The next normal: thought leaders’ insights

Digitalization is ushering in many opportunities for GCC lenders and industry leaders expect the trend to help financial institutions to expand and diversify revenues and control costs

Gulf region countries are still reliant on oil, which accounts for more than 50% of fiscal revenues—except for the UAE, where it contributes around 35% of the fiscal budget, according to Deloitte. The double whammy of the COVID19 pandemic and a plunge in oil price continues to squeeze regional economies. Growth in banking assets across the GCC is linked to regional GDP, which moves largely in tandem with oil prices.

However, despite these difficulties thought leaders are confronting a wide range of challenges, many ongoing, but also some new obstacles in a bid to improve competitiveness and boost capital amid sluggish growth.

Banking technology

Regional banks have been hailed as proinnovation and leading bankers expect them to continue to dominate as the sector goes more digital. Similarly, the banks’ tech-savvy customers and regulatory initiatives such as regulatory sandbox and open banking are also accelerating the banks’ digital transformation efforts. Raghu Nandakumara, Field CTO at Illumio, highlighted that the demand for Zero Trust-based finance solutions in the Middle East has created a need for simple to implement technology and to meet the demand, Illumio is joining hands with some of the top security solutions providers in the region such as Help AG.

Digitalization is ushering in many opportunities for GCC lenders and industry leaders expect the trend to help financial institutions to expand and diversify revenues and control costs.

Islamic financing

Green bonds are a growing category of fixed-income securities and thought leaders expect green Sukuk could widen the appeal of Islamic bonds beyond traditional markets to include ethical investors in Western countries.

S&P Global said that growth in the global Islamic finance industry will slow significantly in 2020/21 due to the impact of the pandemic in core Islamic finance economies amid necessary containment measures.

However, these measures have also highlighted the importance of leveraging technology and creating a nimbler Islamic finance industry. Mohammed Kateeb, Path Solutions’ Group Chairman & CEO, said that as the only software firm certified by the Accounting and Auditing Organization for Islamic Financial Institutions, Path Solutions strives to be unique and innovative to maintain a competitive advantage in this fast-paced, rapidly changing world.

Higher digitalization and fintech collaboration could potentially strengthen the resilience of the sector in a more volatile environment and open new avenues for growth, said S&P Global.

Wealth Management

The uncertainty around the trajectory the pandemic is taking and its impact on the banking sector will likely remain for the foreseeable future. However, in the “new normal” new and reenforced client demands and priorities will emerge, with advisory excellence, the availability of hedging strategies, as well as the confidence in the operational resilience of a wealth manager becoming important factors, said Deloitte.

Thomas Schornstein, Head of Middle East Business and Member of the Executive Board of additive, said, “After three years on the technology side and involvement in numerous client projects I have learned one important lesson, there is no ‘one size fits all’ solution. The key success drivers of the actual business model must be analyzed carefully before a digital journey can be defined.” For wealth managers to enjoy a competitive edge in a ‘new normal’, a more digitally enabled front office will be a key requirement.