MEA Finance - August 2020

Banking and Finance news in the MEA market

August 2020

MEAFINANCE

The future of the banking industry Sonny Zulu, MD of Retail Banking , Standard Chartered UAE

August 2020

A MEA Business Publication Augmented Reality featured cover page - go to page #5 for details

A MEA Business Publication

The future of the banking industry Sonny Zulu, MD of Retail Banking, Standard Chartered UAE

14 Banking & Finance | 24 Technology | 42 Islamic Finance | 48 Advisory View | 58 Lifestyle page 4-5 contents.indd 1

08/08/2020 5:18 PM

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In this issue...

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everal months on, everyone is still trying to work out what the world of business might look like as we learn to live with Covid-19.

It is understandable that there is an inevitable weariness that comes with what has been dubbed the new normal, but the latest issue of MEA Finance aims to look beyond the here and now.

Our cover story this month is an interview with Sonny Zulu, managing director of retail banking for Standard Chartered in the UAE. The biggest winner of the past few months, he argues, has been digitisation.

“The banking industry has become an everchanging landscape, underpinned by disruptive technologies and intense competition,” he says.

He also talks about a new client study on trends that that have emerged from the pandemic within the UAE. Read the full article on page 32.

Staying with that theme we have also talked to a number of banks and technology vendors including Saxo Bank, Deem Finance and Temenos about how the coronavirus has affected and influenced their business.

Their answers, which you can read on page 14 to page 23.

Although the pandemic continues to dominate, it would be too easy to think that it is the only business story in town.

Also in this issue of MEA Finance, Mambu’s Miljan Stamenkovic writes about composable banking and tries to answer the sector’s hardest question – how do you build a bank so that it’s actually agile?

“Composable banking is an approach to the design and delivery ofd financial services based on the rapid and flexible assembly of independent, best-forpurpose-systems” he says on page 36.

And as well as regular coverage of deals we highlight two recent Sukuks issued in Africa.

Enjoy!

Adrian Murdoch

mea-finance.com

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CONTENTS

CONTENTS

MARKET NEWS 6 Dubai Economy and Emirates NBD go live with the UAE KYC Blockchain Platform 8 ADIB extend support to customers impacted by COVID-19 by providing special offers to medical workers

SPECIAL REPORT 14 Covid-19: Industry in Focus

TECHNOLOGY FEATURE 24 Future of technology in finance

COVER INTEVIEW 32 The future of the banking industry

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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

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Banking and Finance news in the MEA market

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BANKING TECHNOLOGY 38 Digital Banking for the post-pandemic reality 40 Cost predictability core to banks’ operational recoveries

ISLAMIC FINANCE 46 Sukuk helps build the road to Nigeria’s economic growth

HEALTHCARE PRIVATE EQUITY 52 Post Covid-19 investor trends in healthcare private equity

LIFESTYLE 58 Strap Lines

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MARKET NEWS

Dubai Economy and Emirates NBD go live with the UAE KYC Blockchain Platform The UAE is one of the first countries in the world to implement a country-wide, blockchain based ecosystem for data sharing

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ubai Economy and Emirates NBD announced the go-live of the UAE KYC Blockchain Platform, an initiative which facilitates secure digital customer onboarding, instant bank account functionality and sharing of verified KYC (Know-Your-Customer) data between licensing authorities and financial institutions via advanced distributed blockchain technology. This market leading initiative is powered by norbloc, a global leader in blockchain KYC technology.

The initiative, which was first announced in February 2020, is set to become a nationwide ecosystem for exchange of verified KYC data. The project is fully supported by Smart Dubai and the Central Bank of UAE who play a key regulatory role in the initiative. Meanwhile, Commercial Bank of Dubai, ADCB, HSBC, and RAKBANK are also set to go live very soon.

“We are very proud to announce that the UAE KYC Blockchain Platform is now production-ready with over 120 companies already instantly onboarded

by Emirates NBD with active and operational bank accounts. This is one of the initiatives that contributes to Agenda Number One of Dubai Model which focuses on improving customer experience”, Omar Bushahab, CEO of Business Registration & Licensing (BRL) Sector in Dubai Economy, said. “This marks a key milestone in establishing

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a UAE-wide ecosystem for KYC data sharing and instant digital onboarding of companies by financial institutions.”

“Emirates NBD is the first banking group to go live on the platform with its initial use case covering E20, its digital business bank. The next milestone will be the go-live of Emirates NBD’s additional use cases and of our remaining banking partners along with the official release of the Consortium Agreement that will govern the ecosystem and outline how data will be shared between Consortium Members.

We are also in advanced discussions with a second wave of financial institutions and free zones to further expand the initiative, and we welcome the remaining financial institutions and free zones to join this effort,” Bushahab added.

With the launch of Phase I, Dubai Economy has migrated all active trade licenses onto the blockchain platform, representing over 40% of all active trade licenses in the UAE. In addition to receiving new leads to open bank accounts, participating financial institutions are now able to leverage the blockchain platform to seamlessly pull data of their customers and receive real time updates made to customer data.

Abdulla Qassem, Group Chief O p e r a t i n g O f f i c e r, E m i r a t e s NBD commented: “Emirates NBD is delighted to be the first banking group in the UAE to partner and go-live with Dubai

Economy on the UAE KYC Blockchain platform. Emirates NBD is a leading supporter of home-grown SMEs and startups who are key contributors to the UAE economy, and we are proud to announce our first live use case which enables SME customers to open accounts instantly through our E20 Digital Business Bank app.” He added, “With multiple use cases covering both Emirates NBD and Emirates Islamic, this pioneering solution aligns with our shared commitment of making banking simpler for our customers, enabling them to focus on their business.”

“The UAE is one of the first countries in the world to implement a country-wide, blockchain based ecosystem for data sharing,” Astyanax Kanakakis, CEO of norbloc, said. “The commitment of Dubai Economy, leading financial institutions such as Emirates NBD, Dubai Government, and the UAE Government to this initiative demonstrates a proactive and ambitious mindset, and positions the UAE as one of the first countries taking significant measures towards creating a digital low touch economy with simplified processes ensuring that business can continue to thrive in the post-COVID environment.”

Abdulla Qassem, Group Chief Operating Officer, Emirates NBD

Banking and Finance news in the MEA market

06/08/2020 5:09 PM

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MARKET NEWS

ADIB extend support to customers impacted by COVID-19 by providing special offers to medical workers ADIB launches a series of offers for healthcare professionals to show appreciation for their exceptional efforts to protect and provide critical care to the community during the Covid-19 pandemic.

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bu Dhabi Islamic Bank (ADIB) launched a series of special offers exclusively to healthcare professionals as a tribute for the relentless efforts during the COVID-19 pandemic as part of the bank’s programme to support customers and community during the ongoing COVID-19 pandemic. These offers include a reduction on the profit rate and pricing discounts on some of ADIB products.

ADIB has been supporting customers during this pandemic by postponing the monthly installments on existing finance in accordance with the Central Bank of the UAE’s Targeted Economic Support Scheme.

Philip King, Global Head of Retail Banking at ADIB, said: “The commitment shown by UAE healthcare professionals to protect our families and communities in recent months has been truly exceptional. ADIB wants to pay tribute to the many heroes who have been working at the frontline to provide critical care in extremely challenging circumstances.

As an expression of our gratitude, the bank has unveiled a series of exclusive offers for medical workers to thank them for their remarkable service.”

