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MEA Finance Banking Technology Summit 2021
Reframing the future of banking
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Though the outbreak of the COVID19 pandemic accelerated digital transformation beyond business models, channels, and touchpoints across the financial services sector in the Middle East, banks had long made considerable progress in digitizing their products and services compared to their peers in the emerging markets.
The Middle East banking sector has come a long way and has weathered several storms over recent years including low oil prices in 2014, but despite all these challenges financial services providers always emerged unscathed due to their innovative strategies.
Over the years, market segments within the sector have also grown from strength to strength. Meanwhile, the wave of digital transformation that is apparent in the Middle East is expected to equip regional financial institutions with the capabilities they require to survive the new normal post-pandemic.
On May 26, bankers from different financial institutions servicing the Middle East gathered for MEA Finance Banking Technology Summit & Awards 2021 at Armani Hotel, Burj Khalifa in Dubai to give each other insights into trends that are reframing the future of banking.
Open Banking
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.
Haifa Aboufarah, Enterprise Account Manager – FSI, Dell Technologies, who moderated the Open Banking and the New Business Models panel said that banks should not miss out on the importance and the benefits of collaborating with fintechs and regulators. Financial watchdogs in the region are playing a crucial role in the digital transformation of the banking sector, putting in place policies and frameworks for a better collaborative and innovative financial industry, said Aboufarah.
Deloitte said that Open Banking is being made possible by advances in technology that provide new functionality for consumers and banking entrants alike.
By leveraging open APIs, Open Banking platforms enable 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.
Yuri Misnik, First Abu Dhabi Bank’s Group Chief Technology Officer, who was part of the panel noted that there is nothing stopping fintech companies to partner with banks as he drew a comparison from his observation in the UK and Australia, saying developments in the Middle East financial service sector are at par with those in some of the world’s renowned financial hubs such as London, Hong Kong, and Sydney.
However, Misnik said that the banking sector needs to understand that Open Banking does not mean a free for all, adding, “That means when you are accessing and when you are exploring the platforms, and you’re using the platform, you need to apply a meaningful set of controls and protection around customer data on transactions, etc.”
Taking a leaf from the UK and Australia, Misnik urged regional banks to have “consistency of engagement”. He highlighted that in Australia and the UK before financial institutions started considering a framework for APIs and a framework for services, they first addressed issues to do with a framework of customer consent.
Asked about the challenges that regional banks are facing now or will face in the future while adopting Open Banking, Saud Al Dhawyani, Chief Technology Officer, Emirates NBD, said that the concept is a hot topic in the financial services industry. “I don’t want to sound negative talking about the challenges that banks face in adopting Open Banking, but these are very important areas that we should really understand before implementing the concept,” Al Dhawyani said responding to the moderator’s question.
Al Dhawyani said that the biggest challenge confronting banks is around the business model. Given that banks are part of an Open Banking ecosystem, which consist of fintechs, regulators and other players in the financial sector, having a standard interface that provides a free and open data-sharing platform in the industry – that alone presents a challenge to different players in the market, he added. But one might ask how does a free and open data-sharing platform poses challenges to banks?
Al Dhawyani highlighted that the current business model created barriers of entry into the financial services sector which had been leveraged on for decades by incumbent banks to protect and retain market share. Hence, the arrival of the Open Banking concept means banks should start reinventing themselves and adopt new business models.
Brian Yeoh, Head, Data and Technology Governance - Financial Technology at ADGM, weighed in saying trust is the mainstay of the financial services sector and one means of ensuring that trust is through regulation.
Yeoh said, “The underpinning idea behind Open Banking is the ability for a customer of a financial institution to be able to leverage the power of their data and do that through an intermediary
THE UNDERPINNING IDEA BEHIND OPEN BANKING IS THE ABILITY FOR A CUSTOMER OF A FINANCIAL INSTITUTION TO BE ABLE TO LEVERAGE THE POWER OF THEIR DATA AND DO THAT THROUGH AN INTERMEDIARY SUCH AS A THIRD-PARTY PROVIDER THAT INTERMEDIATES THE RELATIONSHIP BETWEEN A CUSTOMER AND A FINANCIAL INSTITUTION.
