Issuu

May 2021

Scaling investment heights with Robo-advisory Bernd van Linder, CEO, Commercial Bank of Dubai

May 2021

Scaling investment heights with Robo-advisory Bernd van Linder, CEO, Commercial Bank of Dubai

14 SME Banking | 24 Payments | 38 Insurance | 54 Market Focus - KSA | 57 Special Report

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29/3/2021 4:32 PM

In this issue...

s we (already) approach the mid-point of the year and the region moves into a post-pandemic era, the May 2021 issue of MEA Finance shows how decisions have been made to make this a time of growth and renewal with actions taken by regional authorities to motivate and support Small and Medium Sized Enterprises – SME’s. In our focus on SME’s, we see just how vital this sector of the economy is, with Rehan Ali, Head of Business Banking, National Bank of Fujairah saying that SME’s contribute more than 60% of the total GDP of the local economy. Read all this from page 14. The ever-expanding role of technology and AI is expressed in our Cover Story starting at page 34 and featuring Bernd van Linder, CEO, Commercial Bank of Dubai, who tells us how their newly launched and unique Roboadvisory investment solution is going to enhance customer experience, and on page 22 as part of our Fintech Surge 2021 interview series, Meera Alshaikh, Head of International Relations and Partnerships, Smart Dubai Department describes the Cashless Dubai Initiative. Ahmed Khidhir, Business Development, Manager, Digital Banking Solutions at Temenos, on page 46 argues that Making digital banking human in the post-pandemic world will give banks an edge over competitors and, starting on page 57, our special report with contributions for Avaya and senior banking executives, discusses how technology will change branch banking. Our payments focus, from page 24, shows that despite already high preCovid-19 development activity, the pandemic has acted to further accelerate things. Continuing with Citi’s Dave Aldred Head of Treasury and Trade for MENA, who says they are working with partners to develop blockchain solutions that will become mainstream; SWIFT’s Onur Ozan Head of Middle East, North Africa and Turkey cautions that New technologies can create new opportunities, but must be assessed carefully and Devid Jegerson, Head of Customer Experience and Platform Development at National Bank of Fujairah explains that banks must constantly rethink their offerings. Remaining of key importance during and beyond the pandemic is the role of insurance which we look at with our report on page 38 and where Rajesh Sethi, Chief Executive Officer, Dar Al Takaful, who completed their takeover of Noor Takaful in 2020, mentions that cybersecurity insurance is the need of the hour. Elsewhere in this, as usual, packed and varied edition we take a close look at Africa with Standard Chartered Banks’ Sarmad Lone, Regional Head, Client Coverage Corporate, Commercial and Institutional Banking, AME (p52) on how intra-African trade may be the key to the development of economies across Sub-Saharan Africa and in our Market Focus this month (p55) we hone in on Saudi Arabia, the region’s largest economy, which is expected to witness a surge in sustainable growth due to the government’s efforts to increase spending efficiency. With our market news highlighting some regional finance and banking activities of note in the past weeks, the May issue of MEA Finance will offer much food for your thoughts.

mea-finance.com

CONTENTS

CONTENTS 34

MARKET NEWS

Dubai International Financial Centre and MENA FinTech Association to create innovation forum and establish cross-jurisdiction initiatives to advance the Future of Finance

HSBC launches Green Deposits for corporate and institutional clients in the UAE

Resilience of corporate debt in emerging markets expected to continue with Middle East recording

SME BANKING

14 18

Scaling up growth in the Middle East Nurturing a healthy economy

FINTECH SURGE

Cashless Dubai Initiative reports major progress

COVER STORY

Scaling investment heights with Robo-advisory

INSURANCE

MEA Finance (a MEA Business supplement) 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 EXECUTIVE DIRECTOR AND PUBLISHER : Kenneth Mitchen Email: ken.mitchen@mea-finance.com

Banking and Finance news in the MEA market

Unlocking opportunities in the insurance sector

Prepared to Help

AFRICA FINANCE

The impact of covid-19 on South Africa’s financial sector

BANKING TECHNOLOGY

Making Digital Banking Human in the Post-Pandemic World

PARTNER CONTENT

The Future is Clear and is Cloud(y)

Payments Modernisation in Middle East & North Africa: Trends and Opportunity

OPINION PIECE

Can Intra-African trade buffer the continent from future global economic recessions?

MARKET FOCUS

Building a sustainable future

LIFESTYLE

Privacy is the new ‘ultimate luxury’ for leisure travellers

48 57

BANK B R THROU ANCHES TRA GH CAS N HLESS SFORMED COMM ERCE

Essenti al insig of the region hts from som ’s le e and te chnolo ading finance gy exec utives

Faten Ha labi So nny Zulu Amit Malh otra Kh aled El Bia ly BRAN

CHES

AND PA YMEN

78 mea-finance.com

MARKET NEWS

Dubai International Financial Centre and MENA FinTech Association to create innovation forum and establish cross-jurisdiction initiatives to advance the Future of Finance DIFC and the non-profit organisation, MFTA, have signed a partnership to advance FinTech developments relevant to the region including Open Banking, RegTech, Payments and Digital Assets. DIFC, DFSA and MFTA have launched the “DIFC Innovation Panel” to create a forum to engage with FinTech and Innovation company founders, enablers and thought leaders

ubai International Financial Centre (DIFC) has signed an agreement with the MENA FinTech Association (MFTA), the independent, inclusive, not-forprofit, member-based organisation and industry body. The partnership agreement follows the establishment of the MENA FinTech Association in the DIFC and will see DIFC and MFTA nurture collaboration for advancing FinTech and the Future of Finance in the region including Open Banking, RegTech, Payments and Digital Assets. DIFC and MFTA will also develop and publish joint research and provide strategically important educational programmes on those topics through the DIFC Academy. The partnership and joint initiatives aim at deepening collaboration among regional regulators, industry associations, governments, financial institutions and

FinTech businesses to unlock the full potential of the sector. As part of this collaboration, DIFC Authority, DFSA and MFTA have jointly founded the “DIFC Innovation Panel”, an exclusive forum for founders, enablers and industry thought leaders to provide advice and guidance on how to develop and build a thriving Future of Finance and Innovation ecosystem. A key priority for the panel is to create greater engagement, transparency and understanding among all Future of Finance stakeholders on how to evolve the FinTech sector to unlock growth, while understanding, considering and mitigating new and emerging risks from new technologies. The DIFC Innovation Panel membership is invitation-only and includes a core and extended group. Members include Ebury, Checkout, Tarabut Gateway, Sarwa, Coinmena, Ziina, Baraka, Aura Insurance,

Banking and Finance news in the MEA market

Ripple, Nuwa Capital, Endeavor, DAI, Cambridge Centre for Alternative Finance and C4IR UAE. Arif Amiri, CEO of DIFC Authority, said: “We are committed to strengthening a culture of localised innovation, especially in the FinTech sector, which is aligned with the vision of our leadership to establish Dubai as a hub for start-ups to flourish. As one of the world’s top FinTech hubs, highlighted by the launch of the DIFC FinTech Hive, we are continuously evaluating the FinTech landscape to identify new opportunities and address emerging challenges. “Through our agreement with MFTA, we collaborate to create a roadmap for FinTech entrepreneurs by offering insights on the future of finance. The ‘DIFC Innovation Panel’ will serve as a platform for FinTech and Innovation companies, regulators, financial centres, established financial firms and governments to discuss emerging trends in this promising sector.” Nameer Khan, Chairman of MFTA, said: “We are pleased to see the rapid development of our partnership with DIFC. With a primary focus of supporting FinTech businesses across the MENA region. The collaboration also includes strategic projects with government bodies, regional regulators and IFC’s to further compliment their work in creating an enabling framework which today plays a key role in the economics of a country. The ‘DIFC Innovation Panel’ will serve as a key catalyst in further strengthening the regional MENA FinTech landscape.”

MARKET NEWS

HSBC launches Green Deposits for corporate and institutional clients in the UAE What with seeing a six-fold increase in 2020 over the previous year in its sustainable and transition finance activity in the region and achieving wide recognition for its sustainability initiatives, HSBC has become the first bank in the region to offer a green deposit account

n the 4th of May 2011, HSBC launched Green Deposits in the UAE, which will give corporate and institutional clients a mechanism to make USD and AED deposits in the UAE knowing their funds will be used to finance green initiatives. HSBC is first bank in the UAE to offer a green deposit account Clients will receive a quarterly, portfolio-level view of how their funds have been deployed to support green projects, and they will be able to manage their green account as simply as a regular deposit account. Philippe Robert, HSBC’s Interim Head of Global Liquidity and Cash Management in the Middle East, North Africa and Turkey (MENAT), said: “With the UAE pursuing an increasingly ambitious green agenda, our clients have been asking us for solutions that enable them to manage their capital in a more environmentally responsible way. While there is still a long way to go to meet critical global climate targets, launching Green Deposits in the UAE reflects the increasing awareness

of sustainability and will help embed sustainable finance into corporate treasury management.” HSBC has committed to become a net zero bank in its own operations by 2030, and to achieve net zero in its financed emissions by 2050 or sooner. In the UAE, HSBC is at the forefront of financing the transition to a low carbon economy by expanding its suite of green products for all client segments, from corporates and institutions through to entrepreneurs and individuals. Alok Vijayvergiya, HSBC’s Regional Head of Liquidity and Investments in MENAT, said: “Corporate customers can now incorporate a sustainability agenda into their treasury activities with a simple deposit product, contributing to a greener and more resilient future for the UAE.” The UAE recently submitted its second Nationally Determined Contribution (NDC) to the Secretariat of the UN Framework Convention on Climate Change, which includes a target of reducing greenhouse gas emissions by 23.5% compared to business as usual for the year 2030.

Banking and Finance news in the MEA market

Philippe Robert, HSBC’s Interim Head of Global Liquidity and Cash Management in the Middle East, North Africa and Turkey (MENAT)

To help the UAE and economies across the region achieve their climate targets, in January 2021, HSBC formed a dedicated Sustainable and Transition Finance Team for the Middle East. The Sustainable and Transition Finance Team is building on strong foundations, with HSBC seeing a six-fold increase in 2020 over the previous year in its sustainable and transition finance activity in the region. And, in 2019 and 2020, HSBC was named both the World’s Best Bank for Sustainable Finance and the Best Bank in the Middle East for Sustainable Finance by Euromoney magazine.

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MARKET NEWS

Resilience of corporate debt in emerging markets expected to continue with Middle East recording lowest default level

he percentage of Emerging Market firms defaulting on debts due to the impact of the pandemic is expected to be lower than in many mature markets, according to Aberdeen Standard Investments (ASI). While the COVID-19 pandemic has posed serious challenges that have affected all industries in some shape or form. Despite the continuing negative impact of the pandemic, investment experts at the firm believe there are some good reasons why this EM corporate resilience should be sustained in 2021 and beyond. Kathy Collins, Investment Director, Emerging Market Corporate Debt, Aberdeen Standard Investments, said: “The ongoing COVID-19 pandemic has severely impacted economic growth and business activity throughout the world. Reduced revenues and profits have made debt servicing more challenging for more companies and this is reflected in more distressed credits and rising corporate default rates. “EM corporate debt has not been immune to this trend. However, concerns that emerging market debt issuers might be particularly exposed in this respect are misplaced. Historically the EM corporate debt market has been relatively resilient to past major crises, and this is also evident in default data from the pandemic-hit 2020.” In 2020, the MEA region reported the lowest number of defaults and many of

its currencies are expected to be less affected by global currency weaknesses as they are managed or pegged to the US dollar. According to a report – ‘Default Trends – Global’, published by Moody’s earlier this year, a total of 211 rated corporate issuers defaulted in 2020, more than double the tally (105) for 2019. MEA had the lowest number with just two, followed by Latin America (13) and AsiaPacific (17) while 141 and 38 corporate defaults were recorded in America and Europe, respectively. This is against a backdrop of debt issuance by MENA governments reaching an all-time high of $120.7 billion in 2020 and GCC members crossing the USD $100 billion mark for the first time for issuances, with the $10 billion raised by Qatar’s Ministry of Finance being the largest. The UAE and KSA were the most active issuing countries having secured $40.6 billion and $31.4 billion in bond proceeds, respectively. Meanwhile, corporate issuance was more muted from the region with gross supply on par with the 2019 peak at $61bn, though net supply was a very modest +$15bn. UAE was the largest contributor to supply followed by Saudi Arabia, boosted by the multi-tranche issue of $8bn by Aramco, Saudi Arabia’s largest oil producer. Financials was once again the main contributor with 48% of regional supply in 2020. The negative impact of COVID-19 has been particularly concentrated in some

Banking and Finance news in the MEA market

Kathy Collins, Investment Director, Emerging Market Corporate Debt, Aberdeen Standard Investments

sectors. Examples of this include airlines, lodging, autos and leisure and retail, which are all parts of the consumer cyclical sector. This broader sector accounted for just 6% of the EM corporate debt market compared to 14% in the US High Yield market at the end-2019 and around the onset of the Covid crisis. Collins added: “The COVID-19 shock has certainly increased default risks right across the global corporate bond spectrum, including EM corporate bonds – further underlining the importance of credit research and careful stock selection. “However, there are some structural factors that should help to limit credit risks, such as, EM corporates’ comparatively low debt levels and relatively low exposure to highly pandemic-hit sectors. “In addition, potential currency vulnerabilities in the uncertain event of the US dollar strengthening should be manageable overall and the expected strong global economic recovery should also certainly help to mitigate default risks going forward.”

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26 May 2021 Armani Hotel, Burj Khalifa Dubai, United Arab Emirates

Future of Banking Innovation SPEAKERS

KEYNOTE Bryan Stirewalt Chief Executive Dubai Financial Services Authority

Abe Karar

Ahmad Abu Eideh

Angela Halawi

Brian Yeoh

Cassim Docrat

Devid Jegerson

Chief Digital Officer

Chief Executive Officer

Financial Services Lead

Microsoft

Head of Data and Technology Governance

Regional Director

DDCAP (DIFC) Limited

Head of Customer Experience and Platform Development

Giselle Bou Ghanem

Ghinwa Baradhi

Gonçalo Traquina

Haifa Aboufarah

Advisory Partner

Enterprise Account Manager - FSI

Peter Smith

Rajashekara Maiya

Fintech Galaxy

United Arab Bank

Ellis Wang

Fraser Brown

Group Head of Technology, Transformation and Information

Executive Director, Banking & Insurance

Mashreq

Kokila Alagh Founder KARM Legal Consultants

FSRA, Abu Dhabi Global Market

Senior Program Manager for Public Chief Information Officer Cloud - International CTO Office Middle East, Northern Africa & Turkey (MENAT) Abu Dhabi Global Market Avaya

KPMG Lower Gulf

National Bank of Fujairah PJSC

Dell Technologies

HSBC

Mohammed Abdel-Razek CIO - Africa, Middle East & Islamic Banking Standard Chartered Bank

Onur Ozan

Pedro Pinto Coelho

SWIFT

Portuguese Fintech and InsurTech Association

Head of Middle East, North Africa and Turkey

Chairman

Head of Policy & Strategy

Dubai Financial Services Authority

Global Head of Business Consulting and Product Strategy

Infosys Finacle

Sanat Rao

Chief Business Officer & Global Head

Infosys Finacle

Saud Al Dhawyani

Chief Technology Officer

Emirates NBD

Stefan Kimmel

Chief Operating Officer

Commercial Bank of Dubai

Valérie Bauloye

Head of Channels & Partner Management

Appway

Yuri Misnik

Zubair Ahmed

First Abu Dhabi Bank

VeriPark

Waleed Saied Mohamed Hasabelnabi Co-Founder - VP Technology

Cubic Systems

Yan Bechet

Head of Client Coverage, Dubai Commercial Banking

HSBC Bank Middle East Limited

Group Chief Technology Officer, Executive Vice President & Member of the Group Executive General Manager of Middle East Committee & Africa

The MEA Finance Banking Technology Summit is an exclusive gathering of the region’s leading bankers and technology professionals to debate and learn how new technologies are transforming banking for the new age digital consumer. Join us on 26th May 2021 for the MEA Finance Banking Technology Awards as well, where we honor key players in the industry for their winning initiatives, most innovative technology solutions, and digital readiness that have positioned them as a leader in digital transformation in the Middle East.

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DATABANKING SME SECURITY

Scaling up growth in the Middle East

Regional leaders have been formulating policies and introducing programs to nurture the growth of SMEs to create employment and build sustainable economies

Banking and Finance news in the MEA market

he dual shocks of COVID-19 and a plunge in oil prices, which saw oil tumbling to $27 per barrel in April 2020, severely jolted hydrocarbons-reliant GCC economies. However, the International Monetary Fund (IMF) revised upwards its growth estimates for the MENA region to 4% in 2021 after contracting by 3.4% last year. As regional governments look to re s u s c i ta te t h e i r p a n d e m i c battered economies, the importance of restoring confidence in growth in

a safe, sustainable and inclusive way has never been more crucial. Small and Medium Enterprises (SMEs) represent a significant part of the world economy and are one of the strongest drivers of economic development, innovation and employment, said the International Finance Corporation (IFC), a member of the World Bank Group. In the Gulf region, the contribution of SMEs to overall growth cannot be underestimated, a sector that accounts for around 90% of all businesses and more than 50% of employment worldwide, according to IMF estimates. Regional leaders have been formulating policies and introducing programs to nurture the growth of SMEs to create employment and build sustainable economies. Similarly, both the public and private sectors have been developing programs to catalyze the growth of SMEs including

as well as create jobs to meet the needs of a growing young population. The regional governments have been stepping up their efforts to enhance growth in the SME sector through several initiatives that include an SME-exclusive bank in Saudi Arabia, UAE’s ‘Operation300bn’ and ‘Make It In The Emirates’, among other financing programs. Under its Vision 2030, Saudi Arabia seeks to increase SMEs’ contribution to the GDP to 35% from the current 20% by facilitating their access to funding and encouraging financial institutions to allocate up to 20% of overall loans to them. Last September, the UAE Ministry of Finance unveiled a federal law on securing interest with movable property. The law allows SMEs to use assets including tools and raw materials as

IN LINE WITH OTHER EMERGING MARKETS COUNTRIES BUT BELOW LEVELS IN MANY DEVELOPED MARKETS, CREDIT TO SMES IN THE UAE STANDS AT ABOUT 5% OF TOTAL BANK LENDING WHICH ALSO PUT THE COUNTRY AT PAR WITH ITS ARABIAN GULF NEIGHBORS. – S&P Global

startups. Data from UAE’s Ministry of Economy shows that SMEs make up around 94% of companies operating in the country and provides employment for more than 86% of the private sector’s workforce. GCC governments recognize the important role that SMEs can play in delivering higher and more inclusive growth especially in the post-pandemic era and the sector is central to regional c o u nt r i es’ s u sta i n a b l e re c ove r y strategies as they look to wean their economies off reliance on hydrocarbons

collateral to back loans, as the UAE government moves to shore up lending to the sector. “As we emerge from the pandemic, we see an important role for SMEs as the backbone of the economy to fuel back growth,” said Rehan Ali, the Head of Business Banking, National Bank of Fujairah. In Bahrain, the SME sector has proven to be a key pillar in the kingdom’s economic diversification strategy. Last year, the government announced plans to avail $64 million to subsidize electricity

SMEs make up

94% of companies in the UAE, 86% of private sector workforce Source: UAE Ministry of Economy

bills for SMEs in a bid to spur growth after the devastating impact of the pandemic on the economy.