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The exclusive promotions, which are available to UAE customers working in the healthcare industry, include: • Special reduction on the profit rate of personal and auto finance • AED500 reduction in fees for ADIB covered cards or a voucher from Amazon or Noon when applying for cards • fixed profit rates on home finance starting from 2.99% per annum on home finance • 20% fee reduction on all wealth management products • Smartaccount welcome pack delivered to your doorstep and no minimum balance requirement for Smartbanking

Philip King, Global Head of Retail Banking at ADIB

• An iPad with every Life and Savings Takaful plan, if an AED 1,000 monthly contribution is made ADIB was among the first UAE financial institutions to launch relief measures for customers during COVID19, including the postponement of monthly installment payments and the reduction of certain fees or charges across a range of products, in line with the Central Bank of the UAE’s Targeted Economic Support Scheme in response to COVID-19. ADIB has also collaborated with the Abu Dhabi Department of Finance to be part of the SME Credit Guarantee Scheme, which aims to bolster the resilience of SMEs registered and operating in the Emirate by increasing access to finances.

In addition to supporting customers, ADIB has also offered extensive support to the community during the COVID-19 outbreak. Initiatives include donating AED 25 million to the Ma’an ‘Together We Are Good’ programme, designed to encourage financial and in-kind contributions from individuals and companies to support the community.

THE COMMITMENT SHOWN BY UAE HEALTHCARE PROFESSIONALS TO PROTECT OUR FAMILIES AND COMMUNITIES IN RECENT MONTHS HAS BEEN TRULY EXCEPTIONAL.

Banking and Finance news in the MEA market

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MARKET NEWS

Nasdaq Dubai welcomes listing of USD 1.5 billion Sukuk by Islamic Development Bank to support COVID-19 interventions

Nasdaq Dubai welcomes the IsDB sukuk listing

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asdaq Dubai welcomed the listing of a 1.5 billion US dollar Sukuk issued by Islamic Development Bank (IsDB) to support COVID-19 relief initiatives. The capital raised will fund medical, social and business projects in many of the bank’s 57 member countries aimed at protecting health and improving lives.

The Sukuk is the second to be issued under IsDB’s Sustainable Finance Framework, following its debut Green Sukuk last year and is the first ever AAArated Sustainability Sukuk in addition to being the first COVID-19 related Sukuk in the global capital markets. It brings the number of IsDB Sukuk listed on the region’s international exchange to 12 with a total value of 16.14 billion US dollars.

Dr. Bandar Hajjar, President of IsDB, said: “Our debut Sustainability Sukuk issuance will play a vital role in social projects that improve healthcare

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facilities, equipment and critical staffing in member countries to mitigate the effects of COVID-19, as well as support small and medium-sized businesses and promote employment as countries recover from the effects of the disease.

The competitive profit rate of 0.908% that we achieved reflects strong market confidence in our issuance and we look forward to further expanding our sustainable financing activities, including developing our cooperation with Nasdaq Dubai as the region’s international financial exchange.”

His Excellency Essa Kazim, Governor of Dubai International Financial Centre, Secretary General of Dubai Islamic Economy Development Centre, and Chairman of Dubai Financial Market said: “IsDB’s latest listing demonstrates the effectiveness of global collaboration in the Islamic capital markets to protect and improve the welfare of individuals

and stimulate economic development.

The listing underlines the growth of Dubai as the global Capital of the Islamic Economy, under the initiative launched

by His Highness Sheikh Mohammed Bin Rashid Al Maktoum, UAE Vice President and Prime Minster, and Ruler of Dubai.”

The listing brings the total value of Sukuk listed in Dubai to 70.79 billion US dollars, reinforcing Dubai’s status as one of the largest Sukuk listing centres in the world by value.

Abdul Wahed Al Fahim, Chairman of Nasdaq Dubai, said: “This listing underlines the wide diversity of issuers on Nasdaq Dubai, which so far this year has hosted new Sukuk issuances from a variety of sovereign, multilateral and private sector entities from around the world. We are delighted to make our high profile listing platform and regional and international investor links available to IsDB as it expands its beneficial and widely appreciated activities globally.”

Hamed Ali, Chief Executive of Nasdaq Dubai, said: ” IsDB is playing an important role in the expansion of Nasdaq Dubai as a listing venue of choice for capital markets issuances that meet Environmental, Social and Governance (ESG) criteria. We are preparing further initiatives to support the ESG sector and look forward to welcoming many more such issuances from a range of public and private sector institutions.”

The exchange also hosts IsDB’s first green Sukuk, a one-billion-euro instrument that was issued in December 2019 under the Bank’s Sustainable Finance Framework.

Banking and Finance news in the MEA market

06/08/2020 5:39 PM

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01/08/2020 8:35 AM

Celebrating excellence in banking and finance SUBMIT YOUR ENTRIES NOW! The MEA Finance Awards 2020 celebrate the absolute best of service and achievement in the banking and financial services sectors, and the smartest technology solutions providers to the industry from across the Middle East and Africa.

With the challenges thrust on us in 2020, more than in any recent year, these awards will carry the full weight of the meaning of words like excellence, service and leadership.

KEY DATES September 8 – Submission Deadline September 20 – Shortlist Announcement September 21 - 30 – Judging Process October 5 – Winners Announcement November 25 – Awards Winners Ceremony & Gala Dinner WHO CAN PARTICIPATE? n Commercial banks n Retail and investment banks n Islamic banks n Private banks n Technology providers n Wealth management firms n Consultancy and Advisory firms HOW TO ENTER Step 1: Choose your category.

It is important to review the individual descriptions and criteria before choosing your category.

Step 2: Upload relevant financial performance documents, case studies, or other relevant information.

Step 3: Confirm submission of your entry. *All nominations shall be submitted on or before 8th September deadline.

Our aim is to provide a platform to highlight and honor the visionary institutions and individuals who continue to set standards of excellence in the industry and create robust financial systems through innovation and digital transformation.

Judges will give due recognition to outstanding banks, financial institutions, and service providers for their: n Exceptional products and services n Digital readiness n Responsiveness to the changing times n Innovative leadership

JUDGING PROCESS The awards will feature a rigorous two-step judging process by a panel of industry experts in collaboration with the MEA Finance editorial team.

1. All nomination entries will be meticulously evaluated and analysed based on relevant market knowledge, industry research, and accurate company financial statements.

The MEA Finance editorial team will then create a shortlist which will be given to the judging panel.

2. The judging panel will be composed of senior executives from professional services firms working with the banking industry.

They will review the shortlist and the submitted materials for each category and place a score from 1 to 5 for each category nominee. All scores will be sent back to the editorial team.

3. The MEA Finance editorial team will independently score shortlisted institutions per category. Score values will be from 1 to 5. All scores will be kept confidential and will not be released publicly, nor will they be discussed with any individual applicants.

4. Scores from both the judging panel and the editorial team shall be collected and combined. The editorial team will hold an official tabulation of the scores to determine the highest scoring institution per category which will be declared winner.

Join more than 200+ senior executives from leading banks, financial institutions and technology providers from across Middle East and Africa, in the Awards Gala Dinner for winners.

