similarly, an unstaffed factory can independently perform financial and non-financial activities such as raw material purchase, processing, manufacturing, logistics, sales, financing and loans.

BoT can also proactively build scenario-centered business models, such proactive services, personalized services, and continuous services. For proactive services, BoT can identify scenarios for customers, analyzes customer requirements in specific scenarios based on mass external IoT data, and recommends faster, more proactive financial services.

The most significant feature of scenariospecific business models for BoT is exploring personalized demands based on scenario requirements. BoT’s customers cover both people and “intelligent things”.

By embedding services into production and real-life scenarios, BoT interacts with customers, detects customer experience, and knows customer requirements.

Consequently, BoT can quickly respond to customers’ personalized demands and improve service accuracy.

Furthermore, the demand from social and economic activities is ever-changing and the boundary of demand gets blurred and integrated. With smart devices, BoT provides 24/7 services. With scenariospecific business models, BoT detects real-time customer behavior in specific

scenarios using IoT devices. Technologies such as big data analysis and associated analysis enable BoT to deliver integrated pan-financial services anytime, anywhere, creating customer experience-centric service capabilities.

Another key feature of BoT is the support for a risk management model based on the objective data credit system. In the past, due to limited data acquisition channels, conventional credit assessment systems mainly used the subject’s credit rating. In the Internet era, human transaction data is quickly moved online, enriching data sources. The credit assessment system

new risk management model enriches credit data sources, improves data credibility, and allows more natural and legal persons to enjoy financial rights, facilitating financial inclusion.

Future Prospects The era with intelligent connectivity of everything sees infinite possibilities.

Through a large number of “intelligent things”, the IoT integrates the virtual and physical worlds, and promotes the in-depth integration and interaction between information systems in the virtual world and physical systems in the physical world.

THE ERA WITH INTELLIGENT CONNECTIVITY OF EVERYTHING SEES INFINITE POSSIBILITIES has gradually shifted towards subject credit + transaction credit. In the era of everything connected, data sources will be significantly developed, and the credit assessment system will transform accordingly into an objective system of subject credit + transaction credit + entity credit (real credit of individuals/ legal persons reflected by objective data).

Objective data in the IoT era reflects the relationships between people, people and things, and things themselves. This far exceeds the Internet era in terms of data sources and dimensions. Multidimensional data in the IoT era is closer to that of the physical world, supporting effective assessments of credit ratings.

Using advanced technologies such as big data, cloud computing, mobile Internet, and IoT, BoT develops a risk management toolbox based on objective data.

Under intelligent connectivity of everything, the toolbox dynamically depicts customers’ basic information, production and operations processes, as well as collateral status to support decision-making and services. This

IoT reconstructs economic forms where the supply-driven or demanddriven mode is changing towards a new economic operation mode that features supply-demand collaboration and in-depth integration of R&D, products, financial institutions, and commerce. IoT will also reshape the future financial service system and transform the subjective credit system into an objective system.

“Intelligent things” connected to the IoT will generate an unprecedented amount of data where this data depicts city operations, business operations, and personal lives. For banks, this means wider customer reach, more personalized financial services, and more effective risk control. In addition, “intelligent things” can better represent their owners in economic activities, driving radical changes in banks’ service receivers and business models.

At that time, “intelligent things” will initiate more transactions than people. Panfinancial service capabilities will become the core competitiveness of banks. BoT — a new model for “intelligent things” in the financial industry — is around the corner. mea-finance.com

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ADVISORY VIEW

The role of start-ups in economic recovery and growth Start-up businesses are vital to the continuation and growth of economies, especially following economic shocks. George Hojeige, Chief Executive Officer of Virtuzone explains just how much start-ups contribute to societies by employing, innovating and improving services for consumers

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s the world continues to recover from the impact of the pandemic, the potential for start-ups to stimulate and accelerate economic recovery takes centre stage.

The global start-up economy was previously valued at nearly USD 3 trillion, which has been assessed by experts to be on par with the Gross Domestic Product of a G7 economy.

While the pandemic has impeded this growth, market studies indicate that startups still performed strongly at the end of 2020, citing a 4% year-on-year increase in global venture funding, which reached USD 300 billion.

According to Crunchbase, a leading platform for professionals looking to connect with innovative companies, this remarkable achievement was largely driven by the digital transformation of essential sectors, such as healthcare, education, finance, retail, entertainment and a majority of corporate work around the world.

As these sectors moved their operations online, they created huge market opportunities for companies specialising in tech infrastructure and cloud services, which are some key components of a successful and sustainable digital transformation.

Rise of online businesses in the UAE In the UAE, we have seen a similar

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trend emerge in 2020, as existing companies expedited their digital shift, more entrepreneurs explored business opportunities online and consumers increasingly turned to e-commerce to get the products and services they need.

In fact, Dubai Customs has predicted that e-commerce sales in Dubai will rise by 23% and reach USD 27 billion (AED 100 billion) in 2022, as a result of the drastic shift in consumer trends and behaviour.

In a separate study published by Dubai Economy and Visa, the UAE ranked as the most advanced e-commerce market in MENA, with an estimated annual growth of 23% between 2018 and 2022.

With a burgeoning e-commerce sector, we are likely to see more entrepreneurs and start-ups aim to harness this massive opportunity. From health, fitness and nutrition consultants, to shopping and delivery services, more professionals and businesses will go digital.

Supporting start-ups means supporting innovation and growth Ask any venture capital fund manager what is the first question they ask founders, and they will inevitably answer, “What is the problem you are solving?”

Start-ups play a pivotal role in advancing technologies and fuelling innovation. As they uncover untapped markets and engineer innovative solutions, they are able to disrupt

Banking and Finance news in the MEA market

George Hojeige, Chief Executive Officer, Virtuzone

industries by introducing new and better ways to meet market demands, leading to economic and societal growth.

Consequently, this creates new employment and business opportunities that help revitalise the economy. By enabling and empowering start-ups, the government is helping to advance innovative ways that resolve existing challenges more quickly and efficiently.

In addition, by collaborating with its start-up community, the government can find unfulfilled or underserved markets and start filling in those gaps.

remain financially stable throughout the COVID-19 crisis and in helping the local banking sector bring back its liquidity to pre-COVID level.

How can the UAE support its start-up community?

While the UAE has been constantly improving its start-up ecosystem, banking can still be a challenge for SMEs. As a bank account is necessary for SMEs to start operating, the process should further be streamlined and accelerated, while ensuring KYC and due diligence requirements are met.

Minimising the time frame needed for opening a bank account helps reduce the barriers for start-ups to enter the market. As things move forward, we can expect to see more digital banking and fintech solutions emerge to provide more cutting-edge finance technologies to businesses in the UAE and the region, without compromising on due diligence.

Aside from enhancing the banking process, start-ups also need to be provided with access to financing.

The UAE clearly recognises its startup community as one of the major building blocks of its economy. From the start of the pandemic and to date, the government has been active in launching economic initiatives meant to alleviate the challenges that businesses and startups are facing.

The Central Bank of the UAE has recently revealed that since its AED 100 billion economic stimulus package was launched last year to support businesses during the pandemic, it has helped over 320,000 recipients, including individuals, SMEs and private corporations.

Currently, there are approximately 175,000 customers benefitting from the programme’s deferral arrangements.

Known as the Targeted Economic Support Scheme (TESS), the stimulus package includes AED 50 billion worth of zero-interest, collateralised loans for UAEbased banks and another AED 50 billion in funding. The Central Bank has also credited TESS in ensuring that UAE banks

What is Virtuzone’s role in the UAE’s start-up community?

Virtuzone was established in 2009 specifically to help companies and entrepreneurs that want to be part of the UAE’s business community. The UAE has more than 50 free zone, mainland and offshore jurisdictions, and Virtuzone advises people on the best jurisdiction to set up in, as well as the most costeffective solutions, and then execute these setups for their clients. In a nutshell, we make sure businesses are set up the right way from the beginning.

solutions for their unique needs – and we are excited to soon be unveiling a project we have been working on!

In addition, we work closely with government authorities to enhance the local start-up ecosystem, equip aspiring entrepreneurs with the right information, evolve the current business setup process and enable businesses to tap into new growth opportunities, both locally and internationally.

For one, we are actively working on adopting a borderless business hub model that will allow UAE-based businesses to easily expand into surrounding regional markets, such as Central Asia, Africa and the Far East, with reduced risk, increased confidence and the right connections to do so.

ASK ANY VENTURE CAPITAL FUND MANAGER WHAT IS THE FIRST QUESTION THEY ASK FOUNDERS, AND THEY WILL INEVITABLY ANSWER, “WHAT IS THE PROBLEM YOU ARE SOLVING? As we know that banking is one of the challenges that most start-ups face, we have partnered with local banks and other financial services providers in the industry to ease the bank account opening process for our clients and give them better access to financing programmes.

