November 2023 by meafinance

November 2023

Powering Progress Khalid Elgibali, Division President, MENA, Mastercard

November 2023

Powering Progress Khalid Elgibali, Division President, MENA, Mastercard A MEA Finance Publication

10 Market Focus: Qatar| 14 Wealth and Estate Succession Planning| 26 Islamic Financial Technology| 36 AI in Banking | 50 Opinion

Progression of Progress

n picking up or clicking on the digital version, if you have correctly observed the front cover of this issue of MEA Finance Magazine, you will have noticed that it is the November 2023 edition. It follows, at a seemingly accelerating pace, the October 2023 issue and, as you would expect, the September 2023 issue. This glaringly obvious explanation is made not to remind us of just how quickly this year has passed, but as a mechanism (arguably questionable) to draw out and identify the general theme running through this month’s magazine, which is progression. Perhaps most obviously emphasising this theme is our focus on advancing digitisation and the adoption of AI in banking and finance. From page 36 you can read about how it’s inevitable presence is set to change the sector in the nottoo-distant future. Commenting on this, “Generative AI holds immense potential to spur innovation and elevate productivity in the financial sector of the Middle East,” says Bill Farrell, Managing Partner IBM Consulting MEA. Our cover story in this edition features Mr. Khalid Elgibali, Division President, MENA, at Mastercard. In his interview with MEA Finance, he highlights their numerous partnerships and collaborations, some untraditional, and how their focus on inclusion and business diversification are playing a part in progressing regional development, “At Mastercard, we serve as a trusted partner, technology provider and policy advisor to the region’s governments.” See page 32 for this feature.

Our look into Estate and Succession Planning, from page 14, covers how the region is updating and expanding the options available for handling the progression of wealth from one generation to the next, as vast amounts are set to transfer between generations in the coming years, “Expats should also obtain professional advice on the tax implications of their succession plans,” suggests Leevyn Isabel, Business Development and Client Director at Ocorian. This edition’s Market Focus is on Qatar. From page 10, read this account of how this prosperous GCC nation’s diversification strategy has played out and why growth rates are looking good into the near future. Then, jumping to page 48, we hear from Swift’s Country Head for KSA and Bahrain, Huny Garg who tackles questions on the development of trade finance in the region, “However, for trade to become truly digitised, challenges such as legal harmonisation, standards and interoperability need to be addressed.” Returning to the thread running through this issue, from page 26 we take a look into Islamic Fintech. Fintech is now such a part of the background that it is acknowledged as a word in its own right in respected dictionaries. However, Islamic Fintech makes up only the smallest fraction of this most universal and everyday element in the banking and financial landscape. But progress is at hand, and this is set to change. “Islamic fintech is no longer on the sidelines; it is a dynamic force shaping the future of finance,” states Hisham Hammoud, Chief Executive Officer, Aafaq Islamic Finance. So, with our pages of market news at the start of this issue, we hope that on reading this, your latest copy of MEA Finance, your progression into your day will have been helpfully complimented with the thoughts an insights our esteemed contributors.

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CONTENTS

CONTENTS 32

MARKET NEWS

Emirates NBD launches new digital wealth offering across 21 global and local markets

EVENT NEWS

MEA Finance and Swift partner to present the 2023 Leaders in Banking Technology Kuwait Summit

MARKET FOCUS

10 Qatar: Busy, Buoyant, Buying WEALTH & ESTATE SUCCESSION PLANNING

14 Passing the Baton 18 Planning for Success 20 A Growing Range of Options PARTNER CONTENT launched a new digital 24 Mashreq wealth offering – Thematic Investments, giving customers access to 20+ risk & theme-based portfolios

ISLAMIC FINANCE TECHNOLOGY

26 The Only Way is Up 30 Accelerating Growth

MEA Finance 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

Banking and Finance news in the MEA market

COVER STORY

32 Powering Progress AI IN BANKING

36 Common Individuality 40 Assured Inevitability 44 Intelligence Quotient

TRADE FINANCE

48 Trade’s Route to Change OPINION PIECE Finance – View from the 50 Islamic Investor

50 36 48 EXECUTIVE DIRECTOR AND PUBLISHER Kenneth Mitchen ken.mitchen@mea-finance.com GROUP COMMERCIAL DIRECTOR Nap Estampador nap.estampador@mea-finance.com Tel : +971 50 100 5488 DIRECTOR Andrew Cover andrew.cover@mea-finance.com Tel: +971 50 931 3236

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MARKET NEWS

Emirates NBD launches new digital wealth offering across 21 global and local markets

mirates NBD launched a digital wealth platform that allows customers to trade securities and ETFs on both global exchanges such as, Nasdaq, NYSE, and London Stock Exchange and local markets such as, Dubai Financial Market, Abu Dhabi Securities Exchange, and Nasdaq Dubai. In all, there are more than 11,000 global equities and 150 regional equities available to trade on the platform. The platform is embedded within the bank’s newly launched mobile App ENBD X, allowing customers to conveniently invest and trade in complex financial instruments from the same App that also fulfils all their everyday banking needs. As part of Emirates NBD’s on-going 60th anniversary celebrations, the bank has launched an exclusive three-month digital wealth campaign for ENBD X users. Customers can invest, buy and/ or sell on ENBD X with zero commissions for the months of October, November, and December 2023 with all applicable charges to be refunded within seven working days following each calendar month’s end and custody fees waived off for the duration of the offer. The new wealth platform offers an instant onboarding journey to both existing investment account holders as well as new investors, involving three easy steps. New investors are sent their account details on SMS and e-mail immediately and can start trading securities and ETFs right away after adding funds to their

account through the platform’s Express Top-Up facility. The platform also offers a unique Secure Sign facility, where customers with high trading volume can update and sign investment documents to complete any trade irrespective of its complexity or value. The tool facilitates digital interactions between relationship managers and investors, eliminating the need to visit the branch. In addition to the above, customers can also use the platform to review market updates related to their portfolios and see market movers of the day. It also offers investment tools with historical and intraday charts including

Banking and Finance news in the MEA market

technical analysis, along with access to independent analyst ratings and fundamental data on market consensus. Further, for investors looking to explore investment opportunities based on country, sectors, analyst consensus, dividend yield and other indicators, the platform provides access to a Stock and ETF screener. Customers can also create multiple watchlists to follow stocks and ETFs and track their favourite securities. Marwan Hadi, Group Head, Retail Banking and Wealth Management at Emirates NBD, said: “The launch reflects the bank’s mobile-first strategy with nearly 95% of the bank’s digital banking customers availing services through the mobile banking App. With the launch of the digital wealth offering, we have elevated ENBD X as a one-stop platform for both everyday banking and wealth management needs.” Pedro Sousa Cardoso, Chief Digital Officer, Retail Banking and Wealth Management, Emirates NBD, said, “Our goal has always been to offer customers a benchmark experience with the widest range of on-the-go digital banking services, making their everyday banking experience as smooth and convenient as possible. Now we have taken this to the next level, by empowering customers to manage their wealth and make investments directly and securely through the ENBD X App, thus giving Emirates NBD customers full control of their finances and their wealth in one single platform.”

EVENT NEWS

MEA Finance and Swift partner to present the 2023 Leaders in Banking Technology Kuwait Summit Honing in on the nation’s banking and financial sector, the event brought leaders from Kuwait’s banks together with regional technology and fintech market makers to debate the growth and development of financial technology and market modernisation this leading GCC economy

Event Agenda: Welcome Note: Onur Ozan, MD, Regional Head, Middle East, North Africa & Turkiye, Swift

enior executives from Kuwait’s banking and financial services sector joined regional leaders from those technology and fintech businesses who are at the forefront of building the region’s new financial landscape, in a series of engrossing and

and the developments shaping the modernisation of financial activity in the country. Almost 300 delegates attended, avidly concentrating on the thoughts and insights provided by more than thirty highly involved players in this exciting market.

Panel 1: Payments in Kuwait – the development of payments and role of banking technology in Kuwait The Central Bank of Kuwait recently along with different payments players in Kuwait have worked on different initiatives with major aim is to update processes and improve the efficiency payments in the country. They also issued the regulatory Sandbox Framework document to help foster innovation in products and services in payments. How far has Kuwait come in recent years in the development of payments and adoption of banking technology?

highly informative debates, conversations and presentations on events at the leading edge of the nation’s banking sector. Taking place at the Four Seasons Hotel, Kuwait City, on the 25th of October, MEA Finance partnered with Swift, world leaders in financial messaging, powering most international money and security transfers, to host this very special event that concentrated on Kuwait’s banking technology and payments environment

Covering issues ranging across local and cross-border payments, cyber security, the merging of banking and technology and how such progress can now provide an edge in the increasingly competitive regional banking world. The event was sponsored by Fineksus as Gold Sponsor and First Abu Dhabi Bank, Allied Engineering Group (AEG), Mindgate, Smartstream Technologies, Xpence, Dixio as Silver Sponsors.

How does the country compare with the rest of the GCC in these terms and what can we expect to witness here in the coming years? Speakers: Mohammad Al Kharafi, Chief Operating Officer, National Bank of Kuwait Esam Alkheshnam, Chief Executive Officer, KNET B ushra Al Wazzan, Group Chief Internal Auditor, Boubyan Bank

Banking and Finance news in the MEA market

Moderator: Onur Ozan, MD, Regional Head, Middle East, North Africa & Turkiye, Swift In conversation with Al Ahli Bank Kuwait and Swift A bdullah Al-Qattan, Executive Manager, Operations Division - Retail & Payments, Al Ahli Bank Kuwait A laa AlRousan, Senior Account Director, Swift Panel 2: The Evolution of Cross Border Payments – balancing enhancement, regulation and security Why is it more essential than before that cross-border payments are quicker, frictionless and more efficient? What is in place and which developments are on the horizon to enhance the cross-border payments experience for businesses and the public alike? Can and should cross border always be faster and what should be in place to balance smoothness and speed with jurisdictional regulation and security? Speakers: Fahad Al Bader, GM – Operations,

Kuwait International Bank A bdulaziz Al Duwailah, Head of Banking Operations Group, Boubyan Bank Finali Fernando, Managing Director, Regional Head of Products, CCO and Business Management , HSBC Pritesh Kotecha, SVP, MEASA, Smartstream Technologies Anand Sampath, Managing Director, Head- Payments, Collections & Client

Implementation, First Abu Dhabi Bank Tuncay Coruh, Product Development Director, Fineksus Moderator: Cem Soydemir, Head of Payments Go-to-Market, MEA South & Central Asia, Swift In conversation with: Shaping CrossBorder Payment Scene in the Arab World and Beyond Onur Ozan, MD, Regional Head, Middle East, North Africa & Turkiye, Swift Faisal Alhijawi, Chief Strategy and Development Officer, BUNA Case Study Presentation: Cyber Security in Banking and Finance Adrien Sicoli, Chief Growth Officer, Dixio G u y A o u n , S e n i o r B u s i n e s s Development Executive, Dixio Panel 3: Competitors, Vendors & Partners - The line continues to blur With another year of accelerating digitalisation and further application of fintech behind us, the once clear definitions between competitors, vendors and partners across the banking and finance

landscape continue to dissolve, evolving new business models, new dynamics and relationships. The session will debate the actions and preparedness of financial institutions, examine their attitude toward the newly forming realities and assess how to best leverage the changing market environment. Speakers: M ohammad Al Zayed, General Manager – Operations, Burgan Bank

A bdullah Al Mutawaa, Assistant General Manager - Head of Funds Transfer & Wealth Management, National Bank of Kuwait Talib Sanad, Head of AEG Bahrain, Allied Engineering Group (AEG) H amad Al Fouzan, Chief Strategy Officer, Warba Bank O mar Amireh, CEO – Kuwait, Citi Moderator: Saad Ansari, CEO & Co-founder, Xpence Case Study Presentation: Banking as a Service - The What and the How B alaji Muthu, Executive Director – MENA, Mindgate Solutions Case Study Presentation: CrossBorder Payments in Kuwait S erkan Arslan, Director of Sales and Business Development, Fineksus Panel 4: How Can Technology Provide an Edge in Banking? Honing your effectiveness In day-to-day banking, digital processes are effectively the norm, having consigned old form banking practices to histor y. The way to distinguish your retail bank and hone and edge in the market leans on innovation backed by technology and partnerships with fintechs. But beyond the retail sector, how will technology take a bigger role in commercial and wholesale banking? How will technology change the specialist provision of wealth management ser vices? This session will focus on how technology can continue to improve competitiveness, yield better results to retail banks and provide similar advantages in the broader financial landscape. Speakers: Balaji Muthu, Executive Director – MENA, Mindgate Solutions Philip Koshy , General Manager, Al Mulla Exchange Barrak Al Mattar, CIO, Burgan Bank Moderator: Saad Ansari, CEO & Co-founder, Xpence mea-finance.com

MARKET FOCUS

QATAR

Busy, Buoyant, Buying Qatar’s decade-long economic diversification strategy, which included hosting of the FIFA World Cup and a sovereign shopping spree, continues to build its economy with growth rates remaining healthy into the future

he winds of fortune are blowing favourably for Qatar’s economy. The International Monetary Fund (IMF) said the Gulf state is wellplaced to capitalise on the investments and legacy of the FIFA World Cup to accelerate its transformation journey under Qatar National Vision 2030 while ensuring sustainable economic growth. The success of the World Cup in Doha pushed tourism and non-oil economic activity to new highs and opened new opportunities for Qatari businesses in the hospitality, property, retail and telecommunications sectors.

Qatar, one of the world’s top exporters of liquefied natural gas (LNG) and among the richest nations in per capita terms, has vast financial resources to throw behind its ambitions. Demand for the country’s natural gas has soared as the war in Ukraine has reshaped the global energy market. “Higher energy prices and increased demand for alternative natural gas supply in the world will continue to propel the country’s development, as Qatar lays out the final phase of its national development strategy on the path to achieving the goals of Vision 2030,” said PwC.

Banking and Finance news in the MEA market

The Qatari authorities’ decade-long economic diversification strategy, which culminated in the successful hosting of the World Cup, will continue to build a knowledge-based, stronger, more inclusive and greener economy. The diversification strategy plan encompasses areas such as healthcare, foreign investment, tourism, technology and the financial services sector. Its wealth fund Qatar Investment Authority (QIA) – the driving force behind Doha’s economic growth and diversification – has grown its staff to more than 500 from about 350 five years ago and plans to add another 200 by 2025. Qatar’s banking system remains relatively resilient with regulations broadly in line with regional peers. “As domestic monetary policy has tightened, consistent with the currency peg to the US dollar, banks’ asset quality, liquidity and profitability remains solid,” according to the IMF. Earlier this year, S&P Global projected that the Qatari banking sector would benefit from interest rate hikes, assuming

the sector adopts a pragmatic approach by not reflecting the rate increase systematically which could cause borrowers to default.