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MEA Finance Awards Categories Leaders in Banking and Finance

(Editors Choice – individual awards) Outstanding Leadership Award Lifetime Achievement Award Banker of the Year, Middle East Banker of the Year, Africa Best Technology Executive of the Year for Financial Services - Vendor Best Technology Leadership Award

Financial Services

Best Retail Bank • Best Retail Bank - UAE • Best Retail Bank - Saudi Arabia • Best Retail Bank - Kuwait • Best Retail Bank - Bahrain • Best Retail Bank - Egypt • Best Retail Bank - South Africa • Best Retail Bank - Nigeria

Technology

Best Mobile Banking Solution Best Neo Bank Best Online Banking Service Best Cybersecurity Implementation Best User-Experience Best Digital Transformation Best Payments Solution Special Achievement in Digital Innovation Best Payment Solutions Provider - Vendor Best Cybersecurity Provider - Vendor Best Communications Infrastructure Provider- Vendor Best Core Banking Service Provider - Vendor Best Digital Banking Innovation Provider - Vendor Best Risk Management Solutions Provider - Vendor Best Reg Tech Vendor Best Islamic Finance Banking Software Provider – Vendor Best Islamic Fintech Solutions Provider - Vendor

Best Islamic Bank • Best Islamic Bank - UAE • Best Islamic Bank - Saudi Arabia • Best Islamic Bank - Kuwait • Best Islamic Bank - Bahrain • Best Islamic Bank - Egypt • Best Islamic Bank - South Africa • Best Islamic Bank - Nigeria Best Commercial Bank • Best Commercial Bank - UAE • Best Commercial Bank – Saudi Arabia • Best Commercial Bank - Kuwait • Best Commercial Bank - Bahrain • Best Commercial Bank - Egypt • Best Commercial Bank - Iraq • Best Commercial Bank - South Africa • Best Commercial Bank - Nigeria Capital Markets Transaction of the Year Best Global Bank in the Middle East Best International Islamic Bank in the Middle East Best SME Bank Best Insurance Provider Best Takaful Provider Best Private Bank Best Wealth Management Firm in the Middle East Best Islamic Private Bank Best Trade Finance Provider Best Cash Management Provider

Covid-19 Responsiveness Special Awards

ANNOUNCEMENT & AWARDING

Investment

Winners will be notified in advance. Results will be embargoed until the publication of the October edition of MEA Finance magazine. Simultaneous to its release, all winning institutions and individuals will be announced on the MEA Finance website, social media channels, and e-newsletter.

Best Retail Response to the Covid-19 Crisis Best Commercial Response to the Covid-19 Crisis Best CSR Programme 2020 Best Investment Bank (Conventional) Best Investment Bank (Islamic) Best REIT Manager Best Private Equity Firm Best Project Finance Institution Best Brokerage Solutions Provider Best Investment Management Firm

Service Providers to the Banking Sector

Best Management Consultancy Best Investment Consultancy Firm Best Research & Consultancy Firm Best Digital Transformation Consultancy Firm Best Restructuring Consultancy Firm Best Ratings Agency

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Certificates will be sent to the winners. Subject to the lifting of Covid19 restrictions for such events by the Government of the UAE, an Awards Ceremony with trophy presentations and a Gala Dinner will take place for award winners only, in Dubai on November 25, 2020.

To learn more, visit awards.mea-finance.com/2020/ For inquiries, call +971 50 1005488 / +971 50 9313236 or email: info@mea-finance.com 30/07/2020 8:11 AM

SPECIAL REPORT COVID-19: INDUSTRY IN FOCUS

Navigating troubled waters While the virus has roiled markets and tipped the global economy into recession, it has also accelerated digital transformation, implementation of remote-working, and the unveiling of stimulus packages—all aimed at alleviating the economic impact of the pandemic

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t has been six months since the World Health Organization declared that the novel coronavirus (COVID-19) was a pandemic—a public health emergency of international concern. S&P Global Ratings said that the economic impact of COVID-19 pandemic and responses to it will have large and long-lasting effects on global economies. Aside from the human toll, the increasing changes of a second wave of the pandemic are casting a darker shadow over the outlook on global growth.

GCC countries have started lifting a raft of measures that were introduced to mitigate the spread of coronavirus as they seek to revive economies that are battling a dual shock of COVID-19 pandemic and lower oil prices.

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In the UAE, Dubai received its first foreign visitors on July 7 after nearly five months, hotels in Abu Dhabi and Dubai are starting to see a recovery in business while in Kuwait commercial flights will partially resume this month.

Kuwait will also start allowing citizens and residents to travel to and from the country.

Strategy stated that the necessary containment measures such as work suspensions; the temporary closure of tourism hotspots, cultural destinations, and family entertainment zones; the cancellation of public events and sports activities; and travel and movement restrictions have had a detrimental effect on the global economy and world trade, with serious consequences for the import-dependent Gulf countries.

The pandemic is expected to plunge most countries into recession in 2020, with per capita income contracting in the largest fraction of countries globally since 1870, said the World Bank. While the virus has roiled markets and tipped the global economy into recession, it has also accelerated digital transformation, implementation of remote-working, and the unveiling of stimulus packages—all aimed at alleviating the economic impact of the pandemic.

GCC banking sector According to Temenos, “Before the arrival of COVID-19 banks were already under pressure from big tech firms and payment players and they needed to t ra n sfo r m t h e i r te c h n o l o g i es

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and cultures to create engaging digital experiences. Now, with the effects of the pandemic, the need for transformation is even greater.”

There has been an increasing focus on open, connected banking among regional banks. GCC lenders are leveraging data to drive business growth.

KPMG stated that banks in Saudi Arabia, the UAE and Bahrain are embracing blockchain, which offers b e n e f i t s i n c l u d i n g o p e ra t i o n a l efficiencies, reduction of intermediary costs, and a culture of transparency, without the traditional potential risk of inaccurate information transfer.

Post-COVID-19, the most successful lenders will likely be those that adopt digital technology and embrace artificial intelligence (AI), machine learning (ML) and related digital solutions.

With margins likely continuing to be squeezed and global macroeconomic uncertainty set to carry on until the discovery of a vaccine, Bhavin Shah, Partner at Roland Berger’s Dubai office expects leading banks to design innovative and forward-looking business and operating models.

The global COVID-19 outbreak, paired with low oil prices and weak economic growth, is also expected to drive a new wave of mergers and acquisitions activity among GCC lenders. Earlier this month, Oman Arab Bank completed the acquisition of Alizz Islamic Bank through a share swap deal in a transaction that will create a lender with more than $8.3 billion in assets.

The consolidation between t h e O m a n i b a n k s fo l l o w e d t h e announcement of the merger plans between Saudi Arabia’s National Commercial Bank and Samba Financial Group, a tie-up that is expected to create the Kingdom’s third-largest bank, with about $210 billion in assets.

New normal?

According to McKinsey & Company, by now, most C-suite executives have led their companies’ entire digital

BY NOW, MOST C-SUITE EXECUTIVES HAVE LED THEIR COMPANIES’ ENTIRE DIGITAL TRANSFORMATION OR AT LEAST SOME PART OF THEIR BUSINESS TO PROTECT EMPLOYEES AND SERVE CUSTOMERS FACING MOBILITY RESTRICTIONS AMID THE COVID-19 CRISIS. — McKinsey & Company transformation or at least some part of their business to protect employees and serve customers facing mobility restrictions amid the COVID-19 crisis.

“This global pandemic has had an unprecedented impact on businesses and personal lives. Our priority has been to protect the health, safety, and well-being of our colleagues, customers, and partners,” said JeanPaul Mergeai, Managing Director – Middle East & Africa, Temenos.

Except for a few essential services, most companies across the region will continue to evaluate the ability to remain as productive as possible while allowing some parts of their workforce to work remotely. Digital transformation is expected to play an increasingly important role in information delivery, client updates, a n d p ro d u c t l a u n c h v i a v i d e o , livestream, or recorded webinars.

Google and its parent company, Alphabet, recently announced that its employees will continue working from home until at least June 2021, adding to a growing list of high profile companies such as Twitter, Square and Facebook, that have announced plans to continue the remote-work setup for the foreseeable future, according to a Wall Street Journal report.

S i m i l a r l y, h u m a n res o u rc es ministries across the Gulf region are still encouraging remote working as part of precautionary measures to limit the

spread of COVID-19. In UAE for instance, the Ministry of Human Resources and Emiratisation Resolution No. 281 of 2020 on remote working limits the percentage of an employer’s workforce that can physically work from the premises to 30%. However, as mentioned before companies performing certain activities are exempt from this requirement, such as food and health.

C O V I D -1 9 f o r c e d p u b l i c a n d private sector organizations to adopt remote and flexible working with unprecedented speed and this lesson is expected to help accelerate digital transformation across the region.