We leverage the relationships we have built over the years to directly connect our clients with our partner banks and then act on their behalf to fulfil all requirements. With that added element of trust, we are able to simplify and expedite the banking process for our clients, while helping minimise the risk for our partner banks.

We are also exploring neobanking platforms and technologies to provide SMEs with more targeted banking

As a business that started small 12 years ago, we fully understand how crucial start-up support is in achieving success, and how local start-ups contribute significantly to the nation’s economy.

Since we started, we have enabled over 40,000 entrepreneurs to establish their businesses in the country, and we will continue to champion the start-up community and build on this feat in the coming years.

As part of this commitment, we also equip our clients with the core business support services they need to successfully launch and manage their companies. From their accounting, payroll and VAT registration, to mail management, IT support and branding, our business support services are specifically designed to help position our clients on the path to success. mea-finance.com

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ROUNDTABLE EVENT

The New Rules of Engagement On the 17th of March, 2021, senior bankers and top executives from several leading regional and global financial institutions gathered for the MEA Finance and BACKBASE Roundtable in Dubai to get insight into and debate how regional banks can develop robust customer acquisition, engagement, and loyalty strategy in the current and post pandemic environment

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he Middle East region’s banking sector is buzzing with talk and activity around digitisation. The emergence of Open Banking and its regulation; the customer digital journey and onboarding, as well as how banks can develop a robust customer and engagement strategy amid the COVID-19

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pandemic is forcing the acceleration of digital banking at unprecedented speed.

No function, service, or department seems immune to the wave.

Bankers from several Middle East financial institutions gathered for the BACKBASE and MEA Finance Roundtable themed “Developing a Robust Customer

Banking and Finance news in the MEA market

Acquisition, Engagement & Loyalty Strategy” in Dubai.

The discussion was opened by Saqib Khan, Sales Head for the Middle East at BACKBASE who highlighted that the roundtable was an opportunity for all in attendance to give their perspective on digital selling in line with the current

operating environment, how GCC banks can enhance digital banking with a particular interest in the surge in mobile banking, customer onboarding, augmenting user experience (UX) as well as customer acquisition and retention.

Next in line was a virtual presentation

by Ali Ghuloom, Head of Digitization and Projects Management at National Bank of Bahrain (NBB), who shed more light on NBB’s digital transformation underlining issues to do with digital onboarding, implementation timeline, migration from legacy to digital platforms and how banks can enhance customer experience.

Amsterdam-based BACKBASE works with around 120 banks globally and the company has its regional offices in Dubai.

As one of the world’s leading digital-first banking platforms that seek to enhance banks and financial institutions’ digital transformation, BACKBASE caters to the requirements of tier 1 and tier 2 banks, challenger banks and digital-exclusive such as YAP. In the Middle East region, the firm has worked with nine banks such as the National Bank of Iraq, Bank ABC, NBB, Societe Generale, Qatar Islamic Bank, Kuwait International Bank, ila Bank among others. Khan said that the adoption of mobile and online banking has soared in the last 12 months following the outbreak of the COVID-19 pandemic which underscores the current operating environment for the financial service sector globally. He also highlighted how changing customer behavior is expected to eliminate retail bank branches and ATMs in the future.

What lessons can banks learn from their changing operating environments and evolving customer preferences especially following the outbreak of the pandemic? Across the world, around 12% of consumers reportedly tend to change from one bank to another annually and in that regard, it should be noted that retaining a customer is easy but acquiring new customers is difficult for all types of banks.

The bigger question becomes what should banks do to regain lost customers?

NBB’s digital journey NBB’s Ghuloom highlighted that digital transformation is not a new phenomenon, it started with the first industrial revolution and it is the driver of many industrial developments in the present-day fourth industrial revolution and the banking sector is not immune to automation of services and products. NBB commenced its digital transformation journey in 2017 when the national bank decided to shift from its legacy system of 20 years – including products and services into a digitalized bank in a project that is expected to be completed in two years.

However, after NBB’s management assessed the bank’s transformation

roadmap and concluded that the core focus of the digitalization process was the customers, they approached BACKBASE to enhance the digital onboarding process as well as customer experience.

Asked why NBB made customer onboarding a focal point for their product roadmap, Ghuloom said that the bank’s slogan is “Closer to you”, meaning close to the customer and it was the main driver that led the national bank to place customer onboarding at the core of its digital transformation. To enhance user experience, NBB had to make sure that their new digital service will offer a seamless experience to the customer.

Similarly, customer segmentation contributed to NBB’s decision to put customers first in the bank’s digital journey. Ghuloom emphasized that NBB’s

THE ADOPTION OF MOBILE AND ONLINE HAS SOARED IN THE LAST 12 MONTHS FOLLOWING THE OUTBREAK OF THE COVID-19 PANDEMIC WHICH UNDERSCORES THE CURRENT OPERATING ENVIRONMENT FOR THE FINANCIAL SERVICE SECTOR GLOBALLY – Saqib Khan, Sales Head - Middle East, Backbase mea-finance.com

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current market segment is made up of customers who are 30 years and above hence, for the bank to widen its customer base and tap into the growing segment of Gen Z, the lender considered piloting new products and services that would meet the requirements of this new market segment that the bank did not have.

Therefore digital transformation in the banking sector is being driven by the quest to enhance services and products as well as tap into new market and customer segments.

Rafik Majiti Mashreq Bank

Abdul Rahman Jaroudi Aafaq Islamic Finance

In benchmark terms , NBB was guided by three pillars from the beginning with users being the point of focus as the bank looked at providing intuitive user interfaces among other seamless products which entail how the Bahraini lender leveraged innovation by choosing the right technologies from BACKBASE to offer customers a seamless digital journey.

According to Ghuloom, GCC banks should make customer experience enhancement the focal point of their digital transformation journey. He added that in the legacy system customer onboarding at a bank branch used to take 180 minutes if not more while the difference to digital onboarding on the mobile app takes a maximum of seven minutes. Similarly, it was 50 steps between signing in the documents required to open a bank account until the printing of a debit card, but digitalization has reduced it to 28, and it used to take between one and three days, but the new platform allows it to happen instantly, hence augmenting

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customer experience as one of the main pillars in digital transformation.

In terms of external benchmarking, Ghuloom said that the main goal of digitalization was not to benchmark NBB against other banks but rather to improve the customer journey. However, NBB reiterated that it managed to reduce the number of steps required to open an account from 50 to 28 which is a milestone achievement from where the bank was before. So again, if a bank focuses on the customer and creates a

Devid Jegerson National Bank of Fujairah

The outbreak of the pandemic brought about more than a decade worth of changes in the way banks do business in just a few months. KPMG has said that with 80% of revenue growth predicted to come from digital offerings and operations over the next three years, financial services providers should continue transforming their operating models and investing in key enablers, like integrated cloud platforms, agile ways of working, intelligent automation,

Sonny Zulu Standard Chartered Bank UAE

personalized relationship with customers and you have a good UX (user experience) -oriented team backed by good and solid technologies, “I believe one can always challenge themselves and come up with a seamless customer journey,” added Ghuloom.

Given that Bahrain is the smallest of the six-nation GCC-bloc with a population of around 1.5 million people, NBB unveiled its digital platform one and a half months ago and currently, the national bank is the biggest in the kingdom in terms of market share and operating model. As of March 2021, NBB had managed to onboard 600 new customers digitally in one and a half months since the launch of the mobile app. And in Ghuloom’s words, it was a seamless tracking for NBB customers, as the bank witnessed 12,500 active users on the new app and 20,000 downloads from iOS and Google Playstore. For NBB, Ghuloom said that these numbers were a testimony of the bank’s successful digital journey.

Banking and Finance news in the MEA market

Digital banking in the GCC

Roy Villareal Citibank Middle East

AI, blockchain, and advanced data and analytics.

Sonny Zulu, Managing Director, Retail Banking, Standard Chartered Bank UAE, stressed that different banks have different approaches to the customer journey, as was said during the proceedings of the roundtable adding that, “there are a number of banks that decided to say, let’s start a separate digital bank, completely different.” He gave an example of how Standard Chartered Hong Kong launched Mox, a cloud-based virtual bank that offers a combination of retail banking services as well as lifestyle benefits all in one mobile app.

Zulu went on to share the banking group’s experience with digital banking, saying its more efficient, it implements changes swiftly compared to legacy systems, adding that the legacy system operated on fifty-year-old technology and transforming requires a banking institution to “bring in a lot of API’s and it takes a long time just to get it done.”

Financial service providers in the GCC region are pro-innovation and senior bankers who attended MEA Finance and BACKBASE’s Roundtable said that this trend is here to stay driven by customers’ evolving needs and a conducive regulatory environment.

“Digital transformation is no longer a luxury, but a necessity. Banks that are agile, flexible, and willing to transform their business models will be the ones that succeed, and secure their financial strength for future growth,” said KPMG. The environment that GCC banks are currently operating in is putting to the test the digital transformation journey of several financial services providers across the region and in some cases the decision-makers are being forced to revisit their transformation plans and make the customer’s journey the focal point of their digitalization efforts.