Fiscally fit With strong supervision from the Qatar Central Bank (QCB), the financial sector remains resilient and the positive outlooks on the country’s rated banks mirror that of the sovereign. The QCB has implemented several macroprudential measures since the spring of 2022 to discourage banks from relying on non-resident deposits, especially of short tenors. “Banks’ reliance on non-resident deposits has progressively fallen by more than one-third (nearly $30 billion) since their peak registered in late 2021,” said the IMF. Fitch Ratings said Qatari banks have assets over 220% of the GDP and net foreign liabilities of over $110 billion (47% of GDP) in 2022. Banks in Qatar, like their GCC peers, recorded higher profits in nine months of 2023 on the back of improved operating conditions marked by economic recovery and the central banks’ move to tighten monetary policy. The combined profits of Qatar’s top five banks - Qatar National Bank (QNB), Qatar Islamic Bank (QIB), Commercial Bank of Qatar, Masraf Al Rayan and Qatar International Islamic Bank (QIIB)—reached $5.4 billion (QAR 19.5 billion) in the nine months to September 30, 2023. QNB, the Middle East region’s biggest bank by assets, reported an 8% jump in 9M 2023 net profit to QAR11.9 billion while QIB, the country’s second-largest lender, registered a 7.2% increase in nine-month profit to QAR3.1 billion. Profitability in the Qatari banking sector will remain underpinned by higher net interest margins and non-interest revenues as assets grow and by lower loan impairment charges as economic conditions remain solid. QCB followed the US Federal Reserve’s decision to keep interest rates unchanged to protect Qatar riyal against the US dollar, as the country’s currency is pegged to the greenback.

AS DOMESTIC MONETARY POLICY HAS TIGHTENED, CONSISTENT WITH THE CURRENCY PEG TO THE US DOLLAR, BANKS’ ASSET QUALITY, LIQUIDITY AND PROFITABILITY REMAINS SOLID – The International Monetary Fund

The central bank said it would keep its repo rate unchanged at 6%, its lending rate at 6.25% and its deposit rate at 5.75% “The QCB has maintained price and financial stability. Monetary policy has been tightened broadly following the US Federal Reserve, consistent with the currency peg to the dollar. Monetary policy transmission has strengthened through more effective liquidity management,” said the IMF. Qatar’s banking sector has made significant strides in enhancing customer experience and embracing digital innovation, particularly during the FIFA World Cup 2022. The country recognises the potential of fintech firms and has established initiatives to foster a strong and sustainable fintech ecosystem. PwC said developing new digital products, embracing open banking and establishing strategic partnerships with

QATAR’S BANKS HAVE ASSETS IN EXCESS OF 220% OF GDP AND NET FOREIGN LIABILITIES OF OVER $110 BILLION (47% OF GDP) IN 2022 Fitch Ratings

fintech companies are factors helping the country to strengthen its position in the fintech sector. Qatari banks have been developing their digital capabilities by prioritising customer-centric approaches and digital innovation while the central bank unveiled the National Fintech Strategy earlier this year with detailed guidelines and standards under development.

Sustainable growth Qatar has significant resources at its disposal and its gas revenues are likely to swell further. LNG has been in increasing demand since last year’s energy crisis that was triggered by the Russia-Ukraine war. The Gulf state’s public finances are set to receive a massive boost from the completion of the North Field expansion, a $30 billion project that will ramp up the country’s exports of natural gas and condensates. The IMF said Qatar’s medium-term growth is likely to rise to around 4.5% after the North Field expansion starts boosting LNG production. The North Field, which is currently the world’s largest gas field, has an existing liquefaction capacity of 77 million tonnes per annum (mtpa), but following the completion of ongoing upgrades and expansion efforts, this will increase to 126 mtpa by 2027. State-owned QatarEnergy said in October that it would supply Italy’s Eni with gas for 27 years, following similar deals to supply the Netherlands via Shell and France through TotalEnergies. The energy firm secured two long-term LNG mea-finance.com

MARKET FOCUS

deals from China’s Sinopec and CNPC – each covering a 27-year contract. A 15-year accord was also inked with Germany, which includes the provision of two million tonnes of LNG per year. These deals, and others, bode well for the future. Healthy inflows of hydrocarbon receipts will boost Qatar’s pursuit of longterm economic diversification objectives through Vision 2030. M o s t of t h e s u r p l u s e s f ro m hydrocarbon receipts are expected to be diverted to the QIA – the estimated $475 billion sovereign fund that made a name for itself during and after the 2008/9 global financial crisis, investing billions of dollars in Western companies including UBS Group-owned Credit Suisse, Barclays and Sainsbury’s, while snapping up trophy assets such as Harrods, the British department store. Now the QIA is beefing up its resources to manage the next anticipated petrodollar windfall. With the mandate to invest the Gulf state’s surpluses, QIA invested $1 billion in Reliance Retail, India’s biggest brick-and-mortar retailer in August and snapped up a 5% minority stake in Monumental Sports and Entertainment – the parent company of the NBA’s Washington Wizards, NHL’s Washington Capitals and WNBA’s Washington Mystics – in July. At home, the authorities are leveraging Qatar’s financial firepower and the new infrastructure to develop niche areas in sectors such as healthcare, energy, logistics and education. Qatar is reportedly in discussions with Volkswagen, in which the QIA holds a significant stake, for the automaker to manufacture new technologies in the country.

A budding sporting hub Qatar is diversifying and opening its economy by developing productive sectors outside the oil and gas industry and sports occupy the centre stage of the government’s socioeconomic transformation agenda – though LNG is

expected to continue to play a critical role in the foreseeable future. The country has leapt to the forefront of becoming a new breeding ground for a flourishing sports events ecosystem by playing host to some of the world’s renowned sporting events such as the FIFA World Cup - the first to be held in the Middle East, the Formula 1 Qatar Airways Qatar Grand Prix and the AFC Asian Cup. Qatar is actively using sport to wean the economy from heavy reliance on hydrocarbons as millions of visitors that grace the events are accelerating growth in diverse sectors including travel,

“Qatar is well placed to leverage the top-notch infrastructure built and capitalise on the momentum and visibility created by the World Cup as the government lays out its third National Development Strategy to help achieve the ambitions of Vision 2030,” says the IMF. The government in D oha was considering a brand-new metro system, a modern shipping port, an expansion of its main airport and a new smart city north of Doha as part of the country’s transformation agenda, but the World Cup brought forward the construction timeline for these projects.

QATAR IS WELL PLACED TO LEVERAGE THE TOP-NOTCH INFRASTRUCTURE BUILT AND CAPITALISE ON THE MOMENTUM AND VISIBILITY CREATED BY THE WORLD CUP AS THE GOVERNMENT LAYS OUT ITS THIRD NATIONAL DEVELOPMENT STRATEGY TO HELP ACHIEVE THE AMBITIONS OF QATAR NATIONAL VISION 2030 – The International Monetary Fund

tourism, hospitality and infrastructure with the country expecting six million visitors annually by 2030. Qatar Airways, the emirate’s flag carrier, reported a $1.2 billion profit for the fiscal year 2022/23, underpinned by a higher customer base after the airline hosted the FIFA World Cup as its official partner and airline. The Gulf state is transforming at breakneck speed with Doha now dotted with new infrastructure. It spent more than $300 billion on infrastructure, including an estimated $45 billion that was spent on the Lusail, which was still desert 12 years ago and will be home to 200,000 people post-World Cup.

Banking and Finance news in the MEA market

Overall, back-to-back mega sporting events that are being hosted in Qatar and the broader GCC are boosting the tourism and hospitality profile of the region and providing a tailwind for long-term growth in the industry while diversifying governments’ sources of revenues. Qatar plans to use the budget surplus to replenish reserves, make additional transfers to its wealth funds and potentially boost spending on projects intended to help diversify the economy away from a reliance on hydrocarbon receipts. Its structural reforms have advanced further to achieve Qatar National Vision 2030, including in green financing and digitalisation.

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WEALTH & ESTATE SUCCESSION PLANNING

Passing the Baton Succession planning is a challenge for prosperous families around the world and with a vast amount of wealth expected to move between generations or to bequeathed beneficiaries in the coming years, it is going to become a central concern in the business

he GCC region, one of the world’s hotbeds of wealth creation, has seen an acceleration in trends relating to succession planning, alternate investment vehicles, wealth preservation, digitisation in wealth management and growing interest in sustainable investing. “Changing consumer preferences and digital models, as well as demographic, m a c ro e c o n o m i c , re g u l a to r y a n d competitive trends, have completely upended the wealth management experience for consumers and advisors alike,” according to Deloitte. Considering the overall picture, however, both the depth of disruptive

innovation and the speed of fundamental shifts across wealth management are remarkable and have set the ground for rapid transformation in the sector. The GCC region – the UAE specifically – has built a reputation on the premise of being a safe haven not only for living but also for preserving wealth. The country has established itself as a highly attractive business hub where multinational companies can thrive in fiscally advantageous jurisdictions with favourable corporate tax rates as well as zero wealth and inheritance taxes. “While countries such as Singapore have set the benchmark in attracting and retaining ultra-high-net-worth individuals

Banking and Finance news in the MEA market

(UHNWIs), the UAE and Saudi Arabia are not far behind,” said Henley & Partners. The initiatives that are being implemented by the two countries coupled with their unique cultural and economic propositions, make them formidable contenders in this race. Furthermore, the region is not only attracting a growing influx of millionaires from different markets, but it is also home to wealthy individuals with businesses owned by large enterprising families. Private fortunes are, therefore, intertwined with family businesses. Family-owned businesses in the GCC region understand the importance of succession planning and wealth transfer. A study that was conducted by Lombard Odier in November 2022 revealed that HNWIs are well aware that effective succession planning is of paramount importance in a region where most businesses are family-owned. From Jeddah to Abu Dhabi, ultrawealthy and enterprising families across the Arabian Peninsula have a strong desire to leave a legacy to the next generation and society more broadly. Digitalisation in wealth management is not a one-size-fits-all approach, but

a common theme is better information for decision-making and more proactive management to reduce surprises. “As the shift to digital and virtual accelerates, wealth managers can seize this moment in time and modernise and futureproof their operations,” said EY. Wealth management is one of the most attractive sectors within the financial services sector, thanks to the business’ greater growth prospects, lower capital requirements and a higher return on equity compared to most other retail banking businesses. The business’ offerings are also essential to attracting and retaining profitable retail customers.

Great wealth transfer The great wealth transfer is upon us. With trillions of dollars expected to be passed down a generation in the next decade, succession is a top priority for wealthy families and their offices. “Of the $18.3 trillion of collective wealth expected to be transferred, centimillionaires – individuals with a net worth of at least $100 million in investable assets – will account for more than half of this amount,” said Lee Wong, Head of Family Services, Asia at Lombard Odier. Succession is a true test of the degree or extent to which the transition from one generation of a family to another is managed successfully. It involves the transition of ownership of businesses, property and other assets along with the broader financial concerns of wealthy families, such as philanthropic foundations and art collections. Furthermore, family wealth requires active management and planning throughout each phase of life. For many enterprising families in the GCC region, the goal of strategic financial planning is not simply to manage, multiply and protect their wealth, but to leave a financial legacy for the next generation based on a shared understanding and common set of values. “Family is the cornerstone of traditional Middle Eastern culture, while familyrun businesses are the lifeblood of the economy in the region,” Arnaud Leclercq,

Partner Holding Privé and Head of New Markets at Lombard Odier said in a report last November. HNWIs in the region are adopting protocols to regulate succession, conflict resolution, business valuations and other key issues to preserve wealth and ensure a smooth transition between generations. However, these policies and procedures do not necessarily include key documents such as family constitutions or conflict resolution mechanisms, hence there is still much work to be done. BNY Mellon said three challenges that emerge as wealthy families and their offices attempt succession planning include the inherent nature of the subject,

globally as research shows that not all are prepared for a smooth hand-off. Wealth transfer and succession planning are two sides of the same coin. Without enough of the latter, there is too little of the former. Abu Dhabi issued a new family business ownership governance law in January 2022 that prevents selling shares or dividends of family-owned businesses to individuals or companies outside the family. The law requires prior approval from family partners before a shareholder sells an equity stake to a non-family member. Dubai Centre for Family Businesses opened its doors for business in

OF THE $18.3 TRILLION OF COLLECTIVE WEALTH EXPECTED TO BE TRANSFERRED, CENTI-MILLIONAIRES – INDIVIDUALS WITH A NET WORTH OF AT LEAST $100 MILLION IN INVESTABLE ASSETS – WILL ACCOUNT FOR MORE THAN HALF OF THIS AMOUNT – Lee Wong Head of Family Services, Asia at Lombard Odier

the perceived dichotomy of values between current and future generations and a lack of expertise needed to effectively carry out succession planning. Enterprising families make up a sizeable proportion of the GCC region’s non-oil economy and in these challenging times, the need for adaptability and action to ensure that potential is not wasted, and the future is secured has never been paramount. The latest data from the UAE Ministry of Economy shows that up to 90% of private companies in the country are family businesses, employing more than 70% of the sector’s workforce and contributing about 40% to the Emirates’ GDP. Succession planning continues to be a challenge for wealthier families

June 2023 to provide technical and administrative support to ensure smooth generational succession. The Centre, which is under the umbrella of Dubai Chambers, aims to support effective succession planning and contribute to the growth and sustainability of family businesses in the emirate. The country’s milestone in putting in place tools to govern wealth transfer has seen several global offices flocking to the UAE in the past two years including The Dalio Family Office, which opened its regional offices in Abu Dhabi. Over the years, life insurance and foundations have also emerged as a new asset class for planning succession among wealthy families. Similarly, building a central mission statement based on mea-finance.com

WEALTH & ESTATE SUCCESSION PLANNING

shared family values can be vital to a sustainable legacy. RBC Wealth Management said that a family mission statement is a foundation on which current and future generations can make decisions together, understand their roles and provides a framework to understand what it means to be a member of that family. Wealthy families in the Arabian Peninsula are also turning to foundations owing to how they provide a dynamic option that can accommodate a family’s transformation priorities and values. The immense contribution of family businesses to the economies of GCC countries calls for stronger family governance for the region’s continued success.