SMEs financing Though the IMF said that access to finance ranks as a major constraint for the growth of SMEs across the Middle East, over the past years regional governments have implemented an array of measures to enhance lending to the sector. Funding commitment to SMEs is vital in realizing the sector’s overall contribution to growth in a region that is well known for its heavy reliance on oil revenues. GCC countries also adopted several strategies to encourage the financial services sector to extend credit to SMEs but the most prevalent are credit guarantees and credit registries. Beyond simply lending, banks are also required to strive to understand the businesses they are funding and in doing so, develop financial products and services that meet the needs of small businesses and minimize risk. The Middle East financial services sector is playing a critical role to help SMEs navigate the pandemic crisis despite the challenging operating environment and geopolitical tensions that sometimes spook investors. I n A p r i l 2 0 2 0, t h e A b u D h a b i government unveiled a credit guarantee scheme for SMEs registered in the emirate, giving banks such as First Abu Dhabi Bank, Abu Dhabi Islamic Bank and Abu Dhabi Commercial Bank more of an incentive to lend to smaller businesses. S&P Global said that in line with other mea-finance.com mea-finance.com

DATABANKING SME SECURITY

emerging markets countries but below levels in many developed markets, credit to SMEs in the UAE stands at about 5% of total bank lending which also put the country at par with its Gulf neighbors. “Since the early 2000s, National Bank of Fujairah has been committed to lending to SMEs and has consistently expanded its asset book by providing tailored banking solutions to meet the needs of the SME sector,” added Ali. The IMF highlighted that improving access to finance for SME businesses in the MENA region could boost regional economic growth by up to 1% annually while stimulating job creation. Still in the UAE, Dubai SME allotted $5.44 million for the capital guarantee

of resources so that these companies can identify and apply for aid packages and government support programs that meet their requirements. Regional countries such as Kuwait and Egypt have specified caps on the maximum interest rates that banks are permitted to charge on loans to SMEs to ensure that credit to small businesses is affordable. While Saudi Arabia and Jordan offer SMEs subsidized interest rates through specialized credit institutions and the central bank, respectively. Banks in the Middle East region are also collaborating with agencies such as Dubai SME and Etihad Credit Insurance (ECI) in the UAE and Monsha’at in Saudi Arabia to meet other non-financing needs

BY FOCUSING ON INNOVATION, DIGITALIZATION AND ENTREPRENEURSHIP, GOVERNMENTS CAN SUPPORT SME DEVELOPMENT AND BUILD THEIR GLOBAL COMPETITIVENESS.

Govt-led initiatives

– PwC

scheme that was unveiled by its financial arm in partnership with Beehive, MENA’s first regulated peer-to-peer lending platform, last May. The partnership between Dubai SME and Beehive allows more SMEs and investors to leverage financial technology to support business continuity and growth. GCC banks have been assessing the exposure of their clients and customers to the economic fallout due to COVID-19 including SMEs in a bid to invest in deeper business relationships. Investing in a deeper business relationship can include flexible repayment options, new debt packages to address cashflow shortages and relief as well as insurance products. PwC said that Gulf banks can also offer SMEs access to a centralized database

imposed globally last year demonstrated that technology could facilitate business continuity and enhance resilience to shocks, hence digital innovations can help unlock funding for SMEs and improve government efficiencies. In 2019, UAE’s Mashreq Bank and Emirates NBD launched digital banks for SMEs and startups to address the banking challenges faced by new businesses. Mashreq’s NeoBiz can be opened in under 20 minutes, according to the bank’s website and offers three types of accounts Trader Pro, Basic and Advance. While Emirates NBD’s E.20 allows startups and SMEs to make local and international transfers, pay for utilities and services, generate invoices, track receivables and view profitand-loss statements on a mobile phone. Xpence, a UAE challenger bank also offers startups, entrepreneurs, SMEs and freelancers a business account that combines bookkeeping and banking in one app. The neobank is set to launch in Saudi Arabia after signing a deal with Riyad Bank, it secured BIN sponsorship in Bahrain and is also in talks with banks in Oman and Kuwait to offer similar, according to S&P Global.

of the sector. Between January and November 2020, ECI issued $114 million worth of trade credit support to SMEs which translates to $272 billion non-oil trade insured turnover.

Tech to the rescue Besides funding challenges, SMEs can also face difficulties accessing a wider range of bank services, including account opening which makes it difficult for them to pay for services and invoice clients. As part of its initiatives to mitigate the impact of the pandemic on small businesses and entrepreneurs, the UAE central bank directed local banks to process account opening for SMEs within two days. The IMF said that the travel and movement restrictions that were

Banking and Finance news in the MEA market

The development of the GCC region’s SMEs is seen as a major step in the right direction and every country is running programs to support the sector. “In a competitive world, governments have a vital role to play in providing SMEs with high growth potential the support they need to be competitive and maximize their economic impact,” said Kearney. Fitch said that at the height of the pandemic GCC countries unveiled hefty support packages that dwarfed any previous support in the oil-rich region. Most of these aid packages include monetary and macro-prudential measures and the move by regional central banks to cut interest rates together with these support packages are expected to help sectors most hit by the pandemic to navigate this period of uncertainties especially SMEs and startups.

As part of its efforts to ensure business continuity amid the pandemic, the Saudi government unveiled aid packages worth $61 billion for the private sector and they include a $13.3 billion package to support the banking and SME sectors, said KPMG. The UAE central bank also unveiled a $70 billion stimulus package (20% of UAE’s GDP) to mitigate the economic fallout from coronavirus. The aid includes reduction of utility bills for commercial and industrial activities in addition to waiving and reducing several fees such as merchant service fees and bank

charges. Last July, the UAE created the Ministry of State for Entrepreneurship and SMEs as part of the country’s initiatives to promote entrepreneurship and support small businesses. In February, the Saudi Cabinet approved the establishment of a bank for SMEs. The Saudi Ministry of Commerce said that the digital-only bank is expected to bring together all financing solutions under one umbrella to allow SMEs access to appropriate financing and achieve stability and growth. The UAE also unveiled ‘Operation 300bn’ an initiative that is aimed at boosting

SMALL AND MEDIUM ENTERPRISES REPRESENT A SIGNIFICANT PART OF THE WORLD ECONOMY AND ARE ONE OF THE STRONGEST DRIVERS OF ECONOMIC DEVELOPMENT, INNOVATION AND EMPLOYMENT. – International Finance Corporation

the industrial sector’s contribution to the country’s economic output to $82 billion as well as establish around 13,500 SMEs over the next 10 years. As part of the ‘Operation 300bn’ initiative, Emirates Development Bank pledged $8.2 billion in funding to small businesses and startups in sectors considered a priority to the country’s economy. In 2019, the Abu Dhabi Government launched a $13.6 billion Ghadan 21 stimulus fund to accelerate economic growth. Ghadan 21 is the driving force behind Hub71, a $272 million initiative that was launched to support tech startups in Abu Dhabi and it counts Softbank and Microsoft among its partners. Ghadan 21 is also backing Abu Dhabi’s $1.6 billion supply-chain financing for SMEs which started in January and seeks to help small businesses weather the impact of the pandemic. Under Ghadan 21, the Abu Dhabi government is also offering an $817 million SME credit program. “ B y fo c u s i n g o n i n n o v a t i o n , digitalization and entrepreneurship, g ove r n m e n t s c a n s u p p o r t S M E development and build their global competitiveness,” said PwC. mea-finance.com mea-finance.com

DATABANKING SME SECURITY

Nurturing a healthy economy Rehan Ali Head of Business Banking, National Bank of Fujairah describes the local SME scene, explaining that such enterprises are vital to a healthy economy, how he and his team provide help to them and what they too must do to help themselves

Rehan Ali, Head of Business Banking, National Bank of Fujairah

Banking and Finance news in the MEA market

ME’s are vital to the economy, and regional demographics point toward a busy SME scene. What are you and others doing to help foster growth in this part of the economy? Since the early 2000s, NBF has been committed to lending to SMEs and has consistently expanded its asset book by providing tailored banking solutions to meet the needs of the SME sector. This is a natural focus for us as the SME sector is a vital segment of the local economy contributing more than 60% of the total GDP and offering millions of jobs to both citizens and residents. Against this backdrop, our lending book to SMEs has grown steadily over the years, reflecting our policy of supporting SMEs in the UAE. As such, we have a dedicated focus to helping the SMEs secure funding and to meet their banking needs. NBF, as a long-term partner to businesses, has never stopped lending to SMEs, even during the 2008 financial crisis; our commitment to continuing to lend and support our SME customers even during the Covid-19 pandemic is a clear testament to this focus. We have dedicated RM for borrowing/nonborrowing accounts who take care of the SME customers and their requirements. We are flexible in terms of lending and understand seasonal requirements of clients and have accommodated them in terms of ad-hoc limits and projectbased limits wherever necessary. With government backing and fund-based scheme backing, we will further be able to grow the book and lend to SMEs who are newer in the market on the backing of a scheme. This will further help the SMEs to grow and increase their turnover and hence profitability. The entrepreneurial spirit that is encouraged and nurtured in the UAE has contributed to many of the country’s achievements across various sectors. As we emerge from the pandemic, we see an important role for SMEs as the

backbone of the economy to fuel back growth. As such, we will continue to offer our unwavering support to the sector and leverage our relationships with partners and government entities to best meet their needs.

Funding and investing options are now manyfold. How are you adapting to the meet needs and choices of the expected wave of younger entrepreneurial activity in the region? Over the years NBF has continued to support its existing clients as well as open to support new business owners in the UAE. We have a dedicated product team that looks at the needs of SMEs. In addition, we conduct an annual customer satisfaction survey to better understand our customers’ needs and create products that meet those needs. As a result, we can create products based on the needs of customers and the risk appetite of the bank. Looking ahead, we will continue to work hand-inhand with SMEs to help them overcome any challenges that come their way and empower them with the resources and the means to persevere. We do not only look into the various needs of SME owners across different sectors but have a business unit dedicated to meeting the needs of Emirati businesswomen owners called NBF Elham; this is a unique offering exclusive to NBF. By the same token, NBF has also created NBF Connect, dedicated and exclusive banking platform for Small and Medium Enterprises (SMEs) and the first of its kind in the UAE. The community platform will serve as a one-stop shop for SME members which will include access to a suite of services and solutions as well as knowledge-sharing capabilities. Co-created with SMEs, this is the first time a bank joins hands with the SME community to create a platform of this kind “for SMEs, by SMEs. We have no doubt that aspiring and young entrepreneurs will benefit from this offering while also connecting to a community of fellow business owners.

How do you risk manage your SME lending decisions? We have parametrized lending products for small SMEs and detailed credit undertaking for the relatively midsize and bigger SMEs. Risk is managed through a variety of tools including customer bank statements, audited balance sheet, Etihad credit bureau reports, customer verification reports, among others. Our Relationship Managers boast unmatched experience, industry insight, and a good understanding of the risks that come with lending to SMEs. They maintain close relationships with their clients and meet them on a regular basis to receive first-hand information. They also keep in touch with consumers

on a case-by-case basis in situations where consumers have been directly impacted. Furthermore, the validity of the client’s limits to facilitate operations and accommodate for any delays in the completion of the mandatory yearly audits and fresh loans and new funding were also extended to SMEs to help to jump start the business.

What can SMEs do to help themselves when interacting with banks and financial institutions? At all times, transparency and open communication are essential. SMEs and banks must consider the complexities of market requirements and collaborate to resolve any problems before they become

OUR RELATIONSHIP MANAGERS BOAST UNMATCHED EXPERIENCE, INDUSTRY INSIGHT, AND A GOOD UNDERSTANDING OF THE RISKS THAT COME WITH LENDING TO SMES. who want to be kept up to date on business developments. This bespoke and personalised approach brings us closer to our clients and support our overall decision-making on lending.

How have you helped SMEs cope with the fallout of the global pandemic? The SME sector was one of the sectors that was highly impacted by the global pandemic. As such, we granted a sixmonth extension of working and longterm loans at the height of the pandemic, which was extended further for severely impacted customers. Customers with cash flow problems were supported by rescheduling or restructuring shortterm stretched payments, which were not subject to extra interest charges, to help them get through the pandemic. Interest rate reductions have also been viewed

too severe. Other aspects expected form SMEs include but not limited to: a. Have their finance function boosted and appoint professionals to handle the audit and account’s function. b. Capitalise the company adequately so that they are well prepared in the case of a downturn or cash flow crunch. c. Although SMEs may have a lean framework, it is critical to have enough functions in place to ensure adequate governance. They should make certain that they have a reporting system in place as well as people in charge of governance. d. Internal audit function should be an essential part of all SME companies. e. Control on external borrowings to be in place to make the company stronger and resilient to shocks and downturns in the economy. mea-finance.com mea-finance.com

DATABANKING SME SECURITY

Helping SME’s Work As the recovery from the Covid-19 global pandemic starts to gather pace, Rashid Al Qubaisi, Chief Executive Officer of Aafaq Islamic Finance tells MEA Finance that the road to recovery for SME’s is going to be based on cooperation between banks, finance providers and SME’s, who themselves should also take a proactive role in ensuring they are effectively equipped to tackle the current difficult environment and the coming challenges of recovery

ME’s are vital to the economy, and regional demographics point toward a busy SME scene. What are you and others doing to help foster growth in this part of the economy?

Aafaq Finance’s concentration on the UAE SME sector has grown over the last few years and it now plays a pivotal role in our daily business operations. Under the able guidance of the Chief Executive Officer, Aafaq has been aggressively and actively promoting the financing needs of the SME sector via many Islamic lending products including Corporate Liquidity Murabaha, Corporate Equipment Murabaha, Vehicle Murabaha and Goods Murabaha, to name but a few.

Moreover, the Company has been actively providing financial advice and assistance to existing SME customers who are or were adversely affected due to the pandemic and various COVID19 related lockdowns and restrictions imposed by the Government over the past year and a half, by allowing moratorium

and payment holidays to service their financial commitments without any delay or delinquency. Aafaq Finance continues to lend to new SME customers whose business performance were affected owing to the prevailing negative economic conditions, with the aim of seeing their

THE UAE MARKETS HAVE SHOWN STRONG RECOVERY FROM THE RECENT LOWS OF THE PANDEMIC IMPACT AND WE CAN NOW OFFER TAILOR MADE PRODUCTS TO SUPPORT THE ENTITIES AND BUSINESSES AS THEY STRIVE TO GROW IN THE FUTURE.

Banking and Finance news in the MEA market

growth prospects improve and grow in the post-COVID era, as the SME sector gradually adjust their business models to fit the new market norms of the postpandemic world.

Funding and investing options are now manyfold. How are you adapting to the meet needs and choices of the expected wave of younger entrepreneurial activity in the region? SMEs and entrepreneurs were already confronted with tough working capital requirements and capital investment requirements before Covid-19 struck. Then came the pandemic which impacted them dramatically with significant drops in revenues while still being burdened with their fixed costs which continued during the restrictions brought in to combat Covid-19. The crisis led in many cases to the temporary or even the permanent closure of many SMEs due to a lack of short-term and long-term financing arrangements and facilities. However, the UAE’s Markets have shown a strong recovery from the recent lows of the pandemic’s impact and we can now offer tailor made products and services to support the entities and businesses as they strive to grow into the future.

How do you risk manage your SME lending decisions? With increased and proactive lending to the SME sector now taking place, it is important that assessing the repayment capacity of our customers is taken into serious consideration at all times. With this as a backdrop, Aafaq has revisited and reviewed its financing products and policies to streamline the processes, as well as to seek out and identify bad credit risks. Aafaq has also upgraded its risk mitigation policies to identify potentially difficult issues at the early stages of the credit assessment process with the adoption of robust credit and risk features.

Rashid Al Qubaisi, CEO, Aafaq Islamic Finance

AAFAQ HAS ALSO UPGRADED ITS RISK MITIGATION POLICIES TO IDENTIFY POTENTIALLY DIFFICULT ISSUES AT THE EARLY STAGES OF THE CREDIT ASSESSMENT PROCESS WITH THE ADOPTION OF ROBUST CREDIT AND RISK FEATURES. How have you helped SME’s cope with the fallout of the global pandemic? Now, over one year since the start of the pandemic, SMEs are still as, or even

more vulnerable than at the outset of the start of the crisis. With this being the case in so many places, countries and governments have extended and expanded liquidity relief measures in order to help SME’s cope and grow back to economic health as quickly and strongly as possible. With an increasing number of g ove r n m e n t re c ove r y p a c ka g e s available, we are using “moratorium tools” to restructure payments plans in line with company cash flows and extending the repayment periods for businesses with additional finance to support them through their periods of drops in revenue. This has helped businesses survive and is also a good opportunity to generate long-term goodwill and trust.

What can SME’s do to help themselves when interacting w i t h b a n ks a n d f i n a n c i a l institutions? Lack of credit background information is a factor that contributes to the constraints faced by SME’s when assessing their creditworthiness to interact and request for finance with Banks and Financial Institutions, so they need to keep data that records this clearly and efficiently. SME’s must make sure to maintain and validate their trading and business documents such as Trade licenses, patents and other agreements and certificates too, in order to ease their applications for financial services. They also need to maintain their books of accounts and reports and importantly, to honor their supplier payments without delay. Avoiding diversion of their funds from short term sources to long term investments may impact the liquidity of the company too. Project reports and feasibilit y studies of funding requirement with clear justification and utilization funds along with projected cash flow is a very important way they can help themselves when interacting with their banks. mea-finance.com mea-finance.com

FINTECH SURGE

Cashless Dubai Initiative reports major progress As part of the Fintech Surge interview series for the Future Blockchain Summit from 17 to 20 October at the Dubai World Trade Centre, for which MEA Finance is a Media Partner, Meera Alshaikh, Head of International Relations and Partnerships, Smart Dubai Department, talks about the myriad benefits for both the public and private sector as it transitions to a cashless society, spurred on by the government response to the Covid-19 pandemic and its vision to develop the emirate as a Smart City

By Oscar Wendel, Senior Content Manager of Fintech Surge taking place on October 17 – 20 at Dubai World Trade Centre

he Cashless Dubai Initiative being spearheaded by the Government of Dubai is bearing fruit after an intensive six to eight months, reports Meera Alshaikh, Head of International Relations and Partnerships, Smart Dubai Department. The initiative kicked off in later 2019, quickly gaining prominence due to the impact of Covid-19.

“The shift towards a cashless society has many important returns for cities and countries and has gained enormous importance in recent times, as cashless payments are perceived as a safer way to limit the spread of the coronavirus,” comments Alshaikh. A recent survey by global public opinion and data company YouGov has made it possible to quantify the impact of Covid-19 on payments and shopping behaviour: An astonishing 71% of retail consumers prefer digital channels over cash and 61% of e-commerce consumers use cash and use cards and wallets more than the cash-on-delivery option online.

Banking and Finance news in the MEA market

Meera Alshaikh, Head of International Relations and Partnerships, Smart Dubai Department

In addition, a 2017 report by Visa on the potential benefits of the cashless society estimate an AED1.88 billion increase in government revenue, an AED2.2 billion increase in individual savings and an AED5.5 billion increase in business revenue in Dubai alone. “That, of course, is in addition to a wide range of catalytic benefits, such as wage growth and jobs created. So, to that extent, and in line with the leadership’s vision to position Dubai as one of the smartest and happiest cities on earth, the government formed what is now known as the Cashless Dubai Initiative,” explains Alshaikh.

The Cashless Dubai Working Group has been tasked to develop and implement a roadmap for a seamless transition towards a cashless society in the emirate. The working group comprises Directors General from all relevant local authorities, as well as related stakeholders such as major banks. The initiative forms part of the Smart Dubai drive by the government to transform the emirate into a preeminent global Smart City. The working group has, to date, identified six major focus areas, namely government services, peerto - p e e r t ra n s a ct i o n s , reta i l a n d related services, the unbanked and underbanked population and tourism. A major concern being addressed in tandem is the issue of economic security and cybercrime. “There are many enabling factors to ensure we achieve success in these focus areas, such as having an agile and enabling environment for consumer protection,” points out Alshaikh. Collaboration between the public and private sector, especially start-ups, will be critical to support the initiative to develop fast and reliable technology for such a cashless transition. Innovation will be driven by crowd-sourcing, with the ultimate goal to improve the economic competitiveness of Dubai and the entire region. “We have had extensive brainstorming sessions, culminating in various initiatives currently in the market as we look to enhance the existing solutions so as to come up with more innovative ideas to take them forward,” highlights Alshaikh. These include a unified payments network in collaboration with the Department of Economic Development in Dubai to enable start-ups to plug their APIs into a unified network for the benefit of both consumers and businesses. “Any companies with APIs that are ready to be added can reach out to us and we can connect them with the team working to take this initiative forward,” reveals Alshaikh.

In terms of the future, one of the main goals is to create a universal opensource platform that both companies and individuals can simply plug into. The implications for tourism in particular are far-reaching, especially as it will allow international tourists to Dubai to integrate seamlessly with the cashless society. Another low-hanging fruit for a

individual who is not open to the idea of a cashless society, then we also want to strive to provide you with the option to use your local currency.” It is this flexibility and adaptability that is fast accelerating the transition to a cashless society in Dubai, and also setting a global benchmark in terms of its regulation and implementation.