Shadi Al Nasr, Head of Retail Portfolio, Strategy & Wealth Management, Retail Banking, United Arab Bank (UAB) weighed in saying that due to the changing operating metrics, there is not a single bank that is not considering digitizing its services and products due to the pandemic, however, different banks take different approaches as was stressed

by Sonny.

Al Nasr also highlighted the importance of banks collaborating with fintechs to enhance customer experience, saying UAB had three options to choose from when the bank decided to go digital including a digital-exclusive model, a neobank that leverages legacy bank systems or a hybrid model (challenger bank). But to fully come up with a digital bank that offers the best customer journey, UAB had to rope in fintech experts to develop the business strategy and paperwork to use in its transformation journey.

McKinsey & Company said that millions of bank customers have now embraced fully integrated mobile banking experiences, using smartphones, tablets, and wearables to do everything from e-commerce products and services to open new accounts and make payments.

The regional financial ser vice sector’s digitalization drive is partly self-motivated. GCC lenders are proinnovation and industry experts expect them to continue to dominate the banking scene even as the sector goes more digital. Similarly, the banks’ tech-savvy customers and regulatory initiatives such as regulatory sandbox and open banking will also accelerate the banks’ digital transformation.

Asked about the conversion rate and cost of acquisition for the mobile app versus classical banking by Banali Malhotra,

Marketing Director, RAKBANK, Ghuloom said that with the app the conversion rate soared to 10 from 4 when NBB was using legacy system underscoring the increase brought by digital onboarding. On conversion cost, Ghuloom said that though he did not have the statistics with him there was a notable reduction when opening a bank account digitally.

According to strategy, “Banks are partnering with fintechs and investing in new digital solutions for their home markets.” The Arabian Gulf market has significantly advanced compared to its

DIGITAL TRANSFORMATION SHOULD BE A HOLISTIC APPROACH AND CAN NOT BE DONE IN ISOLATION WHERE BANKS ENHANCE THE DIGITAL JOURNEY AND MISS THE OTHER PARTS OF THE JOURNEY BECAUSE CUSTOMERS NOWADAYS CONTINUE TO EVOLVE AS WELL, IN THE CHANNELS OF CHOICE. – Roy Villareal, Digital and Marketing Head, Citibank Middle East mea-finance.com

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peers in the emerging markets in terms of the approaches that the banks are taking in their quest to enhance their services and products.

One of the key highlights from the BACKBASE and MEAFinance Roundtable is that there are a least three models that are recognizable when it comes to digital banking. Sridhar Iyer, Executive Vice President & Head of Mashreq Neo, said that there are three models in the banking industry, that is native digital banks like Revolut, the second type is like Mashreq Bank which runs both mainstream and digital bank and the third type is that of legacy system banks

Yusra Baqi Aafaq Islamic Finance

Banali Malhotra RAKBANK

digitizing their operations. However, in as much as these banks appear similar to each other, Iyer said that these banks are different in terms of management’s mindset, business approach and how they are evaluated.

In September 2019, UAE-based Mashreq Bank and Emirates NBD launched digital-exclusive banks for SMEs, NeoBiz and E20 respectively, in a bid to support one of the country’s important sectors and this came two years after NBD unveiled Liv., a lifestyle digital-only bank targeting millennials.

Similarly, the UAE’s first independent digital banking platform, YAP, was launched in March. Just like other neobanks, YAP reportedly offers spending and budgeting analytics, peer-to-peer payments and remittances services, and bill payments however it does not offer traditional banking services like

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loans and mortgages. YAP does not have a banking license of its own but has partnered with the National Bank of Ras Al-Khaimah (RAKBANK) which will provide international bank account numbers to users of the neobank.

UAE is expecting another neobank from ADQ following the holding company’s October 2020 announcement that it was considering setting up a digital bank using a legacy banking license of First Abu Dhabi Bank. Banks have used digital to enter new markets, such as FAB’s Saudi offering FAB KSA. In Bahrain, Bank ABC launched ‘ila Bank’, AI-powered and data analytics

Ahmad Shraim United Arab Bank

Shadi Al Nasr United Arab Bank

digital- exclusive bank entity foraying into the neobank market intending to expand the digital bank’s operation across the entire MENA region.

Prioritizing UX (User Experience) The moderator, Mohamed Roushdy, the CEO of Fintech Bazaar, said, “While digital technologies play a vital role in transforming digitally, more important aspects need to be considered like processes, people and cultural changes, it needs a holistic approach.”

He also said that digital transformation might be a better way for banks to reinvert their business and different banks follow different approaches as was highlighted by other speakers.

Digitalization in the financial services sector is swiftly changing the field of play where legacy banks are facing increasing competition from nontraditional entrants

Banking and Finance news in the MEA market

who are billing on customer experience as their point of sale and for GCC banks it›s no longer about the products and services on offer but enhancing UX. Yusra Baqi, Head of Corporate Communication and Happiness, Aafaq Islamic Finance said that for banks, customer experience and the customer journey should be the priority before anything else in digitalization. So, throughout the customer journey, banks should assess whether they have fulfilled a client’s requirements number one, did the client complete their journey without dropping off midway number two, and have any challenges and complaints

Ali Ghuloom National Bank Bahrain (NBB)

raised by the customers been addressed number three, she added.

KPMG said that banks are keen to digitize their customer experience, their services, and their products and this entails expanding beyond the confines of their traditional bricks-and-mortar service models.

Roy Villareal, Digital and Marketing Head, Citibank Middle East, said that digital transformation should be a holistic approach and can not be done in isolation where banks enhance the digital journey and miss the other parts of the journey because, “customers nowadays continue to evolve as well, in the channels of choice,” they can visit a bank branch, use mobile phone banking or opt for an email conversation package.

Deloitte has said that digital banking champions are those banks who are

(will) successfully offer a wide range of functionalities that meet their customer’s expectations, providing an intuitive user experience.

Abdul Rahman Jaroudi, Head of Distribution Channels, Aafaq Islamic Finance, asked about the overall timeline of the digitalization and project implementation, Ghuloom said that the project comes with a lot of challenges, adding that multiple projects and activities take place when a bank goes digital. “But if you are talking about development, just the development of the mobile app itself took 14 or 16 months, we then decided to have more time of testing. That’s why we took more time before we went live. We started November 2019 and went live in January 2021”, he added.

McKinsey & Company has identified three trends underscoring banks’ urgent need to embrace digital: strong customer adoption, increasingly multichannel consumer decision journey and customers’ openness to purely digital propositions.

Since banks cater to different customer segments who also have diverse needs and profiles, the landing page on the mobile app (website) should also enable a direct and meaningful segmentation for each customer, according to EY. Segmentation of customers from the landing page enhances user experience and facilitates robust customer acquisition engagement and loyalty in the future.

For banks to have a holistic approach to customer experience, Zulu emphasized that the “customer journey is very critical,” adding that the way some banking organizations are structured is impeding their digital agenda.

“In many of the institutions today, in many of the markets, we have to accept it, we haven’t yet transformed, the mindset hasn’t yet. In several organizations there are loopholes, a company has a good compliance team that has very good knowledge about the digital platforms and how they work, and how we can

be able to meet these requirements to digitalized but you still have a guy coming from the old generation and planning almost entirely everything in an old way without proper understanding of a bank’s digital journey,” he said.

Zulu went further to say in as much as there is need for banks to engage with regulators, some areas cannot wait for regulation to change. “Some banks have experienced teams, but they still have an outdated operating model whereby they’re still visiting branches, checking what is happening among other things but they have never paid attention to the journey on the digital platform, which means they are working in a completely different world and they don’t even know what are the complaints being raised by customers? what are the issues? what are the pain points?” he added. Data shows that some clients are dropping off the customer journey because they would have failed to proceed to the next stage, issues that may be left unsolved at financial institutions that run on an outdated operating model.

Digital onboarding Customer onboarding is the first contact that a new user has with the bank and the process should be intuitive, seamless, responsive and efficient. It is defined as the guidance of customers in the

first steps of platform accessibility and 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.

Guil Rodrigues, AVP Customer Experience and Design Lead, First Abu Dhabi Bank, said that there is a significant increase in mobile banking especially the adoption of digital wallets but although there have been teething troubles such as customer onboarding, fintech players like BACKBASE are refining the whole process, adding “more players are coming up and we are getting there.”

The implementation of digital onboarding is an essential feature that determines whether a bank can easily acquire new customers especially from the tech-savvy millennials, a key segment for GCC banks. “An automated process is a mutually beneficial situation offering speed, efficiency and convenience for the customers and bank professionals for more value-added tasks,” according to Deloitte.

