11 minute read
Reframing growth with core banking
Digitalization in the financial services sector is swiftly changing the field of play where incumbent banks are facing increasing competition from nontraditional entrants who are billing on customer experience as their point of sale. The outbreak of coronavirus created some exceptional challenges for all industries, but it also accelerated the rate of digital transformation in the financial services sector to record highs as the pandemic had a monumental impact on consumer behavior.
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Oracle and MEA Finance hosted the Connect Core Banking with Finance- A Winning Digital Strategy webinar in August where industry experts gave insight into how regional banks can leverage digitalization to drive growth and boost revenues by unlocking business potential while creating new business values.
The webinar was opened by a presentation by Bhaskar Sahay, partner at KPMG Lower Gulf Limited, titled A Winning Digital Strategy who spoke at length about how the pandemic is aiding the growth of the disruptive economy.
Sahay said that a study that was conducted by KPMG Lower Gulf in the UAE and Oman in April showed that 86% of chief financial officers (CFOs) that were surveyed acknowledged that they find digital maturity challenging and the current operating conditions have heightened the challenges that the financial service sector is experiencing.
Digitalization is on top of the agenda of every financial institution across the Gulf region as they seek to succeed in business and maintain a competitive edge in an overcrowded market. Among
the challenges that banks are facing, KPMG Lower Gulf identified data quality and management, system complexity, competing priorities, and the shortage of the right skills as barriers to succeeding in a financial institution’s digital transformation.
“Today, the fight is between the best data that is available within the bank, and how do we use that data to report whether it is to internal stakeholders or external stakeholders,” said Sahay.
KPMG Lower Gulf also discovered that banks are being confronted by system integration and how to make the connected goal the focal point of everything that they do within the financial services industry and in some cases when they partner or collaborate with institutions outside the finance sector. Sahay said that system integration can only be achieved if a financial institution develops a very strategic focus on the technology side and is not considering a band-aid project.
A winning strategy
Financial institutions in the Middle East are exploring technological innovations and new business models that include digital banking, open banking, predictive banking, and modernization of payment systems as they seek to enhance user experience (UX) and personalization of products to remain profitable and grow their market share.
Deloitte 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.
Gary Brocklehurst, ERP Business Development and Strategy Leader at Oracle, who moderated the ‘Five Simple Pathways to a More Connected Banking Enterprise’ panel said that all financial services systems, data, people and processes within an organization are connected and unified, and c-suite level executive shouldn’t take it as a fantasy “as many organizations are already well on the way to this kind of transformation.” Organizational transformation comes with enormous benefits including enhancing productivity by 50% and by 90% for some processes, Brocklehurst said while quoting McKinsey.
“A unified finance model would reduce reporting times by 66%, getting valuable insights into the hands of decisionmakers faster,” said Brocklehurst.
Asked about areas of focus when it comes to connecting data across the banking enterprise and the opportunities that come with it, Amit Lalloo – FSI Enterprise Architect, ECEMEA, Oracle,
said that financial institutions are largely complex organizations that support many segments, multiple domains and a plethora of business units. Lalloo highlighted that these three entities hold the gravity of customer activities and it is core for banks to remain compliant by assessing the financial health of the organization, as well as the enterprise and its customers.
Vikas Tayade, Director of Intellicore Consulting Group, who was part of the panel and spoke about Enterprise Performance Management (EPM) said that Oracle EPM solution allows c-suite executives in financial institutions to understand budget guidance for a fiscal year—which is nine plus three forecast, and then decide on the drivers which in turn talks about the GDP percentages.
“Several banks in the region use this budget as the steppingstone for planning five fiscal years in the future in terms of looking at how many new branches they will be opening, how many new territories they will be covering, along with the channels by which they will be serving the next three to five years,” said Tayade.
Ibrahim Badra, ERP Cloud Solution Consultant, Oracle weighed in saying the financial services sector has gone
through a tremendous transformation over the years which is having an impact on the industry itself. As the financial services sector is going through tremendous change, banks are exploring ways they can effectively manage these changes and face the challenges while capturing the opportunities that are being brought by the changes in the industry.
Banks in the region are implementing several initiatives whether there is a new service or product, new business model, merging and acquisitions that are happening in the industry amid complex marketing campaigns and adoption of new technologies such as collaboration
– KPMG Lower Gulf Limited
with fintechs, digital banking as well as Open Banking as they look to expand their reach and tap into new markets. “Oracle fusion is a well-connected system that is fully integrated and natively integrated allowing access to real-time information, taking away all those bolts that could have been pulling data from the same line and smoothly from one source to another,” said Badra.
Asked why it is important to align finance and procurement to a bank’s strategy, Lokesh Khatwani, Solution Engineer at Oracle, identified four key building blocks of getting a healthy relationship and the advancements in the financial service sector. Khatwani said that these healthy relationships are enablers or come with significant rewards for banks including being able to withstand competition in the financial industry that is being intensified by fintechs as well as giving stability amid uncertainties in the global supply chain due to COVID-19.
Through Oracle’s sourcing cloud, Khatwani said that banks can implement and execute several sourcing and supply strategies. He also noted that for procurement to maximize its influence and realize the value to the wider businesses, financial institutions should see the value of what procurement brings in as well as the impact it is making not only on the bottom line but also on the top line in terms of the savings being generated.