– Brian Yeoh, Head, Data and Technology Governance - Financial Technology at ADGM
such as a third-party provider that intermediates the relationship between a customer and your financial institution.” It is important to note that Open Banking plays an intermediary role and not a replacement role.
The concept of open finance builds on the principles of Open Banking then expands it to other financial services such as investment, insurance, pensions among others, said Aboufarah. Giving insight into the concept of open finance Abe Karar, Chief Strategy and Digital Officer, Fintech Galaxy highlighted the digital transformation trends that are shaping up the future of the financial services sector adding, “it is interesting, when one starts thinking about open finance and the whole open API economy, I envision the day when you will be driving and when you pass or someone gives you the way, you end up making a small payment to them.”
Asked how banks accelerate their in-house apps development to maintain a competitive edge in an evolving operating environment. Rajashekara V Maiya, Global Head of Business Consulting and Product Strategy, Infosys Finacle said that there are four pathways to innovation, according to a survey that Infosys Finacle conducted on more than 500 global banks. Maiya said that the first pathway is to think about establishing an ecosystem beyond finance, the second pathway is integrating the physical and the digital processes, the third pathway is reimagining and reorienting the transaction flows and the fourth and last one entails accessing the magic of all the other functions.
Digitalization drive
Digitalization in the GCC financial service sector is swiftly shifting the field of play whereby institutions are now focusing more on customer experience, and it is no longer about the services and products available to customers. The emergence of artificial emergence (AI) and machine learning (ML) is creating opportunities for innovation and efficiency while opening doors to new competitors such as fintechs, global retail giants as well as card networks and digital-exclusively banks.
KPMG said, “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.”
The Technology for Banking: Past Successes, Emerging Landscape and
New Challenges panel was moderated by Zubair Ahmed, Executive Vice President & General Manager of the Middle East & Africa at VeriPark. Ahmed asked the panelists how the emerging technologies are shifting the operating environment for financial institutions?
Ellis Wang, Senior Executive Vice President, Group Head of Technology, Transformation and Information, Mashreq Bank said that the outbreak of coronavirus undoubtedly accelerated the adoption of cloud technology as banks moved to offer their clients seamless services despite pandemicrelated restrictions. Wang said that several regional and international banks spent most of last year digitalizing their entire business structures, leveraging on AI to advance efficiency and productivity as well as reduce operating costs.
Asked how shared risk management is becoming the norm whereby banks are collaborating to see how they can solve issues, Yan Bechet, Head of Client Coverage, Dubai Commercial Banking, HSBC Bank Middle East, said, “When I look at banking and collaboration, I think there’s no question whether banks need to collaborate with fintechs, they need to.”
Bechet highlighted that long gone are the days when banks could go it alone with their own IT departments, rather collaboration is now more than crucial for banks to maintain a competitive edge. The partnerships go beyond the relationship between banks and fintech firms to include regulators and other banks owing to the common sets of regulations and practices those financial institutions share.
The Middle East region recently saw the emergence of digital banks such as Mashreq Neo and Emirates NBD’s liv. As well as neobanks such as UAE’s YAP Bank and Zand. Ahmed asked whether these digital-exclusive banks are a threat to the financial services sector.
Stefan Kimmel, Chief Operating Officer, Commercial Bank of Dubai, said that when banks launch digital-only windows, fintech firms have similar standpoints, they do
it for two reasons – either strategically to serve a new market segment that cannot be accommodated under the traditional brand, enter a new segment under a different name or establish a leaner operation. The operation costs of the emerging digital-only outfits are significantly lower than that of incumbent, brick and mortar banks.
“And I see in our market here, given the size of the market, given the regulation, the legal framework, customer behavior and several other parameters, I don’t see that as a huge threat,” said Kimmel.
On critical aspects that banks should not ignore in their digital transformation drive, Valérie Bauloye, Head of Channels & Partner Management, Appway said that previous financial institutions implemented several initiatives to modernize their businesses. However, the pandemic-induced wave of digitalization that has been evident globally showed that digital transformation is not a cosmetic procedure but rather an end-toend process that is aimed at enhancing efficiency while better serving customers’ needs and expectations.