As most GCC countries are gradually emerging from lockdown, it is important to draw the right lessons from this rapid, forced change and to recognize that some of the lessons learnt are cautionary. While remote working is an obvious precautionary measure to encourage higher compliance with the authorities’ efforts to stop the spreading of the coronavirus pandemic, it also delivers cost savings in reduced office overheads such as utility expenses. COVID-19 is still with us and its devastating impact on the economy can’t be underestimated, however, as a trend that has gained traction in the previous years, digital transformation is an important step in every organization, company, and country’s recovery plan.

mea-finance.com

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SPECIAL REPORT COVID-19: INDUSTRY IN FOCUS

The shape of things to come: How GCC banks are adapting to the new normal Bhavin Shah, Partner at Roland Berger’s Dubai office, tells MEA Finance of his projections and the importance of taking a proactive stance in trying times.

How did CoVID 19 and the lockdown across the region impacted the plans of GCC banks?

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o ro n avi rus o utb rea k i s undoubtedly a large shock, truly a Black Swan event.

It has and is expected to continue having unprecedented economic and social consequences.

Naturally, like all the other industries, the financial services sector had its fair share of the impacts. The virus has resulted in the majority of the incumbent plans being put on hold or vastly modified. In particular, the banks that prioritized consumer credit segment with ambitious plans have been significantly impacted due to lock-downs and the increasing reluctance by prospective customers to visit branches. Similarly, segmental expansion plans of various banks were replaced by immediate contingency plans that layout internal transformation agendas aiming to ensure business continuity and operational efficiency of

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the employees while working remotely.

Simultaneously, employee safety has become a top priority for nearly all financial institutions in the region. In the long-term, we expect the current disruption in the physical channels to accelerate branch transformation and omnichannel development efforts across the industry. As a trend that has already gained a substantial pace in the last years, digital transformation will become even more important for regional banks.

When did the pandemic first become something eliciting action from financial services firms and was the industry able to prepare for it in advance?

The region had been following the inflow of news from China. However, only a few institutions were able to realize the size of the potential threat the virus had posed on the economy. In my opinion, the real threat has started to be felt during the first days of the spike in Italy. Those were the days

Bhavin Shah, Partner, Roland Berger, Dubai

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when serious conversations among top executives started to happen and people decided to take action. As history has shown us many times, distress periods re-emphasize the importance of having a war chest at one corner. However, these lessons are forgotten as soon as the world starts to get back to normal. This was the case at the advent of the coronavirus outbreak as well. Unfortunately, very few institutions were prepared for a crisis at such a scale. However, naturally, some have been more effective in dealing with the crisis compared to others until now. The financial institutions that are characterized by relatively more flat hierarchical structures, digitally savvy and more agility have been navigating through the crisis times more effectively. Similarly, the institutions that have not only focused on client-facing aspects of the business, but also the back-office elements for the digital transformation felt the impacts of disruptions relatively less.

How quickly were financial institutions able to adapt their services to COVID-19 restrictions?

It was relatively easier for the financial services industry to adapt to changes caused by COVID restrictions compared to many other industries. The banks in the region have already been pursuing major digital transformation agendas.

They have been innovating internally or inorganically due to the increasing pressures from Fintech and Bigtech.

Many of them had sizeable investments in omnichannel through mobile banking and internet banking. Similarly, numerous banks had introduced chatbots for their call centers, and some have outsourced their call-center operations which resulted in minimization of the impacts of COVID on this aspect of the business. However, the actual impact came via the effects of coronavirus on back-office operations. Remote working has posed challenges on these operations and the firms strived to find solutions that would both ensure the safety of their employees and enable

THE VIRUS HAS RESULTED IN THE MAJORITY OF THE INCUMBENT PLANS BEING PUT ON HOLD OR VASTLY MODIFIED. them to perform their tasks efficiently, securely and effectively while working from home. In this respect, the banks that have already implemented some degree of digital transformation in their internal operations have been impacted relatively less. Furthermore, more agile institutions managed to adapt to a new reality both faster and easier.

Are there any changes resulting from adapting to COVID-19 restrictions that will now become a permanent feature of the way financial services firms operate?

Coronavirus is an unexpected shock that has the potential to result in widescale permanent changes in the way we live in. Naturally, these changes will occur in the way we approach business as well. Like many other industries, this also applies to financial services. Going forward, we expect to observe signals of sharp changes in the mentalities of bank executives.

First of all, we foresee a wide-scale digital transformation in the back-office activities. To increase the resilience of operations to external shock at this scale, banks will attempt to automate back-office functions as much as possible. Secondly, it is anticipated that some roles will retain their work-from-home model to decrease rent costs. Thirdly, we can expect a sharp rise in non-performing assets (NPA) and load defaults across both consumer and corporate segments in the near term. Also, in the near future, we expect to observe an increase in the share of clients that prefer mobile

or online banking. Institutions will strive to make their online and mobile portals more user-friendly to steer their customers to these channels.

Lastly, we anticipate sharp changes in customer preferences. Going forward, people’s preferences will move away from branch-banking to other channels both due to increasing reluctance to visit physical channels and due to rising digital literacy.

If this happened again soon, what would financial institutions do differently?

Firstly, we need to keep in mind that this is not the first crisis/disruption the business world has seen and, most likely, it is not going to be the last. We will witness other shocks coming in different forms and magnitudes. Therefore, we need to be ready for the next one. As mentioned, every crisis re-emphasizes the importance of having a war chest on the corner. However, we always manage to forget this lesson as soon as things get back to normal. Going forward, no matter how well the economy is doing, executives should always ensure that their firms have a war chest for times like this. Furthermore, the world has understood the importance of healthy and ongoing communication during crisis times. Therefore, firms should come up with crisis communication plans, which would be instrumental in business continuity and efficiency in extraordinary times. While we may not, we able to avoid such a crisis, it is in our hands to be as prepared as we can to fight it.

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07/08/2020 8:59 PM

SPECIAL REPORT COVID-19: INDUSTRY IN FOCUS

Making sense of the future Alaa Elshimy, the Managing Director & VPEnterprise Business at Huawei, explains the changes in the banking industry due to the impact of COVID-19 and how Huawei is helping banks in the region adapt to the new normal.

How did the Covid19 and the lockdown in the region affect your plans for 2020?

O

ur priority was the safety of our employees and the needs of customers and governments. The outbreak brought uncertainty and challenges across many sectors. However, we certainly saw an increased demand for ICT products, amidst a boost in network usage as more people work and meet remotely.

There has been tremendous growth of the ICT sector in the Middle East before COVID-19, with countries focused on leveraging advanced technologies to achieve their national visions. As we dealt with the pandemic, we did everything possible to enable the digital transformation of industries and Huawei eagerly supported all organizations to benefit from the latest technologies. So, despite these challenging times, Huawei announced the H1 results showing the business grew 13.1% YOY.

How quickly were you able to adapt your service for finance clients during the restrictions?

The lockdown did affect Huawei business to some extent with many projects under implementation for our financial service customers in the region put on hold. It affected marketing and communication activities with many of our seminars postponed or canceled. However, we

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adapted to the situation quickly to continue services for our customers, enabling functions encouraging customers to take services online with online POC, online workshop, online commissioning.

Today, 80% of our historically face to face services are delivered online.

How did your finance clients approach you for help? Was there a common need or did client requirements vary?

Huawei is a digital technology company.

All our solutions are designed to enable digitalization and automation for our customers so to some extent our technology is designed for this market.

The requirements of banks vary greatly depending on their digitalization status, however, we noticed that working from home is a common factor which will continue for some time. Huawei has the IT solutions enabling our customer’s staff to have remote access to the working environment in a secured and smooth way, as well as solutions for banks to deliver online banking services to their customers.

forever with digital banking becoming an irreversible requirement, and are moving fast to launch digital banking services to acquire new customers.