THERE ARE MANY ENABLING FACTORS TO ENSURE WE ACHIEVE SUCCESS IN THESE FOCUS AREAS, SUCH AS HAVING AN AGILE AND ENABLING ENVIRONMENT FOR CONSUMER PROTECTION.

painless transition to a cashless society is to look at how the Roads & Transport Authority (RTA) can integrate with Smart Dubai. Alshaikh points out that the RTA’s Nol e-purse system is already a man enabler of what the initiative hopes to achieve over the next few years. “It is all about generating opportunities and ensuring convenience. If you are an

“We are constantly looking at global best practice in this regard and how to apply it locally. We are very excited at what we have been able to achieve in a short period. Many countries have been working on such a framework for far longer with fewer tangible results, so we are very optimistic about our achievements to date and our future goals,” concludes Alshaikh. mea-finance.com

DATA SECURITY PAYMENTS

A Shifting Landscape Though the outbreak of the pandemic presented a set of unprecedented challenges to the global financial services sector, it also accelerated and strengthened the adoption of digital payment solutions

h e G C C re g i o n d i g i ta l p a y m e n t s vo l u m es h a ve soared since the outbreak of the COVID-19 pandemic, reportedly generating as much as 10 years’ worth of growth across B2C, B2B, and P2P spaces in just over 12 months. “Payment services providers including banks are leveraging on these adoption rates as an impetus to accelerate digital projects, but significant challenges and risks remain,” said PwC. Though the outbreak of the pandemic presented a set of unprecedented challenges to the global financial services sector, it also accelerated and strengthened the adoption of contactless payment solutions, a trend that was already in full throttle across the region. According to a consumer survey that was conducted by Mastercard in the Mideast region, 70% of respondents said that they are using some form of contactless payment method since the outbreak of coronavirus due to safety concerns. 81% of the respondents said that they would continue using digital payments post-pandemic. “The speed of change in the global payments landscape is accelerating. It is therefore important for banks such as Citi to engage more proactively with fintechs,”

said Dave Aldred Head of Treasury and Trade at Citi for MENA. The advancement in the payments sector across the Gulf region is being driven by the growth in e-commerce and associated services, the shift from cash payments amid concerns that money is a vector of COVID-19 and government support. “The world of payments is going through a period of incredible change, driven by technological innovation and evolving customer expectations, and intensified even further with the challenges of a global pandemic,” said Onur Ozan Head of Middle East, North Africa and Turkey at SWIFT. The ability of payments service providers to deliver seamless and instant payments service 24/7 is key for all players to remain relevant in this changing landscape and globally, many domestic market infrastructures have begun delivering instant payments. The next generation of digital payments vehicles will not only be embedded within smart devices, but they will also have to offer increased securitization, such as tokenization and strong authentication.

Scaling up Globally, payments remain one of the best performing financial services

Banking and Finance news in the MEA market

products but unfortunately for banks – traditionally the main providers of payments services – this momentum is no longer extending to most of them especially under the current operating conditions. Technology giants, fintechs, merchants and social media giants have all created their digital payment offerings. For banks to maintain a competitive edge in the next normal, McKinsey said, “Success will depend on thoughtfully assessing capabilities, determining the role of payments in market strategies, and appropriately aligning payments operations to achieve the required performance improvements.” The nexus between banks and digital payments service providers is no longer about competition but is now about collaboration through adopting cutting-edge technology services to meet customer needs and expectations. Regional banks are leading or participating in several accelerators, incubators, and training programs to advance their access to financial technologies. For fintechs and startups, such partnerships provide easy access to resources, data, funding, space, and networking opportunities to test and showcase their prototypes.

These types of collaborations are a valuable addition to the internal innovation programs of the financial institutions that seek to increase and maintain their customer relevance. “Carving out the payments business allows a more flexible approach to growth while also establishing a currency that makes subsequent consolidation possible, as carve-outs can tap into the higher valuation afforded payments companies,” said McKinsey. Treating payments as a standalone entity for example in the case of Emirates NBD’s Network International allows for the expansion of services across the financial services sector and opens the service to a broader array of customers, thereby driving scale and improving profitability. In April, First Abu Dhabi Bank (FAB) completed the carve-out of its existing payments division into a stand-alone operational entity called ‘Magnati’. Aside from its payment services, Magnati seeks to provide enhanced capabilities to partner with fintechs on product and service innovation. Though GCC banks have made significant progress in their digital transformation journey compared to their peers in the emerging markets, the fact that payments represent the most frequent touchpoints between a bank and its customers makes digital investment in the sector more important than ever. “Consumer behavior has changed over the past few years. Adoption of new technologies has raised the bar of user expectations and pushed operators to create new products that are not just increasingly innovative, but also easy to use,” Devid Jegerson, Head of Customer Experience and Platform Development at National Bank of Fujairah said in an exclusive interview MEAFinance. Ernst & Young said that the payments landscape is experiencing a wave of innovation, driven by technological advancement and consumer desire for on-demand banking and payment solutions.

Digital payments, once a convenience, have become a necessity in these times, said PwC. The emergence of new technologies is also offering regional banks a window to be more innovative and efficient in service delivery, but it is also opening the door to new entrants such as fintechs, global retail giants as well as card networks and neobanks.

Fostering growth Across the Gulf region, the pandemic and its economic fallout has undoubtedly accelerated a string of existing trends in both consumer and business behaviors

The ongoing shifts toward e-commerce, digital payments (including contactless), instant payments, and cash displacement have all been significantly boosted in the past six months, said McKinsey. The COVID-related restrictions that were introduced by regional governments to curb the spread of coronavirus shifted consumer and business behavior towards e-commerce platforms making it imperative for financial service providers to provide seamless payment solutions. “ I n c re a s i n g c o nve rg e n c e a n d integration between e-commerce and mobile technology have radically changed

DRIVEN BY CHANGES IN DIGITAL TECHNOLOGY, CONSUMER DEMAND AND COMPETITIVE FORCES, THE WAY PEOPLE MAKE PAYMENTS IS EVOLVING FASTER THAN ANY OTHER AREA OF FINANCIAL SERVICES. – Ernst & Young

while introducing new developments that saw the use of digital payment methods surpassing the use of cash and debit cards. “The COVID-19 pandemic accelerated the diversification of instruments already underway while encouraging remote, contactless modes of payment,” said Jegerson. As the payments market expands, customer experience is becoming the prime competitive differentiator, said Accenture. To maintain a competitive edge in a crowded market or adapt to changing operating environment, payment services providers across the GCC must understand the needs and expectations of their customer base. The competition bet ween the operators in the payment sector can be considered as a battle to achieve competitive advantages using precise strategies to obtain favorable positions.

the shape of the payments marketplace,” said PwC. A survey conducted by PwC revealed that around 53% of regional retail firms expanded their digital business with Saudi Arabia’s Bin Dawood and Danube benefiting from this surge as their average sales soared by 200% while UAE’s Carrefour reported a 59% leap in online sales. The growth in the Mideast payments industry can also be attributed to regional governments’ support that is seeing banks leveraging these adoption rates to advance their digital transformation strategies. GCC countries are spearheading different digital payments initiatives such as Oman’s Mobile Payments Clearing and Settlement System, UAE’s e-Dirham, DubaiPay, BenefitPay in Bahrain and Saudi Arabia’s Sarie – all of which are meant to enable service providers and mea-finance.com mea-finance.com

DATA SECURITY PAYMENTS

CARVING OUT THE PAYMENTS BUSINESS ALLOWS A MORE FLEXIBLE APPROACH TO GROWTH WHILE ALSO ESTABLISHING A CURRENCY THAT MAKES SUBSEQUENT CONSOLIDATION POSSIBLE, AS CARVE-OUTS CAN TAP INTO THE HIGHER VALUATION AFFORDED PAYMENTS COMPANIES. – McKinsey

government entities to offer payment facilities around the clock. “The payments world is transitioning to digital-first and there’s no turning back,” said EY. S i m i l a r l y, s e a m l e s s p a y m e n t solutions such as digital wallets and “pay” buttons such as FAB’s Payit, Qatar National Bank’s QPay, stcPay in Saudi Arabia, UAE’s Empay as well as Samsung, Google and Apple Pay all remove the hassle of entering payment details for each transaction. “Payments providers, both old and new have been stepping up and embracing digitization to address customer demands for rich capabilities, simplicity and increased predictability, all while navigating the challenges posed by cost pressures, regulatory changes and legacy technology,” Ozan added. McKinsey said that higher limits for contactless payments at the height of the pandemic also triggered rising adoption rates across the globe, making inroads beyond debit’s typical domain of smaller-value transactions. Other factors driving the success of digital payment methods across the GCC includes their popularity among small business and startups, banks’ quest to meet customer expectations, increase efficiency, accelerate growth and cutback operational risk. B osto n C o n s u l t i n g G ro u p a n d Swift projected that digital payments revenues globally could hit the $1.8 trillion mark by 2024, from $1.5 trillion in 2019, lifted by the continued transition away from cash, sustained strong growth in e-commerce and electronic transactions, and greater innovation.

Security & data privacy risk Though the use of seamless payments across the region exploded in popularity last year following the outbreak of the pandemic, the increase in their adoption can also be credited to how they are deemed a secure way of settling payments compared to fiat currency. Due to cybersecurity concerns in the payments industry, EY projected that there will be a wider deployment of b i o m e t r i c s , c l i c k- to - p a y a n d other tokenization technologies, as well as behavioral analytics, to enhance security. Contactless debit/credit cards use a computer chip and a tiny antenna that establishes a connection with t h e p o i n t- o f- s a l e s y s t e m w h e n making a payment. McAfee said that the connection between a card and a POS is through tokenization – the process of converting meaningful data, such as an account number, into a token that has no meaningful value if breached. Mobile payment services such as Samsung, Apple and Google Pay uses near-field communication (NFC), which is also a much safer way of settling payments. American consultant firm Kearney said that the past decade has seen digital payment solutions expanding from using a credit card online to tapping a mobile device, entering a phone number, scanning a QR code, using an instant messenger app, and even using face recognition technology during checkout. ResearchAndMarkets.com noted that consumers are trying out new

Banking and Finance news in the MEA market

payment methods while purchasing from e-commerce websites and favor those methods that have the strongest protection against fraud losses. However, just like any financial technology, the payments sector is not immune to mobile security and data privacy risks. The explosion in digital payment options together with skyrocketing adoption across the region was met with a surge in cybercriminal activity as hackers are becoming more sophisticated and aggressive, making occasional headlines by stealing customer data. KPMG stated that the proliferation of digital channels following the outbreak of the pandemic has also led to increased cyber-risk exposure. Cybercrime and malicious hacking cases have intensified since the outbreak of the pandemic. While non-security concerns such as preference for cash are a hindrance to migration to seamless payment methods, addressing security concerns being raised by consumers creates the largest migration opportunity. Citi’s Aldred, said, “Ensuring that robust platforms are in place to manage client flows in contingency environments are extremely important and reinforce the importance of scale, network and technology investment strategy.” However, the situation is unlikely to change for the better in the future due to the use of third-party vendors, evolving sophisticated and complex technologies as well as cross-border data exchanges, the increased use of mobile technologies by customers and the heightened crossborder information security threats.

Modern data protection wherever and whenever you need it.

DATA SECURITY PAYMENTS

Making New Payments With the increase in new methods, growing cross currency transactions and the continuing pressure for speed, Dave Aldred Head of Treasury and Trade at Citi for MENA, highlights the demands of the regions users of payments services, and the developments and concerns that we can expect will arise as this sector takes shape in the coming years.

ow are you adapting or competing in the p a y m e nt s a re n a to ensure these services remain profitable?

Citi continues to make significant investment in its regional and global payment capabilities. This is important g i ve n t h e f i e rc e l y c o m p e t i t i ve environment from both traditional banks and newer entrants. This investment is critical to ensure that Citi has a clear value proposition and relevance for our clients given the increasing trends on digitisation, globalisation, e-commerce which requires platforms to manage scale given the resultant miniaturisation of payments and new client selling models. As a result, developing standards and scalability on APIs, increasing connectivity to wallets, making payments and foreign exchange conversion frictionless and connecting the new financial market infrastructure such as instant payments or e-billing are important areas to invest in and ensure a market leading capability. For a long time, the challenge on making cash receivables more efficient has been a priority for the majority of banks. Digitisation is making this more of a reality and alternatives to traditional methods of doing business (e.g., cash and cheques) are becoming

Dave Aldred Head of Treasury and Trade at Citi for MENA

available. Clients are also operating in a more global marketplace and the importance of offering seamless cross currency payments is very much at the fore. The speed of change in the global payments landscape is accelerating. It is therefore important for banks like to Citi to engage more proactively with fintechs. This is already part of Citi’s culture and whilst fintech companies are competitors they are also our clients and partners. As a result of this

Banking and Finance news in the MEA market

collaboration the speed to market, scale and commercialisation has increased significantly. So, in summary, leveraging technology and Citi’s network combined with new payment schemes (e.g., faster payments), connectivity with digital wallets and collaboration with strategic partners is helping to grow market share and drive profitability. Spring by Citi is a great example of where we are working with strategic partners to enhance our client’s ability to collect from consumers across multiple payment channels.

What in your mind is the greatest reason for regular non-commercial cross-border payments made in the Middle East and why? Outside of commercial flows and treasury payments, the largest flow is probably remittances, which constitute a payment market of 60-55$bn per annum. The remittance market exists given the relatively high number of expats working in the MENA region. Additionally, religious travel and multilateral agency payment volumes are also significant.

Do you foresee blockchain or even crypto currencies taking a greater role in trade finance and supply chain payments? Absolutely. Where there is risk in a business flow the case for blockchain solutions is strong. Citi, through our network of innovation labs, is working with partners and ecosystems to develop blockchain solutions that will eventually become mainstream. A good example is Komgo where Citi and a number of other partners are working to digitalise the trade and commodities finance sector through a blockchain based open platform. The signs are promising, and I would expect blockchain to become key element of trade solutions in the coming years. Crypto currencies are also seeing a growing amount of interest with Central Banks developing digital strategies and policies. In the coming years, Central Bank Digital Currency (CBDC) could be issued in either ‘retail’ or ‘wholesale’ varieties and could be expressed as either tokens or accounts. CBDC is a claim on the central bank, i.e., a liability on the balance sheet of the central bank. It is redeemable at par value on demand in national currency units. While regulatory interest in CBDC was stimulated by the development of bigtech stablecoins, some argue that they should be represented through the more familiar technology of accounts. The regulation of stablecoins has yet to be determined and it is a real test of whether regulators will adopt a technologically neutral approach.

It could be argued that stablecoins are (or should be) nothing more than E-money expressed as tokens. If this were the case then all of the regulations applying to E-money would apply to stablecoins: they could not pay interest, they would be fully collateralized, they would be direct claims on the stablecoin issuer, and the user would expect re-deemability at par value on demand in national currency. The platform economy exhibits ‘winner takes all’ tendencies but in the case of digital money there is probably space for a number of contenders. After all, new roads create more traffic, not less.

Bahrain, UAE, Morocco, Jordan & Pakistan) as well as e-billing platforms such as e-fawateer. This progress is helping to transform the way governments and organisations conduct business and drives efficiency through digitisation. E-commerce and supply chain stability through the more efficiency and quicker settlement of payments. However, digital progress is not just limited to payments. A banks’ engagement with client is also critical and investment in areas such as digital on-boarding, self-servicing, digital signatures, online ERP file testing are just some areas

I WOULD EXPECT BLOCKCHAIN TO BECOME KEY ELEMENT OF TRADE SOLUTIONS IN THE COMING YEARS. The digital payments market is likely to grow significantly. The real question for regulators is to ensure that the competition between different formats for digital money proceeds on a level playing field.

Payment solutions were in an intense development phase before Covid-19, so has the pandemic made any directly attributable changes or additions? Without doubt the pandemic has accelerated digital transformation globally. Payments are no exception. The MENA region was already on a trajectory of digital payment growth and this has been further fuelled by respective government strategies and changing client sales models. In a world that is rapidly becoming a platform economy or hyper connected where 24/7 or “always on” are becoming normal, it is important to provide connectivity and choice for payments for our clients. Across MENA we are witnessing the implementation of faster or instant payments schemes (e.g.,

that are benefiting from investments in new technology. Let us also not forget another important lesson from the pandemic that has demonstrated the importance of technology, and that is operational resilience and risk management. Ensuring that robust platforms are in place to manage client flows in contingency environments are extremely important and reinforce the importance of scale, network and technology investment strategy.

What are your chief concerns w h e n t h i n k i n g a b o u t yo u r payment’s activities? The main concerns for me remain around cyber security and regulatory compliance. Given Citi’s global network and role as globally systemic important bank the need to execute payments efficiently, safely and adhering to regulatory frameworks is critical. Digitisation is, and has to continue to, play a key role here given the volumes of payments involved, the global reach of Citi’s network and the complexity of our clients’ operations. mea-finance.com mea-finance.com

DATA SECURITY PAYMENTS

The swift evolution in payments Onur Ozan Head of Middle East, North Africa and Turkey at SWIFT talks about the unprecedented change happening in the payments space and how the transformation of the SWIFT platform will enable instant, frictionless and transparent payments, with end-to-end integrity and global reach

ow are you adapting in the payments arena to ensure that your service remains competitive?

The world of payments is going through a period of incredible change, driven by technological innovation and evolving customer expectations, and intensified even further with the challenges of a global pandemic. New competition, propelled by innovative technology, is disrupting the financial industry, putting existing business models increasingly under threat. As a trusted infrastructure provider for over 11,000 institutions, we are evolving alongside our community to meet those challenges. Over the past few years, the SWIFT community has been on a journey to radically improve the experience of sending cross-border payments with our SWIFT gpi initiative. There has been rapid acceptance, with more than 4,200 financial institutions, and 80 market infrastructures currently enabled. In 2020 gpi payments worth US$440 billion were processed daily via gpi, representing more than 75% of all cross-border (MT103) messages sent over SWIFT. Nearly 100% of gpi cross-

border payments are credited to the beneficiary’s account within 24 hours, while 56% reach their final destination within just 30 minutes. In the Middle East, over 200 financial institutions have joined SWIFT gpi, and nearly 80 are live on the service. The foundations we have laid with gpi – end-to-end transparency, better quality payments data, final confirmation with the beneficiary – have set the building blocks for us to take things to the next level. Therefore, over the next two years and beyond, we’re embarking on an exciting journey to enable instant, frictionless and transparent payments, with end-toend integrity and global reach. And the entire process will be driven by smart data, enabling the layering of mutualised services on top, which work for financial institutions today and tomorrow. This will unlock huge opportunities for the payments community. For customers in the Middle East - a strategic trading, business and financial hub - this will open up further opportunities to compete in the global marketplace. To help us achieve it, we are transforming the SWIFT platform based on the concept of transaction management.

Banking and Finance news in the MEA market

Onur Ozan Head of Middle East, North Africa and Turkey at SWIFT

This new approach will put the business transaction at the centre. The platform will provide a set of common transaction processing services, such as prevalidation of essential data, sanctions screening, fraud detection, data analytics, transaction tracking and exception case management – mutualising capabilities that today are typically provided, and invested in, by each financial institution individually. By bringing together data and common services, we aim to significantly improve end-to-end efficiency and reduce total costs, while bringing new business value to end customers with faster, more reliable transactions and better, richer data.

What is next for SWIFT and the payments community? We believe the global customer demand to be able to ‘pay and be paid in realtime’ is the new norm. The adoption and usage of instant payments continues to accelerate, especially during this Covid19 pandemic. According to the FIS 2020 report, Flavours for Fast, 56 countries are already live with instant payments. Speed has become a given for domestic payments as most of these systems are functioning mainly on a domestic level. The next step of the journey to enable

seamless account-to account payments on a global scale by to connecting these different instant payment systems with each other. This is what we are aiming to achieve with gpi instant. In addition to our plans for gpi instant, we are also developing a cross-border payment solution for SME & Consumer low-value payments to enable banks to offer easy, fast, predictable and low-cost cross-border payments to these fastexpanding customer segments.