A new era for wealth management Once a laggard in the adoption of technology, wealth management is accelerating digitalisation, deploying artificial intelligence (AI), Big Data, robotics and other technologies to enhance client’s experience and trust— which is central to private banking relationships. Private banking and wealth management firms have remained largely on the sidelines in an industry where digitalisation has transformed much of the financial services and products. The industry is typically seen as embodying old-fashioned values and providing discrete, tailored service attributes that remain valuable parts of the business, but McKinsey said for many clients, these qualities are “no longer sufficient”. The shift to digitisation is inevitable and industry experts expect it to radically transform the industry in the coming decade. The outbreak of the pandemic forced wealthy clients to accelerate their adoption of digital technologies and seems certain to lead to permanent changes in the behaviour of both firms and investors. “Wealth managers are unlikely to be able to serve modern clients effectively without a digitised operating model,” said McKinsey. Digitalisation in the private banking and wealth management sector is being

WHILE COUNTRIES SUCH AS SINGAPORE HAVE SET THE BENCHMARK IN ATTRACTING AND RETAINING ULTRA-HIGHNET-WORTH INDIVIDUALS, THE UAE AND SAUDI ARABIA ARE NOT FAR BEHIND – Henley & Partners

driven in part by changes among clients. Though the typical client in a developed market today is around the age of 65 years and is fairly comfortable with digital technology, shifting demographics, evolving client behaviours, the rise in new innovative technologies and emerging disruptive competition are all reshaping the industry. A coherent digital transformation plan will give firms a head start in leveraging stronger client relationships, reduced operating costs and enhanced risk management and regulatory compliance capabilities. “The changes are helping firms meet their regulatory obligations, boosting the productivity of relationship managers and lifting compressed margins,” McKinsey added. Moreover, the growth of “automated wealth managers” or Robo-advisors is revolutionising wealth management with unprecedented force. By leveraging algorithms to offer financial advice for a fraction of the price of a real-life client advisor, Robo-advisors are growing at a rapid pace, doubling their assets under management every few months. “In 2030, up to 80% of new wealth management clients will want to access advice in a Netflix-style model—that is, datadriven, hyper-personalised, continuous, and, potentially, by subscription,” said McKinsey. The emergence of a tailored and personalised model underpinned by data can be observed across industries and for wealth managers, continuous access and automatic hyper-personalisation are expected to shift the terms of success.

Banking and Finance news in the MEA market

Over the years, the GCC region’s asset and wealth management market has undergone a dramatic shift as regulators are accelerating the adoption of innovative technologies such as Roboadvisors or digital financial advisories. The Central Bank of Bahrain issued directives on Robo-advisory in 2019 as the Gulf state affirmed its position as a leading digital financial hub. Commercial Bank of Dubai also unveiled its Roboadvisory app CBD Investr in April 2021. The platform offers the bank’s clients access to globally diversified and personalised portfolios of stocks, bonds and other asset classes using low-cost exchange-traded funds. Robo-advisors translate client input into investment logic such as risk or liquidity factors and propose adequate investment opportunities well beyond simply highlighting a handful of ETFs out of a few thousand possibilities. The regulatory push for open API infrastructures across the GCC is expected to make it easier for wealth managers to deliver consolidated client views of multiple relationships. For GCC-based wealth management firms, the decade-long period of relatively easy growth fuelled by favourable market conditions is likely over. The past three years brought a drumbeat of tough economic news, from a slowing global economy and high inflation to sagging equities and bond markets. However, the industry has held up relatively well thus far as the oil-rich markets remain relatively insulated from the challenges confronting other markets.

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WEALTH & ESTATE SUCCESSION PLANNING

Planning for Success

Describing ongoing growth and increasing sophistication, Leevyn Isabel Business Development and Client Director at Ocorian, highlights the emerging trends, practices and changing requirements marking the GCC as key centre for estate and succession planning

W h a t a re t h e l a te st n o n technology-based directives and instruments that are modernising or improving succession planning in the region? The UAE Family Business Law: The law confirms that succession plans of family businesses shall not be considered contrary to the provisions of the UAE Personal Status Law, the law governing successions in the UAE.

What are the key requirements of Muslim and non-Muslim expats in the region in terms of succession?

ith almost 70% of we a l t hy fa m i l i e s re q u i r i n g S h a r i a compliant estate planning, can the region’s professional markets accommodate these needs?

There is no shortage of qualified Shariacompliant estate planning professionals in the region. Sharia-compliant estate planning is not a new field and the same has always been in demand. The challenges are: Local GCC assets structuring: the inclusion and growing weightage of local assets, compared to nonGCC assets, in Sharia compliant estate plans. The novelty of domestic estate planning solutions e.g., common law private foundations, UAE federal trust regime, etc. The growing interaction and interplay of multiple (non GCC) jurisdictions, either through location of the family businesses and/or family members holding non-GCC nationalities / nonGCC tax residencies. The lack of harmonisation and standardisation of laws governing Sharia-compliant estate planning

regimes, the expat will registries and the UAE Family Business Law. We should also keep a watch on the King Abdullah Financial District in Saudi Arabia and the Qatar Financial Centre, the latter is now working on a Sharia-compliant estate planning service.

Leevyn Isabel, Business Development and Client Director at Ocorian

in the different GCC countries. This can make it difficult for wealthy families to develop comprehensive estate plans that cover all their assets in GCC.

Where currently are the region’s most pioneering centres for estate planning development and service provision? The United Arab Emirates (UAE) is without a doubt the most innovative hub for estate planning development, having demonstrated a clear and purposeful goal to lead the GCC in estate planning, as seen by the establishment of foundation

Banking and Finance news in the MEA market

Muslim expats may wish for Sharia compliance in their succession planning. Still, there are differing opinions and interpretations of what it means to be Sharia-compliant. It becomes crucial at this point to seek professional advice. Aside from religious considerations, individuals require assurance that their estate will be passed on to their heirs and/or beneficiaries in accordance with their preferences or the laws of their home countries, with minimum cost and inconvenience. This assurance is especially crucial for expats due to the limited protection and support that their home jurisdiction’s legal systems may provide. Expats should also obtain professional advice on the tax implications of their succession plans. The nationality of heirs, the location of assets, and ambitions for the future of any family business can all have tax implications.

What emerging trends in the region are currently shaping the future course of estate and succession planning? 1. Domestic structuring While international structuring has

been an option for many years in offshore finance centres, such as the Channel Islands, local structuring – such as the UAE Foundation – is relatively new. Clients often prefer to work with a locally based advisor and domestic structuring options are helpful in respect of the increasing costs and pressures of international tax compliance. 2. Growing wealth in the GCC The GCC is one of the wealthiest regions in the world. The region’s economies are booming, and the cost of oil has seen record highs. The region’s burgeoning affluence is driving up demand for estate planning services. 3. G rowing awareness of estate planning in the GCC Families and high-net-wor th individuals are now much more aware of the importance of asset protection and intergenerational planning. The next generation is taking the lead in terms of financial planning, as they are aware that in case of dispute the family assets will be diluted by legal costs and distribution to multiple heirs. 4. Impact investing and ESG I m p a c t i n ve s t i n g a n d E S G concerns, particularly for nextgeneration family members, are on the rise. Ocorian’s research 1 with professionals working for family offices in the Middle East, collectively responsible for more than $15 billion assets under management, showed that 93% of younger family members want to focus more on ESG while 87% want to focus on the long-term sustainability of the family office. That is also translating to increasing interest in investing in private markets and even digital assets.

EXPATS SHOULD ALSO OBTAIN PROFESSIONAL ADVICE ON THE TAX IMPLICATIONS OF THEIR SUCCESSION PLANS 5. T he professionalisation of the family office Family offices are becoming increasingly sophisticated, as they are increasingly demanding more sophisticated investment strategies and greater transparency. Ocorian’s research reveals that 95% take a keen interest in investing in private companies that their families either represent or have a background in. Traditionally, a family office was only about investments and capital allocation. The move to increased professionalisation has gathered m o m e n t u m d u e to g row i n g complexity in managing assets from the growth of alternative asset classes such as private equity, venture capital, hedge funds and real assets as well as a rise in regulatory requirements as they look to global assets. 6. Technology Te c h n o l o g y i s p l a y i n g a n increasingly important role in estate planning in the GCC and beyond. For example, the registration and operations of UAE foundations and family offices are all done virtually. Family offices have also embraced advanced data analytics, artificial intelligence, and machine learning to enhance their investment decisionmaking processes. 7. Affordability The relative low cost of establishment has led to the democratisation of the

1. Ocorian commissioned independent research company PureProfile to interview 30 family office investment managers working for family offices in the Middle East which use third-party private client services providers to support in the preservation and protection of their clients’ wealth. The investment managers interviewed are responsible for assets under management of $15.2 billion. The study took place during February and March 2023. The full report is available on Ocorian’s website.

UAE foundation vehicle, enabling a broader segment of the population to structure and protect their assets. 8. M u l t i p l e e s t a t e p l a n n i n g structures Many wealthy families in the GCC have assets in multiple countries. The usual practice was to have one holding structure, typically a foreign trust or foundation, allowing consolidation of assets. However, with the current state of uncertainty, there is an increased demand for multiple estate planning structures as a strategy to mitigate risk. 9. The use of professional estate planning advisors More and more families in the GCC region are seeking professional advice. Estate planning can be complex and there are a number of factors to consider. Estate planning advisors can help families develop estate plans that meet their specific needs and protect the interests of their loved ones. These trends are all very exciting, but they do also bring new challenges, such as making sure that investments are both achieving target returns as well as the desired ESG credentials. Family offices and private clients across the region need support with navigating these new issues, whether it is with foundation and trust services – to succession planning for family assets and businesses. That is leading to a growing role for thirdparty providers currently and in the future to enable family offices and high net worth individuals to take full advantage of the opportunities in the Middle East and beyond. mea-finance.com

WEALTH & ESTATE SUCCESSION PLANNING

A Growing Range of Options Sanjeev Chowdhury Managing Director and Senior Executive Officer, Secura International details key options for estate and succession planning available in the region as its place as a world centre for such financial services solidifies

ith almost 70% of we a l t hy fa m i l i e s re q u i r i n g S h a r i a compliant estate planning, can the region’s professional markets accommodate these needs?

With the exponential growth of expats in the Middle East, the importance of estate planning has arisen quite remarkably. Trusts and Foundations appear to be the most reliable options of estate planning for Muslims and DIFC/ADGM are the most relevant regional jurisdictions to accommodate this need. Over the past few years, both Trusts and Foundations have gone from strength to strength to facilitate the estate planning. Apart from this, Family Office is a privately held company for management of wealth, assets and legal affairs of families. DIFC, ADGM and Dubai Multi Commodities Centre (“DMCC”) have provisions for Single Family Offices. But there is still a desire to segregate the GCC situs assets from non-GCC assets, and the use of foreign structures to hold non GCC assets remains the preference.

Sanjeev Chowdhury, Managing Director and Senior Executive Officer, Secura International

Banking and Finance news in the MEA market

Where currently are the region’s the most pioneering centres for estate planning development and service provision? DIFC - Dubai International Financial Centre (DIFC) is the leading global financial centre in the Middle East, Africa and South Asia (MEASA) region. D I F C c o n n e cts t h e fa st- g row i n g markets of the MEASA region with the economies of Asia, Europe and the Americas. The unique structure of DIFC gives it a robust regulatory and legal framework that provides world class judicial system based on English Common Law. Across the world, families are experiencing the greatest transfer of wealth between generations. The Middle East region remains one of the top three global regions for private wealth growth. To help ultra-high net worth individuals (UHNWIs) succeed, DIFC has established the DIFC Family Wealth Centre (DFWC). The Financial Centre is very well trusted by families looking for wealth and asset management support. The DFWC is committed to building on DIFC’s reputation in order to serve families better with bespoke solutions. ADGM - Abu Dhabi Global Market [ADGM] is one of the largest financial districts in the world. The International Financial Centre [IFC] with direct application of English common law, is an independent jurisdiction operating in line with international best practices. It has a tax-friendly environment with unique connectivity to east and west markets. ADGM is one of the fastest growing IFC’s in the region. ADGM offers Foundations

that allow the High-Net-worth Individuals (HNWI), families and corporate community to locally access a much sought-after product from a world-class international financial centre. Features of the regime were benchmarked globally and have been developed to be highly flexible and to strike an appropriate balance between regulatory obligations, confidentiality, governance and operations. ADGM Foundations are fast and simple to set up and can be managed with straightforward ongoing reporting requirements. ADGM Foundations can be used for a variety of purposes, including wealth management and preservation, family succession planning, tax planning, asset protection, corporate structuring and for Public Interest Purpose Foundations.

What are the latest non-technologybased directives and instruments that are modernising or improving succession planning in the region? If we are talking about the latest laws, then the following applies: DIFC Trust Law No.4 of 2018 (“DIFC Trust Law”) Trusts (Special Provisions) Regulations 2016 in ADGM ADGM Foundation Regulations 2017 DIFC Foundations Law No.3 of 2018 RAK ICC Foundations Regulations 2019 Law No. 9 of 2020 regulating familyowned businesses in Dubai (“Family Business Law”) DIFC Single Family Office Regulations 2011 DMCC Company regulations 2003 ADGM Companies Regulations of 2015

What are the key requirements of Muslim and non-Muslim expats in the region in terms of succession? For Non-Muslim expats, wills are the most affordable means to secure their estate planning. Currently with the new law for non-Muslim expats, even without a will, an estate of a non-Muslim will not be subject to Shariah law but the law of their home country. However, it is better and advisable that a will is made under the DIFC WILLs Registry which covers properties globally.

For Muslim expats, Trust & Foundation are the most effective means of planning the distribution and maintenance of their wealth. However, it is always advisable that the estate planning conforms to the laws of their country with respect to Shariah principles.