Some banks realized their old IT architecture cannot fit with digital banking and “Working from Home”. With Huawei as a partner in UAE, they are evaluating hybrid cloud transformation to launch the public cloud service, which makes our value proposition different.

Are there changes resulting from the Covid restrictions that will now become a permanent way you operate with your finance clients in the region?

Online communication and engagement will become permanent as bank customers accept this as being efficient and effective, maybe even resisting in-person communication after Covid-19. Another change is cloud service. Huawei previously provided customers with hardware boxes needing installation and commissioning in the banks’ datacenter. Cloud service does not need this, and banks can enable IT functions and resources through online operations, simplifying IT, which they greatly appreciate. We previously forecasted that in the GCC region, most banks will have at least 50% of IT resource running on the cloud by end of 2025. Now it may come earlier.

What were you able to do for your finance clients that helped them through this time?

Many banks noticed gaps during this crisis and acted quickly. For example, some leading banks talking to Huawei about digital banking, forecast that Covid-19 will change user behavior

Alaa Elshimy, the Managing Director & VP- Enterprise Business at Huawei

Banking and Finance news in the MEA market

05/08/2020 10:18 AM

Rapidly adapting to change

capability ensured that Saudi Fransi Capital could support our clients through all channels. Our online trading and investment platform is safe, easy and available 24/7.

Our advisors are available by phone and continue to offer our perspectives to help navigate through uncertainties.

Waleed Fatani, Chief Executive Officer of Saudi Fransi Capital describes how they anticipated and adapted to the conditions created by the Covid-19 outbreak.

Are there any changes resulting from adapting to the Covid restrictions that will now become a permanent feature of the way you operate?

How did the arrival of Covid19 and the subsequent lockdown of society affect your plans for 2020?

When did the pandemic first become something eliciting action from your business and were you able to prepare for it in advance?

If this happened again soon, what would you do differently?

he Saudi market closed 2019 on a high with the World’s largest IPO and as we started the year, no one could have predicted the extent of the challenges we would face during the first half of 2020.

We knew there were significant pressures on the economy, but the extent of COVID-19 both locally and internationally has been unprecedented, and this combined with significant volatility of the oil price and markets, have proved the first half of 2020 to be one of the most challenging periods this generation has faced.

Our priorities were reassessed: health initiatives were put in place, re m o te w o r k i n g c a p a b i l i t y w a s established to continue to serve our clients, and digital initiatives were accelerated. While launches of new investment products and investment banking deals were postponed, both local and international equity trading experienced increased volumes.

For the remainder of the year we remain positive and plan to continue with the rollout of some industry leading investment products and services.

COVID-19 was clearly in the news globally, but the speed and significance of the necessary measures introduced by the Government required urgent action. The Crisis Management Team quickly settled into a rhythm and as a team we addressed the constantly evolving challenges.

T

How quickly were you able to adapt your services to the Covid restrictions?

We rapidly adopted new ways of working and managed to maintain our core businesses throughout. Key trading staff remained in the office in line with official guidance and the secure remote working

Waleed Fatani, Chief Executive Officer, Saudi Fransi Capital

Remote work for many became the norm.

New technologies were embraced and became an important part of our lives and we will continue to use those elements that make us more efficient and effective.

The health of our employees was and continues to be the main priority and we try to minimize the risk by ensuring compliance with Government guidelines. We must continue to embrace new technologies and ways of working, adapt to market changes, and, focus on our digital platform. Further, we will leverage the lessons we have learned, when we next update and test our Business Continuity plans.

The way that a firm collectively and the employees individually respond to such challenges defines its character.

We aspire to ‘Distinguished Service and Outstanding Performance’ and are proud of how we reacted and continued to serve our clients.

THE WAY THAT A FIRM COLLECTIVELY AND THE EMPLOYEES INDIVIDUALLY RESPOND TO SUCH CHALLENGES DEFINES ITS CHARACTER. mea-finance.com

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08/08/2020 5:29 PM

SPECIAL REPORT COVID-19: INDUSTRY IN FOCUS

Building a digital future Kashif Amin Thakkur, the Head of Consumer Banking at Ajman Bank, sheds light on Ajman Bank’s extensive digital footprint and how it cushioned the bank against the impact of the coronavirus pandemic

How did the arrival of COVID-19 and the mitigation measures that followed affect your plans for 2020?

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h e p a n d e m i c b ro u g h t a w h o l e s et of c h a l l e n g es that the whole industry was not ready for. It affected the entire delivery chain, starting from our customer interactions to back end processing. However, the management swiftly responded and created a specific task force that took heed of the situation and focused on deploying a set of quick measures to respond to the changing landscape.

Indeed the plans of the bank have been adversely affected as the whole market has slowed down but as the market opens up we are already seeing signs of business picking up and the bank is quickly looking to get back on track with its plans.

had already undertaken major steps towards digitizing all our services and today our consumer banking customers can be serviced for almost all their banking needs remotely.

How quickly were you able to adapt your services to the COVID-19 restrictions?

Ajman Bank was already on a digitization journey way before the pandemic hit,

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Are there any changes resulting from adapting to the COVID19 restrictions that will now become a permanent feature of the way you operate?

COVID-19 restrictions have only further strengthened our belief that the adoption of innovative digital channels is exceedingly essential for future operations. This is further evident from our consumer behavior analytics. We are accepting this as a permanent positive change and are focusing on bringing state of the art UI/UX for our customers by deploying cutting edge technologies to give them the best in class experience.

If this happened again, what would you do differently?

When did the pandemic first become something eliciting action from your business, and were you able to prepare for it in advance?

Ajman Bank has been at the forefront of adopting new technologies before the pandemic, so we were prepared to tackle this situation a lot better. We

and the current situation had only helped us expedite the transition. By immediately adopting various security protocols we managed to service our clients seamlessly with more than 70% of our staff working from either home or remote locations.

As we had already undertaken major steps towards digitizing all our services keeping in mind the restrictions, our consumer banking customers could be serviced for almost all of their banking needs remotely. We are one of the very few banks that has an off the counter ratio which is above 90%, that means only less than 10% of all of our transactions today take place through our branches.

Kashif Amin Thakkur, Head of Consumer Banking, Ajman Bank

Consumer behavior has taken a sharp turn towards real-time servicing and instant gratification. Digitization had been identified even before the pandemic; our actions have further affirmed our belief that we were on the right track to handle such outbursts. Sustainability and growth can only be achieved by executing digital strategies that are in line with customer expectations and we will continue to adopt these for all such future occurrences.

Banking and Finance news in the MEA market

08/08/2020 5:32 PM

Staying one step ahead Chris J de Bruin, the Chief Executive Officer at Deem Finance explains how their organisation swiftly reacted to COVID-19 by implementing a Business Continuity Plan.

How did the arrival of Covid19 and the subsequent lockdown of society affect your plans for 2020?

W

e ke pt f u n ct i o n i n g seamlessly since the start of the pandemic, unlike most financial institutions. We reacted quickly and effectively in adapting to Covid and had multiple BCP sites set up. This helped ensure no interruption of service for our customers, keeping our Customer Care Centres working 24/7 for all services, while many big institutions restricted their service business hours and emergencies only. Nothing in our company stopped or slowed down, and in this we passed an important test.

The same is true about our ability to continue running the commercial side of the company. We saw a slowdown in April and part of May, as consumers adapted to a new economic reality, postponing borrowing until their situation became clear. However we had strong months in June and July which as we see it, means our continued service and support during the lockdown created goodwill and positive word of mouth, and as soon as consumers were again open to new products and physically approachable for signatures, we saw our numbers climb significantly.