Can you tell us more about those initiatives and what this means for market participants? What are the key benefits? With gpi instant our aim is to create links between the domestic and regional systems to streamline account-toaccount payments. Having successfully trialled gpi instant with several domestic real-time payments infrastructures around the world, in December last year SWIFT gpi Instant gained its first live link in the UK with customers from Lloyds Banking Group now being able to remit instant cross-border payments through Lloyds via the UK Faster Payments system. And most recently we connected gpi Instant to the local instant payment system in India. We are also collaborating with market infrastructures in the Middle East to further develop the integration between domestic and regional systems. The more domestic instant payment systems we can link gpi to, the more crossborder payments will become instant end-to-end, given that at least 35% of international payments have a domestic leg involved, which makes interoperability and co-operation crucial. In addition to gpi Instant, we are also working with a group of 27 financial institutions around the world to enable consumers and SMEs to benefit from fast, predictable payments, with costs and processing times known upfront, and real-time status available to both originator and beneficiary customers via their financial institutions. This will allow customers to make a payment directly

from their bank account to any account anywhere in the world, with certainty and predictability. We are making this possible by leveraging tools within our platform model, but also through collaboration between financial institutions. This is significant not only for end users but gives many financial institutions a powerful value proposition to grow their crossborder payments business in the booming consumer payments space as well. Today we are in the pilot phase, with a planned go-live later this year. Both initiatives are key milestones on our journey towards instant and frictionless cross-border transactions, from account to account, anywhere in the world.

The Covid-19 crisis is clearly propelling a significant acceleration in the digitisation of the global economy, and the financial services industry needs to support this. It means that money and payments need to be fully digital. This has already been happening for some time with the growth of e-commerce and electronic payments but now this process is really accelerating. SWIFT is a proven leader in driving forward digitisation of financial services and we fully intend to continue. That is why we are rolling out a new strategy to further support our members with new capabilities for payments and securities in a digital economy.

Payment solutions were in an intense development phase before Covid-19, so has the pandemic made any directly attributable changes or additions?

What are your chief concerns w h e n t h i n k i n g a b o u t yo u r payment’s solutions?

The pandemic has brought with it public health crises, economic upheaval and widespread uncertainty. It has forced businesses to recalibrate and reprioritise as they adapt to slower economic growth and accelerating technological change – and the payments industry is no exception.

Increased customer expectations around speed and transparency are driving new changes to traditional banking models. This new paradigm has prompted changes that require careful, responsible innovation and flexibility. New technologies can create new opportunities, but they must be assessed carefully, always bearing

WE BELIEVE THE GLOBAL CUSTOMER DEMAND TO BE ABLE TO ‘PAY AND BE PAID IN REAL-TIME’ IS THE NEW NORM. However, even before Covid-19, our industry was already undergoing a major transformation, driven mainly by a shift in customer expectations, evolving regulation and new technology. Payments providers, both old and new have been stepping up and embracing digitisation to address customer demands for rich capabilities, simplicity and increased predictability, all while navigating the challenges posed by cost pressures, regulatory changes and legacy technology.

in mind the demands of compliance and the need to maintain the highest levels of security and resiliency. This is something we are acutely conscious of as we develop new solutions. As we look ahead, we have plans to build a smarter, faster, better digital platform that goes beyond today’s capabilities to facilitate the whole transaction management process. We seek to move towards being a single trusted partner in every area of transactions. mea-finance.com mea-finance.com

DATA SECURITY PAYMENTS

Easy Payments Plans As distanced business sectors converge to provide payment options; banks must constantly reassess their offerings. Devid Jegerson from the National Bank of Fujairah describes the factors bringing change to payments and the benefits these new methods can deliver

ow are you adapting or competing in the p a y m e nt s a re n a to ensure these service remains profitable?

Until recently, the banking sector dominated the electronic payments market for about 50 years. In recent years, the advent of Fintech has precipitated the evolution of banking regulations, bringing about a new era of banking innovation, especially in relation to payment instruments. Consumer behavior has also changed over the past few years. Adoption of new technologies has raised the bar of user expectations and pushed operators to create new products that are not just increasingly innovative, but also easy to use. The entry of new operators has caused an increase in the complexity of the competitive market environment. In particular, with the launch of new forms of electronic payment and especially e-payment, we have seen the evolution of payments and the introduction of new offers and services entering the market: 1. Telecommunication companies enhanced their products by offering new integrated services (e.g., current payment systems)

2. Large distribution chains interested in enhancing the relationship with their customers through payment systems capable of retaining customers (some largescale distribution companies have already experimented with co-branded payment tools with traditional financial operators) 3. Utility suppliers (e.g., ticket offices, local or national transpor t) interested in facilitating the use of their services by offering innovative payment systems Public administrations, interested in entering the payment systems market to facilitate interaction between users and the relevant administration, has in essence led to a convergence between different sectors, where the payments market becomes an enabling factor across heterogeneous sectors. Once distant and separate market sectors, such as banking, telecommunications, large distribution and utilities, today tend to converge in order to meet the needs expressed by end-users (buyers and merchants). The competition bet ween the operators in the payment sector can be considered as a battle to achieve competitive advantages using precise

Banking and Finance news in the MEA market

Devid Jegerson - Head of Customer Experience and Platform Development at National Bank of Fujairah

strategies to obtain favorable positions. At NBF, it is essential to note that our digital transformation – in payments and beyond – is based on being able to add value to our customers and live up to our promise of being the best financial partner to support their personal and professional needs. As such, we constantly assess and re-assess what we are offering by examining various factors. It is necessary to understand what customers want in order to prepare a product offering that can satisfy their needs. From the consumers’ perspective, these factors usually revolve around security, controllability, and practicality. As for merchants, these factors can be summed up as universal acceptance or the maximisation of the number of potential buyers owning this payment instrument, convenience or minimization of management costs, and security.

W h a t i n yo u r m i n d i s t h e greatest reason for regular non-commercial cross-border payments made in the Middle East and why? UAE sits at the top of remittances due to its large expat population representing around 90% of its total population. In the previous years, expat remittances from the UAE totaled $44.5 Billion, 75% of which was transferred through money exchange companies with the remainder sent through banks. India, Pakistan and the Philippines, were the top three receiving countries. From our perspective, a driving force behind innovation is the need for alternative financial solutions to propel financial inclusion with the UAE leading in the payments space. This region boasts an ecosystem that is conducive to FinTech development. Looking at the wider area, roughly 85% of Fintechs in MENA operate in the payments, transfers, and remittances vertical.

Do you foresee Blockchain or even Cryptocurrencies taking a greater role in trade finance and supply chain payments? This is already happening. In trade finance, banks facilitate international trade by providing financing to buyers and sellers. However, as the trade war intensifies between the US and countries such as China, banks are looking to reduce some of the risks they take on through technological innovations. Banks are reducing their reliance on antiquated manual processes and digitizing key trade documents, like Letters of Credit (LCs), to reduce cost and improve efficiency. Others are looking to replace the process altogether with longer term applications of Distributed Ledger Technologies (DLTs). The reasons behind the adoption of Blockchain technology in trade finance is owed to the existing challenges of today’s processes ranging from manual contact creation to usage of multiple platforms leading to high chances of fraud.

As such, Blockchain brings a host of benefits to the trading system, eliminating many of the challenges stakeholders face today: 1. Re a l -t i m e rev i ew : F i n a n c i a l documents linked and accessible through Blockchain are reviewed and approved in real-time, reducing the time it takes to initiate shipment 2. Transparent factoring: Invoices accessed on Blockchain provide a real-time and transparent view into subsequent short-term financing 3. Disintermediation: Banks facilitating trade finance through Blockchain do not require a trusted intermediary to assume risk, eliminating the need for correspondent banks 4. Reduced counterparty risk: Bills of lading are tracked through B l o c kc h a i n , e l i m i n a t i n g t h e potential for double-spending and potential frauds 5. Decentralised contract execution: As contract terms are met, status is updated on Blockchain in real-time, reducing the time and headcount required to monitor the delivery of goods 6. Proof of ownership: The title available within Blockchain provides transparency into the location and ownership of the goods 7. Au to m a te d s et t l e m e n t a n d re d u c e d t ra n s a c t i o n fe e s : Contract terms executed via Smart Contract eliminate the need for correspondent banks and additional transaction fees 8. R e g u l a t o r y t r a n s p a r e n c y : Regulators are provided with a realtime view of essential documents to assist in enforcement and AML activities From our experience at NBF with the UAE Trade Connect (UTC), a new n a t i o nw i d e B l o c kc h a i n p l a t fo r m co-created by Etisalat Digital and seven leading UAE banks, to help financial institutions combat fraud and duplication; we can check invoices with different grades of efficiencies. This means that

Corporates and SMEs can complete their transactions quicker while enjoying an elevated customer experience. UTC’s initial phase focuses on addressing the risks of multiple financing amongst banks and invoice frauds which, if not mitigated, can eventually lead to the weakening of a bank’s balance sheet and in turn, dampen the overall mood of financing to SMEs in the economy. UTC is expected to facilitate increased lending to SMEs to strengthen UAE’s positioning as a central trading hub in the region. Blockchain-enabled trade networks can benefit all stakeholders by reducing frictions from the logistical and operational inefficiencies across the trade finance value chain. In the short term, Blockchain would be instrumental in optimising business processes by reducing redundancies and implementation inefficiencies. The longer-term implications of Blockchain technology in trade finance would be more profound and could lead to changes in or complete re-design of existing processes.

Payment solutions were in an intense development phase before Covid-19, so has the pandemic made any directly attributable changes or additions? The market was already evolving towards diversification of payment instruments for use in specific contexts. These contexts that are not yet fully affected by current payment instruments, such as credit and debit cards, are those involving relatively small payment amounts that are now mostly settled with cash. To cover these contexts, easy and efficient product solutions must be present on the market to become valid substitutes for cash. New technologies and new tools make it possible to store a wide range of personal data. This allows the creation of more personalised payment offers and meeting customer needs in a more defined way. The Covid-19 pandemic accelerated the diversification of instruments already underway while encouraging remote, contactless modes of payment. mea-finance.com mea-finance.com

COVER INTERVIEW

Scaling investment heights with Robo-advisory MEA Finance sits down with Bernd van Linder, CEO, Commercial Bank of Dubai, to talk about the CBD Investr app, the bank’s recently launched Robo-advisory investment solution, on how it is going to enhance customer experience and what differentiates it from other products already on the market

iven that Commercial Bank of Dubai is the first bank in the Gulf region to offer Roboadvisory, would you please tell us more about CBD Investr and what differentiates your newly launched investment solution from other products already on the market?

What differentiates our investment solution from others is the active monitoring and optimization of your investment portfolio through smart algorithms. In comparison, most traditional advisory apps only offer static model portfolios. We also believe that CBD Investr will hugely democratize investments. By offering easy access to global portfolios of stocks, bonds and other asset classes, at an entry-level investment of just $500, we expect a large number of customers to start investing and inculcate the habit of savings early to provide for greater wealth and financial freedom in the future. C B D I nve st r of fe rs c o m p l ete transparency in pricing with no hidden fees and is very affordable with an annual management fee of just 1%. There are no lock-in periods and no

contractual agreements for monthly or regular investments. Customers have the flexibility to withdraw funds partially or entirely at their convenience with no withdrawal fees. Customers do not need any prior trading experience or to track and monitor the markets as the app will automatically

CBD INVESTR ALGORITHMS HAVE BEEN EXTENSIVELY BACK-TESTED USING REAL MARKET DATA OVER THE PAST 10 YEARS AND HAVE CONSISTENTLY OUTPERFORMED MARKET BENCHMARKS OVER THE SAME PERIOD. – Bernd van Linder

Banking and Finance news in the MEA market

optimize your portfolio to maximize returns and minimize risks. We honestly believe CBD Investr will be a game-changer in the investment industry in the region.

Could you tell us more about your partnership with InvestSuite? CBD has partnered with InvestSuite, a leading wealthtech company based in Belgium to develop this innovative investment solution. InvestSuite was founded by practitioners in wealth management and investment advisory, which has helped them to design a solution around investors’ requirements. Their team consists of seasoned experts who operate across AI/machine learning, design, human insights and wealth management. This combined expertise and experience has resulted in the design and development of a range of solutions to help financial institutions extend their product range with next-generation tools, in an agile, fast and cost-effective way. To us, the partnership with InvestSuite is a great example of the synergies that originate when established financial institutions truly cooperate with fintechs. Jointly, we can design solutions that offer the best possible user experience.

What are the actual investment asset classes offered through CBD Investr and how easy is it for customers to start investing with CBD Investr? C B D I n v e s t r o f fe r s c u s t o m e r s convenient access to globally diversified and personalized portfolios of stocks, bonds and other asset classes using low-cost exchange-traded funds (ETFs). These portfolios are tailored based on a customer’s specific goals, risk appetite and investment time horizon and are actively monitored and optimized based on changing market conditions to deliver the best possible performance over the long term. In addition, since different financial objectives may have different time horizons and different risk appetites, for example, funding children’s education versus retirement planning, CBD Investr provides customers the option to create multiple portfolios based on their diverse needs. Customers can start investing in a matter of minutes by simply downloading the CBD Investr app, registering using their Emirates ID and answering a few questions to assess their risk profile and create a personalized portfolio. Customers do not need a CBD bank account to fund their portfolios and can make a local transfer from any bank account in the UAE. The best part is that customers can start investing with just $500 and withdraw at any time, without any charges.

How does the Commercial Bank of Dubai plan to advance CBD Investr to enhance customers’ experience and maintain a competitive edge on the market? As part of the planned enhancements in the next few weeks, the app will offer a virtual portfolio feature that will allow customers to create portfolios and monitor actual performance before investing money. In addition, the app will also introduce a self-investment solution for more experienced investors who want to buy and sell global stocks and ETFs on

Bernd van Linder, CEO, Commercial Bank of Dubai mea-finance.com

COVER INTERVIEW

From left to right: Mark Zanelli, General Manager, Treasury, Asset Management & Global Markets, Dr. Bernd van Linder, Chief Executive Officer, Amit Malhotra, General Manager, Personal Banking Group, Deepak Mehra, Head of Investment Solutions

their own. We will continue to enhance the CBD Investr app based on feedback from our customers to provide a worldclass investment solution backed by exceptional customer experience.

In light of the current economic conditions and the general market corrections, downturns, and crashes, how do you expect the Commercial Bank of Dubai and its customers to benefit from CBD Investr? We feel this is the perfect time to introduce such a product. Customers have begun to realize that taking a speculative approach in the stock market could lead to unfavorable outcomes, especially given the volatile nature of the market. Most customers, unfortunately, do not spend enough time or do not have the knowledge to realize sustained returns on short-term trades. It has been statistically proven that less than 5% of day traders make money. This is where our CBD Investr algorithms help you, as they have been extensively backtested using real market data over the past 10 years and have consistently outperformed market benchmarks over the same period.

CBD INVESTR OFFERS COMPLETE TRANSPARENCY IN PRICING WITH NO HIDDEN FEES AND IS VERY AFFORDABLE WITH AN ANNUAL MANAGEMENT FEE OF JUST 1%. – Bernd van Linder

It is also important for customers to understand that investments are a longterm proposition and not a ‘get-rich quick’ scheme. You need to stay invested and make sustained investments starting as early as possible to maximize returns. The younger you start, the bigger your nest egg is likely to be.

What advice would you give to especially the younger audience to help them achieve their financial goals? The key to achieving one’s financial

Banking and Finance news in the MEA market

goals is to start young, add regularly, and remain invested. Sticking to this will ensure the highest level of certainty of meeting one’s future financial objectives. Unfortunately, many young people get caught up trying to keep up with the Joneses or spend on material objects and projecting a good life on social media rather than planning for the future. The ultimate goal for every individual should be to achieve financial freedom at the earliest and that can be achieved by regularly investing from an early age and letting time do its magic. By staying invested over a long period, you benefit from the concept of compounding returns – when your money starts working hard for you. Youngsters should follow the principle of ‘Pay yourself first” which essentially means that you diligently set aside a fixed amount to save and invest every month before you start spending, rather than spend first and save whatever remains. I would also urge youngsters to follow the 50/30/20 budget rule popularized by US Senator Elizabeth Warren, which recommends you allocate to 50% of your income to essential expenses such as housing, transportation and groceries; 30% of your income to wants or discretionary

spending; and 20% of your income to savings.

Can you tell us more about the back-testing of data? CBD Investr algorithms have been extensively backtested using real market data over the past 10 years and have consistently outperformed market benchmarks over the same period. The High Growth portfolio, which allocates 100% of the investment to equities, has returned over 12% per annum on average over the past 10 years. The average annual performance of the four risk profiles between 2011-2020 are: conservative 4.9%, balanced 8.2%, growth 11.3%, high Growth –12.2%. These returns evidence a strong performance, which will help customers get maximum returns. It is also important to highlight that if you look at the past data, even in the best performing years, markets crash at some point in time and eventually recover. Through the back-tested data, we have empirical evidence that when markets fall, the CBD Investr portfolios tend to fall less and when markets rise, the algorithms try to capitalize on the same and capture the full returns. Over time, markets keep changing and what’s performing today, might not perform tomorrow. Hence CBD Investr portfolios are actively monitored daily, and the smart algorithms reallocate underlying assets, when required, to optimize performance. While the ups and downs of the market cannot be avoided when we seek marketlinked returns, the CBD Investr algorithm is programmed to minimize volatility, which in the long run ensures higher performance.

What is the Commercial Bank of Dubai’s current position in the market? And how do you expect CBD Investr to advance your asset management services and products? CBD has taken the lead as the first bank in the region by launching this innovative Robo-advisory investment app. By providing customers with easy access

WHILE THERE IS A WIDE RANGE OF TECHNOLOGY TRENDS IMPACTING THE FINANCIAL INDUSTRY FROM BLOCKCHAIN TO ARTIFICIAL INTELLIGENCE, ROBO-ADVISORY SOLUTIONS WILL BE ONE OF THE MAIN DRIVERS IN THIS FINANCIAL DISRUPTION. – Bernd van Linder

to globally diversified and personalized portfolios of stocks, bonds and other asset classes, at a low investment entry-level, we feel we will attract a large number of new investment customers and significantly help grow the banks’ asset portfolio. Given the uniqueness of our offering and since CBD Investr is open to all UAE residents and customers do not need a CBD account to start investing, we are confident that we will attract new bank customers through CBD Investr. Subsequently, we will offer these new clients other products such as credit cards, loans, mortgages, etc.

What are your views on digital financial advisories solutions and the role they play in managing investment portfolios? Do you think Robo-advising is the next big thing in fintech? And how do you envision wealth management in the next decade? Digital technology, in general, has taken the financial services industry by storm and continues to drive waves of disruption that have fundamentally changed how financial ser vices, including investments, are provided and consumed. While there is a wide range of technology trends impacting the financial industry from blockchain to artificial intelligence, I think Robo-advisory solutions will be one of the main drivers in this financial disruption. It is already a trillion-dollar industry in the West and is growing significantly and this trend will also take hold in the region. COVID-19 has permanently changed many industries around the world and the wealth management industry is no exception. Firms that continue to improve their digital offerings will earn their place to compete in the market, whilst those who do not will be rendered obsolete. A client-centric, advice-oriented model will form the backbone of digitalization for wealth managers looking to thrive shortly. A hybrid strategy that combines automation with a human touch will ensure greater success and lead to enhanced customer satisfaction. mea-finance.com

INSURANCE

Unlocking opportunities in the insurance sector Following the business trends in the aftermath of the outbreak of the COVID-19 pandemic, insurance companies in the Middle East region are digitalizing their businesses as legacy insurers are starting to pay attention to new business models

he outbreak of the COVID-19 pandemic a year ago threw up unique challenges for all businesses and the insurance sector is no exception. According to Clyde & Co, for several insurance companies, responding to coronavirus meant shelving growth plans to take stake stock of the

impact of the pandemic on operations, claims and investment returns. T h e c o ro n a v i r u s c o nta i n m e nt measures that were implemented by Gulf states such as travel bans and curfews compounded with lower oil prices which led to delays or cancelations of nonessential infrastructure projects

Banking and Finance news in the MEA market

could negatively impact gross written premiums (GWP) growth and earnings prospects throughout the year, said S&P Global. The general decline in disposable income across the region as well as an increase of value-added tax (VAT) and the slashing subsidies in the case of Saudi Arabia will likely have a negative outcome on GWP growth and earnings in 2021. In the Mideast region, the UAE and Saudi Arabia are the two biggest insurance markets with health insurance b u s i n e s s e s d o m i n a t i n g i n b ot h countries. The health division has been the fastest-growing insurance product in the region following the implementation of compulsory cover in the UAE since 2005 and in Saudi Arabia from 2006, said Fitch Ratings.