Given that Bahrain was quick to adapt to global regulations when it comes to innovations, Ghuloom said that NBB is already in the process of integrating its eKYC. He highlighted that the advantage of eKYC is that when a financial institution intends to onboard a customer who has mea-finance.com

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already been onboarded by another entity, they will utilize the central repository which reduces the interactions between a bank and customer because the information is already in central eKYC. Bankers who attended the MEAFinance and BACKBASE roundtable highlighted that regional lenders are leveraging their longstanding customer relationships and proven track record of reliability and sustainability to innovate as well as partner with fintech firms to enhance customers’ journey.

KPMG has called on banks to adopt three approaches to their onboarding process: protect – which entails the development of in-house processes and standards to ensure compliance with jurisdictional requirements in terms of data privacy and API guidelines; compete – that is investing in strategic enablers both in-house and externally including

Dom Monhardt Saqib Khan Commercial Bank of Dubai Backbase

Sridhar Iyer Mashreq

internal data usage (e.g. unstructured, big data) and external (e.g. mobile app, social media) and to be innovative in products and services offered through the building of strategic partnerships with no-financial services players to enhance user experience.

There are different types of onboarding experience as was highlighted during the roundtable when Standard Chartered Bank’s Zulu asked whether NBB was primarily focusing on Current Account and Savings Accounts (CASA) or other products, Ghuloom said that currently the bank’s mobile app was focusing on CASA but would expand to other products line loans in the future.

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In order to provide a seamless onboarding experience, GCC banks should focus on digitalization models that prioritize customer centricity, data insights, and agility but at the same time maintaining security and transparency.

Digital onboarding should remain as simple as possible with low documentation requirements as compared to customer onboarding in legacy banks, should offer simple online uploading capabilities, p re c i s e ex p l a n a t i o n d u r i n g t h e onboarding process as well as interactive assistance through chatbots.

Asked by Dr. Mohit Lodha, Head of Digital Marketing, RAKBANK to share the number of steps on the input fields in the customer onboarding journey, Ghuloom that NBB’s mobile app has five different fields that a user has to input, then nineteen selection fields and four pictorial inputs, which

Frederic de Melker RAKBANK

requires a customer to take a selfie for biometric identification.

In terms of due diligence, Ahmad Shraim, Head of Business Application Support, Information Technology, United Arab Bank asked if the mobile app caters to both low and high-risk customers and if there are cases where a customer may be required to visit a bank branch. Ghuloom said that if a customer is an exposed person, then they’re required to visit a branch, adding “we did not automate this”.

Onboarding trends In Singapore, the financial regulator, the Monetary Authority of Singapore, endorsed financial services providers’

Banking and Finance news in the MEA market

use of digital onboarding (remote verification customers) which enhances the user experience while addressing security concerns such as money laundering and terrorism financing.

In the UK, challenger banks are using photo ID and smartphone cameras for what is known as ‘LivenessTest’. The use of real-time biometric traits for digital onboarding is growing prominence among banks to combat impersonation risk which one of the key concerns among regulators.

Open Banking revolution Open Banking is a connected ecosystem of financial services that allows two or more unaffiliated banks to enrich their digital offerings safely and securely, bringing greater financial transparency and new and tailored customer services to the region.

Mohit Lodha RAKBANK

Guil Rodrigues First Abu Dhabi Bank

According to Deloitte, “Open Banking is a platform-based business approach where data, processes, and business functionalities are made available within an ecosystem of customers, third-party developers, fintech startups, or partners.”

Rafik Majiti, Senior Vice President, Head of Digital, Mashreq Bank said that GCC banks should collaborate with regulators to clear the gray areas in digital banking and speed up to catch up with global trends.

However, Ghuloom highlighted that the Central Bank of Bahrain (CBB) is a pioneer in the Gulf region when it comes to innovation, adding that “when it comes to fintech and its regulation, they are the

ones who are always experimenting with new financial technologies.”

Bahrain’s Data Protection Directive which came into effect in 2019 is the equivalent of GDPR in the European Union and the European Economic Area, said Ghuloom. Hence, Bahrain has robust Open Banking regulations, and it is also the first jurisdiction in the Mideast region to adopt Open Banking in 2018 replicating innovation trends in some of the world’s biggest financial hubs such as London, Singapore and Hong Kong, so when it comes to fintech innovation, “they are very supportive”.

The Gulf region is unarguably mature when it comes to regulators’ preparedness for Open Banking although some challenges such as outdated regulations are persisting as was highlighted during the roundtable.

Last October, Bahrain unveiled the Bahrain Open Banking Framework which provides a holistic definition of the country’s Open Banking regulation, guidelines, technical standards for Open Application Programming Interfaces (API) platforms, security standards (including data privacy), and overall governance.

In the UAE, PwC said that new Open Banking platforms are rising with fintechs and lenders moving towards the adoption of open API solutions amid the defining of the roadmap towards open financial markets by national and offshored regulators. The Central Bank of the UAE recently announced plans to open a FinTech Office to support financial innovation in the country while the Abu Dhabi Global Market proved its unwavering support towards the Open Banking revolution having awarded its first digital-exclusive banking license and Category 1 status to Anglo-Gulf Trade Bank in September 2019.

Devid Jegerson, Head of Customer Experience & Platform Development, NBF, argued the approach that banks are using in their digital journey saying, “I think that the game is different”, banks should not go digital as a way to compensate for the reduction in the

IN SEVERAL ORGANIZATIONS THERE ARE LOOPHOLES, A COMPANY HAS A GOOD COMPLIANCE TEAM THAT HAS VERY GOOD KNOWLEDGE ABOUT THE DIGITAL PLATFORMS AND HOW THEY WORK, AND HOW WE CAN BE ABLE TO MEET THESE REQUIREMENTS TO DIGITALIZED BUT YOU STILL HAVE A GUY COMING FROM THE OLD GENERATION AND PLANNING ALMOST ENTIRELY EVERYTHING IN AN OLD WAY WITHOUT PROPER UNDERSTANDING OF A BANK’S DIGITAL JOURNEY. – Sonny Zulu, Managing Director, Retail Banking, Standard Chartered Bank UAE number of people visiting branches but let it be an innovation-driven strategy.

Jegerson posed a question to fellow bankers who attended the roundtable saying, “Are we able to see things the way they were 15 years ago? Are we able to have these kinds of skills to gauge what the client is doing with our service? But in his view, Jegerson

stressed that banks alone cannot fully digitize faster amid central banks’ regulations, the introspective focus among other things.

Across the border in Saudi Arabia, the central bank introduced its Open Banking framework earlier this year in January, a move that is expected to revolutionize how customers, merchants and financial mea-finance.com

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services providers enhance the value they reap from accessing financial data. Saudi Arabia is investing in the development of its financial services sector as part of the kingdom’s economic diversification drive under Vision 2030.

Open Banking will enhance trust between customers, banks, fintechs and other financial players, and the Saudi Central Bank (SAMA) plans to go live with Open Banking during the first half of 2022.

“In practice, open banking can take many forms including standards and directives such as PSD2 in Europe and Open Banking in the UK. Consumers’ increasing desire for frictionless, more seamless, and intuitive valueadded banking experiences and there are a growing number of fintechs and ‘challenger banks’ seeking to capitalize on these developments,” said KPMG. By using API, a set of communication protocols used to develop computer applications, Open Banking platforms authorizes retail and enterprise clients to access consumers’ financial data in realtime and share account information and transaction history with external parties such as vendors, suppliers, business partners and other banks.

In summation, the bankers who attended the roundtable discussed at length digital banking developments in the Gulf region, regulation challenges and trends that are shaping the future of the region’s financial service sector.

Regulators in the Gulf region are coming up with policies to accelerate digital transformation and promote Open Banking. Customer experience and customer journey should be pivotal in every bank’s transformation journey and customer onboarding should be a seamless and efficient experience given that it is a critical step in a customer’s journey, and it helps financial institutions in customer acquisition and retention.

The BACKBASE and MEAFinance Roundtable was attended by representatives of several financial institutions in the UAE including Shadi Al

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DUE TO THE CHANGING OPERATING ENVIRONMENT, THERE IS NOT A SINGLE BANK THAT IS NOT CONSIDERING DIGITIZING ITS SERVICES AND PRODUCTS FOLLOWING THE OUTBREAK OF THE PANDEMIC, HOWEVER, DIFFERENT BANKS TAKE DIFFERENT APPROACHES. – Shadi Al Nasr, Head of Retail Portfolio, Strategy & Wealth Management, Retail Banking, United Arab Bank

Nasr, Head of Retail Portfolio, Strategy & Wealth Management, Retail Banking, United Arab Bank; Sonny Zulu, Managing Director, Retail Banking, Standard Chartered Bank UAE; Devid Jegerson, Head of Customer Experience & Platform Development, National Bank of Fujairah; Dom Monhardt, Head of Digital Experience, Commercial Bank of Dubai; Sridhar Iyer, Executive Vice President, Head of NEO and Liability Products, Mashreq; Frederic de Melker, Managing Director, Personal Banking, RAKBANK; Guil Rodrigues, AVP Customer Experience and Design Lead, First Abu Dhabi Bank; Roy Villareal, Digital and Marketing Head, Citibank Middle East; Rafik Majiti, Senior

Banking and Finance news in the MEA market

Vice President, Head of Digital, Mashreq Bank; Shadi Al Nasr, Head of Retail Portfolio, Strategy & Wealth Management, Retail Banking, United Arab Bank; Ahmad Shraim, Head of Business Application Support, Information Technology, United Arab Bank; Mohit Lodha, Head of Digital Marketing, RAKBANK; Banali Malhotra, Marketing Director, RAKBANK; Abdul Rahman Jaroudi, Head of Distribution Channels, Aafaq Islamic Finance; Yusra Baqi, Head of Corporate Communication and Happiness, Aafaq Islamic Finance; and Benazir Poonawala, Head Customer Experience for Retail Banking Group, Mashreq. It was moderated by Mohamed Roushdy, CEO, Fintech Bazaar.