Undeniably there is an impact associated with the overall deceleration in the UAE economy. The strong sales I refer to above were achieved despite our adjustment of risk criteria to increased prudence, because now it is not only about the ability of an individual to pay

their credit, but also because there are sectors of the economy in which employment levels became less stable.

Summarizing, we performed well during the lockdown and are resuming growth as it subsides but coursecorrecting in line with the economic outlook for 2020-2021. We are most proud that we where continuously accessible to our customers and available to answer all their queries keeping our service levels well above the 90% mark.

When did the pandemic first become something eliciting action from your business and were you able to prepare for it in advance?

We recognized the importance of Covid 19 early in February when the first reports came out about its virulence in Asia. We signaled to our shareholders that Covid was going to have a material market impact, rather than the comparably mild incidents that SARS and MERS had in prior years. I think we reacted ahead of other institutions, and in February were already working in a distributed model, had triggered our Business Continuity Plan in full, held daily reviews of events and established very clear staff protocols to navigate the contagion period. We reacted early and with full force.

customers, whether in sales, collections or services. Not only did we remain accessible to our customers 24/7 online and through our Customer Care Centre, we also launched new methods for our customers to make payments to their accounts from the safety of their homes.

Are there any changes resulting from adapting to the Covid restrictions that will now become a permanent feature of the way you operate?

I think there are two major categories of change that are here to stay.

We have validated several concepts from our Business Continuity Plan execution, which are now part of our operating model. As is increasingly clear, decentralized, premises-light work environments are here to stay. We functioned effectively on a work-from home basis.

Moreover, the current pandemic may accelerate the adoption of digital processes for the industry, which was already at full throttle in Deem. This means we are fast-tracking implementation of digital signatures and identities, as well as shifting more intensely towards digital channels for communication and as payment channels.

If this happened again soon, what would you do differently?

Every crisis is different, so we will not rest on having acquitted ourselves well this time. I think we did the right things at the right times, so the key is to remain vigilant and as we did this time, take cues as quickly and never underestimate the full spectrum of possible scenarios ahead.

How quickly were you able to adapt your services to the Covid restrictions?

We adjusted our entire business, from customer-facing processes to internal operations within 4 weeks. At no point did we stop engaging with our

Chris J de Bruin

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08/08/2020 5:33 PM

SPECIAL REPORT COVID-19: INDUSTRY IN FOCUS

Embracing the new normal: COVID-19 Tim Haywood, General Manager, Regional Vice President at Walton Group of Companies gives an insight into the changes that were brought about by the coronavirus pandemic and how Walton Group is adapting and evolving to ensure business continuity across its Middle East, Asia and North America regions.

How did the arrival of COVID-19 and the subsequent lockdown of society affect your plans for 2020?

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h e u n p re c e d e nte d a n d sudden impact of COVID-19 undoubtedly caught everyone by surprise and the Walton Group of Companies, along with most global companies had to adapt quickly.

The implementation of work from home policies across thae Middle East, in Asia and North America to mitigate the spread of COVID-19 impacted the economy differently from one market to the other. Our ability to engage in business travel and open new markets has been impacted severely, but again, we have had to adapt and utilize online tools and functions to deliver news, webinars, training, and sales presentations for our business partners and their clients.

As such our Middle East & North Asia, business volume is up, while Southeast Asia is down marginally.

The Walton Group’s business is focused on North American Land Investment, so our fortunes are tied to the US real estate market and its reaction to COVID-19. Despite an initial severe downturn in home sales activity and mortgage applications in March, both have rebounded very strongly.

The prevalence of ‘telecommuting’ has increased the demand for remote

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working, and it is driving homebuyers towards new home purchases sooner, with a focus on space for themselves and their families in suburban, masterplanned communities.

When did the pandemic first become something eliciting action from your business and were you able to prepare for it in advance?

With a significant presence in Asia & North America, we adapted very quickly to ensure the safety of our employees and work from home policies were introduced immediately as each region was affected.

Across the Walton Group, we utilized video conferencing already, but we fully embraced the technology available to ensure that all employees, clients, and business partners were kept informed and this continues as we look to improve ways in which we can communicate and share timely, relevant information more efficiently.

with our normal business activities but to enhance our communication with clients and business partners with the provision of live and recorded webinars from our Executive Management, Asset Managers and external industry experts.

Are there any changes resulting from adapting to COVID-19 restrictions that will now become a permanent feature of the way you operate?

The COVID-19 pandemic has changed the way we all operate, and I believe will continue to do so for the long term.

Companies will continue to evaluate the ability to be as productive while allowing some parts of our workforce to work from home, at least in part. Technology will play an increasingly important role in the delivery of information, client updates, and new product launches via video, live and recorded webinars, etc.

If this happened again soon, what would you do differently?

Personally, I would put my own online practices in to place sooner. COVID-19 will continue to force us to adapt and remain vigilant and governments across the world will determine how we can operate as further waves of the virus evolve.. The wider acceptance of online tools and video meetings will force companies to continue to embrace digital content creation and improve their online presence and accessibility.

How quickly were you able to adapt your services to the coronavirus restrictions?

As with most product providers, we had to adapt and evolve quickly to embrace technology to ensure continuity of service. Face to face meetings had to be replaced by video meetings both internally and externally, but we quickly put processes in place to not only engage

Tim Haywood

Banking and Finance news in the MEA market

05/08/2020 10:21 AM

Seizing digital transformation opportunities Jean-Paul Mergeai, Managing Director – Middle East & Africa, Temenos gives MEA Finance an insight into its recently launched SaaS and AI technology propositions that are aimed at supporting banks in response to the pandemic.

H ow d i d C ov i d -1 9 a n d t h e lockdown in the region affect your plans for 2020?

O

ur priority was to protect the health, safety and well-being of our colleagues, customers and partners and we adapted quickly to changes brought by Covid-19. At times 98% of our staff worked from home with most solutions delivered to clients remotely and our teams continuing to develop products and recording sustained levels of interest in our solutions. All sales and services engagements were performed remotely. Our clients are highly satisfied with the level of support and assistance from Temenos, and the ability to use their banking technology solutions without interruption of service.

How quickly were you able to adapt your service for finance clients during the restrictions?

It is remarkable how well we maintained business operations for our customers.

We took more banks live on new or upgraded solutions in the first half of 2020 than we did in the first semester of 2019. Thanks to our innovative cloud technology and methodology, many implementations took place remotely to help banks adapt to the ‘new normal’.

Cloud has been central to our business since becoming the first banking software company to put a core banking system

on the cloud. This cloud-first approach allowed us to react quickly to banks’ digital needs and roll out propositions letting them keep delivering value to customers. We launched eight SaaS and AI propositions to help banks, including cybersecurity in collaboration with Microsoft and explainable AI models, helping identify customers in need and offer relief loans.

These propositions, based on SaaS technology, let banks implement powerful solutions in days, rather than months.

How did your finance clients approach you for help? Was there a common need or did client requirements vary?

C o ro n a v i r u s a c c e l e ra te d d i g i ta l engagement trends and “all digital” is the ‘new normal’. Middle East and Africa (MEA) banks are no exceptions, as we witness greater demand for digital modernisation.

In the UAE, we signed Al Ain Finance as our first Public Cloud customer. Spurred

Jean-Paul Mergeai

on by the pandemic, the corporate finance company underwent end-to-end digital transformation to better serve its SME customers. Because we can implement the technology remotely as SaaS, we anticipate a quick turnaround and incredible time-to-value for the business.

What were you able to do for your finance clients that helped them through this time?

In April, we launched AI-driven SaaS propositions, immediately available to help banks with the crisis, including meeting customers’ needs for intimate interactions with technology to give customers a personal digital communications channel to connect with advisors.