Following the business trends in the aftermath of the pandemic, insurance companies in the Gulf region are also digitalizing their businesses as legacy insurers are starting to pay attention to new business models. PwC said that legacy insurers have become some of the largest funders of these InsurTech startups as they recognize that joining forces with tech firms can be a game-changer. InsurTech has also captured the interest of tech-savvy GCC governments as well as private equity and venture capital firm as evident from a surge in insurance technology investments since 2018. According to the Dubai International Financial Centre, InsurTech will help build strength and resilience for insurance and reinsurance to thrive in the post-pandemic world.

Digitalization drive Though insurance has lagged other sectors in digitalizing its core business and embracing customer experienceled approaches, InsurTech is expected to advance the development of the industry. Insurers are leveraging on how tech is deeply embedded in people’s lives by weaving technologies into their product and service offerings and how they are delivered to consumers and commercial customers. The outbreak of the pandemic and its global impact on economic activities triggered an overnight shift in customers’ needs and expectations, while compelling virtualization of insurance operations which on its own exposed gaps in the industry’s digital capabilities and raised cybersecurity concerns. “With the emergence of the Low Touch Economy, businesses have pivoted to digital offerings, bringing greater convenience and peace of mind to their customers,” Rajesh Sethi, Chief Executive Officer, Dar Al Takaful. Global InterTech company Charles Taylor opened its doors for business in the Gulf region in 2019. The firm provides insurance technology-enabled

solutions including claims solutions, SaaS technology solutions for insurers, brokers and managing general agents (MGAs), and end-to-end management of insurance programs and processes. “The need to accelerate digitization and enhance virtual operations turned headwinds into tailwinds at many insurers, driving faster action to deliver within the coming year what might originally have been three-to-five-year transformation plans,’ said Deloitte. As more insurers are increasingly focusing on adding new technology capabilities to their businesses,

will be those that use new models to invite people – customers, employees, partners, intermediaries and the public – to co-create their new course for the future. In 2018, the global InsurTech market was valued at $533 million, and it is expected to hit the $1 billion mark by 2023, as such several Mideast-based insurers are recognizing the potential that AI can offer. Aqeed, another Dubai-based InsurTech firm, allows customers to compare and buy insurance policies from its platform. Through Aqeed’s dashboard, users can

THE NEED TO ACCELERATE DIGITIZATION AND ENHANCE VIRTUAL OPERATIONS TURNED HEADWINDS INTO TAILWINDS AT MANY INSURERS, DRIVING FASTER ACTION TO DELIVER WITHIN THE COMING YEAR WHAT MIGHT ORIGINALLY HAVE BEEN THREE-TO-FIVE-YEAR TRANSFORMATION PLANS. – Deloitte

acquiring mature InsurTechs could be increasingly attractive for legacy insurers provided they can make a nearterm impact on operations. Dubai-based Addenda, an InsurTech firm that uses distributed ledger technology to streamline processes between insurance companies have signed more than five major regional legacy insurers on to its integrated Blockchain platform since graduating from DIFC’s FinTech Hive accelerator program in 2018. Some of the regional insurance majors using the InsurTech firm’s services include Aman Insurance, Al Wathba Insurance, National Takaful Company (Watania), Noor Takaful and Oriental Insurance. Accenture said that as technology’s level of impact grows ever higher throughout society, successful insurers

also access documents and policies in force, contact insurers and compare prices among other services. The way GCC insurers will respond not just to the economic fallout due to the pandemic but also to the changing operating conditions amid long-term shifts such as tech innovations, the economy, and evolving consumer preferences will be critical. Deloitte said that generating continuous innovation in insurance policies, sales strategies, operations, and customer experience could turn out to be the biggest differentiator in 2021 and beyond. Insurtechs and incumbents in other parts of the are also unveiling on-demand auto, home, life and personal liability products that offer more flexible terms than the products of old – enabling customers to pick and mix the cover they mea-finance.com

INSURANCE

need, how long they require it, and when they want it. According to Accenture, the Chinese insurance giant and one of the world’s biggest insurers, Ping An, has invested around $7 billion into technology and R&D to date with plans to spend another $15 billion over the next decade. On the security front, as more insurers in the Gulf region allow their workforce to work remotely more data and applications are moving outside the traditional security perimeter increasing exposure to cyberattacks. Deloitte said that insurers should consider implementing “zero trust” principles by imposing verification requirements on anyone seeking access to data or systems, regardless of being internal or external, while adopting

strong in core Islamic economies across the Arabian Gulf, North Africa and Southeast Asia is driven by large Muslim populations and relatively low insurance penetration (GWP as a proportion of GDP). Despite the impact of the pandemic on the regional economies, Moody’s sees takaful premiums growing modestly in the next two to three years due to growing demand for Shari’ah-compliant insurance products, the digitalization of insurance processes and an enabling regulatory environment. In Saudi Arabia, the new mandatory medical covers for Hajj and Umrah pilgrims is expected to generate an additional GWP of between $400 million and $667 million this year and help the market return to growth.

CYBERSECURITY IS THE NEED OF THE HOUR, PARTICULARLY WITH MORE STAFF WORKING FROM HOME, INCREASED THREATS OF HACKING, AND THE NEED TO REMAIN ONLINE. THESE CIRCUMSTANCES HAVE LED TO BUSINESSES SHIFTING TOWARDS DIGITAL. – Rajesh Sethi, Chief Executive Officer, Dar Al Takaful

“security by design” principles in their digital transformation journey. Insurance firms should also ensure that their cybersecurity teams enhance controls and endpoint protection technologies to exert greater control over end-user devices. “Cybersecurity is the need of the hour, particularly with more staff working from home, increased threats of hacking, and the need to remain online. These circumstances have led to businesses shifting towards digital,” said Sethi.

Takaful Growth prospects for takaful remain

The growth of takaful is also being aided by changes in the regulatory landscape which makes it easier for takaful operators to obtain licenses. In the GCC, the largest takaful market, insurers are expected to benefit from compulsory health insurance requirements in Oman, Saudi Arabia and Kuwait as well as similar measures in Saudi motor insurance. Moody’s noted that takaful operators will benefit from these measures because the sector mainly focuses on retail lines of the business unlike conventional insurers in the Gulf region who are also active in commercial lines.

Banking and Finance news in the MEA market

However, takaful operators are likely to take a hit from plunging numbers of insured individuals under medical policies due to a massive departure by foreign employees because of job losses and programs to nationalize the workforce in the GCC such as Saudization and Omanization. S&P Global said that a slowdown in economic activity and consolidation in several sectors is forcing companies to re d u c e t h e i r wo r kfo rc e w h i l e c o n s u m e rs w i l l a l s o l i ke l y d efe r purchases of new cars and other items due to economic uncertainty.

M&A The challenging operating environment due to the pandemic together with a plunge in oil prices and an exodus of expatriates who mostly requires health insurance is putting more pressure on GCC insurers’ GWP which is expected to culminate in a surge of mergers and acquisitions (M&A) for companies to remain profitable and maintain a competitive edge. “We expect strong M&A activity to continue as we head into 2021, driven by divestitures of non-core businesses, continued competition for distribution targets, the hardening of specialty property and casualty insurance and significant levels of deployable capital,” said PwC. Last November, French insurer AXA agreed to sell its operations in the GCC region to Kuwait’s Gulf Insurance Group for a total cash consideration of $269 million. AXA said that it sold its stakes in AXA Gulf, AXA Cooperative Insurance Company and AXA Green Crescent Insurance Company and the deal is expected to be closed in Q3 2021. Deloitte stated that a combination of offensive and defensive M&A strategies will likely materialize as insurers position themselves to protect existing markets, accelerate the recovery stage and pivot to thrive. Saudi insurers Al Ahlia Cooperative and Gulf Union merged last December

increasing the paid-up capital of Gulf Union to $61 million (SAR 229 million) from $40 million (SAR 150 million). As part of the merger deal, Gulf Union issued 7.94 million new ordinary shares at SAR 10 apiece to buy all Al Ahlia for $21.2 million (SAR 79.47 million). The tie-up between Al Ahlia and Gulf Union in Gulf Union Alahlia Cooperative Insurance Co. followed the consolidation of Walaa Cooperative Insurance Co. and MetLife in March 2020.

WE EXPECT STRONG M&A ACTIVITY TO CONTINUE AS WE HEAD INTO 2021, DRIVEN BY DIVESTITURES OF NON-CORE BUSINESSES, CONTINUED COMPETITION FOR DISTRIBUTION TARGETS, THE HARDENING OF SPECIALTY PROPERTY AND CASUALTY INSURANCE AND SIGNIFICANT LEVELS OF DEPLOYABLE CAPITAL.

Growth prospects

– PwC

According to Deloitte, businesses must concurrently manage three key phases of the COVID-19 crisis – respond, recover and thrive. Following the outbreak of coronavirus, insurance companies in the GCC region took immediate steps to ensure business continuity and introduced initiatives for customers and their communities to cope with the crisis.

As the global economy emerges from the COVID-19 crisis and heads into the next normal, Deloitte urged insurers to consider the implementation of a mix of offensive and defensive actions to accelerate sustainable recovery efforts and pivot to the thrive phase when growth is reemphasized, despite challenging economic conditions.

As for financial investments, the Insurance Authority has prioritized higher solvency in the insurance sector and penalized investments that do not qualify for solvency. Though several Gulf insurers managed to digitize their operations swiftly last year, the sector still faces lingering obstacles to growth and profitability in the year ahead. mea-finance.com

INSURANCE

Prepared to Help Just as have all business sectors in the region, Takaful and Insurance providers have faced challenges and changes in recent years. Rajesh Sethi, Chief Executive Officer, Dar Al Takaful, describes some of the changes and strategies that kept the business ahead of the trials of the past and the present Rajesh Sethi, Chief Executive Officer, Dar Al Takaful

Banking and Finance news in the MEA market

ow well equipped for the unexpected was the regional insurance sector when the Covid-19 pandemic made its impact?

Looking back, the regional insurance sector moved nimbly during the pandemic. On the other hand, the medical system was under severe stress. With the support of regulators and astute national leadership, new hospital facilities were set up, payments by insurance companies to hospitals were expedited, and other business continuity plans were successfully activated. This has brought greater convenience to everyone in the industry while also keeping processes smooth and transparent for customers.

How well do you think takaful and conventional insurance c o m p a n i es p e r fo r m e d fo r their clients during the global pandemic? The customer experience remains seamless as a result of swift, agile decisions. A host of well-calculated strategies were implemented, keeping the customer journey in mind while also

system, and to protect frontline healthcare workers. For clients experiencing financial stress, the industry provided more affordable solutions and longer payment terms. With the support of regulators, both conventional and takaful companies launched new schemes and discounts for certain preferred client categories (such as doctors, safe drivers, etc). With the emergence of the Low Touch Economy, businesses have pivoted to digital offerings, bringing greater convenience and peace of mind to their customers. At Noor Takaful, we digitized almost immediately. Additionally, the pandemic led to nascent digital aggregators for life insurance products, a definite first for the UAE. Keeping the customer at the core of its operations, companies went to steep heights to enhance their customers’ experience and maintain their trust during the pandemic.

Have regional takaful companies’ investment strategies changed much in the past five years? Yes, investments have changed in two major ways. When it comes to capital expenditure, we have observed a shift

AS FOR FINANCIAL INVESTMENTS, THE INSURANCE AUTHORITY HAS PRIORITIZED HIGHER SOLVENCY IN THE INSURANCE SECTOR AND PENALIZED INVESTMENTS THAT DO NOT QUALIFY FOR SOLVENCY.

taking medical resources and capacity into consideration. As a result, customer services were uninterrupted, especially for emergency procedures. Elective procedures were postponed to divert additional stress on the medical

towards digital, apps, social media, and more support of the emergence of direct retail sales. As for financial investments, the Insurance Authority has prioritized higher solvency in the insurance

“Throughout the pandemic, clients have looked towards their insurance partners for safety, advice and prompt service. This was a unique opportunity for Noor Takaful to live up to its brand promise of ‘ethical insurance’. All our client services remained un-interrupted. We served our clients with sincerity of purpose and prompt payments. We ensured our staff remained safe through work-from-home facilities and in-house vaccination drives. In particular, we supported the community with sponsorships for insuring ambulances and frontline healthcare workers with additional death cover in case of pandemic infection.” Rajesh Sethi, Chief Executive Officer, Dar Al Takafuls.

sector and penalized investments that do not qualify for solvency. This has been a wise strategy. Insurance companies are now required to follow the Insurance Authority’s Board of Directors’ Decision Number 25 of 2014, which contains specified investment caps for investments such as bank deposits, sukuks, real estate and equity investment, etc.

What are the options for takaful cybersecurity insurance? Cybersecurity is the need of the hour, particularly with more staff working from home, increased threats of hacking, and the need to remain online. These circumstances have led to businesses shifting towards digital. To help customers and businesses stay safe and work with greater peace of mind, Noor Takaful provides cybersecurity insurance. We work with leading insurers to bring this trusted and reliable product to our customers.

Which regional takaful and insurance sectors have been the most changed by Insurtech activity? The industries that have been deeply impacted are motor, health, term life, home insurance, and travel insurance. mea-finance.com

AFRICA FINANCE

The impact of covid-19 on South Africa’s financial sector Despite inherent obstacles and the additional burden of the global pandemic, South Africa harbours the ambition and the advantages to become the continent’s financial hub. However, worrying indicators and difficult numbers will need to be overcome before it can achieve this goal By Mushtak Parker

t is no surprise that the Money Smart Week South Africa held in March 2021 reflected the changing mood music of a global financial sector under siege over the past year thanks to the economic and health impact of the COVID-19 pandemic. Under normal circumstances, the event, which is aligned to Global Money Week, promotes financial literacy “aimed at motivating and empowering South Africans to become better educated about their finances.” This year’s theme was building financial resilience and staying healthy in the context of the pandemic. The vagaries of the pandemic including lockdowns and social distancing, fasttracked changes in the banking sector especially digitisation, but the current watch words include business and personal finance resilience, proliferation of scams and fraud, credit responsibility, importance of retirement and funeral planning and the necessity of a will.

The Financial Sector So how is the South African financial sector coping under COVID-19? Finance Minister Tito Mboweni in his 2021 Budget in February put a moral burden on South African banks, insurance companies and

pension funds, reminding them of their role in helping to build the post-pandemic recovery, especially in financing the country’s huge infrastructure ask. The government has committed to a R791.2bn infrastructure investment drive including a blended finance Infrastructure Fund in collaboration with the private sector. The carrot dangling in front of the financial sector is Mboweni’s reiteration of his ambition to turn the country into the financial hub for the continent thus opening up new expansion and investment opportunities for its banking majors. “The government and the South African Reserve Bank,” maintains Mahin Dissanayake, Senior Director, Fitch Ratings’ African banks team, “will certainly encourage banks to step-up lending to stimulate the economy. What measures or incentives the authorities will introduce remains unclear. The budget refers to an ambitious, yet vital, infrastructure rollout which presents significant lending opportunities for banks, but this will play out over the medium term. State-owned enterprises (SOEs) will be at the forefront of the roll-out and it is important that these entities are financially sustainable.” In the past especially during the Zuma presidency, banks were holding back

Banking and Finance news in the MEA market

because of the dire macroeconomic situation and allegations of corruption and state capture. Fitch maintains that South African banks “will initially remain cautious on infrastructure financing given elevated sovereign risks. It also exposes them to a whole range of new risks such as the viability of new projects, repayment risk, political risk and operations risk. These could be mitigated by solid transaction structures and the banks certainly do have this expertise.” Mboweni confirmed that the Treasury will soon publish draft amendments to Regulation 28 for public comment. The amendments to Regulation 28 seek to make it easier for pension funds to increase investment in infrastructure. South African banks are expected to remain focused on traditional retail and corporate lending, partly based on projected low customer loan growth in 2021 (less than 5%) reflecting the macroeconomic backdrop, the weak operating environment and the impact of the pandemic on borrowers. The ‘Big 3’ rating agencies, Fitch, Moody’s and S&P, were all caught on the backfoot over Mboweni’s stronger fiscal trajectory in Budget 21, “mostly driven by exogenous developments from a faster recovery in domestic demand, as well as the rebound in international prices for mining commodities which has supported activity in extractive industries.” The dire economic indicators too present a mixed outlook for 2021. GDP growth, according to Mboweni “is expected to rebound by 3.3% in 2021, following a 7.2% contraction in 2020, and will average 1.9% in the outer two years.” For Pretoria to deliver on the manifold needs of the economy in uplifting the population out of poverty on a sustained basis, a minimum GDP growth of 5% is required.

these measures will eventually wind down. Fitch sees a continuing rise in impaired loans in 2021 and this may also discourage banks from expanding their loan books.

The Hub

Tito Mboweni, Minister of Finance

Gross government debt increased from 65.6% to 80.3% of GDP for 2020/21. Mboweni says this will stabilise at 88.9% of GDP in 2025/26. “Our borrowing requirement will remain well above R500bn in each year of the medium term despite the modest improvements in our fiscal position. Consequently, gross loan debt will increase from R3.95 trillion in the current fiscal year to R5.2 trillion in 2023/24,” he reminded. But at what cost? The country’s debt-service burden is projected to grow progressively from R232.9bn in 2020/21 to R338.6bn in 2023/24.

The Outlook So, how does this impact on the outlook for the South African financial sector? Fitch’s Dissanayake believes that the drag on bank earnings and prospects due to the pandemic will last for at least another two years. “Profitability weakened significantly in 2020, with the sector›s operating return on risk-weighted assets declining to 1.2% from 2.8% in 2019. Banks’ business and revenue prospects will remain subdued in 2021,” he adds. The rebound in the domestic economy to him will not translate to a rebound in

banks’ profitability because of low interest rates, muted loan growth and still high credit losses. “We believe asset quality will continue to deteriorate with the expiry of debt relief measures, rising unemployment and the hardest hit SMEs struggling to recover from the crisis. Around 20% of sector loans have been restructured due to the pandemic and some of these will inevitably become impaired. We guide a sector impaired loan ratio of 6.5% by end2021 (end-2020: 5.2%) – albeit still low by global emerging markets standards.” Structural challenges however remain. The low take-up of the Treasury’s loan guarantee scheme by SMEs but extended by the banks, for instance, could mean the winding down of the facility. Relaxed liquidity and capital rules as well as state-guaranteed loans were important measures introduced by the Ramaphosa government last year. This ensured banks continued to lend through the crisis. The low take-up could result in the National Treasury making further revisions to the scheme. One of the main reasons for the limited success of the loan guarantee scheme was that the banks extended debt relief directly to customers. But

How realistic also is Mboweni’s financial hub ambitions? In his Budget speech he confirmed that the “National Treasury continues to work with industry bodies to implement reforms promoting South Africa as a financial hub for the continent in light of the African Continental Free Trade Agreement (AcFTA).” The other potential ‘rivals’ are Nairobi in Kenya and Casablanca in Morocco. The latter, despite minimal post-Arab Spring reforms, remains a Francophone absolute monarchy with a lack of financial market depth and critical mass. The former is dogged by political instability, a tortuous bureaucracy, a lack of financial market depth and critical mass, entrenched corruption and a spill over terrorism threat from neighbouring Somalia. Bankers maintain that if South Africa can capitalise on its financial sector strengths comprising a world class architecture including the Johannesburg Stock Exchange (JSE) with its cross listing to the London Stock Exchange and others in Africa, then this can offset its geographic remoteness and socioeconomic structural issues. Fitch’s Dissanayake maintains that the “South African financial services and markets are among the most developed and best regulated in global emerging markets. South Africa has a significant lead over other African markets.” His colleague in the Sovereign Ratings team, Mahmoud Harb, concurs that “strong international investor interest in South Africa’s financial markets reflect its fully floating exchange rate regime, the deep rand markets and a strong institutional framework and regulatory environment.” Indeed, to them, the silver lining for the financial sector is the comfort South African banks give through their “solid capitalization, funding and liquidity.” mea-finance.com

BANKING TECHNOLOGY

Making Digital Banking Human in the PostPandemic World Emotions drive around 80 percent of the decisions a person makes in a day. Yet most digital banking applications today are highly transactional utility apps designed for checking balances and performing payments and transfers. As such, they fail to create a significant emotional connection with the user, appealing only to the logical side of the brain. In this article, Ahmed Khidhir, Business Development Manager, Digital Banking Solutions, Temenos describes how making your digital banking services connect emotionally with your customers can greatly enhance their experience and build stronger bonds

Banking and Finance news in the MEA market

n a post-pandemic world, where the digital experience will be a primary area of differentiation and competition for financial institutions, banks will need to move away from purely transactional digital apps by offering digital experiences that connect with the consumer on an emotional level. Thus, a deeper customer intimacy and engagement will become the new normal of digital banking. The benefits could be significant. Emotionally connected customers exhibit less price sensitivity, purchase more products, and recommend a given brand more compared to customers who are only highly satisfied. According to the Harvard Business Review, after a major bank introduced a credit card that was designed to inspire emotional connections with holders, its use increased by 70%. Another study showed that emotional connections can increase customer lifetime value up to 800% for financial services firms.