Asked about the gap in digital transformation and what institutions should focus on filling, Sanat Rao, Chief Business Officer & Global Head, Infosys Finacle, who joined the summit via video link from London said that the gap has changed in terms of connection over the last several years. Rao said that there is a noticeable change over the last five years in a lot of institutions, their digital and electronic channels and customer touchpoints. Rao also identified the other challenge being faced by institutions as their ability to create a truly digital enterprise. THE EMERGENCE OF NEW TECHNOLOGIES SUCH AS AI, ML, INTERNET OF THINGS (IOT) OR BLOCKCHAIN, TOGETHER WITH EVER-CHANGING CUSTOMER EXPECTATIONS AND PREFERENCES ARE REDEFINING ALL WE KNOW ABOUT THE FINANCIAL SECTOR.
– Gonçalo Traquina, Advisory Partner, KPMG Lower Gulf
Fintechs vs Banks
The relationship between incumbent financial institutions and new entrants is no longer about competition but is about collaboration through the adoption of digital technologies to scale up the business.
Deloitte said, “The majority of incumbents appear to recognize that while some fintechs may be coming after a piece of their market share, more often than not these tech-driven start-up’s offer new tools, platforms, capabilities, and approaches to improve customer experience and bolster their operations. This approach underscores the notion that fintechs are more friend than foe.
The Competitors, Vendors and
Partners, The Blurring Line panel was moderated by Gonçalo Traquina, Advisory Partner, KPMG Lower Gulf. Traquina said that the financial services sector is going through a burden shift. “The emergence of new technologies such as AI, ML, Internet of things (IoT) or blockchain, together with ever-changing customer expectations and preferences are redefining all we know about the financial sector.”
Traquina sees the relationship between financial institutions and new entrants remaining competitive and profitable. Mohamed Abdel-Razek, the CIO of Africa, Middle East and Islamic banking at Standard Chartered Bank said that banks have the trust from clients, the knowledge of the industry and the process while a fintech possesses the innovation component in the form of new technologies to advance client experience such as visualization, AI and ML, adding, “So I think it’s very important to collaborate.”
Onur Ozan, Regional Head - Middle East, North Africa and Turkey at SWIFT concurred with Abdel-Razek noting that financial institutions and fintechs largely collaborate to enhance business and meet customers’ ever-changing needs. Ozan closed by saying amid a wave of digitalization, fintechs are not going to kill banks neither will banks kill fintechs, but the financial services sector is changing amazingly fast and fintechs are the catalyst of digital transformation.
Kokila Alagh, the Founder of KARM Legal Consultants, said that the competition and collaboration between banks and fintechs have led to the immense growth that can be witnessed across the Middle East region, where banks are speeding up digitalization, launching new products and open to discussion with the fintech to advance digital transformation in the financial services sector.
Similarly, Fraser Brown, Executive Director, Banking & Insurance at FSRA, ADGM weighed in saying regulators seek to ensure that incumbent banks are agile and robust at the same time embracing the opportunities that fintech presents. Brown believes that fintechs are going to kill a few incumbent banks, “those that don’t move swiftly enough to embrace both the challenge and the opportunity.”
Customer demands
For several regional banks, business is no longer about the products and services on offer but meeting customers’ everchanging demands and expectations. The outbreak of pandemic has accelerated several trends in both customer and business behaviors in the financial sector– and customers do not expect to go back.
The Demanding Consumer: What’s
New and Beyond Banking panel was moderated by Angela Halawi, Financial Services Industry Lead at Microsoft. Halawi said that technology has become an important aspect of our lives and it is driving new customer trends and behaviors that are making it incredibly challenging for financial institutions because they’re coming with everchanging demands.
Ahmad Abu Eideh, the CEO, United Arab Bank said that culture is one of the most important aspects, especially for financial institutions that are about to embark on digital transformation. “As a bank that has just embarked on its digitalization journey, culture is a critical aspect of the digital transformation because with or without it I know that it will be either a make it or break it process,” said Abu Eideh. If a bank does not have the right culture in place and its workforce does not embrace change, nothing happens.