CUSTOMER DATA, ANALYSIS AND SEGMENTATION

Essential insights from some of the region’s leading finance and technology executives

Devid Jegerson Amit Malhotra Mamoun T. Alhomssey Ahmad Dorra

Better customer insights will drive sales

SPECIAL REPORT

CONTENTS 60

IN-DEPTH ANALYSIS

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Building the Bank for Tomorrow

Customer data optimization will enable banks to broaden their offerings to clients, from helping them improve their wealth management to providing ideas on how to invest their money.

SPECIAL REPORT

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Creating Value from Customer Data

A bank’s analytics strategy in an incredibly fast-moving world should enable business agility and not cripple it.

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Data, food for growth

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Transforming the Banking World

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Data is the key in understanding customers’ needs and expectations.

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Advanced data analytics enable businesses, including banks, to enhance decision-making, improve service delivery, and tailor the service to growing customer expectations.

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From Descriptive to Predictive and Prescriptive

While customer data analytics is a critical tool for banks, the way they utilize and manage it is key to ensuring that they are gaining meaningful insights on customer needs.

IN-DEPTH ANALYSIS

Building the Bank for Tomorrow Customer feedback is credited for much of the revolution or evolution in the GCC region’s banking sector as well as the industry’s resilient growth over the last decade.

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T

he outbreak of Covid-19 was a black swan event that forced an unprecedented acceleration of digitilisation across all sectors as governments implemented “stay at home” measures to curb the spread of the pandemic.In the GCC banking sector, the quest to tailor customer experience to each client and maintain a competitive edge in an overcrowded market had already paved way for digitalization well before the pandemic hit.

Digitalization in the Gulf financial services sector is a prime example of how banks are leveraging customer data, analytics and segmentation to improve their products and services as well as build a “bank of the future”. Artificial Intelligence (AI) can help banks unleash the power of big data while revealing insights into future investments, clients and competitors.

Customer feedback is credited for much of the revolution or evolution in the GCC region’s banking sector as well as the

industry’s resilient growth over the last decade. “Customer insights, say through call center demand analytics, should feed into banks plans to help them increase response times and better serve customers,” says EY. Big data is key to bankers. It is the manual that helps them meet customers’ preferences and expectations. Similarly, it is from this data that financial institutions explore new avenues of growth or new business models. “Advanced data analytics enable businesses, including banks, to enhance decision-making, improve service delivery, and tailor the service to growing customer expectations,” said Devid Jegerson, the Head of Customer Experience and Platform Development at NBF. Customer data is transforming the banking sector and financial institutions are responsible for managing the data they collect. “Banks have the opportunity to intelligently use their data and seamlessly integrate it with the customer journey,” said Ahmad Dorra, Customer Engagement

Solutions Sales Leader – Middle East, Africa & Turkey, Avaya.

Leveraging customer data Although GCC banks had made significant progress in their digital transformation journey, digital banking was never fully embraced likely due to customers’ reluctance until the beginning of last year. But the outbreak of the pandemic accelerated the pace of digital adoption across products and demographic segments.

“GCC banks can leverage analytics capabilities at scale to achieve a new level of customer understanding and targeting,” says Jegerson. The unprecedented adoption of digital banking services across the Gulf region also widened financial institutions’ data collection and storage tools and as such, banks have amassed troves of consumer data and mines more every day.

Customer is king GCC banks are increasingly collecting

mea-finance.com

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significant amounts of data as improving customer experience has become key to maintain a competitive edge. To succeed or adapt to changing operating environment, banks and financial service providers across the Gulf region must understand the needs and expectations of their customer base.

“GCC banks are collecting more and more data as improving customer insight in a time of great change becomes a priority, and the analysis of customer feedback and its synchronization with CRM data delivers an effective CX template,” said Dorra.

Customer insight plays a critical role in product development and customer

In a report, GCC Banking Trends - 2021 and Beyond, Avaya said that a bank’s analytics should be fast, responsive, adaptable and flexible to enable the firm to address the problem at its root and should give real-time insights for a timely resolution.

Gaining insights into customers’ preferences is at the top of every management’s priority list as the preference for banking products has become more diverse. In 2017, Emirates NBD tapped into a new generation of customers by launching Liv., the UAE’s first digital bank targeted at millennials.

With the enhanced implementation of data segmentation, GCC banks will meet

As customer propositions can no longer be static and onesize-fits-all—they should be intelligent and tailored and go beyond banking to address customer needs that may involve both banking and non-banking products and services.”

- McKinsey & Company

communication in the banking sector.

According to consulting firm McKinsey & Company, “Understanding what leads to a superior customer experience also enables banks to make thoughtful and efficient trade-offs.”

Banks and financial institutions can optimize customer feedback by integrating big data into their CRM and break it down using analytic solutions to gain insight into their clients’ current as well as future expectations. This also calls for GCC banks to implement robust customer segmentation policies that will enable them to develop new services and products to meet customer expectations.

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their customer expectations, increase efficiency, accelerate growth and cutback operational risk.

Avenues of growth While regulatory requirements limit the widespread sharing of customer data, GCC banks should cultivate the mythical 360-degree view of clients – one that accounts for their current value as well as their potential lifetime value to stay competitive in an overbanked market.

Mamoun Alhomssey, CIO at ADIB, said, “Clean data can help banks establish a personalized stream of targeted communications with customers by

providing them with accurate, real-time understanding of their needs.”

Given how the financial services sector is generally ahead of the curve when it comes to possessing insights into their clients, the ability to spot and iron out any glitches is key to making self-service banking effortless and avoid reputational damage. “Your analytics strategy in an incredibly fast-moving world should enable your business agility and not cripple it,” Avaya said in a report, GCC Banking Trends - 2021 and Beyond.

When the pandemic made landfall on the shores of the Arabian Gulf almost a year ago, all regional banks swung to digital-only models moving nearly all their interactions with customers online to build solutions that better suited clients’ needs at that time.

Deloitte said that banks that have built their organizations with a product-oriented focus (if we build it, they will come) should consider shifting to a more customercentric footing.

Banks are also leveraging customer data to bring immense value to the sector through effective credit management, fraud management, operational risks assessment as well as integrated risk management.

According to EY, the bank of the future will integrate disruptive technologies with an ecosystem of partners to transform their business and achieve growth.

A data-driven approach to digitalization can help banks’ security systems through the detection of fraud signals and analyze them in real-time using AI and ML to pinpoint illegitimate users and/or transactions before they compromise the entire banking system. In January, the UAE central bank imposed a combined $12.5 million fine on 11 local banks for compliance failure – penalties that can be avoided.

Similarly, the heightened use of digital banking is also exposing customers to cybersecurity. Alhomssey said that there has been an increase in online fraud in the UAE which has exposed customers to phishing and falling prey to fake but ‘genuine-looking’ bank websites.

Apart from analyzing and breaking up customers’ data long after they’re already

using a bank’s products, GCC financial institutions should look into developing real-time insights into individual prospects to generate interest to attract more clients or tap into new business models.

According to Deloitte, banks should have data and analytical experience as well as marketing and measurement capabilities to develop and implement an effective customer-acquisition strategy. In a bid to support one of the UAE’s important sectors, Mashreq Bank and Emirates NBD launched digital-only banks for SMEs in September 2019.

Next frontier Customer segmentation involves the process of dividing clients into groups based on common characteristics - behavioral or demographic - allowing banks to market to each group effectively and appropriately.

As GCC governments grow their digital economies, the importance of data has never been greater. Several bankers globally are giving attention to the current state of affairs but in this global economic downturn, there is a lot that GCC financial services can do with their existing client bases. Banks should look at co-creating with customers frequently and often in a proposition lifecycle, said EY. Deloitte stated that a leading customer retention strategy is to classify each type of customer (silent attrition, desired and dissatisfied) and create appropriate initiatives to change their behavior. Banks should implement customer retention strategies by understanding clients’ needs and expectations.

McKinsey also said that banks should analyze data for two kinds of insight: first, identify where changes in experience will result in different customer behavior that creates more value and find “breakpoints”—places in the journey where changing a particular element of the experience will have a disproportionate effect on the overall outcome.