We received high demand for our dedicated AI-based SaaS solutions from banks assisting small businesses and retail customers with fast loan approval and viable financial products. For one US customer, we deployed a dedicated SaaS-based loan application solution in just four days, with incredible results: the bank approved $1.4 billion small business funds in under two weeks.

Are there changes resulting from the Covid restrictions that will now become a permanent way you operate with your finance clients in the region?

In this ‘new normal’, bank customers want more digital services and interactions.

In MEA we are seeing a significant move away from cash. Our recent EIU report found that 6 in 10 banking executives think cash will dip below 5% of retail transactions within five years, compared to 48% globally – a trend coronavirus is accelerating.

T h e s e b e h a v i o u ra l s h i f t s a re permanent, and our technology enables banks to accelerate their digital transformations to meet their customer needs and differentiate their service using digital channels.

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07/08/2020 9:02 PM

FUTURE OF TECHNOLOGY IN FINANCE

Digital trends that will shape the future of the financial services sector The COVID-19 pandemic and its fallout has presented the financial service sector with an opportunity to accelerate customer experience strategies and efficient business models that will define future success.

By Walter Sebele

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he GCC financial services sector has been relatively quicker in digitizing their operations compared to their peers in other emerging markets regions. The outbreak of the COVID-19 pandemic has further presented the sector with a catalyst that is accelerating the pace of digitalization as financial institutions seek to catch up by incorporating artificial intelligence (AI), blockchain, and other technologies to meet their customers’ ever- evolving needs, remain competitive and improve business results.

KPMG stated that as governments are implementing measures to mitigate the spread of the virus, the question for the banking sector is how to respond to its operational and regulatory challenges while contributing in a positive way to the economic recovery.

Digitalization drive The outbreak of COVID-19 has increased the talk and activity on fintech strategy, experimentation, as well as investment, acquisition, and integration across the financial services industry, and no function, service or department, seems immune to the wave.

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“Digital transformation is no longer a luxury, but a necessity. Banks that are agile, flexible, and willing to transform their business models will be the ones that succeed, and secure their financial strength for future growth,” said KPMG. The current operating environment is putting to test regional banks’ digital transformation plans, and, in some cases, the situation is forcing banks to revisit their priorities and try to launch new services with new products to survive.

Cyber-security Banks face the difficult task of balancing the traditional approach to risk management with the need to respond quickly to a crisis that has created massive changes to their operating environment.

Cybercriminal activities which include fraud and phishing attacks have increased as more employees work remotely.

As banks shift from crisis mode which was caused by the fallout from coronavirus financial services executives need to address new emerging risks such as video and voice communication surveillance with everyone using Zoom and other platforms, data security controls for the use of personal equipment, and cases of third and fourth parties falling victim to cyber issues said EY.

Blockchain technology The Middle East is seeing an increasing inflow of fintech companies challenging the incumbent banks through better flexibility and better catering to customers’ requirements.

Blockchain is expected to transform t h e wa y t h a t c a p i ta l m a r ket s operate through the tokenization of traditional bonds, stocks, and other assets and putting them on public blockchains. The public ledger would be instrumental in removing gatekeeping and third parties in the loans and credit system while making it more secure to borrow money and lowering interest rates.

According to PwC, the implementation of the blockchain is poised to become an integral part of financial institutions’ technology and operational infrastructure.

Big data, machine learning, and cloud computing can play a big role in allowing banks to learn more about customers and be in a position to make business decisions in real-time including learning about a customer’s spending habits as well as enhances the agility of financial institutions and enabling secure online payments, digital wallets, and online transfers.

Banking and Finance news in the MEA market

08/08/2020 8:41 AM

Digital transformation: Exploring other avenues Institutions that took years to scale their digital plans have been forced to readjust and realign to the new reality overnight—thanks to the pandemic, says Sunil Paul, Co-Founder, and COO of Finesse.

Having learned lessons from the pandemic, what do you think is the most important aspect of digitization for financial institutions?

T

he ability to recognize and adapt to the new reality! Post the onset of the pandemic, the world has changed in ways we never could imagine. Not an optional strategy anymore, the coronavirus has become the catalyst to drive digitalization to greater heights in the financial services industry. With physical channels having slowed down, customers transitioned to digitally consuming financial services, and with travel becoming a risk, the workforce too transitioned to remote working leveraging collaboration tools and cloud-based services.

Institutions that took years to scale their digital plans have been forced to readjust and realign to the new reality overnight—thanks to the pandemic.

The financial institutions that invested in digitization early were able to quickly adapt and cater to the changing demand very quickly. It will be essential these forward-seeing institutions continue improving their processes towards building a fully virtual banking experience for its customers with automated processes and AI-based communication platforms. Investing in secure capabilities on the cloud would also benefit its employees by powering a secured anytime, anywhere work platform – thus creating an empowered workforce.

What do you think is the next big thing in tech to transform financial services?

As clearly shown in the past, technology will drive financial services to better profitability in the years to come. Few of technology advances we believe will drive profitability include blockchain, new generation API banking, Whatsapp banking, and improved ways of furthering digitizing process (like integrating digital identity like UAE Smart pass).

Finesse is at the fore-front supporting these changes across 120+ businesses in the financial sector – that includes 80% of banks in the UAE. Our BFSI portfolio includes solutions & services for Core Banking, API / Digital / New Generation Banking, Trade Finance, Treasury, Governance, Risk & Compliance, Regulatory Reporting, Basel III & IFRS-9, Credit Control & Management, Fraud Management, Multilevel Authentication, Secured App Protection, PIM / PAM, Banking Process Outsourcing to list a few.

W h a t i s yo u r a p p ro a c h i n collaborating with tech providers/banks in enhancing your digital capabilities?

As the leading digital system integrator in the region, Finesse is at the forefront identifying, evaluating, and then bringing in innovations from the world’s leading products to our financial service clients.

With immense knowledge on the business processes of our clients, we

can inform them of the best possible implementation of these solutions within their businesses and be by their side through the implementation – including integration with their existing platforms.

As digital adoption increases across the board, what is your strategy in implementing ironclad security measures?

In these times, when network security breaches are ubiquitous, Finesse Global is committed to providing our clients with the ‘Zero-Trust modeled’ network security in all of our implementations.

This model, among others, assumes the network to be hostile, that threats exist on the network at all times, both within and outside the network.

Implementing this model of network security ensures our implementations are secure and ready to stop security b re a c h e s . W i t h wo r k-f ro m - h o m e becoming increasingly important for employees, and customers preferring a mode to transact from the safety of their homes, this initiative is even more important to be part of every business.

Sunil Paul, Co-Founder and COO, Finesse

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06/08/2020 8:42 AM

FUTURE OF TECHNOLOGY IN FINANCE

Fintech lessons from the coronavirus pandemic Looking at the further evolvement of technology in the financial services industry in general, blockchain undoubtedly has a significant role to perform as institutions look to benefit from the efficiencies and financial transparency says Lawrence Oliver, DDCAP Group’s Director & Deputy Chief Executive Officer.

Having learned lessons from the pandemic, what do you think is the most important aspect of digitization for financial institutions?

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he financial industry has undoubtedly learned a great deal from the pandemic and perhaps the most significant has been the increased realization of the considerable operational efficiencies that technology can deliver. Whilst various technology capabilities had already been implemented by financial institutions before the pandemic, it swiftly became apparent that the range of automated services available to clients was, in certain jurisdictions, limited and this shortcoming is undoubtedly something that financial institutions have since been looking to eradicate.

Pe r h a p s t h e m o st s i g n i f i c a nt development has been the increasing focus of financial institutions on th e p ote nt ia l imp l ementa ti o n of Straight Through Processing (STP) capabilities to eliminate manual operational requirements and provide a seamless range of functionality both internally and for their client base. The requirement to swiftly move staff to a work from home environment following

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the implementation of lockdown measures globally presented financial institutions with a range of operational challenges that the use of STP would have eliminated. As a result, we have witnessed a significant increase in the number of financial institutions seeking to implement a full range of STP functionality.