Devid Jegerson, EVP Head of Customer Experience and Platform Development, National Bank of Fujairah, concurred that culture is fundamental in the financial services sector especially when an institution is going through the digital transformation phase.
Asked what role culture is playing from a tech background Waleed Saied Mohamed Hasabelnabi, the co-founder - VP Technology, Cubic Systems said that culture and good leadership go hand in glove, and this is an approach that can be used as a tool within the organization to enforce the change of culture and policies to enhance transformation. “Leadership and culture are core to transformation. Without them, an institution will not be able to adopt and implement a successful digital transformation journey, regardless of the technology being adopted and its efficiency,” said Hasabelnabi.
As Islamic banking is becoming mainstream, attracting interest from non-core Islamic financial hubs such as London and New York, Halawi asked if the evolving customer behaviors and trends in conventional banking are the same as those being witnessed in Shari’ahcompliant finance.
Cassim Docrat, Regional Director, DDCAP (DIFC), opened by highlighting that the enabling technologies being adopted by financial service providers and all the frenzy around digitalization is aimed at meeting customer expectations. Docrat also said that banks’ approach to digital transformation makes it appear as if they’re playing catch up with fintechs. He noted that fintechs seem to be a step ahead of financial services institutions and the challenge with customer behavior and especially gen Z and millennials is that they are very agile and can switch around whenever they like.
Transformational technologies
Financial institutions are facing increasing pressure to adopt new digital technologies into their business models
to maintain a competitive edge in a competitive market and to achieve high operational efficiencies.
The financial services industry has seen drastic technology-led changes over the past few years. PwC said that while executives look to their IT departments to improve efficiency and facilitate game-changing innovation, fintechs are encroaching upon established markets, leading with customer-friendly solutions developed from the ground up and unencumbered by legacy systems.
The Transformational Technologies
& Implementation panel was moderated by Mohamed Roushdy, CEO, Fintech Bazar. Roushdy said that the financial services sector has been buzzing with chatter and activity on fintech strategy including digital transformation, innovation, and Open Banking, but this digitalization comes at a cost.
Asked about the challenges, opportunities, or concerns faced by financial institutions in digital transformation strategies, Ken Coghill, Director and Head of Innovation & Technology Risk Supervision, DFSA said from a regulator’s perspective, risks do exist, but they are insignificant. “From a regulatory point of view, we have to look a bit deeper and be cognizant of the fact that every time an innovation is being implemented it either creates or reduces operational risk,” said Coghill.
Ghinwa Baradhi, Chief Information Officer - Middle East, Northern Africa & Turkey (MENAT), HSBC noted ever-changing customer behavior and expectations as the main challenge that is confronting financial services providers. Baradhi also highlighted that technology is evolving at a fast pace to the extent that the financial sector is failing to catch up with the digital transformation trends, customers’ expectations and regulatory requirements.
Zubair Ahmed, Executive Vice President & General Manager of the Middle East & Africa, VeriPark, weighed in saying the challenge is in the fusion of short term versus long term view on transformation. “Several organizations on the digital transformation front are caught between short term versus long term view on transformation, and I have seen every three months, this challenge coming up,” said Ahmed.
Giselle Bou Ghanem, Senior Program Manager for Public Cloud- International CTO Office, Avaya, who was also a panelist, said, “The customer is both a challenge and an opportunity while the changing customers’ behavior and expectations chase after experience rather than products, is what is both an opportunity and a threat.”
Nicolai Solling, Chief Technology Officer, Help AG, said that from a cybersecurity perspective, a financial institution requires a whole new set of capabilities to maintain security on new digital platforms. Solling said that for organizations including cybersecurity providers, the wave of innovation is making it difficult to keep up with the new cyber threats, cybercrime and malicious hacking due to the proliferation of
– KPMG
digital channels.
Individual speakers
The impact of COVID-19 - Bryan Stirewalt
Middle East financial institutions had significantly digitized their businesses way before the outbreak of the pandemic last year. However, the “stay at home” orders that were introduced by regional governments to curb the spread of the virus inevitably accelerated digital adoption to an all-time high record, generating as much as 10 years’ worth of growth in just four months.