If managed well, data analytics and segmentation can improve models of consumer behavior, giving c-suite executives in banks insight into future opportunities and risks that lie ahead.

Banks that have built their organizations with a productoriented focus (if we build it, they will come) should consider shifting to a more customercentric footing.”

- Deloitte

Similarly, leveraging customer data is not always about revenue generation but organizations can use data strategically to reduce costs through better planning and optimization of operations as well as reducing and managing risk.

Customers are increasingly becoming more accustomed to the service standards set by e-commerce companies and carhailing platforms such as Amazon, Namshi and Careem, they also expect the same degree of consistency, convenience, and personalization from their GCC financial service providers. McKinsey stated that as customer propositions can no longer be static and one-size-fits-all—they should be intelligent and tailored, and go beyond banking to address customer needs that may involve both banking and non-banking products and services.

Amid an increasingly challenging operating environment intensified by the pandemic, GCC banks are compelled to leverage analytics and data-driven capabilities to tap into new avenues of growth, reduce costs and improve efficiencies, drive their digital footprint and bolster their risk and regulatory compliance priorities.

Avaya’s Dorra said that a bank’s analytics strategy in an incredibly fast-moving world should enable business agility and not cripple it.

Tapping AI and ML The increase in technological changes is leading to a surge in the amounts of data being collected, processed, shared and used in digital form at a lower cost and on a larger scale.

The European Banking Authority said that managing data is not new but the ability to store huge amounts of data in any format and analyze it at speed is.

AI and ML are driving an unprecedented shift in how financial institutions attract new customers and retain those already in the fold. In an era where customers can share their data, the ability to aggregate, manage and analyze data by banks will become increasingly important.

The use of cloud computing has also been an enabler of advanced analytics, as these computer system resources provide a space to both store and analyze large quantities of data in a scalable way, including through easy connectivity to mobile applications used by customers.

To remain competitive and drive value for their clients, GCC lenders will need to leverage AI while synchronizing data analytics with their CRMs to deliver a more personalized customer experience and develop innovative new propositions. “Analytics can help banks evolve new business models and provide more personalized offerings and even improve risk profiling of customers,” said Amit Malhotra, General Manager, Personal Banking Group at Commercial Bank of Dubai.

Deloitte said that the rise of advanced data analytics and cognitive technologies has also led to an explosion in the use of complex algorithms. The optimization of customer data will enable banks to broaden their offerings to clients, from helping them improve their wealth management to providing ideas on how to invest their money.

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Ahmad Dorra

Customer Engagement Solutions Sales Leader – Middle East, Africa & Turkey, Avaya

The pandemic has encouraged GCC banks to commit to digitization in a way never seen before and to deliver services differently to customers.”

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Creating value from customer data In an exclusive with MEA Finance, Ahmad Dorra Customer Engagement Solutions Sales Leader – Middle East, Africa & Turkey, Avaya, sheds light on how the COVID-19 pandemic has encouraged GCC banks to commit to digitization and how Avaya is helping them in this transition.

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ell us more about Avaya and the services that the company is providing to GCC banks to help them mitigate the impact of the pandemic on their operations?

Banks in the GCC have had to transform their processes and procedures very quickly, and over the past year, have shifted towards digitalizing the entire experience. Processes that required physical documentation had to be digitized, and branches had to reimagined if they weren’t closed. It was not easy, but the banks that got it right demonstrated that the digitally transformed customer experience was not only possible but also the best way forward.

Operating in a very stringent regulatory environment with regard to data privacy, access control, and security, banks also had to explore ways to connect employees with customer data, and employees with customers digitally. Again, a model that

was built on the in-person interaction an verification model went online very quickly.

We’ve been helping GCC banks with that transformation. But more importantly we’ve been making the point that successful digital customer journeys, retail or not, are built with the principles of what makes a customer experience successful. The fundamentals of frictionless operation, simplicity, and hyper-personalization should apply.

its synchronization with CRM data delivers an effective CX template.

Your analytics strategy in an incredibly fast-moving world should enable your business agility and not cripple it. Regulators are either looking into or have initiated strategic plans to drive open banking in the GCC. We invite banks and regulators to be more creative with their use of data and pursue advanced analytics strategies.

Regardless, analytics should be fast, responsive, adaptable and flexible to enable you and your team to make fast decisions.

Given the uncertainty surrounding the trajectory of the COVID-19 pandemic, how can banks leverage advanced customer data analytics to prepare for the next normal?

How did the outbreak of the pandemic deepen the changes in customer preferences and what challenges do these shifts bring?

GCC banks are collecting more and more data as improving customer insight in a time of great change becomes a priority, and the analysis of customer feedback and

Most executives we talk to say their banks are pursuing an app-centric banking relationship with both the SME and consumer segments, and that they have

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GCC banks are collecting more and more data as improving customer insight in a time of great change becomes a priority, and the analysis of customer feedback and its synchronization with CRM data delivers an effective CX template.”

seen substantial increases in mobile banking interactions as a result of Covid-19; some suggest that five years of expected growth occurred in just one year.

This comes with challenges. Some banks have struggled to meet user demands amid this growth, finding that most mobile banking users need customer support for queries, complicated questions or just reassurance, which is not always at hand.

Our advice is to: Simplify: Think about the fundamentals of customer experience. Track the customer journey. Decide on the best channels for the best actions.

Partner smart: Work with partners who keep you ahead of the fast-moving smartphone market. Keep evolving your customer-facing apps while never letting the fundamentals slip.

Stay ahead for the Everything Customer: Continuously add new capabilities such as text chats in video calls, enriching customer journeys based on knowledge management databases, resolving complex issues based on customer preferences, proactively messaging customers to improve experiences, and providing security in-app using predictive analytics.

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How can customer data analytics help financial services providers deliver frictionless experiences to maintain a competitive edge?

Our advice to banks is to use a data analytics strategy in such a way that it enhances their business. In order to prepare for the next normal, we would recommend a strong insights strategy that includes:

Solving the problem at its root: Make customer self-service effortless and embed virtual assistants to guide the customer journey, answer inquiries, and predict next-best actions.

W in-win situation: your workforce engagement solutions should give you deep, real-time insights needed for a timely resolution.

Working with experts is the way to go: Work with experts who are aware of how to use customer data and be compliant.

They should also be experienced with GDPR and similar regulations and business-agility conversant, to provide solutions relevant in a fast-changing regulatory environment.

What is your outlook on the financial services sector? And how can GCC

banks use analytics to explore new avenues of growth or new business models?

The pandemic has encouraged GCC banks to commit to digitization in a way never seen before and to deliver services differently to customers. At the same time consumers and employees are reassessing their own values.

As the global economy enters 2021 at a subdued growth rate, bankers are managing in a challenging and dynamic operating environment, with significant pressure to ramp up the quality of the digital services they offer.

However, this uncertain banking outlook provides an opportunity to reconfigure working practices, customer experiences, and use better customer insight to drive sales. Banks have the opportunity to intelligently use their data and seamlessly integrate it with the customer journey. Already, data rules enable the marketing of personalized products and proactive messaging to drive sales in the consumer segment. We expect more of this to come as regulations open and business sales are added to the mix.

We are reducing our environmental footprint Considering the continued growth of the aviation industry and related carbon emissions, our sector needs to become more sustainable.

So as KLM, we are taking responsibility for making our business more sustainable. How? By flying on sustainable fuel, with more efficient routing, with cleaner planes and by recycling our waste.

Learn more about our journey to more sustainable aviation on klm.com/flyresponsibly

SPECIAL REPORT

Devid Jegerson

Head of Customer Experience and Platform Development at NBF

The spurt of big data has opened enormous opportunities for the banking sector to grow.”

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Data, food for growth Devid Jegerson Head of Customer Experience and Platform Development at NBF explains that today, digital products and services are enabling GCC banks to learn more and bring customer insights. In a time of significant change, analysing customer feedback and synchronising them with CRM data is an opportunity for organisations to better adapt products to customer expectations and experiences.

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rom personal banking services to wealth management, how is data analytics reshaping the GCC banking sector?

Advanced data analytics enable businesses, including banks, to enhance decision-making, improve service delivery, and tailor the service to growing customer expectations.

By understanding customer’s needs, the banking sector can have a more accurate picture of its community of customers to serve them better. The adaptation of the business products via customer data analytics coming from the customer perspective will bring a real and meaningful impact on the banking sector’s future.

At NBF, our strategy has been to respond to change with agility and thrive on it to enhance and strengthen our offering. Digital transformation has been sitting at the very centre of its development journey. Over the years, we have been working tirelessly to ensure the user experience reflects enhanced

efficiency, better security and resilience, and faster or instant servicing. Our new branches are increasingly becoming more digitised and our customers have responded well to emerging technology.

Moreover, we have been integrating automation and robotics to eliminate paperwork from banking processes and on the corporate banking side, developed trade finance payment facilities and other digital platforms to continue enhancing our offering.