Here are three examples of how banks can build emotional connections via digital banking:

Adding features that “wow” their customers By introducing unexpected, different or “cool” features into online and mobile banking apps, banks can build emotional connections with their customers. A worthy proponent of this approach is Tesla, which adds unique capabilities to its cars such as dancing door wings that help create emotionally connected brand enthusiasts. Adding a touch of humor in digital banking can also trigger positive emotions from the user. A ubiquitous example of this is the Google Doodle – a witty, interesting, and often-interactive alteration of Google’s logo that changes daily and is designed to induce positive emotions from users.

Connecting with the customer’s lifestyle By offering digital banking journeys that connect with the customer’s everyday needs, values, and aspirations, banks can elicit a more intimate and emotional engagement with the customer. A great example of this is Flowe, an environmentally friendly challenger bank launched in Italy in 2020. Targeting a younger demographic, Flowe helps customers build a more sustainable future via a range of initiatives, including a debit card made of recycled wood. Flowe’s digital banking app likewise helps the consumer to be more eco-friendly by offering personalized advice and gentle nudges based on the CO2 impact of the user’s transactional behavior. By connecting with the customer’s values and aspirations the way Flowe does, banks can develop a more meaningful and emotional relationship with their customers.

Adding a human touch Despite the proliferation of mobile devices in today’s digital world, studies have shown that even the most digitally native consumer segments need human

Ahmed Khidhir, Business Development Manager, Digital Banking Solutions, Temenos

interactions and, in many cases, prefer face-to-face communication. Bringing more humanity to the digital banking experience can help banks build stronger emotional connections with customers. According to Deloitte, the merging of digital and real-life experiences is a key component in achieving an excellent overall customer experience. Adding a human touch to the digital experience is achievable by seamlessly enabling

applications that gauge the user’s emotional state. This can be accomplished by integrating emotional AI technology into digital banking. Emotional AI technology measures reactions in real time by analyzing the user’s interaction with a digital app and device—e.g., by tracking mouse cursor movement patterns. This approach can help banks measure the emotions triggered by a digital banking application and optimize the user experience to achieve the desired emotions. We might also one day see emotionally intelligent digital banking applications that can automatically, and in real time, adapt the user experience and digital marketing based on the individual user’s emotional state and reactions measured using emotional AI technology.

Conclusion As competition in retail banking continues to intensify, differentiation in digital banking is going to be less about features and functional breadth and more about the intimacy and emotional bonds that digital banking applications create with the user. To successfully engineer

BY OFFERING DIGITAL BANKING JOURNEYS THAT CONNECT WITH THE CUSTOMER’S EVERYDAY NEEDS, VALUES, AND ASPIRATIONS, BANKS CAN ELICIT A MORE INTIMATE AND EMOTIONAL ENGAGEMENT WITH THE CUSTOMER. access to real-life interactions and communication via audio/video chat or screen sharing and offering easy access to human interactions in digital banking journeys whenever the customer needs it. All of these techniques can significantly improve the overall customer experience while building stronger emotional bonds with customers. In the future, we might also see the proliferation of digital banking

digital experiences that enable positive emotional bonds, banks will need to adopt a mindset that focuses on emotional engagement and customer intimacy as much as functional superiority. Such prioritization can help banks shift more of their consumers away from transactional relationships to those in which digital ex p e r i e n c e s c re a te m e a n i n g f u l connections that drive deeper loyalty and more profitable customers. mea-finance.com

PARTNER CONTENT

The Future is Clear and is Cloud(y) Cloud is an essential ingredient for a successful banking business. Rajashekara V. Maiya, Vice President and Head, Business Consulting Group, Infosys Finacle, looks at the reasons for hesitancy and argues why banks must prioritize a complete transition to cloud without delay

oday, cloud is an essential ingredient for a successful banking business. An EFMA study reports that 86 percent of financial institutions think that cloud will be the most important technology of 2021. In the post pandemic months, there has been a meteoric rise in the demand for cloud applications across financial service industry. And while banks are no stranger to the cloud technology, the adoption is far from “done”. There are several new agile tech-savvy financial institutions that continue to lead in innovating with cloud-native strategies, but others are yet to achieve critical mass.

A lot has changed in recent times Even three or four years ago, migrating to cloud was not an easy call to make for a bank. There were not many providers to start with and the early ones, like Japan’s NTT or China’s Huawei, basically called their data center-combined infrastructure offering as “cloud”; the service was mainly used by large telecom players. The emergence of hyperscalers – whether by accident as in the case of Amazon which was looking to rent out spare server capacity, or design, as in the case of Microsoft Azure and IBM, who both

spotted a huge opportunity, proved to be a game changer. Soon, even companies such as Alibaba, entered the space. So now, banks can no longer say that there are not enough service providers. The second reason for reluctance stemmed from data sovereignty. Banks were concerned about customer data and other sensitive information being stored on servers outside the country of origin. Cloud Service Providers (CSP) have addressed this issue by implementing a hub and spoke model with servers located all over the world meeting regulatory expectations of localization and confidentiality. Eve n c ost , w h i c h u s e d to b e considerable 7-8 years ago, when cloud offerings cost almost as much as on-premises infrastructure, is no longer an issue. With the cost of bandwidth, computing and storage plummeting by 28 to 33 percent every year, cloud is today, a super-fast, highly economical and extremely reliable (99.9999 percent uptime) option. The availability of 1 TB storage even on consumer smartphone and tablet devices, combined with organizational level storage (provided by the likes of Microsoft, Google or Apple) has brought about externalization of

Banking and Finance news in the MEA market

Rajashekara V. Maiya, Vice President and Head, Business Consulting Group, Infosys Finacle

storage and discouraged the practice of storing data locally. Banks should therefore stop trying to buck this trend and confidently move to cloud instead.

Interoperable, secure, compliant Another reason for cloud hesitancy is the lack of standardization and interoperability. With each hyperscaler, from AWS to Google to IBM, working on a different stack, questions on the availability of adequate technical support

are bound to arise. Fortunately, a plethora of communities have mushroomed in recent years, offering timely advice and guidance. The CSPs too have worked towards interoperability, because of which AWS can today work on an MS or MS&IBM stack, and have also introduced large-scale certification programs to improve access to skills and talent. Clearly the days of proprietary stacks are over; the way forward is very much in the direction of collaboration and choice, all good reasons in favor of adoption. In fact, banks can now easily use and manage multiple clouds because of the advances in hybrid/ polycloud management. Banks have also pleaded a lack of clarity on regulatory support and guidance to justify not moving to cloud. While this may have been the case in the past, today, central banks and governments are cloud’s biggest advocates, and most have published detailed guidelines on its use. In fact, many dispensations are cloud users themselves – for example, the Indian Government has hosted the Aadhaar program on cloud. However, the biggest argument against cloud used to be (its’ questionable) security: for banks, which are custodians of customers’ data and money, nothing is more important than a safe environment. Over the years, CSPs made huge strides in logical, physical, data transmission and storage security among others to prove that they were more than capable of withstanding every type of threat. Today, their exemplary commitment to security is keeping them a step ahead of their attackers. What’s more, cloud providers are indemnifying their clients against any losses they may suffer due to a breach, dismantling yet another objection to cloud migration.

A cloud for every bank Every bank can draw value from cloud but go about it in different ways. A bank with low appetite for risk may opt for a pure play private cloud, and progress towards a hybrid or public cloud once it

gains confidence. The bank must also decide what services to consume from among several options including platform as a service, infrastructure as a service, software as a service and even database as a service. Further, it needs to schedule the order in which various applications will be migrated – for example, start with peripheral applications like accounts receivable and payable before moving on to core applications like deposit and loan management.

Fly high on cloud Cloud elevates every bank, regardless of approach, to a position where it can achieve a lot more. At the top of the list is the possibility of building a platform business. Another big advantage of cloud

and liquidity risk today. On top, interest rates continue to fall, stressing profit margins. Then there is the onslaught from new competitors, most of whom run on cost to income ratios that are half that of incumbents. As banks desperately look for ways to improve cost competitiveness, cloud, with its subscription-based/ pay per use/ pay per location and similar pricing models, is enabling them to reconstruct the cost dynamics of their IT landscape and free up resources for future investment. The impact of cloud is such that it is changing the very definition of work, workforce and the workplace in the context of banking. Take for instance, datacenter related work such as server, security and application maintenance,

AN EFMA STUDY REPORTS THAT 86 PERCENT OF FINANCIAL INSTITUTIONS THINK THAT CLOUD WILL BE THE MOST IMPORTANT TECHNOLOGY OF 2021. is a sandbox environment that greatly eases integration and collaboration with the external ecosystem; the result is that integrations that used to take 12 to 18 months now get done in a fraction of that time. Cloud also opens up a new business model whereby a bank may offer banking as a service (or a subset, such as only trade finance or deposits or virtual account management) to entities like Non-Banking Finance Companies and operators of Prepaid Payment Instruments. All these factors make it easier for banks to comply with Open Banking mandates, which are becoming increasingly common in the wake of postpandemic digitization. Last but not least is a cost advantage that goes beyond mere cost reduction: In an unusual twist, banks are battling unprecedented credit

which ceases to be relevant when infrastructure moves to cloud. The workplace too undergoes a change because the datacenter is lodged not in the bank’s physical premises, but on cloud anywhere in the world. Consequently, the workforce engaged in activities, such as database, network and server administration, is affected and needs to be rebadged and reskilled. Finally, cloud enables banks to innovate constantly throughout their operations. It helps banks with talent constraints to source the right people from outside, especially the gig economy. On cloud, banks can provide the ideal experimentation environment to parttime innovators, developers and testers, which was never possible when they were running on-premises. mea-finance.com

PARTNER CONTENT

PAYMENTS MODERNISATION IN MIDDLE EAST & NORTH AFRICA

Trends and Opportunity

To meet the many challenges that they face today, Banks need to modernise their payments infrastructures. Houssam Chaker Regional Sales Head, Volante Technologies explains some of the key requirements and options available to ensure success.

ver the past few years, the banking sector has gone through a massive transformation, with the modernisation of payments at the epicentre of this journey. Not only has the pandemic accelerated the pressure for banks to digitise, but they also need to provide value-added services to meet high customer expectations. Providing a superior digital payments experience is key, covering a range of capabilities such as Straight-through Processing (STP), immediate execution with simplicity, efficiency, transparency and security. For financial institutions to succeed with their payment modernisation journey, the key ingredients are as follows: egulation: “GiantTechs”, now R working hand-in-hand with regulators, enabling Fintechs to quickly adapt and meet growing demand from corporate and retail customers for a better way of handling finance. intechs: Supported by regulators F through receptiveness to cloud availability and open banking frameworks, collaboration between fintechs and banks is becoming the

new normal. These partnerships allow banks to offer value-added services to their existing and new customers with greater ease. Cloud: Cloud democratisation is on the rise in the region, helping banks speed up payment transformation, collaborate with fintechs through native open APIs, and scale up progressively and securely at optimal cost. Banks can then focus on business and value-added services, rather than maintain costly infrastructure. Open banking: Regulators across the region are introducing new Open Banking frameworks to encourage faster, more secure payments and improve banking services overall. I SO 20022: ISO 20022 is being adopted for domestic and crossborder payments systems, with SWIFT leading the way starting migration by November 2022, and new real-time networks being designed as ISO 20022 native from the ground up. While this could mean a major IT project for some banks, expected rewards (such

Banking and Finance news in the MEA market

Houssam Chaker, Regional Sales Head, Volante Technologies

as higher STP, reduced fraud and reconciliation efforts) should more than compensate the effort. ayments infrastructure P modernisation: On a domestic basis, a real-time payments revolution is sweeping the region. Besides payment speed, real-time payments systems benefit business customers in terms of availability of remittance data, improved control over payment

Payments Modernisation MENA ISO20022

Regulation

Messaging and data backbone

New frameworks and mandates

Open Banking

Payments Modernization

Regulatory frameworks – APIs

Fintechs

Regulatory sandbox

Cross Border payments

Domestic Payments

RTP, Instant, 24X7…

Swift, Buna, GCC RTGS, Ripple …

Cloud

PaaS and Cloud

AWS, Azure, Google, OCI…

Payments as a Service

timing, and technology that supports an “always on” economy. B usinesses of all sizes are starting to demand faster, more transparent, and cheaper crossborder payments. SWIFT gpi has expanded on the traditional SWIFT correspondent banking network by introducing transparency and other options such as BUNA, AFAQ/ GCC RTGS, Visa Direct, Visa B2B Connect, Mastercard Send, and Ripple (blockchain) are diversifying customers’ choices. ayments as a Service – PaaS: P Cloud-based technologies, APIdriven architectures, open banking, and the current pace of evolution in the payment ecosystem, is driving PaaS strategy choice for banks. Banks are looking to capitalise on the opportunity offered by new business models with optimal flexibility and cost in the all too important quest for reducing time to market, meeting regulatory and compliance requirements and, increasing agility and speed when delivering valueadded services to end customers.

While the above presents a real opportunity for banks and financial institutions to get ahead of the competition by bringing new customer experiences to market, most banks are being held back by legacy technology. To meet today’s customer demands, regulatory mandates and capitalise on the opportunity, financial institutions need to modernise their payments infrastructures. When doing so, they should look for platforms that are cloudnative and cloud-ready, microservicesbased, and API-enabled. Continuous real-time operation is essential, as is 24x7 availability. ISO 20022 fluency is a must. They should also look for proven solutions that allow them to bring new capabilities and services to market with minimal effort. At Volante, we are proud to be partnering with a wide range of leading global and regional financial institutions. Our payments modernisation solutions enable banks to free themselves from the limitations of legacy, so they can focus on their true goal: strengthening their positions as leaders and innovators and delivering distinctive value to their customers.

About Volante Technologies Volante Technologies is the leading global provider of cloud payments and financial messaging solutions to accelerate digital transformation. We serve as a trusted partner to over 100 banks, financial institutions, market infrastructures, clearing houses, and corporate treasuries in 35 countries. Our solutions and services process millions of transactions and trillions in value every day, powering four of the top five corporate banks, 40% of all US commercial bank deposits, and 70% of worldwide card traffic. Volante’s cloud-native ecosystem of business services simplifies and automates complex systems and processes in payments, capital markets, and financial message integration. Built on a microservices architecture underpinned by an ISO 20022 canonical model, it is designed to accelerate financial institutions’ payments modernisation journeys, allowing them to deploy only the services they need, without coding or complex systems integration programmes. All of Volante’s solutions can be deployed in bank data centres and private clouds, or as a managed service in Volante’s secure cloud, providing institutions with greater agility and choice, while lowering the cost and duration of modernisation implementations.

mea-finance.com

OPINION PIECE

Can Intra-African trade buffer the continent from future global economic recessions? Sarmad Lone, Regional Head, Client Coverage Corporate, Commercial and Institutional Banking, Standard Chartered AME explains how intra-African trade may be the key to the development of economies across Sub-Saharan Africa and that with recent key initiatives such as the African Continental Free Trade Area Agreement (AfCFTA), there is a real chance that positive change will occur

he economic uncertainty in the wake of the COVID-19 pandemic places a huge load on economists to formulate effective recovery and resilience strategies, more so in Sub-Saharan Africa. According to the World Bank’s recent biannual Pulse report, the pandemic has taken a toll on economic activity in Sub-Saharan Africa, putting a decade of hard-won economic progress at risk. Depending on the success of measures taken to mitigate the pandemic’s effects, it is estimated that economic growth in sub-Saharan Africa will drop from 2.4

percent in 2019 to between -2.1 percent and -5.1 percent in 2020. The dip could be attributable to an approximate 6.9 percent contraction in African economies, that are heavily reliant on exports of commodities, whose prices are dropping. This could claw back some of the major strides that Africa has made in its participation in trade and value chains as well as result in a reduction of foreign financing inflows. A f r i c a ’s i n t e r n a t i o n a l t r a d e relationships and transactions are vital and have showcased significant growth over the last two decades. According to

Banking and Finance news in the MEA market

Sarmad Lone, Regional Head, Client Coverage Corporate, Commercial and Institutional Banking, Standard Chartered AME

a recent UNCTAD report, in the period of 2015-2017, total trade from Africa to the rest of the world averaged $760 billion in current prices. Similarly, the share of exports from Africa to the rest of the world represented 80 to 90 percent of Africa’s total trade transactions between 2000 and 2017. However, a decline in Africa’s international trade activity could have a

silver lining. There is growing consensus amongst economic planners of a need to shift the mindset on intra-African trade and view it as a key driver of economic growth in the post COVID19 era. Intra-African trade provides a compelling opportunity to move away from significant reliance on extractive exports. However, oil, minerals and agricultural exports are subject to price volatility and require less labour, thereby limiting employment opportunities for a continent with a young population. Conversely, according to the Economic Commission for Africa, when African countries trade with each other, they exchange more manufactured and processed goods, have more knowledge transfer, and create more value. In addition, Increased value addition or sophistication increases the value of the exports and therefore productivity. Africa’s growth is fuelled by small to medium sized enterprises (SMEs). SMEs possess the extraordinary ability to tap regional African markets, grow exponentially and create jobs, while also accounting for 80 percent of the region’s trade, according to the Africa Trade Policy Centre (ATPC). The opportunity for intra-Africa trade is best viewed with a ‘glass half-full’ approach with an equally pragmatic view of the challenges that lie ahead. Let’s start with the barriers to trade in the continent. Barriers such as high tariffs and poor supply chain infrastructure raise trade costs, erode the competitiveness of goods and services, inhibit exports, and generally stifle economic growth. Recent studies conducted by the World Bank indicate that 75 percent of the delays in the movements of goods are from trade facilitation and that 25 percent are attributed to infrastructure. Proof exists that these barriers can be reduced. Poor infrastructure causes congestions, delay and ultimately high transportation costs. African countries have begun investing in physical infrastructure at key ports, introducing One-Stop Border Posts (OSBPs) whilst

doubling down on soft infrastructure such as integrated border management systems as well as mobility of human resources. The advantage of OSBPs is that they eliminate the need for vehicles, travellers and goods to stop twice to undertake duplicated border-crossing formalities. According to the Africa Union’s Program for Infrastructure Development In Africa (PIDA), African regional economic communities have identified approximately 76 borders posts for implementation. Addressing the infrastructural challenges will lead to a reduction in key trade bottlenecks, faster movement of goods through key links and nodes, and ultimately lower transport costs. The crystal ball shows encouraging signs on Africa’s trade facilitation front. Two years ago, African countries inked a landmark trade agreement, the African Continental Free Trade Area Agreement (AfCFTA), which commits countries to remove tariffs on 90 percent of goods, progressively liberalise trade in services, and address a host of other non-tariff issues including import quotas. The agreement will certainly deepen trade, boost economies, create jobs and achieve the elusive market integration objectives. The 54 signatures created a single African market of over a billion consumers with a total GDP of over $3 trillion, making Africa the largest free trade area in the world. Globally, trade agreements, like human relations, carry hopes and suspicions. Pulling off AfCFTA was therefore a great feat by African countries from a trade negotiations perspective. AfCTA’s scope exceeded traditional t ra d e a g re e m e n t s a n d c o v e r s intellectual property rights, e-commerce and competition policies which have diminished trade and heightened protectionism. It provides an opportunity for African countries to improve diversification in exports and trade. This is expected to significantly benefit agricultural products. African countries spend over $80 billion in food imports.

