Shaping the future of financial services

Mashreq has a history of leading the industry in the adoption of new financial services technology. Here, Tarek El Nahas, Senior Executive Vice President and Head of the International Banking Group, tells MEA Finance how their pioneering spirit has equipped the bank to take the Covid-19 crisis in its stride, providing uninterrupted services, and positioned it to become a significant force in the industry.

By Adrian Murdoch

Mashreq Bank has talked about behaving like a BigTech firm with a banking license. What do you mean by this?

We firmly believe that banks must adopt a model similar to that of Big Tech firms, as a result of the huge shift in changing expectations from customers, accelerated by rapid developments in technology.

Even before COVID-19 hit, customers expected banks to provide a similar digital experience as they receive when interacting with other large brands or online marketplaces – and these expectations have only increased further during the pandemic as people rely on digital channels for their day-to-day necessities.

Against this backdrop, at Mashreq, we consider it imperative to be at the forefront of technology, and we regularly collaborate with various Fintech firms; due to their expertise in technology and inherently lean structure which allows them to be more agile and innovative. This collaboration has led to numerous solutions which have enhanced the experience for our customers; in the areas of payments, wealth management, credit underwriting and Know Your Customer (KYC) processes.

Banks that want to be at the forefront of innovation in the future will have to employ data analysts, data translators, digital marketers, social media experts, and implementation specialists in the areas of big data analytics and robotics. At the same time, employees with more traditional skill-sets will need training to develop the skill sets required to function in a digital-first banking world. This will enable them to play key roles in translating data, leading teams, closing the gap between data and technology, and providing a bridge between the new and old.

We also believe that providing convenient, fully digital platforms (from end-to-end) is going to be the way of the future. Ultimately, most consumers want platforms that provide transparency, convenience and simplicity. This is why we launched market-first platforms such as Mashreq NEO and NEOBiz – fully digital banks in the UAE geared towards individuals and SMEs respectively.

One of the key challenges with digital banking is not so much the banking rather, it is the regulation. Has it kept up? What still needs to be done?

There will certainly be increased scrutiny from regulatory bodies to firstly modernize digital banking operations more efficiently, and secondly manage important and complex issues around the protection of customers. Cybersecurity is one important aspect, due to the growing volume of cyberthreats during the pandemic worldwide. Therefore, it is critical for banks to integrate information security processes within their risk management framework. In the UAE, this is something that we have collaborated on extensively with the UAE Banks Federation (UBF) to try and mitigate such concerns. Another area that has become more prevalent recently is usage of data – as this is an area that is becoming more regulated around the world. The authorities are also carefully studying developing technologies such as AI, cloud computing, crypto assets and more.

Tarek El Nahas, Senior Executive Vice President and Head of the International Banking Group, Mashreq Bank

While keeping up with the rapid pace of technology is undoubtedly a huge challenge, it is our belief that the regulators and industry have done very well at striking the right balance between risk and innovation. In the UAE in particular, the government continuously keeps an ongoing dialogue with the public and private sector to discuss ways to tackle these complex issues.

Ultimately, the most important thing going forward is that there is strong protection for customers, a level playing field which ensures that financial institutions all adhere to the same regulations, and that there is a culture of transparency and fairness in the sector.

You continuously innovate. To what extent is this being driven by the bank and to what extent is it being driven by your customers?

Innovation has always been a major part of Mashreq’s philosophy since the very beginning, due to the bank’s pioneering spirit to deliver products that meet customers’ ever-changing needs. Historically, Mashreq was the first bank in the UAE to offer chipbased credit cards, ATM dispensers, digital point-of-sale readers, as well as provide a fully dedicated mobile banking app for corporates.

More recently, as part of the bank’s wider digital strategy, we have introduced a number of measures over the past two years which have seen digital transactions increase significantly. These solutions ensured that the groundwork was already in place for us to successfully handle the disruption caused by the COVID-19 pandemic. Ironically, the pandemic has resulted in more people having an urgency to augment their lifestyles with digital tools - and many of our clients that were historically resistant to onboard themselves on digital platforms, want to do so now.

One example is the success of our digital platform called matrix – which is our GTB trade and cash management platform and provides our corporate

clients with trade transactions, cash management, liquidity pooling and trade tracker capabilities. In the past, people weren’t necessarily signing on for the digital platform or all of its services - but today we have successfully on-boarded more than 800 individual companies to these digital platforms.

H o w h a s M a s h r e q B a n k responded to the Covid-19 pandemic? Do you think that it is has helped the adoption of digital banking?

As soon as the pandemic occurred, our immediate priorities were focused on protecting the welfare of our customers and employees as well as ensuring that we were able to provide services to our customers as normal, without any disruption.

As a result of our agile strategy and robust business continuity planning, we managed to increase our network usage and quickly equip all our staff with special technology kits, remote conferencing facilities, controls and guidelines, specific to each business unit. This ensured we were able to provide ongoing services with minimal interruptions. We also sanitized all branches in accordance with the regulations from the authorities and proactively communicated with all our customer segments, informing them about the ways that they continue to transact over our digital platforms.