What emerging trends in the region are currently shaping the future course of estate and succession planning? Foundations - Foundations are a form of hybrid entity similar to both a private company and a trust structure. Combining the mechanisms of both a Foundation is established for beneficial purpose determined by the ‘Founder’ yet retains a corporate level of independent legal personality. With the benefit of the independent legal personality Foundations are well suited

Additionally, trusts can save time, reduce paperwork and sometimes reduce inheritance or estate taxes. Family Offices - A family office is a private wealth management advisory firm that serves ultra-high-net-worth individuals (HNWI).Family offices are different from traditional wealth management shops in that they offer a total solution to managing the financial and investment needs of an affluent individual or family. Laws allowing application of home country laws for expats in the absence of WILLs. - It explicitly allows expats to use the law of their home country for inheritance matters, but if a registered will or any other estate planning instrument exists, the relevant terms recorded must be followed. There is a massive generational wealth transfer happening in the Middle East,

FOR MUSLIM EXPATS, TRUST & FOUNDATION ARE THE MOST EFFECTIVE MEANS OF PLANNING THEN DISTRIBUTION AND MAINTENANCE OF THEIR WEALTH to offer practical and flexible structures for a multitude of purposes including private wealth management and preservation, succession planning, tax planning, charitable institutions, asset protection, corporate structuring and creditor protection. Trusts - A trust is a legal entity with separate and distinct rights, similar to a person or corporation. In a trust, a party known as a trustor gives another party, the trustee, the right to hold title to and manage property or assets for the benefit of a third party, the beneficiary. Trusts can be established to provide legal protection for the trustor’s assets to ensure they are distributed according to their wishes.

and few wealthy families are adequately prepared. Amidst a global politically uncertain landscape, the main concerns for the Middle East’s most affluent people are wealth preservation, capital growth and succession planning. Proper estate and succession planning is key to Middle East families’ long-term financial security. They are exploring how to fully structure generational wealth transfers. This is caused by factors such as wealth transfer being a relatively new issue for the region because the generation that built the wealth is still around. However, care must be taken to navigate this relatively new world, and proper professional advice is essential. mea-finance.com

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PARTNER CONTENT

Mashreq launched a new digital wealth offering – Thematic Investments, giving customers access to 20+ risk & themebased portfolios Customers can digitally start investing in Thematic Portfolios within a few clicks with no additional document requirements from Mashreq Customers.

a s h re q c o n t i n u e s to innovate its wealth solutions and has launched its new digital wealth offering - Thematic Investments, giving customers access to invest across 20+ risk & theme-based portfolios focusing on themes such as Impact Investing, AI/ Robotics, Cyber Security, Healthcare, Future Cars, Growth Premier and many more. This solution caters to customers focusing on emerging trends with various investment options, from USD 100 to premium portfolios of USD 10,000. Mashreq is the first player in the market to provide Thematic Investment using a fully digital platform. Mashreq customers can start investing in Thematic portfolios using the Mashreq Mobile app without additional documentation. To cater to different investment needs, customers also have the choice to invest lump-sum or create monthly investment plans on the platform. Thematic portfolios also provide a smart rebalancing option to clients to ensure the optimal composition of underlying assets for each theme. The platform offers a transparent single charge structure of 1.25% per annum on active investments. This allows customers to do subscription, redemption, or rebalancing transactions

Vipul Kapor Head of Mashreq Private Banking

at ZERO fees while managing their thematic investments. Mashreq customers to start Thematic Investments need to just login to Mashreq Mobile App and start investing with as low as USD 100, selecting a monthly/ lumpsum investment option. The platform is intuitive and user-friendly, providing customers with detailed information about various portfolios, past & projected performance, underlying assets, etc., helping customers make the right choice. M o re ove r, i nvesto rs ex p l o r i n g investment options based on risk appetite, minimum investment amount, past returns, regions, etc., can access

Banking and Finance news in the MEA market

advanced navigation to choose the right investment. The platform seamlessly integrates into the bank’s recently enhanced Mashreq Mobile App, enabling customers to effortlessly invest in Thematic Investments while managing their everyday banking tasks from a single app. Mashreq is currently providing leading digital wealth solutions, viz. Global Equities, UAE Equities, Mutual Funds & Thematic Investments catering to a range of needs of its customers while managing their wealth using state-ofthe-art digital platforms. This is enabling customers to start their investment journey not only conveniently but also at affordable minimum investment entry points, achieving financial inclusion. Vipul Kapur, Head of Mashreq Private Banking said : “As a bank, we are passionate about what we do and how we add value to our clients. We have always believed that technology, if harnessed optimally, can create significant value for all stakeholders in the ecosystem. On Mashreq’ Mobile App, clients can invest into Thematic Portfolios, buy & sell Mutual Funds and trade various asset classes including domestic, international equities, foreign currencies and commodities across global markets including Shari’ah compliant offerings. They can also have access to a range of analytical capabilities like portfolio 360, diversification into multiple assets and currencies and key details regarding their investment lending, which empower clients to make relevant and timely decisions regarding their financial goals and wealth planning ”

ISLAMIC FINANCE TECHNOLOGY

The Only Way is Up Islamic banking and finance fintech, while currently nowhere near the scale as used in conventional finance, is on a clear growth path that will further boost its uptake regionally and across the globe

he soaring demand for digital financial services and the rapid adoption of financial technology (fintech) solutions are shaping the growth of the Islamic banking sector while enhancing customer experience and industry competitiveness. From an institutional perspective, digitalisation is reinventing business processes and models while creating new compelling value propositions by leveraging Big Data, AI and other innovative technologies such as the cloud.

The global Islamic finance market has grown exponentially over the years and is witnessing an increase in the number of fintech firms that are being set up around the world, to provide a range of Shari’ahcompliant structured finance solutions. “The $3 trillion Islamic finance industry continues its growth path and is expected to expand by around 10% per year in 2023/24, similar to 2022,” Dr Mohamed Damak, Senior Director & Global Head of Islamic Finance at S&P Global said, adding countries in the GCC region –

Banking and Finance news in the MEA market

notably Saudi Arabia and Kuwait – are largely fuelling this performance. Moody’s projected that a vibrant Islamic fintech sector would benefit economic growth and to some extent the banking sector by raising awareness of Islamic financial services while supporting financial inclusion by providing tech-enabled new business opportunities for the Islamic economy. T h e p a s t t h re e y e a r s h a v e demonstrated how the capacity of a company or a financial institution to shift its business online is critical for its continuity. S&P Global said accessing bank services digitally, issuing Sukuk on a digital platform using blockchain technology and enhancing cybersecurity will help improve the industry’s resilience. Higher digitalisation and fintech collaboration could help strengthen the Islamic finance sector’s resilience in more volatile environments while opening new avenues for growth.

Shari’ah compliant fintechs Islamic fintech remains in the early stages of development and lags behind conventional fintech firms. “The Islamic fintech sector remains a very small part of the global fintech industry but it is building momentum, driven by financial regulators who are increasingly focused on developing the fintech industries,” according to Moody’s. The Global Islamic Fintech Report 2022 revealed that fintechs following Shari’ah principles represented just $79 billion in transaction volume at the end of 2021, around 0.8% of the global fintech industry. However, the sector’s growth was strong, up 61% in 2021 from a year earlier. With high inflation and economic slowdowns making investors more selective, many conventional fintechs, lacking the more stable funding of established institutions, have scaled back operations. The GCC region has largely bucked the trend, with Saudi Arabia and the UAE accelerating the growth of the Islamic fintech industry, given their ample liquidity. Moody’s said the sector’s small size means lower volumes of capital are required. “We expect Islamic fintech assets to exceed 1% of the global fintech industry by 2025 from the current level of 0.8%. Islamic fintech innovation also has the potential to increase the efficiency of the Islamic finance sector and promote financial inclusion in some key markets such as Indonesia and Bangladesh. Indonesia, the UK, the UAE, Saudi Arabia and Malaysia are home to 59% of Islamic fintechs currently in operation globally. “The key commonalities of many of these markets include historically strong regulatory focus on the growth of the halal economy, their large Muslim demographic structure and advanced Islamic banking sectors,” said Moody’s. The UAE’s leading fintechs include Beehive, a Dubai-based peer-to-peer lending platform, which provides Shari’ahcompliant financing and solutions for small and medium-sized enterprises (SMEs), and Aafaq Islamic Finance - which

offers banking, financing, and Takaful (Islamic insurance) solutions. Meanwhile, in Southeast Asia, Indonesia is home to 61 fintechs, including peer-topeer lending platforms and digital bank Hijra, formerly Alami, neobank Bank Aladin, LinkAja – a digital payments portal and Tanamduit an Islamic investment platform. Islamic fintech firms that are providing financing solutions, along with digital-only banks are competing directly against the established bricks and mortar Islamic banks. “Globally, there are already 34 Islamic digital challenger banks and 163 Islamic fintechs offering financing services,” Moody’s said while projecting growth in the Islamic fintech sector due to the regulatory shift towards digitalisation and evolving open banking regulations. The Islamic banking sector is expected to benefit through potential back-office improvements through automation of

in 2021 and the number is set to grow further with the licensing of Australia’s first Islamic bank, Islamic Bank Australia, in July 2022. The digital bank is expected to capture the growing tech-savvy Muslim population in the country. Refinitiv said the launch of Islamic Bank Australia follows similar moves in other non-core Islamic finance markets such as Germany and the UK. The UK is home to Nomo, the world’s first international digital Islamic bank that is backed by Kuwait’s Boubyan Bank Group. Digital banks are also emerging in core Islamic finance markets, in line with global trends, because of new licensing frameworks that are being introduced by financial regulators. Unlike the incumbents, digital banks are not burdened by legacy infrastructure. The leading Islamic digital-exclusive banks in the core Islamic markets include Saudi Arabia’s D360 Bank and STC Bank

THE $3 TRILLION ISLAMIC FINANCE INDUSTRY CONTINUES ITS GROWTH PATH AND IS EXPECTED TO EXPAND BY AROUND 10% PER YEAR IN 2023/24, SIMILAR TO 2022 – Dr Mohamed Damak

administrative processes. However, customers’ evolving banking needs are increasingly looking for digital and innovative Islamic financial services, necessitating up-to-date digitalised frontoffice offerings.

Banking reimagined Digitalisation in the Islamic finance sector is creating a nimbler finance industry. S h a r i a h - c o m p l i a n t b a n ks a re accelerating and strengthening the digitalisation of complex processes as well as end-to-end customer journeys in lockstep with their conventional peers. Islamic banks operated in 77 countries

and Bank Fama and Bank Allo in Indonesia. D360 Bank, a Shari’ah-compliant neobank backed by the Public Investment Fund and Derayah Financial Company, is targeting the underserved segments, focusing on addressing customer pain points and leveraging innovation and technology to make banking convenient, accessible and fair to all. “With internal operations now live, D360 Bank is due to announce very soon when it will open its doors for public registration,” Mohammed Ghonaim, acting CEO of D360 Bank, said in a speech at the second edition of the Financial Sector Conference earlier this year. mea-finance.com

ISLAMIC FINANCE TECHNOLOGY

Dubai Islamic Bank (DIB), the UAE’s biggest Islamic lender by assets, unveiled its digital spinoff – rabbit – in December 2021. The Islamic digital banking platform, which is aimed at serving the needs of techsavvy customers, offers current accounts, globally accepted debit cards as well as payments and money transfer services. DIB also acquired a 20 per cent stake in Türkiye’s TOM Group of Companies in September, marking the Shariahcompliant bank’s entry into the country’s banking sector. The investment makes DIB a ‘significant minority shareholder’ of Istanbul-based TOM Group, with an option to increase its stake to 25% within 12 months. “Our entry into the Turkish banking sector through the investment in a digital financial group represents this dynamic approach to an ever-evolving market environment,” Dr Adnan Chilwan, DIB Group CEO said, adding that the bank is of the view that digital banking propositions in Türkiye and other markets will enhance its efforts to provide financial services to mass population segments – including the underbanked and non-banked segments. Abu Dhabi Islamic Bank unveiled “Amwali,” the Shariah-compliant bank’s digital offering targeting the growing segment of tech-savvy youths, in August. Amwali brings together an entire suite of banking products and technology to enable young customers to enjoy a whole new way of banking that is paperless, signatureless and branchless. Meanwhile, in Southeast Asia, Malaysia’s Bank Islam, Al Rajhi Bank and AEON Credit Service have been working with financial technology solution providers including Mambu and Codebase as they enter the more competitive digital banking landscape. Digitalisation in the Islamic banking sector is customer-driven as financial institutions seek to enhance services and products as well as tap into new market and customer segments. The Islamic finance sector has evolved over the years and banks continue to build on the digital banking momentum to tap into

GLOBALLY, THERE ARE ALREADY 34 ISLAMIC DIGITAL CHALLENGER BANKS AND 163 ISLAMIC FINTECHS OFFERING FINANCING SERVICES – Moody’s

the growing millennial and Gen Z techsavvy customer segment.

Sukuk tokenisation Sukuk issuance, which bans interest payments and pure monetary speculation, has been gathering steam outside of core Islamic finance centres, in locations such as Luxembourg and London. However, the industry remains largely fragmented and plagued with several challenges including the uneven implementation of rules as well as high costs and probability of human error due to multiple intermediaries that are involved in the issuance process. The rapid advancement in financial technologies, increasing socio-economic pressures and infrastructure investments are opening doors to disruptive innovation in Islamic capital markets.

DIGITAL SUKUK WILL PROVIDE A QUICKER AND CHEAPER WAY FOR ISSUERS TO TAP ISLAMIC FINANCE MARKETS DUE TO THE LIMITED NUMBER OF INTERMEDIARIES INVOLVED – S&P Global

Banking and Finance news in the MEA market

The tokenisation of Islamic bonds by leveraging blockchain technology is expected to reduce the various costs associated with the issuance process— potentially opening the field to startups and small and medium enterprises (SMEs). Blockchain has the potential to accelerate and unlock the long-term potential of the Islamic finance sector while enhancing its appeal beyond its traditional borders. It will allow for all transactions to be unalterably timestamped and uniquely cryptographically signed—increasing operational efficiency, cost reduction and enhancing transparency. S&P Global projected that digital Sukuk will provide a quicker and cheaper way for issuers to tap Islamic finance markets due to the limited number of intermediaries involved. The benefits may include enhanced transaction security, traceability and integrity, which could further strengthen compliance with Shari’ah requirements. However, this assumes the availability of reliable technology, the readiness of legal frameworks to accommodate these instruments and the availability of standard legal documents. Industry experts say reducing the time, cost and minimum issuance volume requirement could open the Sukuk market to more issuers. The standardisation and streamlining of Islamic finance is expected to make the issuance of Islamic bonds comparable with conventional instruments from a cost and effort perspective while smart Sukuk can help generate more secure and immutable data while reducing the number of intermediaries involved.

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ISLAMIC FINANCE TECHNOLOGY

Accelerating Growth Set for a period of sustained growth in the coming years, Hisham Hammoud Chief Executive Officer, Aafaq Islamic Finance details what is driving the expansion of Islamic fintech.

as as much energy and development been applied to Islamic fintech as has been to conventional banking and finance?

Islamic fintech is experiencing remarkable growth and development in 2023. The sector has witnessed a surge in investments and innovation, driven by several factors. The Islamic fintech market size is anticipated to reach $179 billion by 2026 at a CAGR of 17.9%, compared to the overall global fintech industry, at a CAGR of 13.5% over the same time period. Consumers worldwide are becoming more conscientious about their financial choices, seeking services that align with their preferences. This trend has given rise to a host of Islamic fintech startups, catering to the specific needs of this discerning clientele. Governments and regulatory bodies have recognised the potential of Islamic fintech and introduced frameworks to support its expansion. This regulatory backing has created an enabling environment for startups and established players, stimulating the growth of the sector. Moreover, established financial institutions are actively exploring Islamic fintech solutions to diversify their portfolios. In the last year, partnerships between traditional banks and Islamic fintech startups have significantly increased, facilitating the integration of Sharia-compliant principles into cuttingedge financial products and services making it a dynamic force shaping the future of finance.