A great example of this is our latest innovation, NBF CONNECT, a platform that has been co-created alongside the SME community. We have long recognised the indispensable value that SMEs bring to the country’s economic engine. With COVID-19 accelerating the digital world’s transition, we wanted to step in and be the first to help digitize this vital sector. As such, we joined forces with SMEs to build a platform that meets their business needs and helps them navigate their growth-journeys.

What security and data privacy risks are emerging as a result of a pandemic-driven customer data gold rush within the GCC financial service sector?

Proper data analysis will help us serve our customers better and ensure successful customer experiences. As one of our focuses is SME businesses, we have launched the NBF CONNECT platform to enable B2B transactions and other systems based on customer feedback. All this information is flowing through different channels, including customer feedback, and is analyzed in our CRM in terms of customers’ needs and requirements.

As mentioned correctly, the data gold rush is assisting in better customer service, and the emerging risk continues to be about data leakage and Identity theft, especially by using social engineering (Phishing emails, WhatsApp messages, fake/lucrative advertisement using social network channels) to penetrate people

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and systems. We at NBF follow strict data protection mechanisms, as we ensure data observation is moral, ethical, legal and fair. In addition, we configure stringent access rules – need to know – and configure the data leakage systems to protect this information from potential incidents. Also, as part of our corporate social responsibility, we conduct various awareness sessions for our customers.

What does clean data mean? And how are regional banks synchronizing consumer data and their customer relationship management to meet their clients’ evolving demands amid the impact of COVID-19?

Acceptance of Data as an economic asset is well-recognised. It can be listed as one of the key agendas for discussion by boards and management committees of organisations globally. Data and contextual information generated from that have now become a basis for organisations to make more effective decisions, thereby benefiting from operational efficiencies and increased business value. However, it is also a fact that data which has not been managed effectively has resulted in organisations losing time, money and effort.

Clean data is a set of data ready for analysis after removing or modifying i n co r re c t , i n co m p l e t e , i r re l e v a n t , duplicated or improperly formatted data.

The information that are removed or modified are usually unhelpful when it

Acceptance of Data as an economic asset is wellrecognised.”

comes to analyzing data, as it hinders the overall process and results in producing inaccurate results.

Data cleaning is not merely about erasing information to make space for

new data, but instead finding how to maximize a data set’s accuracy without necessarily removing information. Having clean data, i.e., ensuring that the data is fit for purpose, depends on the data management practices followed by an organisation that, to name a few, includes metadata and master data management, stewardship framework, data quality rules, etc.

It begins with managing the quality of the data through well-defined data governance policies & standards that are embedded in the organisation and robust technology & system architecture ensuring that the various stages of the data life cycle (capturing, cleaning, classifying, storing, using and disposal) are managed in the best possible manner. Leadership commitment towards these objectives goes a long way in ensuring that the data’s health and reliability are maintained at all times.

As a result of the COVID-19 pandemic, all industries are closely following how this will affect consumer and business behaviour and preferences in the short, medium and long-term. Many surveys are conducted to understand how COVID-19 pandemic reshaped customers’ behaviours. Below is the finding by The Banking Experience

DATA & DIGITAL INITIATIVES

ACTION TAKEN BY BANKS

Digital transformation

Developing digital customer acquisition platform

Blockchain-based KYC

Platform designed to enable businesses new to the UAE to open accounts entirely digitally.

Leveraging customers demographic and transactional data

Displaying personalised banners, including products and services customers may need in a crisis or otherwise

Leveraging customers demographic data

Identifying the vulnerable ones (like self-employed, high-debt, old-age customers, etc.) and reaching out to them with customised products and helpful advice.

Service usage behaviour

By leveraging branch locator pages, ATM listings in Google and more, to drive users who are potential branch visitors to online channels.

Interest clusters & AI

Creating COVID-Sensitive Products & Services to the right beneficiaries. For example - Payment holidays, moratoriums for loans, relaxation in EMIs, less stringent KYC norms, waiving minimum balance charges.

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survey conducted by Mintel-Comperemedia in the USA. Key Findings: 1. 50% of consumers & 76% of businesses said the COVID-19 pandemic changed how they interact with their financial institution.

2. Of these respondents, 66% of consumers and 73% of businesses feel that these changes will be permanent.

3. Nearly half (42%) of consumers expect automated tools to support their financial wellness based on the insights that their bank has about them. Additionally, 52% of consumers are comfortable using a chatbot or virtual assistant to perform banking activities.

4.

Ne a r l y t h re e - q u a r t e r s ( 7 3 % ) of respondents said their bank should be recommending specific products/solutions based on the information they have about their business.

5. W hen business leaders were asked what solutions, they expect their bank to provide in the future, the three most popular choices from business leaders were: a. V irtual assistants to help manage company finances (60%), b. Secure mobile-optimized treasury management platforms (54%), c. Secure online treasury management platforms (52%).

Here are some examples on how regional banks are synchronizing consumer data and their customer relationship management to meet their clients’ evolving demands

How do you envision consumer data mining in the next decade? And how can GCC banks leverage analytics to explore new avenues of growth or new business models?

Extracting meaningful information through the process of data mining is widely used to make critical business decisions. In the coming decade we can expect data mining to become as ubiquitous as some of the more prevalent technologies used today.

Some of the key data mining trends for the future include:

Multimedia Data Mining: It involves the extraction of data from different kinds of multimedia sources such as audio, text, hypertext, video, images, etc. and the data is converted into a numerical representation in various formats. This method can be used in clustering and classifications, performing similarity checks, and to identify associations.

Ubiquitous Data Mining: This method involves mining data from mobile devices to get information about individuals. This method has a lot of opportunities to be enormous in various industries, especially in Banking.

Distributed Data Mining: It involves mining a considerable amount of information stored in different company locations or at other organizations. Highly sophisticated algorithms are used to extract data from different locations and provide proper insights and reports based upon them.

Spatial and Geographic Data Mining: Extracting information from environmental, astronomical, and geographical data also includes images taken from outer space.

T ime Series and Sequence Data Mining: This type of data mining is based on cyclical and seasonal trends and analyzing random events that occur outside the regular series of events.

The spurt of big data has opened enormous opportunities for the banking sector to grow. Looking at the tremendous impact of analytics and how it has completely transformed banking functions, it should be considered an essential part of every initiative. GCC banks can leverage analytics capabilities at scale to achieve a new level of customer understanding and targeting. Applying digitization at scale can

deliver an almost seamless integration of banking services into clients’ daily routines.

Some key banking analytics to explore new avenues of growth

B etter Personalization with Rich Data: Clustering of customer base with advanced criteria, where human-centric, design thinking pillars and CRM tools help banks match customer needs to real-time solutions.

Digital-only Banking: With the high cost of a physical branch network and an increasing number of customers switching to digital channels, digital-only banking entities are growing rapidly.

More and more banking organizations are expected to move to digital-only banking in 2021 to protect their customer base and expand their market share, empowered through open banking APIs and cloud technologies.

AI-Driven Predictive Analytics: The banking industry can consolidate both internal and external customer data that is rich and financially viable, not only to know their customers but also build their predictive profiles. With the enhanced use of data, banks will provide consumers with value driven services through next best actions, instead of blind selling products as they will be able to minimize customers churn, fraud and money laundering.

Payments Infrastructure: Payments infrastructure will always remain the most active area of innovation in the banking industry. Driven by dynamic consumer expectations and technological changes, innovations in the payments industry will persist. The driving force behind the differentiation will be data and technology, changing the dynamics of payments.

Sources:

https://www.businesswire.com/news/home/20200729005507/en/Citizens-Survey-Finds-COVID-19-Permanently-Change-Consumers https://www.flatworldsolutions.com/data-management/articles/data-mining-future-trends.php https://cio.economictimes.indiatimes.com/news/business-analytics/banking-analytics-trends-to-look-in-2020/74560219 https://www.axios.com/ppp-small-business-loan-program-restart-81226b0b-3b79-4f10-85d2-a02b31733e81.html

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Amit Malhotra

General Manager, Personal Banking Group, CBD

Improving customer experience and delivering personalized offering based on the needs of customers has proven to deliver excellent results to organizations.”

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Transforming the banking world Amit Malhotra General Manager, Personal Banking Group, Commercial Bank of Dubai, tells us why Data analytics is a vital resource for improved management of information to grow better understanding of your customers.

Use of data will continue to create increased opportunities for banks to profit from better levels of service

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rom personal banking services to wealth management, how is data analytics reshaping the GCC banking sector?

For banks and financial service providers to succeed in today’s complex business scenario, it is important and necessary to understand the needs and expectations of their customer base. Data is the key in understanding customers’ needs and expectations. This data can be further enriched by leveraging data analytics solutions, which can help organisations to understand customer behaviour better and deliver personalised and relevant offerings to meet their needs.

In addition, customer analytics enables the real-time delivery of personalized product or service offerings at the right time, which vastly enhances the customer experience.

Financial services providers need to understand the needs and expectations of their customer base.