According to the economic commission for Africa, AfCTA is expected to expand access to markets at a regional and international level, thus generating state revenue and increasing farmer income, resulting in the provision of reserves for investing purposes especially in modernising the agricultural sector through processing and mechanisation. AfCTA is key to paving the road to intraAfrican trade but the road remains bumpy, for now. Apart from promoting intraAfrican trade, AfCFTA’s litmus test will showcase how quickly African countries can fast-track export diversification and product sophistication thus making trade more inclusive. Domestic policymakers need to demonstrate the commitment to industrialisation and manufacturing. A unique catalyst for intra-Africa trade is the empowerment and inclusion of women in cross-border trade. According to UN women report titled: Unleashing the Potential of Women Informal Cross Border Traders to Transform Intra-African Trade shows that informal cross-border trade has become an integral part of trade flow for the East African Community (EAC) and Southern African Development Community countries. The report states that over 70 percent of the cross-border traders are women. In West and Central Africa, women informal cross border traders “employ 1.2 people in their home businesses; support on average 3.2 children as well as 3.1 dependants who were not children or spouses. Also, with over 70 percent of small cross-border traders (CBT) being women and two-thirds of traders relying on CBT as their primary source of income, interventions targeted at intra-Africa exports and imports have a huge potential to drive development, inclusion and poverty reduction. The consequences of a COVID-19driven recession should be the perfect excuse for African governments to hasten the mainstreaming of intraAfrican trade in their respective national trade and development strategies. The impact will be felt for years to come if policymakers fail to address this now. mea-finance.com

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Building a sustainable future

Saudi Arabia, the Arab world’s largest economy, is expected to witness sustainable growth on the back of the government’s continued efforts to increase spending efficiency and enhanced public-private partnerships

audi Arabia is restructuring and opening its economic activities, rethinking the role of foreign investors as the kingdom looks to ease fiscal burdens and do away with dependence on oil, with a strong focus on the financial sector, tourism, technology, and foreign direct investment. The International Monetary Fund (IMF) projected that Saudi Arabia’s

real GDP will rebound by 2.6% in 2021 after contracting last year due to the fallout from the dual shocks of COVID-19 and low oil prices. The Saudi Central Bank (SAMA) expects the economy to swing back to growth by 3.2% this year after a 3.7% contraction in 2020. Under Crown Prince Mohammed bin Salman’s Vision 2030, the Saudis are leaving no stone unturned

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in their efforts to diversify the economy away from dependence on oil revenues. The government’s efforts to diversify the economy are critical to sustainable growth and Moody’s indicated that Saudi Arabia’s credit rating could be upgraded if the country moves away from oil faster than planned. Public Investment Fund (PIF), the driving force behind the kingdom’s

December, projected a deficit of $38 billion (SAR 141 billion) or 4.9% of GDP for the current fiscal year and aims to nearly balance its budget by 2023. S&P Global expects Saudi Arabia’s economy to recover in 2021-2022 from the shocks of 2020 as global demand for oil recovers and private consumption increases.

Financial sector

economic growth and diversification, plans to double its AUM to $1.07 trillion) by 2025. Saudi Arabia introduced several initiatives in the first quarter of the year to spur growth in the non-oil economy including “Made in Saudi” and the new “Shareek” – a $1.3 trillion investment program to enhance the collaboration between the public and private sector. The kingdom renamed its central bank to Saudi Central Bank (SAMA) last November as the government widened the regulator’s mandate to include supporting economic growth as one of its prime objectives. In the financial service sector, Saudi banks are well-capitalized by international standards and S&P Global expects them to outperform their regional peers on average despite the lower profitability. Saudi Arabia, which unveiled its $264 billion (SAR 990 billion) 2021 budget last

The Saudi financial services sector is the backbone of the country’s economic diversification drive. In 2018, the government launched a national development program that is aimed at increasing the total size of financial assets to GDP ratio, boost the share of capital markets assets and raise SMEs’ bank financing. Earlier this year, SAMA issued the “Open Banking Policy” to ensure the Saudi financial sector’s infrastructure readiness to leverage “the most prominent financial technologies” and implementation of necessary regulatory practices. The central bank said that it “will work with market participants” amid plans to go live with open banking in the first half of 2022, a move that is expected to present significant opportunities for fintech companies and the country’s financial service sector. Open banking allows fintechs and third parties to build products and services for the financial institution’s customers and these lower barriers to entry for startups increase competition and innovation, said Strategy&. The Saudi central bank is also encouraging consolidation in the banking and insurance sectors to create stronger entities that can support the role the private sector plays in advancing the government’s economic diversification agenda. Earlier in April, Saudi Arabia completed the landmark merger between National Commercial Bank and Samba Financial Group into Saudi National Bank (SNB), a banking giant with around $223 billion in assets. SNB is expected to be on equal footing with regional rivals Qatar National Bank and First Abu Dhabi Bank.

“With a 30% market share built on well-established franchises, SNB now enjoys a prime market position, strong capitalization and a well-balanced risk profile,” said S&P Global. Last month, the Saudi stock exchange (Tadawul) said that it was changing its corporate structure into a holding company ahead of a highly anticipated listing this year. The newly created Saudi Tadawul Group will have four subsidiaries, Saudi Exchange, securities clearing center (Muqassa), securities depository company (Edaa) and a new technology-services business (Wamid). The restructuring of Tadawul and possible public offering will make it the third publicly listed stock exchange in the GCC region after the Dubai Financial Market and Boursa Kuwait. SAMA extended a deferred payment programme to support SMEs and private sector financing in March for another three months until June 2021 to bolster the economy that was hit by a double whammy of low oil prices and the coronavirus pandemic. The central bank also extended the guaranteed financing programme for an additional year until March 14, 2022 to support small enterprises.

Diversification drive Saudi Arabia, the Arab world’s largest economy, is expected to witness sustainable growth on the back of the government’s continued efforts to increase spending efficiency and enhance public-private partnerships. “As the vaccination program gains more momentum and COVID-related restrictions are eased, non-oil sectors will continue their growth trajectory, estimated to reach 3.5% in 2021 and reflecting stronger private consumption, gradual resumption of religious tourism, and higher domestic capital spending signaled through PIF’s five-year strategy (2021-2025),” said the World Bank. The kingdom hopes to accelerate the privatizations of sectors of the economy to plug its deficit that ballooned last year mea-finance.com

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due to the outbreak of COVID-19 and an expected plunge in oil revenues. Though Saudi Arabia’s reforms are starting to have a positive impact on the economy, the kingdom is still reliant on oil which accounts for three-quarters of the sixnation GCC bloc’s spending. Saudi Arabia sold two flour mills to investor groups that comprised National Agriculture Development Co. and Abdullah Al Othaim Markets Co. in deals that are valued at $570 million and $229 million, respectively. Saudi energy giant Aramco’s newly formed pipeline subsidiary, Aramco Oil Pipelines Company, agreed to a $12.4 billion deal to sell a 49% stake to an EIG Global Energy Partners-led consortium. Crown Prince Mohammed unveiled the “Shareek” program in March, a $1.3 trillion initiative that seeks to bolster the collaboration between the public and private sector while mobilizing the country’s biggest listed firms such as Aramco, Saudi Telecom Co. and SABIC to help wean the kingdom from its heavy reliance on hydrocarbons export. The initiative is part of $3.2 trillion (SAR 12 trillion) worth of investments planned by 2030 and includes SAR 3 trillion from PIF, the Saudi sovereign wealth fund, and $1.07 trillion (SAR 4 trillion) under a new government investment strategy that is yet to be revealed. KPMG stated that privatization and encouraging public-private partnerships (PPPs) will remain key to the government’s Vision 2030 goals – measures that have been given additional impetus by the rise in public debt. P I F, w i t h a ro u n d $ 4 0 0 b i l l i o n AUM on behalf of the government, is financing several mega-projects that are currently under development in Saudi Arabia including the $500 billion futuristic NEOM City, Qiddiya, and the Red Sea Development Company’s mega tourism project. The development of the Red Sea Project commenced in the second half of 2019 with Phase One of the project expected to be completed in 2023.

AS THE VACCINATION PROGRAM GAINS MORE MOMENTUM AND COVIDRELATED RESTRICTIONS ARE EASED, NON-OIL SECTORS WILL CONTINUE THEIR GROWTH TRAJECTORY, ESTIMATED TO REACH 3.5% IN 2021 AND REFLECTING STRONGER PRIVATE CONSUMPTION, GRADUAL RESUMPTION OF RELIGIOUS TOURISM, AND HIGHER DOMESTIC CAPITAL SPENDING SIGNALED THROUGH PIF’S FIVE-YEAR STRATEGY (2021-2025). – The World Bank

The entire Red Sea Project is expected to be completed in 2030 and upon completion, it will comprise 50 hotels with 8,000 rooms and around 1,300 residential properties across 22 islands and six inland sites, according to information on the company’s website. S&P Global expects the investment initiatives that were recently announced by the Saudi wealth fund to spur corporate credit growth, mostly in constructionrelated industries and it will offset the gradual lifting of support aimed at easing the impact of the pandemic.

Debt issuance Saudi Arabia’s budget deficit is financed by a combination of external and domestic debt issuance and drawdowns from its existing stock of assets, said S&P Global. The Saudis have increased debt issuance in previous years to achieve fiscal sustainability and stability as well as to balance financing sources between debt and government reserves. Saudi Arabia tapped international debt markets with a $5 billion dual-tranche dollar-denominated bond in January as Gulf countries continue to raise cash buffers to weather the pandemic crisis. The $2.75 billion 12-year notes mature in

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2033 while $2.25 billion 40-year security mature in 2061. The government returned to capital markets to issue $1.8 billion (EUR 1.5 billion) euro-denominated bonds in February, as the kingdom joined the ranks of countries that get paid to borrow in euros as the outlook turns favorable with a recovery in oil prices. According to Bloomberg, Saudi Arabia expects public debt to hit the $250 billion (SAR 937 billion) mark by the end of 2021, more than 30% of economic output. Morgan Stanley also expects Saudi Arabia to be the biggest emerging-market issuer of hard-currency debt this year with $14.5 billion of bond sales. Saudi Arabia is betting on tourism as the kingdom seeks to increase the contribution of the sector to the GDP by 10% and generate one million jobs by 2030, part of the government’s larger plan to attract around $133 billion in new investments over the next decade. As part of its broader plan to diversify the economy, Saudi Arabia said together with state-backed entities it would cease doing business with foreign firms whose regional headquarters are in any other country by 2024 in a bid to curb “economic leakage”.

BANK BRANCHES TRANSFORMED THROUGH CASHLESS COMMERCE

Essential insights from some of the region’s leading finance and technology executives

Faten Halabi Sonny Zulu Amit Malhotra Khaled El Bialy

BRANCHES AND PAYMENTS

CONTENTS 60

IN-DEPTH ANALYSIS

Disruption in the GCC banking landscape fuels the belief that branches have had their day.

A NEW BANKING LANDSCAPE

The growth in mobile apps and digital banking will reduce the presence of branches with those remaining adapting to offer new services.

MANAGING CUSTOMER LED CHANGE

What is driving the changes in banking services and how should our new digital tools be used?

TRANSFORMING THE BANKING WORLD

The customer must lead, and agility will be the key to success.

KEEPING THE CUSTOMER IN MIND

64 77

There remains a need for branches but evolution to enhance customer experience is a must.

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IN-DEPTH ANALYSIS

Reinventing banking As banks in GCC region are facing disruption from these entrants in the payments market, there is a widespread belief that the days of the bank branch network are numbered

inancial services providers in the Gulf region had significantly digitized their businesses way before the outbreak of the COVID19 pandemic last year. The “stay at home” orders that were introduced by regional governments to curb the spread of the virus inevitably accelerated the use of contactless payment methods to an alltime high record, generating as much as 10 years’ worth of growth in just four months. “The shift towards digital and cashless payments has increased over the last few years, and the COVID-19 pandemic has accelerated the shift to contactless payments,” said Amit Malhotra, General Manager, Personal Banking Group at Commercial Bank of Dubai. In a report, GCC Banking Trends - 2021 and Beyond, Avaya said that the pandemic accelerated migration from cash payments and the shift is here to stay with the trend expected to have knock-on effects on how banks approach their retail branches. Amid fears that cash might be a possible vector of the coronavirus, the shift to contactless payment methods across the Gulf is also being driven by the growth of e-commerce

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as the pandemic pushes more shoppers online and changing preferences among the region young tech-savvy customer base. Digital payments, once a convenience, have become a necessity in these times, said PwC.

However, as digital payments are opening a new banking chapter, GCC banks should not leave the bank branch behind in the race to digital but rather implement new technologies to enhance the experience, Avaya noted in the report.

The cloud communications and workstream collaboration solutions provider also urged Gulf lenders to leverage branches to master best practices Know-your-Customer (KYC), gathering customer data and loyaltybuilding in an overbanked market. An enabling environment The use of seamless payment methods has undoubtedly increased and the use of smartphones for payments has surpassed the use of debit cards as the preferred method of payments among consumers across all six Gulf states. The pandemic has accelerated several trends in both consumer and business behaviors in the payments sector– and consumers do not expect to go back, said Mastercard. The shift in buying behavior towards e-commerce platforms at the height of the pandemic when regional governments i n t ro d u ce d m ove m e n t a n d t r ave l restrictions made it imperative for banks to provide consumers with a seamless solution to save and manage their card details across multiple websites. With several consumers and retailers experiencing the convenience of online shopping, a survey by PwC discovered that 53% of Middle East retail majors increased their online presence with Saudi Arabia’s Bin Dawood and Danube benefiting from this surge as their average sales increased by 200%. In the UAE, Carrefour saw a 59% jump in new online customers. According to Deloitte, there has been a surge in the shift towards digital and contactless payments as consumers shift a greater share of their purchase online and businesses – either by choice or by necessity – race to setup -commerce capabilities to capture sales in the new normal. GCC banks are taking advantage of these adoption rates as a launchpad to drive their digital transformation strategies. The success of digital payment methods across the Gulf can also be attributed to the financial services sector’s quest to meet customer expectations, increase efficiency, accelerate growth and cutback operational risk.

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IN-DEPTH ANALYSIS

Visa said that contactless payments are successful globally because they offer real convenience, especially for ticketing and purchases in restaurants, express stores, buses, trains, parking and vending machines – places where the cash turnover is usually high, and consumers are usually in a hurry. “I feel that contactless payments will continue to grow rapidly in the years to come, with further enhancements to provide faster and more secure transactions,” added Malhotra. Security & data privacy concerns Although seamless payments exploded in popularity last year following the outbreak of coronavirus, the increase in their use is also credited to how they are deemed a

a customer is making a payment. The connection is through tokenization – the process of converting meaningful data, such as an account number, into a token that has no meaningful value if breached, according to McAfee. While mobile payment services such as Samsung, Apple and Google Pay utilizes near-field communication (NFC), which is also a much safer way of settling payments. However, just like any technology, digital payments come with both mobile security and data privacy risks. Cybercrime and malicious hacking cases have intensified since the outbreak of the pandemic. According to KPMG, the proliferation of digital channels following the outbreak of the pandemic has also led to increased cyber-risk exposure.

Defining the future of bank branch is a major business priority for GCC banks at a time when many bankers view branches as cost centers and predict a significant reduction in their footprint and retention of high-specification sites.” - Faten Halabi, Regional Sales Leader, Avaya

secure way of settling payments compared to fiat currency. According to ResearchAndMarkets. com, “Consumers are trying out new payment methods while purchasing from e-commerce websites and favor those methods that have the strongest protection against fraud losses.” Contactless debit/credit cards use a computer chip and a tiny antenna that connects with a card reader when

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PwC also weighed in, saying that the situation is unlikely to change for the better in the future due to the use of thirdparty vendors, evolving sophisticated and complex technologies as well as crossborder data exchanges, the increased use of mobile technologies by customers and the heightened cross-border information security threats. Globally, financial institutions are finding themselves a step behind as their existing

approaches to combat cyberattacks cannot adequately handle several threats and burdens, they encounter. Hence leaders in the GCC financial should constantly change their operating models to obtain a holistic view of the evolving landscape of financial crime. The evolution of fraud and financial crime moves in tandem with the developments in the domains they plunder. Branches of tomorrow Digitalization in the GCC financial service sector is swiftly shifting the field of play whereby banks are now forced to focus on customer experience, and it is no longer about the products and services on offer. The payments market has been traditionally served by conventional banks, but the new and innovative non-banking payments providers are causing disruption and driving rapid changes in the financial service sector. The emergence of new technologies is creating opportunities for innovation and efficiency at the same time opening doors to new competitors such as fintechs, global retail giants as well as card networks and digital-exclusively banks. As banks in GCC region are facing disruption from these entrants in the payments market, there is a widespread belief that the days of the bank branch network are numbered. Defining the future of bank branch is a major business priority for GCC banks at a time when many bankers view branches as cost centers and predict a significant reduction in their footprint and retention of high-specification sites, Faten Halabi, Regional Sales Leader, Avaya said. Several regional lenders including Mashreq Bank and the National Bank of Ras Al Khaimah (RAKBANK), closed some of their retail bank branches amid a plunge in traditional in-branch activities. While others are digitally transforming their branch network into user-experience centers. However, in a report, GCC Banking Trends - 2021 and Beyond, Avaya urged GCC banks not to leave the branch behind in the digital journey but rather pilot new technologies such as robotic process automation,

biometrics (voice and facial recognition), video, Internet of Things – and evolve the branch to create an effortless experience. In 2019, Mashreq said that it would allot over $136 million until 2023 towards its digital transformation strategy. The same year, Mashreq joined forces with Avaya and Koopid to introduce the region’s first digital engagement banking bot—a system that enables its customers to access banking services and complete service requests almost entirely through an AI-powered (AI) agent. “Today, we have some clients who have been banking with us for over five years and they have never visited any of our branches. Does this mean that the branch will completely disappear?”, Sonny Zulu, the Managing Director of Retail Banking, Standard Chartered Bank UAE asked adding that rather the primary purpose of the branch will continue to evolve in line with prevailing trends. The bank branches must evolve radically, from being a traditional banking hall to a place where customers can experience the products and services it offers and the companies it collaborates with, said Accenture. For banks to successfully transform their retail branches into user experience centers, Avaya in its report GCC Banking Trends - 2021 and Beyond urged them to leverage the potential of their front office employees by turning them into sellers by equipping them with the right tools, capabilities, customer data and insights to make them more effective and give them compelling new key performance indicators. Last September, RAKBANK also slashed its physical presence by 25%, closing nine retail branches across the UAE as part of the bank’s digital transformation drive. To create successful experience store networks, GCC banks will have to take a flexible, globally standardized and locally flexible approach to customer offerings and experience. According to Accenture, banks will also need to manage the overall business and systems architectures on a cross-channel global basis and drive

employees’ behavioral change starting from the customer experience mindset, not a procedural or regulatory standpoint. Outlook Contrary to a growing belief that the days of the bank branch network may be over, the reality is some customers still prefer human interaction, and the existence of retail branch networks creates reassurance and trust in the sector, even for digitalexclusive financial service providers. “Constant and continuous change of the business model to be more proposition-

new payment tools being launched in the GCC region. Avaya’s Halabi said, “When migrating to a new branch strategy, powered by technology, issues such as selecting service capability in certain branches, or ill-prepared branch employees who are not empowered and equipped to satisfactorily address customers’ diverse concerns must be addressed.” According to ResearchAndMarkets. com, MENA digital payments market is expected to register an annual growth rate of 6.5% between 2020 and 2025.

Bank branches must evolve radically, from being a traditional banking hall to a place where customers can experience the products and services it offers and the companies it collaborates with,” - Accenture

centric and considering new innovations and best-in-class technologies are a way of life in our financial institution,” Khaled El Bialy, Managing Director, Banque Misr UAE. Accenture stated that customers love digital for routine transactions but want human contact when they need it – and the fact it’s available in physical branches reassures them about the bank’s brand. Having said that, it is very much clear that branches are part of the future and for customers, they play a vital role as visible, tangible locations that provide a positive and personalized experience. In the last decade, the digital payment industry has recorded robust growth, with new providers, new platforms, and

While digital wallets have been around for a while, the adoption rate has varied a great deal. Contactless payment options such as digital wallets and “pay” buttons such as First Abu Dhabi Bank’s Payit, stcPay in Saudi Arabia, Samsung, Google and Apple Pay and Empay in the UAE remove the hassle of entering payment details for each transaction. Visa also said that payment technologies such as tokenization and secure remote commerce that increase security and reduce friction will gradually evolve to be part of the default checkout flow of e-commerce merchants, replacing traditional checkout forms.