Hisham Hammoud, Chief Executive Officer, Aafaq Islamic Finance .

Before Covid -19, Malaysia, the UK and Indonesia led in Islamic fintech startups, respectively ranking 1st, 2nd and 3rd.* Have M i d d l e E a st e r n c o u n t r i e s overtaken them yet? Preceding the onset of the COVID-19 pandemic, Malaysia, the UK and Indonesia were dominant in Islamic fintech startups. However, the subsequent trajectory has witnessed Middle Eastern countries emerging as pivotal players, reshaping the industry’s dynamics and prospects. Nations, including the United Arab Emirates, Saudi Arabia and Bahrain

Banking and Finance news in the MEA market

have made remarkable strides in Islamic fintech. Regulatory support, government initiatives and increased investments have fuelled rapid growth in the region. These countries have actively embraced innovation, attracting startups. The evolving landscape of Islamic fintech defies simplicity, marked by a convergence of factors shaping its trajectory. Notably, the Middle East has experienced a surge in Islamic fintech, with a deliberate focus on domains like digital Islamic banking, Sharia-compliant crowdfunding, and Takaful. Furthermore, Middle Eastern Islamic fintech entities have entered into global collaborations, expanding their horizons beyond domestic boundaries. In this evolving and dynamic space, it is clear that Islamic fintech is a global landscape with various regions excelling in different facets of the industry. Middle Eastern countries have certainly risen to prominence, but the Islamic fintech sector is characterised by a rich tapestry of innovation and competition, with each region contributing to its growth and dynamism.

Can a vibrant Islamic finance sector noticeably contribute to economic growth in the region? A thriving Islamic finance sector holds substantial potential for driving economic growth within the region with features and principles making it a formidable contributor to broader economic development. A key attribute is its role as an alternative source of capital. Islamic Finance

operates on principles of risk-sharing and asset-backed financing, making it a valuable resource for businesses, governments and infrastructure projects. This accessibility to diverse capital sources can facilitate business expansions, support government infrastructure initiatives and empower entrepreneurs to realise innovative ventures. Furthermore, its ethical and inclusive financial practices extend services to individuals and businesses that may have been marginalised by conventional financial systems. This enhances entrepreneurial activities, fosters job creation and invigorates overall economic vitality, making it a valuable player in the economic landscape.

In and of itself, does Islamic fintech provide the possibility of widening the uptake of Islamic banking and finance? Islamic fintech stands as a transformative force poised to magnify the accessibility and adoption of Islamic banking and finance. In the ever-evolving landscape of financial technology, it assumes the role of a strategic catalyst, synergising modern tech-driven solutions with the core principles of Islamic finance. By harnessing the power of digital platforms and innovative financial products, it reaches untapped markets, bridging the gap for underserved populations. This newfound accessibility bolsters the appeal of Islamic finance to a more extensive and diverse clientele. Moreover, the sector champions transparency and trust, fundamental pillars of Islamic finance. Distributed ledger technologies, such as blockchain, ensure immutable records and smart contracts validate compliance with Sharia principles. Such heightened transparency instils confidence and reinforces the ethical underpinnings of Islamic finance. Financial inclusion finds a robust ally in Islamic fintech. By breaking down barriers to entry through digital wallets, microfinance and peer-to-peer lending, it empowers those previously excluded

from the formal financial ecosystem. This strategic approach broadens the reach of Islamic banking to the unbanked and underbanked, creating a more resilient and inclusive financial system.

Islamic fintech currently accounts for roughly 1% of the global fintech market. What factors will lead to this figure increasing? The rise of Islamic fintech, currently representing a modest 1% share within the global fintech market, is underpinned by a confluence of strategic factors poised to catalyse its growth. One of these pivotal factors is the sustained expansion of the global Muslim population, providing a burgeoning demographic for Islamic fintech to serve. This demographic evolution sets the stage for wider

the facilitation of Islamic fintech’s success. The evolution of Islamic fintech from a 1% share within the global fintech market is an intricate interplay of demographic shifts, ethical finance, proactive regulation and innovative product offerings. This sector is poised to transcend its current status, becoming a dynamic force that shapes the future of finance.

Could the use of Islamic fintech widen the uptake of Sharia principles in the region and beyond? Absolutely, the integration of Islamic fintech presents a transformative opportunity for not only the region but also the broader global landscape, fostering the uptake of ethical finance in the financial realm. Islamic fintech, by design, offers ethical, equitable and

ISLAMIC FINTECH IS NO LONGER ON THE SIDELINES; IT IS A DYNAMIC FORCE SHAPING THE FUTURE OF FINANCE adoption as these potential consumers seek financial services aligned with their faith. The surge in interest in ethical and socially responsible finance across the global financial landscape is the second strategic driver. Islamic finance, rooted in principles of ethical and equitable financial dealings, dovetails seamlessly with this burgeoning trend. As ethical finance gains momentum, it creates a conducive environment for the accelerated growth of Islamic fintech. A key element fostering this expansion is the proactive stance of regulatory bodies and governments. Many countries are cognisant of the potential of Islamic finance and fintech and are crafting progressive regulations that facilitate the growth of this sector. These regulatory frameworks, evolving and increasingly harmonised across borders, are integral to

compliant financial services. As these fintech solutions gain wider adoption, they inherently encourage users to engage with ethical financial products. This, in turn, promotes a more extensive understanding and acceptance of ethical finance, both within the region and on a global scale. To conclude, the integration of Islamic fintech is poised to be a transformative force in the global financial landscape. With its ethical, inclusive and innovative financial solutions, Islamic fintech is facilitating a deeper understanding of ethical finance and making it accessible to a diverse audience. As the sector continues to evolve and gain momentum, it is well-positioned to drive the widespread adoption of ethical finance on a global scale. * (Bloomberg Intelligence)

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COVER INTERVIEW

Powering Progress Describing their many partnerships, nontraditional collaborations and innovations, Khalid Elgibali, Division President, MENA, Mastercard, details how their focus on inclusion and business diversification is playing a leading role in assisting regional development

rom a Mastercard perspective, can you give an assessment of the current condition of the region’s economic health?

We have entered the era of a multi-speed global economy, which means that some markets are feeling the impact of inflation and rising interest rates more keenly than others. The ongoing economic diversification drives in many countries make this region well-equipped to withstand global economic challenges. While non-oil industries have been affected by higher inflation, diversified GCC economies like Bahrain, Qatar, Oman and the UAE are still enjoying a boost in growth. According to Mastercard’s Economic Outlook for 2023, broad spending remains, with consumers choosing wallet-friendly brands and chasing the best value. In this environment, businesses with an omnichannel presence are more likely to withstand shocks by meeting customers where they want to shop, in the physical or virtual world. Our analysis indicates that having a multichannel presence provided a 6% lift in retail sector sales through 2022. One very positive trend we have witnessed is the post-pandemic recovery of the tourism sector, with the GCC region standing out as one of the most resilient tourist hubs. Our Travel Industry Trends 2023 report indicates that in 2022, the region outperformed the entire international travel industry’s recovery by 40%. It also surpassed the recovery of the top 10 highest-spending destinations by about 60%. In fact, if the region was measured as a single country, it would feature among the top five tourist destinations worldwide and rank third for inbound tourism spending in the last year with $45 billion. This makes the tourism sector a key contributor to the local economy.

How does Mastercard keep ahead in the increasingly competitive regional payments scene? Khalid Elgibali, Division President, MENA, Mastercard

Banking and Finance news in the MEA market

As consumers shop, bank and transact digitally more than ever before,

we continue to strengthen digital payment capabilities across the region. We are constantly innovating to enhance our value proposition to meet the needs of our customers and all segments of society. We combine our local know-how with our global capabilities to deliver market-relevant products and services that solve real problems on the ground. We are applying our trusted technology solutions to new use cases, brought to market through partnerships with fintech companies, governments, financial institutions, digital giants and telecom operators. By tapping into our multi-rail capabilities to create competitive localised solutions, we are accelerating the transfer of value in new ways, thereby paving the way for an inclusive digital economy. Case in point is our strategic partnership with e&, where we leverage our core payment products and value-added services to drive an ambitious digital future for the company’s consumers in 16 markets across the Middle East, Asia and Africa. Furthermore, we work to advance capabilities like cross-border remittances, account-to-account transactions, B2B payments, Click to Pay and Buy-NowPay-Later (BNPL) solutions. Most recently, we launched Click to Pay in Kuwait in partnership with One Global. In addition, we are collaborating with acquirers and payment processors to bring Card-as-a-Service (CaaS) and Bank-as-a-Fintech (BaaF) solutions to the region. These emerging models allow banks, fintech companies and nonbanking financial institutions (NBFIs) to effortlessly create and launch innovative products and advanced use cases with scalability and quicker time to market. Our recent partners in this space include CSC Jordan, Areeba and SimpliFi. We also have several examples of successful digital payment initiatives in Egypt. In coordination with the Central Bank of Egypt (CBE), we partnered with Vodafone and Etisalat to facilitate the self-registration of mobile wallets in the country, reaching a milestone of 1 million transactions in a single day.

In 2019, we joined forces with Levi Straus & Co., Commercial International Bank and the Center for Development Services to pilot our HERfinance Digital Wages initiative among workers at Lotus Garments Group, a Levi’s manufacturer in Port Said. Bringing the benefits of the digital economy to cash-dependent workers, the initiative helps managers digitise their payroll while considering the specific needs of female workers.

knowing consumer credentials are protected against potential breaches. In Saudi Arabia, we are rolling out Mastercard Gateway to local ecommerce merchants with support from key industry players, such as Amazon Payment Services and Checkout.com. The platform helps merchants comply with Saudi Payments’ requirement to route all domestic transactions through the domestic payment network ‘mada’, which now offers

AT MASTERCARD, WE SERVE AS A TRUSTED PARTNER, TECHNOLOGY PROVIDER AND POLICY ADVISOR TO THE REGION’S GOVERNMENTS. To date, over 16,000 workers have been paid digitally across 10 factories supplying global brands, including M&S, Kontoor, PVH and The Children’s Place. Our goal is to reach 20,000 workers in total.

How is Mastercard guiding merchants and businesses through the rapidly changing payments technology environment? We are committed to empowering businesses big and small to achieve their full potential. As part of our multi-rail strategy, we focus on building enduring partnerships with key ecosystem players to provide secure, transparent, affordable, simple and future-proof payment solutions to merchants. We are also helping them safeguard their offerings through our advanced cybersecurity technology. Our global payment processing solution Mastercard Gateway enables us to bring innovative payment flows to new markets. Powered by advanced secure technology, the platform brings multiple benefits to merchants and end users alike, including more convenience, higher approval rates and fewer preventable payment declines to maximise revenue and increase customer satisfaction. Meanwhile, merchants can enjoy added peace of mind with reduced risk of fraud,

new transaction types, such as automated payments, thus enabling quicker checkout experiences for consumers. In the UAE, we partnered with fintech company Dapi to introduce seamless account-to-account (A2A) payments, powered by Mastercard Gateway, in the country. Meanwhile, our Digital First program offers a convenient, secure and personalised end-to-end digital payment experience for consumers, and helps banks and NBFIs deliver world-class digital journeys. Research has proven the program’s effectiveness at driving higher consumer engagement, encouraging top-of-wallet behaviour and increasing operational efficiencies in terms of servicing and fraud prevention. We have recently awarded the Digital First program certificate to Bahrain Commercial F a c i l i t i e s C o m p a ny ( B C F C) a n d L’bankalik, the digital bank of Attijariwafa bank in Morocco, in recognition of their efforts to drive innovation in the payments ecosystem. In the UAE, we brought Click to Pay to the nation in collaboration with payment service provider Foloosi, which has rolled out the innovative payment method across its 6,000-strong merchant base. In Pakistan, we joined forces with digital wallet provider JazzCash to revolutionise mea-finance.com

COVER INTERVIEW

digital payments by introducing affordable acceptance solutions in the country. And on a regional level, we signed an agreement with ZainTech to create unique data-driven solutions for businesses across the Middle East and North Africa. Through the alliance, we seek to accelerate the adoption of advanced analytics, AI and machine learning in the region. As we continue to drive inclusion, we have pledged to connect one billion people and 50 million micro, small and medium enterprises (MSMEs) worldwide to the digital economy by 2025. An integral part of this objective was equipping 25 million women entrepreneurs with the tools and resources they need to grow their businesses. We achieved this global milestone two years ahead of the deadline in June this year. Realising that small businesses are the lifeblood of economies, we provide digital payment solutions for startups and SMEs that enable them to pay and get paid quickly at low transaction costs, expand their reach and deliver a seamless experience for their customers. In Morocco, we entered a strategic partnership with the Confédération Générale des Entreprises du Maroc (CGEM) to provide small businesses with digitalfirst tools and access to financial services. Earlier this year, we partnered with the international organisation Women Choice, led by Morocco-born social entrepreneur Nezha Alaoui, to establish the Social Innovation Incubator for Women’s Employment. Together, we seek to create one million jobs for women across the Middle East and North Africa in the next five years. In addition, we will provide 1,000 budding female social entrepreneurs with the training and resources to start their own businesses. Furthermore, we are working to equip startups and SMEs with the knowledge and capabilities that empower them to go digital and grow digital. In this context, we partnered with Mercy Corps to bring its digital mentorship platform MicroMentor to Morocco, Egypt, Lebanon, Jordan, the UAE and Saudi Arabia.

MicroMentor connects small businesses with mentors so that they can get access to “just in time” mentorship – support on a specific topic or problem right when they need it. In addition, we initiated a collaboration with NAPS, a leading player in Morocco’s fintech ecosystem, to develop innovative payment solutions for individuals and businesses. We are also a limited partner in Apis Partners, a fund that invests in

fintech companies across Africa. It has been wonderful to see how our expertise and collaborations have positively impacted the payments landscape in the region.