How are regional banks optimizing

digitalization and customer feedback to maintain a competitive edge as well as transform their operations?

Improving customer experience and delivering personalized offering based on the needs of customers has proven to deliver excellent results to organizations. Results have shown that satisfied customers spend more, exhibit deeper loyalty to companies, and reduce costs for companies. In that dynamic of value creation and durable competitive advantage, delivering digital services and operations has emerged as a prime mover in reshaping customer experience in almost every sector.

As digital giants such as Amazon, Apple, and Uber continuously reinvent themselves by delivering simple, immediate, and individualized experiences, banks are also taking bold moves to build dynamic shared digital ecosystems around customer needs.

Digitalization and analytics are vital tools in accelerating the growth of an

organization. Deeper and more detailed profiles of customers, together with transactional and trading analytics, can improve the acquisition and retention of clients, as well as cross- and upselling. Banks can also use advanced analytics to provide faster and more accurate responses to regulatory requests.

A good example of what CBD has executed is our suite of digital products including Digi Accounts, Digi Cards and Digi Loans, which enable customers to get new products (cards/loans) or top up on their existing products in real time, in under three minutes, leveraging data analytics.

What security and data privacy risks are emerging as a result of a pandemic-driven customer data gold rush within the GCC financial service sector?

Without a doubt, the COVID-19 global pandemic has been the main catalyst to digitalization not only internally, but by our

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customers who have increased their usage of digital channels. Social distancing and remote working have forced us over the last year to revisit some of our traditional manual processes and move towards automation and cloud adaption but at CBD we had already started the digital transformation journey well before the crisis and this helped us to adapt much more quickly than other organisations.

While introducing new products and services, embedding security and privacy controls has always been a priority for us. As security and data privacy risks continue to evolve, Financial Institutions need to be both proactive and preemptive in managing these risks with

consumer data and their customer relationship management to meet their clients’ evolving demands amid the impact of COVID-19?

The Covid-19pandemic has introduced many unique challenges that businesses have never faced before. Customer service teams are having to deal with multiple issues, ranging from customer engagement, satisfaction and support through this crisis.

In this scenario, having clean customer data is even more imperative. Ensuring that your consumer data is updated, removing incorrect, corrupted, incorrectly formatted, duplicate, or incomplete data within your CRM and integrating all data through a centralised Customer Data Platform will

Analytics can help banks evolve new business models and provide more personalized offerings and even improve risk profiling of customers.”

stringent information security controls.

The increased adoption of automation and straight through processing has also helped reduce human errors and operational risk.

Further, although law enforcement has made some progress with combating fraudsters, the largest security and privacy risk is still borne by the general public who remain vulnerable and gullible to prize scams and phishing attacks despite the frequent awareness campaigns.

What does clean data mean? And how are regional banks synchronizing

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help all organisations provide better and more relevant communication and services to their customers.

Particularly in times of crisis, a customer’s interaction with a company can trigger an immediate and lingering effect on his or her sense of trust and loyalty. With job uncertainties and paycuts becoming more common especially in the West, a primary indicator of customer experience will be how banks meet customers changing needs with empathy, care and concern. Now is also the time for customer experience leaders to position

themselves at the forefront of the longerterm shifts in consumer behaviour that result from this crisis. Keeping a real-time pulse on changing customer preferences and rapidly innovating to redesign journeys that matter to a different context will be key.

How do you envision consumer data mining in the next decade? And how can GCC banks leverage analytics to explore new avenues of growth or new business models?

It is difficult to make predictions especially about the future. But one fairly safe prediction is that data will continue transforming the world in the coming decade. The quantum and scale of data available to organisations will only increase going forward. Banks already have enormous amounts of consumer data, through ATM deposits/withdrawals, pointof-sale purchases, online payments, loans… et cetera, but they have not been very good at utilizing these rich data sets.

Analytics can help banks evolve new business models and provide more personalized offerings and even improve risk profiling of customers. As data analytics technologies advance, banks should look at using customer behaviour to tailor product recommendations or offer insights on customer’s money habits.

Even interest rates and credit limits can be decided upon this data. For example, if a customer regularly makes payments on time, the bank can offer him better interest rates.

Banks may be able to provide more services to its customers beyond banking, and look at providing services across hospitality, retail, travel and ecommerce sectors amongst others. The bank can act as a data company at the center of a consumer ecosystem where the revenue streams include not just banking but also many other B2C and B2B businesses. Great analytics is not the only requirement here: banks must get many other things right to be relevant to and trusted by customers.

And already several leading banks around the world are taking steps in this direction.

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SPECIAL REPORT

Mamoun T. Alhomssey ADIB CIO

Digital services and improved customer experiences do not operate in a vacuum, and banks must utilize the power of quality data to make intelligent decisions and fulfill customer needs.”

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From Descriptive to Predictive and Prescriptive Banks must have real-time data for faster insights and quicker responses to stay competitive. Mamoun T. Alhomssey CIO, Abu Dhabi Islamic Bank, explains that as technology advances, so has accessibility to customer data, providing illuminating insights and improved decision making

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rom personal banking services to wealth management, how is data analytics reshaping the GCC banking sector?

With the uncertainty brought by Covid-19, understanding the evolving needs and expectations of customers is key for the success of any bank in today’s world. To adapt and effectively respond to these changes, banks must explore new avenues of growth to upgrade their services and provide better customer journeys across different channels. Through utilizing customer data analytics and AI technologies, banks are able to deliver personalized experiences and appropriate solutions at the right time, meeting customer needs. The insights gained from a human-led approach to customer data will help banks evolve and stay ahead of the competition.

Financial services providers need to understand the needs and expectations of their customer base.

How are regional banks optimizing digitalization and customer feedback to maintain a competitive edge as well as transform their operations?

T h e p a n d e m i c h a s re s u l t e d i n a fundamental shift in customer behavior marked by an increased preference for digitization and remote banking experiences. Digitization of banking services is a necessary advancement to help banks fuel new growth opportunities and adapt to evolving customer needs by offering safe, convenient, and efficient mobile and online banking experience. To maintain a competitive edge, banks need to reimagine the way they serve their customers by providing digital solutions

that meet their needs, while still ensuring the delivery of a holistic and personalized banking experience.

What security and data privacy risks are emerging as a result of a pandemicdriven customer data gold rush within the GCC financial service sector?

The shift to digitization and the adoption of various digital platforms has heightened the threat of cyberattacks and security risks, encouraging fraudsters to be opportunistic. Online fraud in the UAE has risen considerably in recent months, even as misinformation abounds about coronavirus-linked health and financial issues. Cybersecurity has become more essential than ever, especially to banking customers who are always the number one target for fraudsters.

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Clean data can help banks establish a personalized stream of targeted communications with customers by providing them with accurate, real-time understanding of their needs.”

Customers are facing the risks of phishing, falling prey to a fake but ‘genuinelooking’ bank website, and eventually offering credentials to a hacker. In addition, the heightened use of open public WIFI and home networks that lack security has allowed for opportunities for misuse by fraudsters. During this time, it is essential for banks to ensure tighter security measures and controls are in place.

What does clean data mean? And how are regional banks synchronizing consumer data and their customer relationship management to meet their clients’ evolving demands amid the impact of COVID-19?

While customer data analytics is a critical tool for banks to leverage on, the way banks utilize and manage this data is key to ensuring that they are gaining meaningful insights on customer needs. Digital services and improved customer experiences do not operate in a vacuum, and banks must utilize the power of quality data to make

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

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intelligent decisions and fulfill customer needs. Banks need to stay competitive by having real-time access to data for faster insights and quickly respond to changing market conditions and customer needs.

To support a community of Data Scientists and self-service business intelligence (BI) users; Data needs to be catalogued, Golden records need to be created; this needs Data Governance to be in place hence Clean Data.

Clean data is structured data entailing valuable information which is clear of data errors and inconsistencies to ensure an enhanced quality of data. Clean data can help banks establish a personalized stream of targeted communications with customers by providing them with accurate, real-time understanding of their needs. Clean data also equips banks with the ability to respond to market challenges and opportunities in a resilient manner.

How do you envision consumer data mining in the next decade? And how

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 WEB ASSISTANT Marie Orayan web@mea-finance.com

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can GCC banks leverage analytics to explore new avenues of growth or new business models?

With the growing technological advancements, customer data has become more accessible, providing banks with authentic business insights and vastly improved decision-making capabilities.

In the next decade, as the digitization trend continues to evolve, it is crucial for banks to utilize consumer analytics and lead a data-driven strategy to maintain a competitive edge. With analytics, ADIB is moving from “Descriptive to Predictive and Prescriptive” analytics to yield the best outcomes. It is becoming much more comfortable to predict emerging customer trends, allowing for potential avenues of growth for banks. In addition, implementing relevant Artificial Intelligence solutions that leverage the power of Machine Learning and Big Data is crucial to allow banks to engage in smart investment decisions and product offerings that will ensure their success.

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

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