Bryan Stirewalt, Chief Executive, Dubai Financial Services Authority, covered several issues ranging from how the UAE is poised to recover from the effects of the pandemic to cybersecurity concerns that are increasing as banks move to digitalize their operations. Stirewalt said that as the UAE is leading the world in COVID-19 vaccine rollouts and is on its way to economic recovery, “the country’s entrepreneurial spirit will certainly be a strong element in its financial recovery and continued resilience.”
The DFSA chief said that as part of the government’s initiatives to promote innovation and digitalization, the financial services sector has been transitioning toward a more innovative environment long before the pandemic struck. “As a regulator, we recognize that having clear lines of communication with our regulated entities and stakeholders is critical during the crisis period,” said Stirewalt.
As the country is emerging from the pandemic, Stirewalt said that the UAE financial sector is part of the solution and not part of the problem, adding, “Looking forward, we must all be agile, making bold changes to business plans in an evolving operating environment, and we must remain resilient throughout the volatile periods that remain ahead.” The UAE banks are on a strong footing in terms of capital and liquidity and have always been compared to their peers in international financial hubs such as Hong Kong, London, New York, and Shanghai. From an operational risk standpoint, Stirewalt said that regulators are seeing a recalibration of risk priorities over the last year. “Operational risk and operational resilience have jumped from the backseat swiftly,” he added.
The DSFA chief also highlighted how cloud technology has systemically become important to the banking industry and to all other sectors as the economy is going digital. “Sustained disruption in the financial services sector is happening, and the challenge to regulators is to face it and embrace it as a positive force,” said Stirewalt.
Digital payments
The use of digital payment methods has undoubtedly soared as the use of smartphones for payments has surpassed the use of debit cards as the preferred method of settling payments globally. Digital payments, once a convenience, have become a necessity in these times, said PwC.
The success of digital payment methods can also be attributed to financial services providers’ quest to meet customer expectations, increase efficiency, accelerate growth and cut back operational costs. Damon Madden, Principal Product Sales Specialist, ACI Worldwide, said that the financial service sector should be open to alternative payment methods and that is what is being witnessed in the UAE and across the world, where the outbreak has accelerated the adoption of seamless, contactless and intuitive payment methods that address the day-to-day requirements of users.
Madden also touched on digital payment maturity, noting Amazon’s acquisition of Payfort, which was rebranded to Amazon Payment Services last December, a move he said underscored that seamless and integrated experiences offered by digital payments and e-commerce are the future of business.
He also said that the modernization of the payments should not only focus much on the services offered such as
cross-border payments among others but on the way they enhance customer experience.
Madden said that the future of the payments sector is about network intelligence. “The future is about having information coming from different organizations, different capabilities, different regulators, bits of information about your customers, about their relationship not just with the X service provider but with the outside world.”
Blockchain revolution
As digital transformation is “changing the playing field” for the financial service sector, distributed ledger technology, also known as blockchain technology, is revolutionizing recordkeeping and it is poised to change the future of finance – in accounting, asset registers, payments, trading, collateral management among other services.
KPMG said that the traditional financial systems operate with a centralized database, usually with a single point of authority while blockchain technology allows for a distributed database that holds a growing number of records.
Gaurav Dubey, Chief Executive Officer, TDeFi Accelerator said that since the inception of blockchain the talk about the entire supply chain shifting to blockchain including cars and flights has not yet materialized. However, what certainly has happened is blockchain finding a killer app and that’s finance.
Dubey said that to date, transfer of value and sort of value has been established, adding, “And then looking at the track record, I think, and that can be entirely my perspective, the next phase of cryptocurrencies is certainly decentralized finance, and the way it’s moving.”
Posing a question to the attendees at the MEA Finance summit, Dubey asked why some sections of the financial service sector are increasingly trusting digital currencies as a store of value? He noted that the support for cryptocurrencies emanates from how they are supposedly evenly and well-distributed.
Cryptos have decentralized governance and work well for the financial service sector. “You don’t have to trust a single party, a single regulator, a single governance structure, so to say, or even the technology underlying because technologies can be hacked,” said Dubey.