How have Mastercard’s numerous collaborations with governments, organisations and municipalities across the region contributed to digital transformation? At Mastercard, we serve as a trusted partner, technology provider and policy advisor to the region’s governments. We support their efforts to create secure and balanced regulatory environments that ensures fair and healthy competition while promoting innovation, effective scaling of digital infrastructure and more citizen choice. We are also supporting them in translating their digital

Banking and Finance news in the MEA market

transformation strategies into reality by digitising payments and government services, driving financial inclusion and building robust, innovative and secure payment ecosystems. Over the past year, we have marked several milestones in this domain. The latest is the opening of our Global Center for Advanced AI and Cyber Technology in Dubai, a joint project with the UAE Government that aims to enhance AI capabilities and readiness in the region. Drawing on our technical knowledge and expertise, the initiative supports the UAE National Strategy for Artificial Intelligence 2031 that seeks to position the country as a global leader in AI. Building on the success of a series of Digital Country Partnerships across three continents, we also launched the world’s first Digital City Partnership with Dubai. The initiative leverages our multirail payments network and data-driven digital commerce technology to address key priorities of the Dubai Economic Agenda (D33). In Tunisia, we are the preferred partner of La Poste, the technology arm of the government, for all government disbursements with our e-dinar card programme. We are currently building out solutions by linking cards to the D17 wallet, powered by Mastercard QR. In addition, we are helping the region’s governments shape smart and connected cities of the future and deploy cuttingedge urban mobility solutions. In Jordan, we joined forces with the Greater Amman Municipality and Network International to introduce the country’s first transit payment ecosystem, powered by Mastercard Payment Gateway Services. In Egypt, we are supplying the Cairo Metro with an open payment infrastructure. And to promote Saudi Arabia’s gaming industry in line with Vision 2030, we joined forces with Saudi Esports Federation (SEF) and SNB to create innovative financial solutions for gamers. We are also sponsoring Gamers8, the largest gaming and esports festival in the world that takes place annually in the country.

How influential is Mastercard in the promotion of the values of sustainability in the region? Our scale and reach enable us to achieve tangible impact by engaging our entire ecosystem in initiatives that promote the adoption of sustainable practices. We are harnessing the power of partnerships and cutting-edge technology to build a more sustainable and inclusive future. In line with our dedication to reducing our carbon footprint, we have set a target to achieve net-zero emissions across our operations by 2040. As part of our goal to empower consumers to choose a sustainable future, we are gradually switching to payment cards produced from 100% recycled plastics. In the MENA region, we partnered with National Bank of Bahrain (NBB), Abu Dhabi Commercial Bank (ADCB) and Al Hilal Bank in the UAE that have committed to a 100% shift to sustainable cards. This year has also witnessed an exciting new announcement in this space: in a first move for a payment network, all our newly produced plastic payment cards will be made from more sustainable materials from 1 January 2028. In addition, in collaboration with Swedish fintech company Doconomy, in which we have also invested, we developed the Mastercard Carbon Calculator. With this handy tool, banks enable their customers to track the carbon footprint of their purchases. We have also founded the Priceless Planet Coalition, an ambitious endeavour t h a t b r i n g s to g et h e r c o r p o ra te sustainability efforts to combat the global climate crisis by restoring 100 million trees by 2025. The initiative has garnered over 100 members worldwide, united by the shared belief in our philosophy of doing well by doing good.

Inclusion is a core value at Mastercard. How do you bring this to life? At Mastercard, we are committed to building a prosperous digital economy that works for everyone. We care about

incorporating diverse perspectives that are driving innovation and creating a balance that reflects the world we live and operate in. We firmly believe that when you educate a woman, you empower a community. That’s why we seek to provide women and girls with access to the knowledge and skills required to support themselves and their families. We are advancing social progress through practical training for women on topics related to business, financial literacy and entrepreneurship. We also aspire to empower women to play a key role in the technology industry and increase their contribution to economic development. To achieve this objective, we are building partnerships with local educational institutions to launch our global program Girls4Tech that seeks to equip girls with futureproof core technology skills. To date, over 4 million girls in 63 countries have benefited from the award-winning initiative that is available in 20 languages, including Arabic. This means we are more than three quarters of the way to hitting our target of reaching 5 million girls worldwide by 2025. To ensure that everyone benefits from the digital economy, we initiated a collaboration with Ajman Bank to launch the first-ever Touch Card in the UAE. The card facilitates payments for blind and partially sighted people by allowing them to easily distinguish between their cards. We plan to roll out the innovative payment solution across the region, with Saudi Arabia and Bahrain as the next target markets. The thoughtful design provides a greater sense of security, inclusivity and independence to the 2.2 billion people around the world with visual impairments, as well as anyone in a low-light environment or simply reaching into a wallet or purse one-handed. We are also committed to advancing diversity and inclusion across our own operations. We provide equal pay for equal work, and proactively work to achieve gender parity across our organisation. We currently have 40% women’s representation in the Middle East and Africa.

In terms of countries, we have made great progress on gender diversity in Saudi Arabia, where women’s representation currently stands at 28%, compared to the market benchmark of 8%. We have also exceeded market benchmarks for women’s representation in the UAE (42% vs 21%) and Qatar (45% vs 11%). In January 2022, we signed an official pledge spearheaded by the UAE Gender Balance Council that aims to increase women’s representation in senior and middle management roles in the country to 30% by 2025. In recognition of our women’s empowerment efforts, we have been a regular fixture on the Bloomberg Gender Equality Index since its inception in 2016.

How do you see the nearto medium-term future for Mastercard in our region? We have been at the forefront of payments innovation in this dynamic region for nearly four decades. In recent years, the region has emerged as a global centre of excellence, and a launchpad for deploying strategic partnerships, non-traditional collaborations and new business models across our global network. In line with our commitment to driving digital transformation and financial inclusion in the countries where we operate, we will continue to invest in strengthening its financial ecosystem, expanding our rails and enhancing our offerings. We also believe this region can play a key role in achieving our global financial inclusion goals. Our vision involves extending the reach of our networks and forming more strategic partnerships with key public and private sector players to address the needs of the unbanked and underbanked. We seek to ensure all stakeholders have access to fast, efficient and affordable payment solutions, and reinforce trust in digital payments among businesses and consumers. We are committed to harnessing the power of technology and partnerships to realise our mission of powering economies and empowering people across the region. mea-finance.com

AI IN BANKING

Common Individuality The impact of Generative AI on banking and financial services is beginning to be noticed and will become apparent as more individuals, or those sharing commonalities are increasingly offered bespoke options

h ile much ha s b een made of the threat from financial technology firms (fintechs) and Big Tech, incumbent banks will likely continue to lead in retail banking. To thrive, banks need to reinvent themselves and operate like tech companies leveraging advanced data capabilities, a cutting-edge tech stack and an agile operating model. As generative artificial intelligence (GenAI) makes great inroads into many industries, the question for banks is not whether the advanced technology will profoundly impact their industry, but how.

When OpenAI released the consumerfocused Chat Generic Parser and Transformer (ChatGPT) last November, it set off frenzied use of GenAI in daily tasks from writing to coding and reached 100 million monthly active users earlier this year. The release of ChatGPT Enterprise, which is targeted at large businesses, in August gave rise to a plethora of opportunities across various industries. GenAI is making remarkable progress in a wide array of industries, the financial services sector included, as demonstrated by the rollout of OpenAI’s

Banking and Finance news in the MEA market

GPT-4 and Google parent Alphabet’s Bard. McKinsey projected in June that banks and the wider financial services sector are poised to benefit from savings arising from GenAI to the tune of $200 billion to $340 billion annually. On top of that impact, the adoption of GenAI tools could augment customer experience and improve decision-making while mitigating risks through better monitoring of fraud and risk….and this is just the beginning. GenAI’s impact on banking is just beginning and eventually, it could drive reinvention across every part of the business. Both neobanks and traditional banks are in a similar position to take advantage of the opportunities presented by GenAI. Banks are right to be optimistic, but they also need to be realistic about the challenges that come along with advancements in technology. Though the use of GenAI in the banking sector offers significant potential benefits, it also comes with challenges and risks that must be carefully managed.

Players in the industry should approach AI adoption with a comprehensive strategy that includes addressing biases, ensuring data privacy, complying with regulations and maintaining transparency and accountability.

Augmenting customer experience GenAI is revolutionary. The most immediate impact that innovative technology is expected to have on banks, much like digital transformation before it, is further advancing customer experience and personalised product offerings. Over the years, all customer-facing channels, whether in retail banking, corporate banking wealth or wealth management, have introduced digital banking services to meet customers’ evolving demands. However, the majority of these experiences still required the involvement of a customer service representative. British consultancy firm Pierre Audoin Consultants (PAC) said banks can leverage GenAI service in combination with conversational AI solutions to deliver new or augment existing chatbot or virtual assistant interfaces. Furthermore, the large language models (LLM) capabilities at the core of GenAI can aid both digital assistants and customer service advisors with increased levels of insight relating to individual customers’ requirements and the banking services that would best meet their needs. “GenAI’s ability to process very large and diverse data sets and to generate content in accessible and easily usable formats is proving very useful in enhancing efficiency and improving customer experience, risk mitigation and compliance reporting for financial providers,” the International Monetary Fund (IMF) said in a report August. E m i ra tes N B D p a r t n e re d w i t h Microsoft in July to harness the power of GenAI to advance the banking group’s operations and productivity across various business functions. The bank said the collaboration seeks to

GEN AI’S ABILITY TO PROCESS VERY LARGE AND DIVERSE DATA SETS AND TO GENERATE CONTENT IN ACCESSIBLE AND EASILY USABLE FORMATS IS PROVING VERY USEFUL IN ENHANCING EFFICIENCY AND IMPROVING CUSTOMER EXPERIENCE, RISK MITIGATION, AND COMPLIANCE REPORTING FOR FINANCIAL PROVIDERS – International Monetary Fund

unlock new opportunities for innovation, efficiency and customer experience within the banking industry. On a global scale, Goldman Sachs announced in March that it was using GenAI solutions and tools to aid its software developers in writing and testing code. JP Morgan is also developing a ChatGPT-like software service that leans on a disruptive form of AI to select investments for customers. The Wall Street lender applied to trademark a product called IndexGPT earlier in May to tap cloud computing soft ware using AI for analysing and selecting securities tailored to customer needs. “GenAI is helping both banks and customers. Hyper customisation is a big trend within the banking sector as customers are looking for a personalised, tailored service rather than a one-sizefits-all approach,” Anand Krishnan, Director, Head of Technology at Emirates Investment Bank said at Fintech Surge 2023 in October. “New fintech investment organisations are bringing out micro-customised products. These systems understand how customer demographics change over the years and this will have a major impact on the banking sector.” The ‘gold mine’ of customer data that incumbents have accumulated over the years is a key value differentiator that is unlocked by the potential of GenAI.

“GenAI can deliver personalised banking services through digital engagements via online portals or mobile apps or as an invaluable advisory tool to support front-office bank employees in customer interactions,” according to PAC. Banking experts expect GenAI to create ‘focused financial offerings’ for individuals within retail and private banking channels and for corporate banking tailored to their specific needs and interests is a differentiator that can drive new forms of competitive advantage. The depth and breadth of data a bank has on customers, as individuals and groups with common preferences, allows them to create recommendations for bespoke financial products to an individual’s specific needs at a far greater scale through digital services than has been previously possible.

GPT-ifying wealth management The adoption of GenAI in finance functions will likely follow an S-curve pattern as with other technologies. “Generative AI will eventually collaborate with traditional AI forecasting tools to create reports, explain variances and provide recommendations, thereby elevating the finance function’s ability to generate forward-looking insights,” according to a Boston Consulting Group report. The enhancements will empower finance professionals to make more informed strategic decisions, leading mea-finance.com

AI IN BANKING

to improved operational efficiency and effectiveness. The hyper-personalisation inherent in ChatGPT capabilities holds the potential to transform the financial services landscape radically, setting a new standard for customer experience and engagement. Recognising the power of this innovative technology, Morgan Stanley Wealth Management is using OpenAI’s technology to leverage its vast data sources to assist financial advisors with insights into companies, sectors, asset classes, capital markets, and regions around the world. Furthermore, Bloomberg unveiled its version of GPT specifically designed for the financial services sector in April 2023. BloombergGPT can analyse company earnings reports and other financial statements to identify potential investment opportunities and risks. The platform can also examine news articles and social media posts to provide real-time sentiment analysis, enabling wealth managers to react quickly to market trends and changing investor sentiment. “The complexity and unique terminology of the financial domain necessitated a domain-specific model, and BloombergGPT represents the first step in developing and applying this technology to the financial industry,” said PwC. The adoption of AI in the wealth management space will have a significant impact by providing more personalised, data-driven advice in areas such as portfolio optimisation, risk management, fraud detection, tax analysis and even relationship management. BloombergGPT can automate many tasks that are currently performed by relationship managers, such as answering client questions and responding to customer service inquiries. PwC projected that the model has the potential to disrupt the wealth management industry - an industry based on human interaction that provides tailored advice in the context of specific wealth ambitions. As ChatGPT’s capabilities expand, the traditional roles of wealth management and financial advisors may soon become

GENERATIVE AI WILL EVENTUALLY COLLABORATE WITH TRADITIONAL AI FORECASTING TOOLS TO CREATE REPORTS, EXPLAIN VARIANCES, AND PROVIDE RECOMMENDATIONS, THEREBY ELEVATING THE FINANCE FUNCTION’S ABILITY TO GENERATE FORWARD-LOOKING INSIGHTS – Boston Consulting Group

obsolete, paving the way for a new era of customised and intelligent financial solutions. Generative AI will allow affluent investors and HNWIs to access an incredible amount of information and ask questions in a language that the client is comfortable with and receive answers. It remains to be seen whether the GCC financial services sector will adapt swiftly enough to harness the full potential of generative AI and beyond or if it will be left behind in the tech revolution. Globally, fintech firms such as Stripe announced integrations of ChatGTP-4 while banks including Morgan Stanley Wealth and JPMorgan Chase have unveiled plans to internally adopt the technology.

Risks abound When ChatGPT broke onto the scene, as well as the fanfare, there were concerns about risks that could come with it. Without doubt there are going to be many opportunities for the application of AI in the banking and finance sectors but there will, of course, be dangers that need to be anticipated and planned for. Earlier in 2023, several major financial institutions reportedly restricted their employees from using ChatGPT. The ban, which was initially imposed by multinational banks including Bank of America, Citigroup, Deutsche Bank, Wells Fargo and Goldman Sachs, was not a result of any particular incident but rather due to concerns about potential

Banking and Finance news in the MEA market

regulatory risks surrounding the sharing of sensitive financial information with OpenAI’s chatbot. The biggest of the concerns voiced by financial institutions and banks is that these advanced and innovative technologies make it much easier – and harder to detect – for financial criminals to engage in money laundering, terrorism financing and fraud. The Association of Certified Fraud Examiners said as more sophisticated versions of GenAI and ChatGPT evolve, bankers and compliance professionals can expect to see instances of more persuasive phishing emails or more convincing impersonators scamming for information. The solution to financial crime concerns is for banks and financial institutions to implement robust cybersecurity measures to protect AI systems from hacking attempts, data breaches, and unauthorised access. While GenAI is in its early days, several financial institutions are moving forward with applications, including answering customer questions about loans and financial topics through AI-powered chatbots and reducing mid-to-backoffice operational expenses. Its ability to comb unstructured data for insights radically widens the possible uses of AI in financial services and bank executives in the GCC region plan to experiment with AI foundational models in various business activities from data analysis, process automation and customer support.