Murat Civelek, Senior Director of Constellation Consulting, said that Oracle EPM is one of the world’s leading platforms that covers all topics with advanced features of active price-performance management. Civelek said the Oracle investment platform has evolved over the years with the latest cloud structure reaching record levels which is unique in the EPM market.
Civelek highlighted that Oracle API offers a user-friendly interface for organizations and it can be integrated with many systems including core banking finance and operations, central hub and data which is ready for EPM—which is useful for running correct performance management activities.
The five pathways to a more connected banking enterprise include linking core banking with finance and operations, expand revenues with relationship level sales budget planning, execute projects more effectively, leverage modern procurement and seamlessly perform financial performance reporting.
An expert view
Industry experts who attended the Oracle and MEA Finance webinar highlighted the importance of digitalization in the financial services sector saying the emergence of new technologies is offering the industry a window to be more innovative and efficient in service delivery.
“So when you look at core banking today several financial institutions which have been very successful on the consumer front have unraveled the advantages of having a good database around customers and then not just keeping it up to date, but using it to drive insights,” said Sahay.
Oracle’s Lalloo said core banking has been around for over four decades and it is among the first systems that were developed for the financial services sector, having started as a very basic accounting system. Core banking has been evolving as the business is getting more sophisticated, taking on more features such as product management, master for product data, reference data and master of customer data in the form of a Consolidated Revenue Fund (CRF), he added.
The moderator of the Financial Services Leaders Viewpoint panel, Mohamed Roushdy, who is a Fintech and Digital Transformation Advisor, raised a question on what kind of barriers do banking experts see hindering the adoption of the new platform. From his industry experience within the banking sector, Lalloo acknowledged that the financial services sector has significant challenges as they move from monolith to purposeful monolith.
Darren Clarke, the Chief Financial Officer, Commercial Bank of Dubai weighed in saying that there are huge opportunities present in any finance function. Clarke said that currently, significant challenges have been in relation to capacity, efficiency, data and tools while adding that webinars offer knowledge around skills, systems, connectivity, and what banks can do in the future.
The Rise of Open Banking in the Middle East
Thomas Reda Sales Director Middle East, ACI Worldwide (EMEA) Limited succinctly describes the reasons why open banking is here and is soon going to become the norm for financial transactions and interactions in our region
The rate at which industries are migrating from physical to digital banking platforms has grown exponentially in the last year. Rapid change is inevitable in the new normal of today’s global economy, especially in a globally connected business hub like the Middle East.
The post-pandemic banking era is going to be all about providing superlative value to customers through more secure and seamless experiences. It is quite apparent then, that open banking will gain significant momentum in the face of uncertainties and massive digital transformation in both developed and developing markets.
The Middle East market is no stranger to the concept of open banking since the region had already adopted new technologies required for regulatory compliance. However, its demand grew significantly during the pandemic, as many small and medium enterprises recognized the need for secure and customizable digital banking solutions. Finastra’s 2020 survey shows over 88% of UAE banks are looking to open their APIs to enable open banking in 2021, with many banks adopting it with every passing month.
Open banking is on the rise. Here’s why.
The major reasons for this paradigm shift are the regulatory push of open banking adoption by countries and the proliferation of Open APIs. The number of Open API to complete the transactions on a digital platform. The efficiency of an open bank in operating transactions completely outweighs the traditional means of banking.
Data Security: Open banking follows strict network security protocols. The
API itself ensures app-based secure transactions and access control at every stage of banking. Through procedures like API gateway, encryptions, signatures and using quotas, the app follows the most stringent security protocols.
Additionally, features like KYC and encryption infrastructure, AI-enabled authentication protocols and machine learning-enabled cybersecurity processes make it a secure digital banking system. And most importantly, these protocols are updated regularly to keep up with the dynamic global banking and security landscape.
Customer Experiences: Open banking systems with dedicated APIs make digital transactions more convenient and attractive to consumers. With added data security and multi-platform availability, a user is in control over their personal data. The API also helps in boosting customer engagement while catering to their banking needs in a secure, agile and future-ready way. ACI Worldwide delivers these capabilities and more, helping enterprises create a customized, efficient and secure open banking ecosystem for a seamless and successful digital transformation journey.
platforms globally has grown by 47% in the first two quarters of 2020, and it is predicted that Open APIs will have a moderate-to-high impact on the banking business in 2021.
A future-ready banking system entails prominent cashless payment. Saudi Arabia aims to make 70% of transactions non-cash by 2030. It is further amplified by unprecedented internet penetration and smartphone usage. Both UAE and Saudi Arabia have internet penetration of 99% and 96% respectively, with smartphone penetration of 200% and 120% respectively.
All these factors combined with the need for efficient, reliable and contact-free banking solutions in the post-pandemic world have made open banking a go-to module for a future-proof transactional ecosystem.
Why open banking?
The entire banking sector has had to undergo a massive shift during the pandemic, with new challenges to keep the banking operations running with little to no in-person interaction. Given the need for faster and more customercentric solutions, open banking systems can offer significant benefits to banks and financial institutions. These include: Efficiency: Open banking systems use third-party APIs designed by industry experts to collect, process and distribute data from various banks
Thomas Reda Sales Director Middle East, ACI Worldwide (EMEA) Limited