Dubey also spoke about Decentralized Autonomous Organizations (DAO), which is the basis of financial institutions, but in the case of blockchain, it is managed by a decentralized authority with multiple parties voting. “DAO rests upon a governance structure that is backed by people who are fully vested into the product that’s managed by the governance code,” said Dubey.
Dubey said that DeFi is decentralizing finance, adding, “we are coding stable coins, we are coding stable instruments, so we are not creating indices that are probably devised by some expert.”
Cloud & AI solutions
Cloud technology is an enabler of transformation in the financial services sector 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.
“Banking and capital markets leaders increasingly recognize that cloud is more than a technology; it is a destination for banks and other financial services firms to store data and applications and access advanced software applications via the internet,” said Deloitte.
Omar Akar, Vice President & Managing Director – Cloud & AI Business Group, Huawei, opened his presentation by highlighting how it has become inevitable that the digital economy is a key cornerstone of every country’s sustainable economic growth post-pandemic. “Digital economy now contributes to more than 18% of the overall global GDP and is expected to expand significantly in the next coming years.”
While in the Middle East region, Akar said that certain countries are pioneering in supporting and driving this digital agenda highlighting how the UAE seeks to boost the digital economy contribution to the overall GDP of the country from 4% to around 14% as part of 2031 strategy.
Akar said that regional banks are very agile and supporting the digital agenda of their respective countries as they advance their digital transformation agendas. The advancement in digital technologies and fintechs globally is putting pressure on banks to accelerate their digital journeys. Akar also highlighted that there is a positive change in technological investments.
“We’re seeing enterprises and banks investing in next-generation digital technologies such as artificial intelligence and how to leverage on these technologies to support multiple fronts including streamlining repetitive tasks and reducing or driving less human exposure especially during the pandemic,” he said.
Cybersecurity & regulation
Cybersecurity and malicious hacking cases have increased since the outbreak of the pandemic last year. The expected expansion of the IoT is introducing a new set of security risks and challenges that will require serious attention from financial services sector executives. Deloitte said that the surge in remote working calls for a greater focus on cybersecurity, because of the greater exposure to cyber risk.
The upsurge in sophisticated cyberattacks calls for new ‘cutting edge’ detection mechanisms to meet the threat including ‘user and entity behavior analysis (UEBA).
Help AG’s Nicolai Solling said that in the past, organizations used to build their cybersecurity environments using a centralized approach. Giving an example of financial institutions, Solling said that in the past a bank’s branches were connected through a centralized environment where one could invoke an organization’s cybersecurity capabilities and there was this concept of a central crunch point where one could access the cyber risks.
However, the cybersecurity ecosystem has evolved and now organizations have the distribution of security towards
users that are potentially located in any geographical part of the world.
Solling said, “Open Banking, as we just heard about is just going to be yet another example of how your data will be distributed around environments, potentially to third parties.” He noted that the concept of how an organization can maintain and keep data secure given the different kinds of data governance frameworks that organizations have in place is going to be something that companies are going to spend a lot of time on in the future.
Last year, there was an absolute explosion of cyberattacks. Solling highlighted that ransomware was very rife at the height of the pandemic and even though an organization may have protection in place, its business partners and customers might have been exposed to ransomware attacks in the past, and in the future, it might also happen.
Help AG recorded an upsurge in distributed denial-of-service (DDoS) attacks, both on a global scale and across the Middle East region. Cyber attackers who use ransomware are becoming sophisticated just as digital technologies are also evolving. Solling said, “In the old days, we used to talk about the files were getting encrypted on machines and the machines are taken out of production, that is still the case today.”
“However, attackers have become more and more sophisticated in that they have built the capability of exfiltration data before encrypting it. So, when you choose to pay or not to pay a ransom, attackers may potentially turn around and threatens to leak an organization’s data.” The cybersecurity firm said that DDoS attacks on its customers were up 183% last year.
Solling said that as financial institutions have become more and more dependent on delivering services on digital channels, and the availability of these services is critical to their operations, companies need to consider DDoS as a real threat to their businesses.