AI IN BANKING

Assured Inevitability The future for digitalisation and AI is assured in banking and finance, and Sriranga Sampathkumar VP and General Manager – Middle East and Africa, Infosys, shows how and why in answering questions about the coming evolution of the sector

eaving aside the Covid-19 pandemic, what have been the other main drivers of the digital banking revolution in the region?

In the dynamic landscape of Middle East and Africa, the digital banking revolution continues to be catalysed by a confluence of three factors: Regulations: Central banks promote healthy competition by welcoming new entrants while enforcing strict regulations on security, reliability and efficiency. This approach benefits consumers with more options, enhanced services and innovative financial solutions. We see this trend in the digital wallet space with players like M-Pesa across African countries, STC Pay in Saudi Arabia, Paga in Nigeria and initiatives like Emirates Digital Wallet. Numerous countries have established regulatory sandboxes, introduced digital banking licenses, implemented open banking regulations and reinforced Data Protection Regulations, consumer protection and cybersecurity standards to create a balanced and competitive financial landscape. C onsumer Expectations: Rising customer expectations have reshaped the banking paradigm, demanding seamless, secure and convenient services accessible anytime, anywhere. We see this trend in real-time payments where markets like India have set a new

benchmark, and customers across the region now demand faster and more seamless payment transactions. Banks have understood that the network and infrastructure facilitating these transactions are the backbone for enabling customers to pay and receive money quickly. So, tier 1 banks are spending to have the required infrastructure and business ecosystem. Technology: The maturing of modern technologies, such as cloud computing, artificial intelligence (AI), and application programming interfaces (APIs), has been a game-changer. Cloud enables cost-effective scalability, allowing banks to expand their digital infrastructure swiftly. Recent developments in generative AI-powered solutions hold the promise of scaling personalised customer experiences, predictive analytics and fraud detection, elevating service quality. APIs continue to facilitate seamless integration between banks and third-party services, fostering a vibrant fintech ecosystem. This convergence of regulatory pressures, customer demands and advanced technologies has propelled Middle East and Africa into a digital banking revolution. Financial institutions embracing these changes are not just meeting current expectations but also positioning themselves at the forefront of innovation, ensuring a future-ready and customer-centric banking experience.

Banking and Finance news in the MEA market

Sriranga Sampathkumar, VP and General Manager – Middle East and Africa, Infosys

After intense digitalisation in recent years, what is the outlook for banking technology providers in the region? The disruption in banking resulting from digitalisation is significant. But the outlook remains positive, and there is scope for growth. Some trends point to this: More and more markets are seeing new entrants, such as telcos with banking licenses. With access to a large customer base in every corner of a country, these telcos are also tying up with banks to work in a regulated environment. The advent of challenger banks or neo banks is another: banks focusing on a niche such as retail, corporate, consumer and wholesale operations. These banks compete with traditional banks with disruptive technology a n d fa ste r t i m e -to - m a r ket a s key differentiators. I ncumbent banks are taking a comprehensive approach to digital transformation to enhance their competitiveness in the evolving banking ecosystem across the region. If we look at broad heads for transformation spends, they are typically across four key areas:

a. Elevating digital customer experience to drive growth b. Digitising and automating ubiquitously to cut costs c. A cloud-first approach to bring scale and faster go-to-market d. Leveraging the power of open APIs, enterprise event manager and gen AI to unlock new possibilities

What is coming over the horizon in digitalisation and technology’s role in the regional banking and finance space? In the last two decades, a rapid and transformative fusion of advanced technologies — cloud, APIs, AI, blockchain, IoT and mixed reality — has reshaped industries globally. Small businesses can swiftly establish their digital footprint through cloud platforms, while APIs empower diverse players to innovate, giving rise to models like Banking as a Service. Blockchain systems and mixed reality are on the brink of merging physical and digital realms in the metaverse. These integrated technologies are profoundly altering how individuals and businesses operate and bank. Among these, the cloud has shifted from a technological tool to a vital force enabling business transformation, offering agility and scalability crucial for financial institutions leading digital transformations. APIs simplify the creation of innovative business models, with initiatives like open banking driving standardisation. Meanwhile, AI is driving automation to new heights, significantly reducing the cost of personalisation and enabling tailored offerings. This transformative trio — cloud, open APIs, and AI — is revolutionising industries and setting new standards for innovation, customer experience and business efficiency.

How do you see the use of cloud services in banking and finance developing in the coming years? Today, banking on the cloud is no longer about adoption but acceleration. Banks

realise the critical importance of moving to the cloud, and many have taken the plunge. However, different banks are at various stages of their cloud journey. Several factors influence their maturity, including their digital investments, strategic vision, innovation appetite, talent pool and regional regulatory landscape. We expect accelerating adoption due to the significant value that banking in the cloud offers. In some countries where regulations around the cloud define the adoption curve, banks will look to make the most of the cloud by moving their non-production environments to the cloud as a first step, followed by module-by-module movement of production systems in line with the evolving regulatory guidelines. It is important to note that the full value of cloud investments can be unlocked when banks move not just the peripheral but also the mission-critical systems to the cloud. As the journey unfolds, we are confident that banks will navigate these steps and expedite their transition to the cloud.

How can hybrid cloud and AI capabilities help business growth and the productivity of banks and financial institutions? Hybrid cloud and AI offer a potent combination of agility, scalability and intelligence that are key to driving growth and productivity for banks. Today, the cloud is the biggest fulcrum in banks’ digital transformation initiatives, and the hybrid cloud is a pivotal enabler for them to streamline and accelerate their cloud adoption journey. With a hybrid cloud, banks can dynamically scale their infrastructure, optimise costs, strengthen resilience through diversification of cloud environments, and gain the much-needed flexibility to drive a seamless cloud adoption journey. AI, on the other hand, equips them with data-driven decision-making capabilities. It also unlocks a plethora of possibilities around risk management, fraud detection, transaction monitoring, anti-money laundering (AML), compliance and more.

Together, hybrid cloud and AI create opportunities for banks to harness cutting-edge AI tools from public cloud platforms, reinforcing their drive towards innovation and efficiency.

How do you see the role of generative AI in shaping the future of the regional financial market? The region is anticipated to grow substantially in the generative AI (Gen AI) market. Gen AI, known for its immense potential, is poised to catalyse innovation, stimulate economic expansion and open avenues across sectors, including the banking industry. For instance, Gen AI can create highly personalised customer experiences. Powered by gen AI, Chatbots can provide instant customer support, answer queries and even help with financial planning. MEA is a diverse region with multiple languages spoken — here, Gen AI can assist in providing multilingual customer service and support. G en AI can also play a pivotal role in expanding financial inclusion. By leveraging alternative data sources and innovative credit scoring models, banks can provide financial services to individuals and businesses that were previously underserved. Multiple use cases are currently being built by various application providers and cloud-hosting partners. Banks can leverage this ecosystem with close collaboration of multiple vendors and create a repository to address all the key areas. Gen AI has many other essential applications, like automated document p ro c e s s i n g , a u g m e n te d f ra u d detection and prevention, bolstering cybersecurity and more. However, there are challenges to consider: data privacy, regulatory compliance and the need for skilled generative AI professionals to implement and manage this transformative technology effectively. The ethical use of Gen AI in banking will also be critical. mea-finance.com

AI IN BANKING

The Path Ahead Bongiwe Gangeni Head of Consumer, Private & Business Banking, Standard Chartered Africa & Middle East, and Europe (AME/E) describes the benefits that digitisation has brought to banking and offers some thoughts on the direction that AI and the further evolution of digital services will bring

eaving aside the Covid-19 pandemic, what have been the other main drivers of the digital banking revolution in the region?

Bongiwe Gangeni, Head of Consumer, Private & Business Banking, Standard Chartered Africa & Middle East, and Europe (AME/E)

Banking and Finance news in the MEA market

The shift and preference towards digital banking began to take shape long before the COVID-19 pandemic. Over the years, the world has undergone significant change, in the main driven by digital transformation. The way consumers interact with businesses has been revolutionised by an explosion of ecommerce, while c a s h l e s s a l te r n a t i ve s i n c l u d i n g mobile wallets and instant payments are driving new behaviours in cash management. Meanwhile, the advent of digital currencies and the growth of the decentralised internet are creating new channels for growth. In Africa, this widespread adoption of digital financial services has not only allowed banks to streamline their operations and enhance efficiency but has also been instrumental in expanding financial inclusion. By breaking geographical barriers and reaching previously underserved communities, digitalisation has democratised access to financial products and services,

fostering economic growth and social development in the region. In the Middle East, governmental directives focused on digitisation are increasingly being introduced, cascading down to the financial sector. In the UAE, for instance, the Central Bank of the UAE through its subsidiary Al Etihad Payments has in October 2023 launched the nation’s first Instant Payments Platform, Aani, revolutionising h ow c o n s u m e rs a n d m e rc h a nt s settle payments.

What do you think will be the next noticeable developments in the digitalisation of retail banking services? The digitalisation of retail banking continues to undergo significant transformation. New non-traditional entrants are revolutionising the “front end” of banking and integrating financial services into client relationships. Banking models are shifting towards customer journey-centred approaches, focusing on lowering operating costs and enhancing engagement. Digital products and payment capabilities are expanding through big data and analytics, aligning more closely with customer needs. Continued digital adoption is also evident, underlined by the rise of mobile banking which is particularly true in Africa. Additionally, technological advancements such as AI, cloud computing, and the metaverse are streamlining processes and offering innovative financial products. These developments reflect a customercentric, technology-driven future for retail banking. When it comes to serving the digital economy effectively, collaboration is the way forward. While responding to the increasing demands for digital and innovative solutions, banks have also sought to collaborate with other players outside of banking. A case in point is the collaboration between banks and fintech companies to offer short-term loans in a competitive and agile manner.

These partnerships allow banks to leverage the innovative capabilities of fintechs, providing customers with new financial solutions, such as mobile wallets, digital lending and innovative payment options.

Has corporate and wholesale banking had the same attention from digitalisation as retail banking? Digitalisation has impacted corporate and wholesale banking, though not as rapidly compared to retail banking. Nevertheless, the adoption of digital technologies is gaining momentum, particularly in transaction banking. At

their offerings in a modular, agile way, while forming deeper relationships by co-creating solutions that truly deliver. A key example of this is Standard Chartered’s nexus, which enables online platforms and ecosystems to develop tailored financial services products with the bank, thereby providing millions of new, tech-savvy clients with convenient access to financial services.

Are there good business cases for the use of Generative AI in banking and finance? Yes, there are several use cases for AI in banking. Firstly, it can improve personalisation by analysing customer

NEW NON-TRADITIONAL ENTRANTS ARE REVOLUTIONISING THE “FRONT END” OF BANKING AND INTEGRATING FINANCIAL SERVICES INTO CLIENT RELATIONSHIPS

Standard Chartered, we are creating new digital approaches to streamline clients’ transaction journeys. Through our user-friendly digital platforms such as Straight2Bank, we are enabling clients to enact transactions in real-time. Another area of increasing interest among corporates is digital assets as they explore a variety of use cases, for example in monetising new digital opportunities such as the metaverse, or as a means of accepting and sending settlement payments. To better service the digital-first demands of corporates, a growing number of financial institutions are developing banking-as-a-service (BaaS) models that enable them to provide

behaviour and providing customised support in real-time. AI tools can also increase the speed of service delivery by automating routine tasks and freeing customer-service executives to focus on more complex issues. AI can even aid in fraud detection, flagging suspicious activities more accurately. The “African Digital Banking Transformation Report 2023” cites nearly 69 percent of survey participants stating that AI will be the most important technology trend for African banks in 2023. At Standard Chartered, we are harnessing the power of AI to automate many of our manual processes relating to onboarding clients, completing e-KYC requirements, and processing structured and unstructured data. mea-finance.com

AI IN BANKING

Intelligence Quotient Bill Farrell Managing Partner IBM Consulting MEA discusses the uses of AI in the regional financial sector highlighting the clear benefits it brings to businesses and the adaptations and reskilling it will spur in the workforce

ow can hybrid cloud and AI capabilities help the business growth of banks and financial institutions?

Modern financial institutions demand modularity, security, openness, AI for business-driven capabilities and collaboration on a hybrid cloud. Hybrid cloud and AI success are built at the intersection of flexible and innovative

IT, business and financial strategies that can significantly contribute to the business growth of banks and financial institutions in several ways. AI, Data and automation, integral components of this hybrid model, play a crucial role in enhancing various aspects of banking operations. At IBM, we empower clients to elevate customer experiences, modernise core banking infrastructures, pioneer innovative

Banking and Finance news in the MEA market

payment solutions and transform enterprise risk management. These technologies streamline processes, automate repetitive tasks, minimise errors and boost cost efficiency. By freeing up employees from routine tasks, AI enables them to focus on more strategic responsibilities, leading to increased productivity. Moreover, AI can contribute to improved compliance by automating

Value’s, Seven Bets, highlighting generative AI among the seven trends shaping the future of business. This signifies the importance of the shift toward an “AI-first” mindset, influencing leaders to capitalise on AI’s current and future opportunities while effectively managing enhanced risks across their organisations. To support clients in this journey, IBM Consulting has established a Centre of Excellence (CoE) for generative AI. It stands alongside IBM Consulting’s existing global AI and Automation practice, which includes 21,000 data and AI. The CoE helps accelerate clients’ business transformations with enterprisegrade AI, including watsonx, as well as technology from our ecosystem of business partners.

monitoring and reporting processes, thereby reducing non-compliance risks. Additionally, the ability to adapt quickly to dynamic market conditions and evolving customer expectations is a key benefit. AI achieves this by analysing vast amounts of data, facilitating informed decision-making. The synergy of hybrid cloud and AI capabilities empowers banks and financial institutions to innovate swiftly, enhance operational efficiency, ensure compliance and achieve substantial cost savings, ultimately fostering business growth in a competitive landscape.

How do you see the role of generative AI shaping the future of business? Generative AI is on the brink of a transformative era. Foundation models, a driving force behind the most potent generative AI, are poised to revolutionise business operations rapidly. An IBM study, “CEO decision-making in the age of AI” found 43% of CEOs leverage generative AI for strategic decision-making while 75% of CEOs hold the belief that the organisations equipped with the most advanced generative AI win.