The pandemic taught us that businesses must be able to ensure that their operations are able to pivot and change direction seamlessly in line with shifts in the environment as well as changing customer preferences. During this time, we have definitely seen a large spike in digital transactions – and have noticed that customers are benefitting from the increased convenience that our digital channels can offer. While it is difficult to know exactly how much customer behaviour will change in the future, we do think that more people will stick to these digital services, and this will continue to be a focus area for us, given

INNOVATION HAS ALWAYS BEEN A MAJOR PART OF MASHREQ’S PHILOSOPHY SINCE THE VERY BEGINNING, DUE TO THE BANK’S PIONEERING SPIRIT TO DELIVER PRODUCTS THAT MEET CUSTOMERS’ EVERCHANGING NEEDS.

our longstanding expertise and offerings.

It has been a challenging year economically with collapsing oil prices and regional downgrades from the ratings agencies. With diversification of the economy the watchwords for the GCC, how can Mashreq Bank help?

The pandemic has brought unprecedented challenges on a global scale. However, we are certain that the UAE is well placed to handle this crisis due to factors such as diversification of the economy (which was already underway for the last few years), a high level of digital adoption amongst UAE banks, and a variety of initiatives and stimulus packages provided by the Central Bank of UAE quite early on.

We recognize that as a leading bank in the region, we have a responsibility to support the economic revival – and the quick action from the Central Bank and the UAE’s leadership has enabled us to provide support packages to all our customer segments. These included benefits such as restructuring payment terms, interest rates and processing fees, as well as offering payment holidays and an extension of loan payments – which have provided our clients with some financial relief and stability during this period.

Going forward, we continue to maintain an ongoing dialogue with the local authorities and look for ways to support all our customers, whether corporate companies or individuals.

What are going to be your priorities for 2021? And where do you see expansion opportunities for the bank?

Our first priority is to continue supporting our customers and employees during this difficult time and in ensuring their well-being. Another area that remains incredibly important for us is continuing to develop our digital platforms and offerings, especially given our customers’ evolving reliance on digital solutions during this period. We will hence continue to invest in our digital infrastructure, which goes hand in hand in supporting innovation and empowering our staff with new products, processes and services in a faster and more efficient manner. We will also be upskilling our employees and redesigning some jobs to allow people to develop and grow within the bank, in line with technological advancements, and our wider branch transformation strategy.

We also believe that there are opportunities for us to support numerous sectors within the economy that will soon undergo rapid acceleration in the future. Due to the increased focus on digitization brought about by the pandemic, trends that were taking place before have been accelerated. For example, in education, trends such as e-learning and online trainings, have increased significantly –

which means the structure of institutions, as well as fees could be impacted. Other industries that are rapidly changing and will continue to transform for good include e-commerce, healthcare, IT and logistics. These are areas we continue to pay attention to as a leading bank and will be ready to support with tailored solutions.

Mashreq is located in several countries outside the UAE. What services do you offer in other regions, and what are your immediate focus areas internationally?

Mashreq’s international network spans eleven countries: The Kingdom of Bahrain, Kuwait, Hong Kong, India, London and New York, operate one branch each; Egypt has twelve branches in Cairo and Alexandria; and the State of Qatar has two branches in Doha. The Bank is also present in Pakistan, Bangladesh and Nepal through representative offices.

We offer pre-dominantly corporate banking services in locations such as Bahrain, Qatar and Kuwait.

Our largest operation internationally is in Egypt - where we provide both corporate banking as well as retail banking services and participate in many large syndication loans across the country. We also recently launched various financial packages aimed at supporting local communities impacted by COVID-19 in Egypt.

At present the Bank’s branches in London, New York and Hong Kong are primarily focussed on financial institutions business.

In New York we have direct membership of FED and CHIPS clearing systems and are recognized as a systemically important bank with a large share of USD clearing business.

About two years back we ventured into corporate banking business in India through our Mumbai branch which was hitherto focused on FI business only. In a short span of time we can boast of having several top Indian corporates as our clients.

Mashreq’s international network spans eleven countries, Tarek El Nahas

We have recently started selective corporate banking business in New York and plan to soon roll out corporate b a n k i n g b u s i n e s s i n H o n g Ko n g also. In line with our India business model, we will adopt the “Focused Player” approach in these countries targeting select corporate segments with our state-of-the-art products and services.

We also have an offshore banking license in the Kingdom of Bahrain, which is playing an important role in both mobilizing wholesale low cost institutional deposits and in the growth of the Bank’s Bahraini business.

The Bank’s strategic goal is to continue to leverage its existing footprint by supporting the needs of international clients in each of its franchises. The primary focus remains on payments, trade, investment and capital flows, whether inwards or outwards, between the GCC, Egypt and the rest of the world.

IBG differentiates itself through an in-depth knowledge of the markets we operate in; adopting a relationship based approach in all of our interactions; delivering a high level of service quality to all of our customers and leveraging off the strong product capabilities developed by our partners in our UAE home base.