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Faten Halabi Regional

Sales Leader, Avaya

If they are to be preserved, we see branches evolving into customer experience zones.”

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A new banking landscape Faten Halabi Regional Sales Leader, Avaya explains that that while there will be reductions in the number of physical bank branches, exacerbated by the accelerated growth in mobile app use in the past twelve months, those that remain are evolving to provide newer services and facilities. However, when adapting the role of branches there are numerous considerations to assess

hile bank branches are becoming less of a necessity for many t ra n s a c t i o n s , t h e re will still be a need for them. What functions or purpose will branches serve in the coming years? Defining the future of the branch is a major business priority for GCC banks, and it is easy to see why. Many bankers see branches as cost centers and predict a reduction in the branch footprint but a retention of highspecification sites. That said, the bank branch continues to remain relevant – particularly if it is preferred as the touchpoint for high-value customers. If they are to be preserved, we see branches evolving into customer experience zones. Whether this is a videoenabled customer service agent interaction, a digitized document processing facility, or a retail showcase of the bank’s suite of products and services, the physical experience of the bank branch can still hold value for a significant percentage of the banked population.

What were, or still are the top considerations when managing transitions away from your branch network. The most important consideration is to ensure that alternate channels are equipped, tested, and fully ready to address the workload that will be directed towards

them if a branch were to close. With the operational burden of branch management, cash stock, human resources, and real estate reduced, banks can turn their focus to driving and defining banking trends. However, there is a note of caution to take here – it can be tempting to excitedly take on and build the most exciting, innovative

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technologies. But it is important to ensure that the basics of customer experience are still covered. For most customers, their loyalty to their bank remains strong - so long as their needs are met. The inconvenience of failed or delayed transactions is often a tipping point driving customers from one bank brand to another. When migrating to a new branch strategy, powered by technology, issues such as selecting service capability in certain branches, or ill-prepared branch employees who are not empowered and equipped to satisfactorily address customers’ diverse concerns must be addressed.

Of the many options for day-to-day purchases such as contactless or smartphone, do you foresee any one payment method or trend taking a clear lead? The growth of paper money in higher denominations was largely due to the mobility it afforded, without burdening the holder, but today, your smartphone can very

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well be the immediately accessible payment method you need. This is echoed by the respondents to Avaya’s Life and Work Beyond 2020 survey, which polled 10,000 consumers across 11 countries, and shows that usage of mobile payment methods, including banking applications, are seeing significant growth. And according to our qualitative research on GCC banking, executives believe that five years’ worth of mobile app growth has been compressed into just the last 12 months. This is not to say that the future is all about neo-banks and digital payments, but it does speak to users’ preference for effortless payment models. If mobile payments provide that effortlessness, that will be the winner.

Innovation in payments apps moves fast and is constantly evolving. How do banks keep pace with developments in this space to ensure competitiveness and high levels of service? In the race for customer attention,

traditional banks are often perceived to have been overtaken by FinTech innovators, neo-banks, payment gateways and apps, financial networks and even consumer technology players. This argument limits the understanding of a bank to a personal account or card provider, when, in fact, the breadth of services that banks offer encompass nearly every potential financial product a consumer may need, as well as a host of services for corporates and governments. Banks can keep pace by realizing the value in the data that they hold. Running analytics to uncover insights from this data can result in an illustration of changing customer trends across p rod uc ts, p reference s in te rms of transaction modes and times, and so much more. Applying this intelligence to business and product planning will enable banks to move to the forefront o f c u s t o m e r re l e v a n ce a n d b e i n g prepared with products and solutions for customers at their point of need.

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Sonny Zulu Managing

Director of Retail Banking, Standard Chartered Bank, UAE

Who wouldn’t want to move to something better?”

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SPECIAL REPORT

Managing customer led change Traditional bank branches are closing or changing their role as customer preferences evolve. Sonny Zulu Managing Director of Retail Banking, Standard Chartered Bank, UAE describes what drives this change, what payments options we can expect to see and that how we use our digital tools is what matters.

hile bank branches are becoming less of a necessity for many transactions, there will still be a need for them. What functions or purpose will bank branches serve in the coming years?

When I joined the Banking industry about 18 years ago, bank branches were the centre of most banking businesses. The back office was the hive of activities where most of the branch staff spent over five hours or so after closing the doors to customers balancing books, updating registers, ticking vouchers, filing and checking checkers. There is no question that innovations and technology developments have contributed significantly to simplify most these processes. Accordingly, most of the manual processes have been digitised and migrated from being staff assisted to selfserviced. Today, we have some clients who have been banking with us for over five years and they have never visited any of our branches. Does this mean that the Branch

will completely disappear? Not necessarily. However, the primary purpose of the branch will continue to evolve in line with prevailing trends. There are also a few challenges with ‘digital only’ models which will necessitate the continued and prolonged existence of the brick and mortar. Having said that, a few facts will remain true in the coming years: • Reducing number of Branches – Nearly all the major banks have been announcing a reduction in their branch footprint in the last few years. At first it was in tens and now it’s in the hundreds within a 12-month period. Oddly, some of these branches were only opened in the last decade. We expect this trend to continue with some banks eventually operating a single branch model. The branches may therefore remain to exist albeit in far fewer numbers than today. This drastic change may go unnoticed as more customers migrate to digital platforms. • R educing number of staff per Branch - Not too long ago, I had some

branches in my network that had over 45 staff. Today, those same branches are being successfully managed by less than 12 staff. With automation and simplification of processes, the future of work is changing. We now need more coders, data analysts and innovative thinkers who will be able to effectively serve the customer of tomorrow. We will still need people but with a different skill set. It is therefore important for all bankers to upskill themselves to remain relevant in the coming few years. •L imited transactions at the branch – given the shrinking margins and limited monetisation of digital platforms, Banks are looking for more efficient ways of doing business to reduce their operating costs and create room for more investments in innovation. In the coming few years, there will be distinct price differentiation between digital and manual transactions. Banks will also limit the number and type of manual transactions that can be

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performed at the branch. Although this may be seen as being driven by banks, in reality, it is the customers that are driving this change. Think of it, why would a customer drive several kilometres, burn fuel, risk getting a speeding or parking ticket, get jammed in traffic, queue up at the branch just to perform a simple transaction which they could have done in the comfort of their home at no cost? • Simple, Fast and Accurate Services – with automation and accelerated digitisation, transactions performed at the branch will be much faster and customers who visit the branch will spend less time there. Some banks have already implemented biometric authentication. Others have taken out the requirements to complete physical forms and reduced the number of required signatures. With such process enhancements, the turnaround time at the branch will be much shorter. The fact that digital capabilities allow the staff and the customer to access and look at the same data at the same time will drastically reduce the error rate and the customer will have better experience. • C omplex transactions – some wealth management transactions which include investments in different assets classes often require face to face interaction especially for first time investors. Having said that, the branch may not necessarily be the place to meet. In the coming few years, there will be a lot of banking deals sealed at safe and secure alternative locations such as hotels, homes and timeshare flexible office spaces. Undoubtedly, despite all the technology advancements and prevailing consumer trends, there will always be a need to accommodate those consumers who still prefer to visit the branch. These include the vulnerable clients who may need an assistant or those that may be less digitally savvy. Financial inclusion is a big topic globally and most banks appreciate the fact that there will always be a need

Banking and Finance Supplement

to provide alternatives for consumers who may not migrate to digital platforms. The branch of the future will therefore serve a small part of the population in a very different way which will be simpler and faster.

What were, or still are your top considerations when managing transitions away from your branch network. The key driver in our decision making is consumer preferences and prevailing trends. We put the client at the centre of everything we do. For example, we know that the Branch is not the favourite place for millennials. However, they need the financial services as part of their daily lifestyle. We therefore take our products and services to where the millennials are spending most of their time. With this approach, we are not migrating millennials away from the branch, rather following them where they are. I must admit that in some cases, we make efforts to proactively migrate our clients away from branch. However, in most cases it is more of an awareness drive. We build awareness, provide information and naturally the adoption is almost inevitable. Who wouldn’t want to move to something better? We are also aware that some consumers have genuine cyber security concerns. We therefore ensure that we build tight controls to protect our clients.

Of the many options for day-to-day purchases such as contactless or smartphone, do you foresee any one payment method or trend taking a clear lead? Radio-frequency identification (RFID) or near field communication (NFC) payments are definitely surging. However, what I foresee taking a clear lead in the next chapter is voice payments, instant cross border payments, card provisioning, and extending contactless to other wearable smart devices. Innovation in payments apps moves fast and is constantly evolving. How do you keep pace with

developments in this space to ensure competitiveness and high levels of service? It is always important to remember that digital platforms are only tools. How we use them is what is really important and that is what makes the difference. There is often the temptation to keep looking for the latest innovation and to upgrade to the latest version without fully understanding and effectively utilising the existing technology. There is a race for the most, the best, the only and the first innovation. However, we are a business. As you know, most digital banks have huge investments and huge capital valuations but are not making profits yet. Some will survive and some will not. Some innovations will have marginal gains while others will be game changers. As we often see in the mobile industry, some new versions, costing double the price, can hardly be distinguished from the predecessor. It is therefore important to strike a good balance between keeping pace and growing the business. In today’s unexpected pandemic accelerated environment, how do you manage the development and decisionmaking demands of the digitisation imperative? The pandemic helped to accelerate the decision-making process. Most decisions are now being made far down in the organisation. Staff have been empowered and they know which decisions can be made on the spot by a single individual and which ones are significant in scope and more infrequent requiring senior authority or more people to decide. Agile ways of working have also helped to ensure that we remove approval layers and enhance collaboration. Everyone involved in the process is now working as one team with a clear objective. Our teams have become better at dealing with unsuccessful experiments and at learning from our experiences. We are comfortable to experiment, learn fast, try a new method and take timely decisions. Our speed to market has improved significantly. What would have taken us 3 months is now being delivered in a few weeks or days.

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8/5/20 4:26 PM

SPECIAL REPORT

Amit Malhotra

GM, Personal Banking Group, Commercial Bank of Dubai

The key is to ensure all services are available on the digital channels, and position branches as valueadding advisory centres.”

Banking and Finance Supplement

,Group, Commercial Bank of Dubai

Transforming the banking world Amit Malhotra GM of the Personal Banking Group, Commercial Bank of Dubai, stresses that the process of change from the traditional branch model to digital must be by customer demand and that going forward, the success of a bank will be based on its ability to be agile.

hile bank branches are becoming less of a necessity for many transactions, there will still be a need for them. What functions or purpose will branches serve in the coming years?

There is a popular misconception that the days of the bank branch network may be over, but the reality is more complex. I believe the future is a hybrid model of high quality, full-service branches combined with a fully-fledged digital service offering. In essence, all banks will become digital banks supplemented by a branch network, not unlike Amazon having physical stores. Our customers have the choice and convenience of using the digital channels for all of their day-to-day requirements, but in case they need personalized advice or are looking for products such as investments or a mortgage, they can come to our branches

and meet with the specialized advisors. The key is to ensure all services are available on the digital channels, and position branches as value-adding advisory centres.

What were, or still are your top considerations when managing transitions away from your branch network. Our aim is for the transition from branch to digital to be fully driven based on customer demand. Our customers must want to move to digital, because their digital experience surpasses the physical one in the branch network. I can confidently state that this is today already the case for actual transactions, with the main remaining challenge being the customer on-boarding and identification. We need to provide digital solutions that effectively fulfil the KYC requirements, mitigate risk and enhance the client experience. CBD

has adopted cutting edge technologies and partnered with fintechs to enable these KYC requirements and provide bestin-class customer experience. The new digital identity tools have helped us in optimizing our compliance models and boosting our performance in risk mitigation. Moreover, digital identity verification is quicker and easier than their manual equivalents, reducing the on-boarding time and minimizing human error incidents. This enhances the customer experience and will create a further pull towards a transition to digital channels.

Of the many options for day-to-day purchases such as contactless or smartphone, do you foresee any one payment method or trend taking a clear lead? The shift towards digital and cashless payments has increased over the last

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SPECIAL REPORT

Banks effectively deployed technology and demonstrated unprecedented agility and resilience.”

few years, and the COVID-19 pandemic has accelerated the shift to contactless payments. I feel that contactless payments will continue to grow rapidly in the years to come, with further enhancements to provide faster and more secure transactions. Companies like Samsung, Apple, and Google already have their own contactless payment systems based on NFC technology (near-field communication) and more and more customers are using these systems. For example, in China and London contactless payments are commonly used as a mode of payment in public transport. This trend is set to grow especially with the increased popularity of using wearables for payments. Hence, I do not expect any individual payment method to take a lead over all others, but I do expect contactless payments in any shape or form to continue to grow exponentially.

Innovation in payments apps moves fast and is constantly evolving. How do you keep pace with developments in this space to ensure competitiveness and high levels of service? Everything starts and ends with the customer. At CBD, we are constantly evolving our payment propositions in line with market developments and

Banking and Finance Supplement

consumer appetite for more convenience payment options. CBD is at the forefront of engaging with the market payment leaders and fintechs towards ensuring that our offerings are competitive and offer the highest level of service, all with the aim of further improving the customer experience. The global pandemic has also proved that the recovery will be led through digital channels and innovation, especially with the increase in the number of consumers moving away from cash to cashless payment modes.

What are you doing to enhance payment services for merchants, small businesses and corporates? While we continue to innovate and provide contemporary solutions that bring value to all merchant segments, the bank is specifically focusing on the SME/ MSME sector by launching the Tap2Pay/ SoftPOS solutions that are not only cost effective to the merchant, but are secure, innovative and faster to deploy. On the payment gateway front, in line with UAE’s vision of transforming into a fully digital economy, the platform offers end-toend eCommerce payment acceptance capabilities catering to the needs of all merchant segments.

In today’s unexpectedly pandemic accelerated environment, how do you manage the development and decision-making demands of the digitisation imperative? As we look back to 2020, we should be proud of the way the banks have responded to a crisis that was not on any organization’s radar. Faced with branch closures, and the need to expand end-to-end process digital capabilities, I believe that we did things that once seemed impossible. Despite some h i cc u p s , b a n k i n g o p e r at i o n s w e re executed smoothly. Customers were served, employees were productive, and regulators were reassured. Banks effectively deployed technology and demonstrated unprecedented agility and resilience. The success of a bank going forward will be based on its ability to be agile. The landscape of the financial sector is changing dramatically. With technological disruption, the emergence of new entrants, both fintechs and digital giants, as well as the constantly evolving customer expectations, organizations are forced to continuously adapt to these changes and deploy an agile organizational model.

We are reducing our environmental footprint Considering the continued growth of the aviation industry and related carbon emissions, our sector needs to become more sustainable. So as KLM, we are taking responsibility for making our business more sustainable. How? By flying on sustainable fuel, with more efficient routing, with cleaner planes and by recycling our waste. Learn more about our journey to more sustainable aviation on klm.com/flyresponsibly

SPECIAL REPORT

Khaled El Bialy

Managing Director, Banque Misr - UAE

Investment in technology and people is deemed a necessity and not a luxury.”

Banking and Finance Supplement

Keeping the customer in mind Khaled El Bialy Managing Director, Banque Misr, UAE is concise with his thoughts about the changes to branch networks, payments, digitisation and the customer experience, pointing out the important reasons for the necessity of branches with the caveat that their evolution is a must

hile bank branches are becoming less of a necessity for many transactions, there will still be a need for them. What functions or purpose will bank branches serve in the coming years? Fast-moving transformation of digital delivery channels while customers are willing to switch services for unique digital features is inevitable. Banks evolve in that area in order to reduce risk, improve cost-efficiency and better serve customers. However, branches are quite important delivery channels, and they will continue to be so for a long time. Most customers deal with us across many venues including digital — there are very few who would skew to branch-only or digital-only. There are many reasons for the continued necessity of branches, including concerns over internet security, simplicity of use and a lack of knowledge surrounding the capabilities of online and mobile banking along with the instinctual human desire to meet the people they are entrusting with their money which is in essence a good tool for trust-building and effective value preposition delivery. Having said that, branches must evolve consistently with other channels to continue delivering its unique value and cost efficiency.

What were, or still are your top considerations when managing transitions away from your branch network.

What are you doing to enhance payment services for merchants, small businesses and corporates?

• Design better digital experience with effective value proposition; • Create a fast, easy and secure self-service experience; • Align Transformation with our overall institution and Branch Business Goals.

Building on our solid infrastructure and versatile platform, we are exploring different ways to enhance customer’s payment services through various delivery channels; such as, online, mobile, kiosks, point of sales and smart terminals. This is all happening with our customer’s experience at our line of sight.

Of the many options for day-to-day purchases such as contactless or smartphone, do you foresee any one payment method or trend taking a clear lead?

In today’s unexpected pandemic accelerated environment, how do you manage the development and decision-making demands of the digitization imperative?

I still believe that contactless payments will lead the way for some time as they provide a secure, safe, fast, effortless and good overall customer experience, while also for banks, providing brand positioning and increased revenues.

We are currently witnessing what will surely be remembered as a historic disposition of remote work and digital access to services across every business sphere. Investment in technology and people is deemed a necessity and not a luxury. The uptick in the use of digital services is here to stay with a main focus on customer’s experience and value creation across all business verticals. Having said that, conducting continuous risk assessments of digitized processes and take appropriate actions to remediate any identified security gaps, is a must. These assessments should also be a foundational element of future digital transformation initiatives, so the proper controls can be implemented from the beginning to provide a safe, secure and stress-free customer’s experience.

Innovation in payments apps moves fast and is constantly evolving. How do you keep pace with developments in this space to ensure competitiveness and high levels of service? Constant and continuous change of the business model to be more propositioncentric and considering new innovations and best-in-class technologies are a way of life in our financial institution.

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LIFESTYLE

Privacy is the new ‘ultimate luxury’ for leisure travellers Empire Aviation explains that as travel for leisure starts its recovery, the privilege of having luxury travel options can be enhanced by making the Hideaway Bea journey as special as the destination ch Resort & S

Soneva Fush

s leisure travel gradually recovers, there is a growing demand from affluent leisure travellers seeking highly personalised private travel services and experiences, in safe and luxurious surroundings. When it comes to privacy, nothing beats the unique benefits of private jet travel and more charter clients are choosing to combine this with awardwinning luxury travel destinations with super-premium properties and unique experiences such as private yacht cruises. It is a perfect combination thanks to the shared understanding of the unique expectations of this discerning clientele and a commitment to providing 5-star customer service.

Combining private jet charter and luxury destinations for a unique experience Private aviation offers just that; the

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

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EVENTS AND MARKETING MANAGER Cris Balatbat crissyb@mea-finance.com Tel: +971 58 594 4818 ADMIN AND FINANCE MANAGER Marilyn Nainque marilyn@mea-finance.com Tel: +971 58 5025836

Fushi (Maldives) properties inspired by n a t u re a n d offering the ultimate in privacy. Soneva offers experiences with ‘intelligent Luxury’ in mind – peace, time and space. Soneva Fushi inspires the imagination with 63 beachfront villas and 8 Water Retreats, ranging in size from one to nine bedrooms. The ‘No News, No Shoes’ approach suggests a slower, more appreciative lifestyle. Lily Hotels owns and operates the Hideaway Beach Resort & Spa on Dhonakulhi Island, belonging to the Haa Alifu Atoll. Its intimate ambience and remote location offer guests ‘a true hideaway’. Hideaway Beach is an exclusive world for people seeking ultimate luxury and privacy and provides a tranquil retreat for those in search of an exotic getaway. The 10 categories of villas are among the largest in the Maldives. Whatever your preferred destination, Empire Aviation can arrange private charter anywhere in the world.

FEATURE CONTRIBUTORS: Adrian Murdoch, Mushtak Parker, Walter Sebele editorial@mea-finance.com

WEB ASSISTANT Marie Orayan web@mea-finance.com

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