Bill Farrell, Managing Partner IBM Consulting MEA

models and generative AI in the Masters golf tournament to automatically add AI-generated spoken commentary to every shot, player and hole. In addition to that is the enhancement of Wimbledon and US open’s digital fan experience

GENERATIVE AI HOLDS IMMENSE POTENTIAL TO SPUR INNOVATION AND ELEVATE PRODUCTIVITY IN THE FINANCIAL SECTOR OF THE MIDDLE EAST Collaborations between tech giants like SAP and IBM aim to harness generative AI and large language models for a superior user experience, faster decision-making and deeper insights, transforming business processes. Practical applications are already visible, such as the use of IBM’s foundation

through IBM watsonx. These features included AI commentary for insightful match highlights on the app and AI Draw Analysis, which rates players’ draw favourability. The broader business landscape is also recognising the impact, with the report by IBM Institute for Business

How can generative AI spur innovation and boost productivity in region’s financial sector? Generative AI holds immense potential to spur innovation and elevate productivity in the financial sector of the Middle East. The region’s commitment to innovation is exemplified by initiatives like Saudi Arabia’s Vision 2030 and the UAE’s Vision 2071. The 2023 report by the World Government Summit (WGS) also positions the Middle East as a promising hub for technology. Generative AI plays a pivotal role in this transformative landscape; enhancing the efficiency of customer service reps by enabling access to iterative quick responses to complex queries posed by customers; deepening customer engagement through digital technologies, intelligence and analytics to provide personalised, conversational responses to queries, not only about financial transactions and data but also for non-financial information at financial institutions such as careers, policies, education and more. IBM’s groundbreaking watsonx platform, encompassing AI studio, data store and governance toolkit, empowers clients to accelerate and scale AI across mea-finance.com

AI IN BANKING

various use cases. This enterprise-ready platform democratises AI, making it more accessible for businesses of all sizes to design and deploy accurate, scalable and adaptable solutions. As businesses transition from +AI to AI-first, watsonx, with its 10-year roadmap, stands as a significant stride toward delivering on the vision of democratising AI and driving positive impacts on economic growth in the Middle East. How does IBM work with banking and finance clients to ensure the best outcomes from AI? IBM advises financial institutions to go after areas where they can see quick gains in productivity and time to value – augmenting and automating talent acquisition, management and support, enhancing customer service, automating app modernisation and IT Ops and bolstering security. We focus on use cases that are scalable and relevant to banks, insurers, financial markets and other financial services industry stakeholders. We see big potential with foundation models – which are reusable and require minimal training – in helping leaders implement AI to radically change how their businesses operate. In the realm of AI and automation, IBM plays a pivotal role in enhancing banking operations across various fronts. By streamlining operations, automating repetitive tasks, and minimising errors, AI boosts cost efficiency and productivity. Moreover, AI’s contribution to compliance is significant, automating monitoring and reporting processes to mitigate non-compliance risks. The ability to adapt rapidly to market dynamics and evolving customer expectations is facilitated by AI’s analysis of vast data volumes, enabling informed decision-making. IBM’s collaboration with leading financial institutions further demonstrates its commitment to driving impactful transformations. Partnerships with First Abu Dhabi Bank, Dubai Islamic Bank and Emkan Finance highlight a diverse range of initiatives. For First Abu

Dhabi Bank, the collaboration focuses on modernising digital infrastructure, while Dubai Islamic Bank leverages IBM Consulting to accelerate its data transformation journey. Emkan Finance’s collaboration aims at developing digital financing products for SMEs in Saudi Arabia, fostering growth and risk management through digital technology. IBM’s approach is characterised by a deep understanding of client needs, a commitment to innovation and strategic collaborations, ensuring that AI for business solutions are tailored to deliver the best outcomes for banking and finance clients.

How will the deployment of AI change human capital in the regional financial sector? AI is marked to bring about transformative changes in the human capital landscape within the regional financial sector.

assuming the role of a creative partner, fostering innovation. In the realm of human resources, AI, exemplified by Watson Orchestrate, is streamlining talent acquisition, promotion and retention processes. For instance, within IBM’s Consulting business unit, this implementation resulted in significant time savings, with 12,000 hours saved and an 85% reduction in the promotion cycle duration. This liberated the workforce to focus on essential talent-related services, emphasising the shift from routine paperwork to thoughtful and creative input. A s A I i n c re a s i n g l y m a n a g e s m o n oto n o u s ta s ks , a sy m b i ot i c relationship between humans and technology emerges. This evolution leads to enhanced productivity, the development of new roles cantered a ro u n d A I i m p l e m e n ta t i o n a n d

IBM’S APPROACH IS CHARACTERISED BY A DEEP UNDERSTANDING OF CLIENT NEEDS, A COMMITMENT TO INNOVATION AND STRATEGIC COLLABORATIONS, ENSURING THAT AI FOR BUSINESS SOLUTIONS ARE TAILORED TO DELIVER THE BEST OUTCOMES FOR BANKING AND FINANCE CLIENTS The findings of a recent IBM Institute for Business Value study about the workplace in the era of generative AI reveals that UAE Executives estimate that 40% of their workforce will need to reskill as a result of implementing AI and automation over the next three years. The recent introduction of IBM watsonx has ushered in new possibilities in Generative AI, and we are witnessing its impact in two distinct ways: firstly, trusted AI is supporting the automation of routine business processes and secondly, AI is

Banking and Finance news in the MEA market

management and the acceleration of tech disruptions. The long-term impacts include heightened efficiency, innovation and the ability to address complex challenges. However, the integration of AI comes with ethical considerations, such as data privacy and algorithmic bias, necessitating vigilant management. Continuous reskilling efforts will be crucial to ensuring the workforce remains adaptable to evolving AI capabilities in the face of rapid technological advancement.

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TRADE FINANCE

Trade’s Route to Change Considering questions about regional trade finance today, Huny Garg Country Head, KSA & Bahrain, Swift, highlights some of the developments, improvements and challenges facing businesses today

re cross-border payments bodies and standardisation bringing marked improvements to the workings of trade finance across the region?

Any improvement in payments and settlement processes helps international trade across the Middle East and Africa. The ability to move money faster, coupled with transparency and availability of richer data, is a key requisite for facilitating faster trade. Hence, the ongoing work across the industry to enable interoperability between banks and corporates supports the co-creation of a trade ecosystem that is standardised and scalable. This includes our work with High Value Payment Systems (HVPSs), providing common standards, and a secure and resilient messaging service. By 2025, all reserve currency HVPSs will have fully transitioned to the ISO 20022 standard, and more than 90% of HVPS value worldwide will move on ISO 20022 rails. With global trade being complex and broad, and standardisation and interoperability being crucial to ensuring connectivity between physical and financial supply chains, these

Huny Garg, Country Head, KSA & Bahrain, Swift

developments should help to introduce greater harmonisation and efficiency into processes. Swift is also supporting corporates in relation to the ongoing move to ISO 20022, for both HVPS and for crossborder payments and reporting (CBPR+), as part of its wider strategic focus. We aim to help financial institutions achieve key objectives for all corporates, both those connected and not connected to Swift.

Banking and Finance news in the MEA market

These include to capture and validate richer data in ISO 20022 at source and make this data readily available across the processing chain. On the inter-bank side, for CBPR+, the benefits of ISO 20022 have already been experienced by some corporates. Many banks have migrated from MT to ISO 20022, sending pacs.008 instead of MT103, with many of these payments originated by corporates. On the corporate-to-bank side, approximately 3000 larger multi-banked corporates have been using Swift as a channel to interact with financial institutions directly. We will extend ISO 20022 standards to corporates for C2B flows by enabling the FINplus service to these corporates connected on Swift. They will soon be able to use the premier FINplus channel to exchange ISO 20022 messages with financial institutions and gain access to other value-added services such as payment tracking via banks. As a centralised, multi-currency platform for cross-border payments, BUNA stands to benefit greatly from ISO 20022 adoption. Usage of the standard will play a significant role in supporting interoperability and creating greater efficiency in payment flows between institutions.

As the region’s businesses continue their growth, diversity and sophistication, are trade financing solutions keeping pace? Digitisation, across all sectors, remains high on the agenda of Middle Eastern governments and policy-makers and a shift towards greater focus on trade digitisation is well underway in the

region. A higher level of digitisation in trade promises to deliver improved operational efficiencies and reduced manual entry, as well as enabling dataled reporting and compliance, cash flow management and fraud mitigation. Banks, corporates and the wider industry are all focused on moving towards a fully digital trade economy. Abu Dhabi Global Market (ADGM) is one of the early adopters of the Model Law on Electronic Transferable Records (MLETR) to enable digital exchange of trade-related title documents. With the UK recently passing the electronic trade documents bill, there is anticipation of an impending revolution in the digitisation of trade. However, for trade to become truly digitised, challenges such as legal harmonisation, standards and interoperability need to be addressed.

the area of electronic bills of lading (eBL), and as part of the FIT Alliance, we been collaborating with the ICC among many others, alongside eBL platform providers. We’ve been developing a proof of concept for the solution, using an Electronic Transport Document API that leverages the Digital Container Shipping Association’s industry specifications. We’ve also collaborated with two authorised eBL providers: edoxOnline and CargoX. The project continues, set to include sharing of results and further validation of the solution.

finance, we’ve recently integrated the sustainable trade finance guidelines into our KYC Registry, allowing clients to include climate data within the registry to give transparency on their progress to reduce emissions. And we’re exploring opportunities to provide even more transparency across a broader range of sustainability data points within the registry. We’ve also just onboarded our first ESG solution provider (Greenomy) as an ancillary partner, providing our members with easier access to sustainability solutions.

Are regional banks factoring in sustainability or ESG concerns into their trade financing options?

How is the economically important SME sector being catered for in their trade finance needs by the region’s bank?

ESG and other value-based factors are a major focus across the global financial services industry. They are also shaping

HOWEVER, FOR TRADE TO BECOME TRULY DIGITISED, CHALLENGES SUCH AS LEGAL HARMONISATION, STANDARDS AND INTEROPERABILITY NEED TO BE ADDRESSED

Collaboration is essential to this work. Swift is working with its community globally to develop APIs for the full lifecycle of Corporate to Bank Guarantees in collaboration with the International Chamber of Commerce (ICC). These future ready (ISO 20022 compatible) APIs will help tackle friction arising from different standards, identity and security specifications. We are also working to develop a cross-platform interoperabilit y framework to help support digitisation, reduce the industry’s reliance on paper and make supply chains transparent and reliable, while improving the accuracy and traceability of data. In

the decision-making of investors – especially younger generations. This is in turn is set to influence banks across the region, particularly as they continue catering to a younger demographic in specific countries – the Middle East is home to one of the youngest populations in the world. Meanwhile richer data bought by the move to ISO 20022 offers greater insight into supply chains, helping foster transparent and efficient trade finance. This helps to promote greater financial inclusion by enabling more corporates – notably SMEs – to access trade finance. Swift embeds sustainability into everything we do. In relation to trade

Banks in the region have been expanding their product and client base across the SME segment with improved availability of quality data, adoption of technology for onboarding and better risk management tools. The pace of change has been greater in open account and supply chain finance where B2B payments are the final mode of settlement, usually over the Swift network. SMEs still face a number of challenges in payment settlements, for example the cost of transactions, lack of transparency and inefficient compliance process. Over the last five years, Swift has worked closely with our community to evolve the cross-border payments experience. In addition to adoption of ISO 20022 standards for rich data that improves efficiency of compliance, Swift’s global payments innovation (gpi) delivers fast, transparent, trackable payments for high value payments. Building on the success of Swift gpi, Swift Go ensures low value cross-border payments are as easy, predictable, transparent and as low cost as domestic payments. Through Swift Go, we are providing consumers and SMEs with more choices for sending money around the world. Swift Go is now being used by more than 600 banks across 120 countries. mea-finance.com

OPINION PIECE

Islamic Finance – View from the Investor While the Sharia funds sector is growing at pace, there are areas in need for professionalisation and to abandon the assumption that it will sell based purely on itself, while also developing products that are competitive in the broader market

he Sharia/Islamic funds sector is growing rapidly with a 300% increase in AUM’s over the last decade based on data from the General Council for Islamic Banks and Financial Institutions in Bahrain which has resulted in an AUM of $200 billion. There is a steady demand coming from investors wanting to have good exposure to these funds. That said, there are some details of the market which still needs to be professionalised. Sometimes the fact that it is Sharia itself leads to what I call as infantilism of the market. Just because it’s a Sharia Fund, the assumption is that it will sell. As if that label is enough. It is a severely unidimensional view assuming that all investors, whether retail, mass affluent, HNWI or institutional level will simply choose funds based on the fact that its Sharia. Not so, and the author has yet to come across good treatment in the professional or academic press where the investment allocation decisions, frameworks and appetite of Sharia Fund investors has been explored properly. A recent paper by John Sandwick and Pablo Collazo published by the Journal of Asset Management in 2021 tries to undertake a bit of a review on this matter by trying to analyse modern portfolio theory with Sharia.

Bhaskar Dasgupta, Chairman of the Board & Non- Executive Director Apex UAE, Bahrain, Israel & India Boards

Some interesting points they come up with include. 1. There is no performance hit by investing in Sharia fund products. 2. Due to the prohibitions of Sharia, the investible universe for Muslims is therefore different from other investors. 3. Normally Sharia investors will invest in 4 major asset classes: money market funds (Murabaha), fixed income in the form of sukuk’s / bonds, equities on the

Banking and Finance news in the MEA market

basis of any of the MSCI or Dow Jones Sharia Equity Indices and then finally alternative asset classes where REITs and Commodity ETC’s roam. 4. The authors evaluate Morningstar and applying these factors, come up with about $15billion of AUM worth of 60 securities. 5. Once you start slicing the population by minimum ticket sizes, geographies, sectors, etc. The market is quite narrow. Given these findings and what Apex has been seeing in the asset management industry across multiple funds and several billion dollars of AUM, the market still needs to grow up hugely and the starting point is to stop infantilising the customer. The asset management sector needs to develop products which are competitive with the broader market. The demand is there, the returns are there, so that’s not an issue. Given the macro-economics of the international economy – the focus on real assets is even better from an investor perspective. Are there Islamic Asset Management firms offering a wholistic Islamic Asset management service across all asset classes, sectors, segments? Not that we have seen. There is only a tiny proportion of Islamic Sharia-based fund managers with the track record that we see in other markets. One way for Islamic asset managers to see how to develop their industry will be to look at how the ESG asset management structure has grown over the past few years – they do share quite a lot of similarities on a conceptual basis. Using low-cost fund platforms, outsourced services with launches of multiple Sharia funds (smaller) to build up a full suite of funds for the Sharia Investor is one way forward.

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