Accelerated digital investment gives Middle East banks a decisive advantage post-COVID

Yaser Alzubaidi, Vice President – Sales Specialist Organization, Avaya International

According to research recently conducted by Avaya, 50% of banking customers express a preference towards ‘digital only’ service channels such as online banking, mobile apps, chatbots and social media. In response to these customer preferences, in recent years, banks have been spending billions of dollars on digital transformations initiatives, and globally, some of the largest financial institutions globally have continue to reinvest larger percentages of their yearly revenue into technology. This trend is perhaps even more pronounced in the GCC, where the banking sector has been a clear frontrunner in digital transformation among industry verticals.

M o re ove r, re c e n t re st r i c t i o n s have disrupted traditional service c h a n n e l s , f u r t h e r a c c e l e ra t i n g these digitalization efforts. Time-toimplementation cycles have shortened significantly as banks turn to the latest technologies to elevate digital While adapting to the ‘new normal’ has presented challenges for a number of Middle East industries, the region’s banks have been quick to double down on their technology investments and enhance digital services – both for customers and employees says Yaser Alzubaidi, Vice President – Sales Specialist Organization, Avaya International

ser vices, omni-channel customer support, and team collaboration.

Pioneers Set the Pace

In response to the COVID-19 pandemic, Middle East banks have accelerated roll out of fully-digital branches, virtual banking services, self-service chatbots and other digital innovations in a bid to deliver world-class experience and convenience for customers. These initiatives perfectly address key customer satisfaction drivers as outlined by our research, including using new digital technology to be super-efficient (41%), allowing customers to communicate how they want, when they want (36%), and providing a consistent level of service every time (35%).

As an example, one of the largest banks and most reputed banks in the United Arab Emirates has further enhanced its customer-centricity through collaboration with Avaya. Working with us, they have gained the ability to draw incredible customer insights from voice-based engagement between customers and contact center agents. Using voice analytics, every single voice engagement is turned into actional insights that can drive revenue while also increasing relevance for each individual customer.

Aside from this, technologies that enable contact center agents to work remotely and solutions that enable seamless, persistent collaboration b e t w e e n i n te r n a l a n d ex te r n a l stakeholders have been foremost among those that regional banks have requested from Avaya this year. In the coming months, the need to rapidly enable remote workforces and ensure customer service capabilities are not disrupted by ongoing developments will continue to drive IT spending in the region’s banking sector. Here too, first movers will gain a competitive edge as 59% of consumer respondents in our research indicate that consultations with financial advisors by video would contribute to making them ‘happier’ customers.

The new era of enterprise software

Thomas Schornstein, Head of Middle East for additiv explains how structural change means wealth managers cannot wait lengthy times for implementation and software vendors must change their service models to accommodate the market.

Iremember when I worked in banking, it wasn’t unusual to take up two years to select a piece of enterprise software, with an expectation that it would take another 2 two years before we actually used it! If these kind of protracted procurement and deployment cycles were becoming a thing of the past, the pandemic is likely to kill them off completely.

Post-pandemic wealth management

The world of wealth management has been shaken up and the rate of digitalization has been accelerated. But, as we have written before, this means more than just using digital channels. It will entail a reappraisal of servicing, sourcing and operating models, together with an expansion of services focused on education and planning

Fast time to value

In the face of this kind of rapid structural change, wealth managers can no longer wait years to implement change. Customers won’t wait that long. Budget holders, scarred from previous overrunning and failed projects, won’t sign it off. And the board won’t stomach the opportunity cost of projects that don’t deliver fast value.

Thomas Schornstein, Head of Middle East and a member of additiv’s executive board.

Continuous deployment

Instead, what is needed are short projects with fast feedback loops. Wealth managers need to replace the long sequential cycles of designing, building and deployment with fast testing and iteration, capturing and validating customer feedback and continuously deploying new features.

Risk sharing

Another change we observe is greater risk-sharing between wealth managers and software vendors, which in turn leads to better alignment. In the past, a vendor would sell a software license to a client, giving them a large upfront payday. It was then up to the client to implement, deploy and run the solution.

Today, the risk is shared. Subscription revenues spread risk and reward, while cloud deployment makes switching possible. In effect, it takes longer for the software provider to make profits with a higher risk of attrition, which incentivizes the provider to deliver longlasting and continuous value to the customer. Furthermore, some vendors like additiv have stopped charging for implementation, making time to value top of mind for vendor and customer alike.

Assets under intelligence

The last major change we see is in how value is created. As the wealth management industry transitions from safeguarding client assets to helping clients achieve their financial goals, so we see a corresponding change in enterprise IT.

As we move from assets under management to assets under intelligence, the features and functions of software give way in importance to data and analytics. The key attribute of wealth management systems today is their ability to it amass and drive insight across multiple datasets – locational, contextual, market, transactional; what we at additiv call a system of intelligence. Systems of intelligence deliver the most relevant and engaging customer interactions at the right time and over the right channel to guide the client to better outcomes

Time to change your approach?

In summary, if your organization is still buying systems based on functional specifications and multi-year deployment plans, then it is time to change. The world has moved on.