If you had to go back in time, what would you have done differently in your business?

DDCAP Group is an intermediary in the global Islamic finance markets with offices in London, Dubai, and Kuala Lumpur and we must provide a seamless service offering to our

clients. This we provide through our multiple award-winning, 24/7 web-based asset facilitation platform, ETHOS AFP (ETHOS).

Given our reliance on robust technology infrastructure, we closely monitored developments related to the global outbreak and spread of COVID-19 since it entered public awareness. Our early concerns resulted in a detailed review of the business process, procedure, financial technology solutions and systems infrastructure before the end of January 2020. During the following six weeks, we conducted extensive testing of our business continuity assumptions to ensure our full operational capacity and capability during a viral pandemic situation. The

EVER SINCE WE IMPLEMENTED REMOTE WORKING IN MARCH, WE HAVE PROVIDED UNINTERRUPTED SERVICE TO OUR CLIENTS AND THIS DEMONSTRATES THE ADVANTAGES DERIVED FROM THE SIGNIFICANT AMOUNT OF BUSINESS CONTINUITY TESTING THAT WE UNDERTOOK IN THE EARLY PART OF THE YEAR.

Banking and Finance news in the MEA market

06/08/2020 8:43 AM

AS AN INTERMEDIARY, WE AIM TO PROVIDE OUR CLIENTS WITH DIGITAL CAPABILITIES THAT MEET THEIR SPECIFIC, BESPOKE REQUIREMENTS. What do you think is the next big thing in tech to transform financial services?

Lawrence Oliver, DDCAP Group’s Director & Deputy Chief Executive Officer

wellbeing of our staff was imperative and as testing continued and transmission of the virus spread, by the end of February 2020 it became clear that we were best able to protect our employees worldwide by transitioning to remote working practices.

As a result of this decision, following completion of testing, we moved to remote working practices worldwide on 18th March 2020.

The testing through the first quarter of 2020 was designed to ensure that our financial technology and systems infrastructure could support all staff working remotely worldwide as well as the provision of a seamless, automated service to our clients, both for a protracted and indefinite period. Ever since we implemented remote working in March, we have provided uninterrupted service to our clients and this demonstrates the advantages derived from the significant amount of business continuity testing that we undertook in the early part of the year.

Hence, if we are to go back in time, we would undoubtedly undertake the same exercise again.

As mentioned previously, automation of existing manual processes by financial institutions will be a key focus in the coming months. The automation is being accelerated by the global pandemic and the operational challenges faced by many institutions due to their lack of such automation. A particular emphasis, especially in the retail sector, will be placed on the adoption of remote transactional capabilities for clients either via mobile application technology or secure website links to remove the reliance upon face to face meetings and manual intervention.

Looking at the further evolvement of technology in financial services in general, blockchain undoubtedly has a significant role to perform as institutions look to benefit from the efficiencies and financial transparency it can provide. Similarly, Open Banking, with APIs enabling third-party developers to develop applications and services around financial institutions will feature prominently in the coming years.

W h a t i s yo u r a p p ro a c h i n collaborating with banks i n e n h a n c i n g yo u r d i g i t a l capabilities?

As an intermediary, we aim to provide our clients with digital capabilities that meet their specific, bespoke requirements.

This frequently necessitates a significant amount of collaboration with clients both in terms of collating the scope of their individual requirements and thereafter the testing and implementation of the resultant technology.

Such collaboration encompasses both face to face meetings and often several virtual meetings and conference calls to ensure that we encapsulate the full range of capabilities sought by our clients. To facilitate this, we have a dedicated and experienced team of people focused solely on the further enhancement of our ETHOS platform in line with client demand.

As digital adoption increases across the board, what is your strategy in implementing ironclad security measures?

Architecturally, it is vitally important to design and implement robust security measures from the outset of any technology development as it is extremely difficult to retrofit subsequently. Accordingly, we have, from day one, chosen to imbed only proven, industry-standard security measures into our technology offerings.

Ultimately, in most cases, people are the weakest link in any security chain and therefore regular staff training aligned to robust, practical processes is vitally important. Furthermore, limiting security attacks using options such as whitelisting and two-factor authentication (2FA) together with the implementation of regular penetration testing and ensuring that such measures are built into your standard business processes is essential.

Achieving the correct balance between your chosen security measures and what is practical for the business is the challenge faced by all institutions and ultimately, your chosen security strategy needs to be multi-layered and constantly reviewed and updated as threats change and new ones are identified.

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FUTURE OF TECHNOLOGY IN FINANCE

Digitalization: The next battle for success Saxo Bank was a fintech company before the term was even coined and we embraced digital onboarding and digital management long ago.

MEA Finance catches up with Nicholas Wright, Sales Director, MENA Region at Saxo Bank.

Having learned lessons from the pandemic, what do you think is the most important aspect of digitization for financial institutions?

O

ne of the few positives to come from the pandemic is that it has accelerated the pace of digitization of financial services. If there were previously any doubts as to the importance of digitizing this industry, I think they are now gone. Never has fintech been so critical to operational business and now the need for tech in banks and other financial services organizations is being exposed.

The term “financial institutions” covers a wide range of segments from banks, wealth management, stockbrokers, etc, but what unites these institutions is that it has never been clearer that they all need to provide their services digitally, whether this service relates to retail banking, private banking, or investing in stock markets. Where we saw many such digitization projects meandering in their progress pre-lockdown, it is apparent that COVID-19 has been the final push

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to convince senior executives that they must move in the digital direction quickly For example, we have observed for some time that the Middle East was comparatively slow to adopt the likes of Robo-investing, but since the COVID-19 outbreak, there has been a significant shift in momentum from financial institutions to launch such tech-driven modes of investing.

Financial institutions now have every reason to provide most aspects of their service in a digital form. Not only are their business advantages, but clients now expect and demand that they can control and access their investments from their home or from wherever they are simply with their phones. At Saxo, we have been lauding the advantages of fintech and operating digitally since we formed almost 30 years ago, with the ambition to democratize trading and investments, and over the years we have developed platforms and technology that allows our clients to trade or invest anywhere, anytime. It is clear to us that any financial institution that delays the digitization of their services will be left in the dust as customers quickly pivot to digital.

However, one of the top priorities for financial institutions must be to first have the technological infrastructure to operate their own business digitally and remotely. The lockdown exposed some companies which did not have such capabilities and these companies must now be rushing to upgrade their infrastructure. The second phase of this digitization will be for these same companies to upgrade their technology infrastructure so that they can offer their services to clients in a digital format.

Another important but not often discussed advantage for financial institutions is the improvements to back-office services that digital technologies can make and, in particular, onboarding new clients, alongside KYC and compliance requirements. The task of onboarding clients is admin-heavy and time-consuming, and to be able to streamline this process digitally will free up people hours to take on tasks that add more value to the company.

If you had to go back in time, what would you have done differently in your business?

Saxo Bank was a fintech company before the term was even coined and we embraced digital onboarding and digital management long ago. Our business has significantly increased during the

Nicholas Wright, Sales Director, MENA Region, Saxo Bank

Banking and Finance news in the MEA market

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pandemic, as investors looked to access the financial markets, trade the volatility surges and many investors saw the correction in March as a good entry point.

The violent swings in the markets mean the traditional methods of wealth management are exposed. Traders are looking for fast, nimble systems for investing that offer them control and transparency.

If we could have done something differently or better, it would be to increase our capabilities for onboarding new clients to be able to better handle the scale of new clients who were keen to open Saxo accounts during the lockdown.

We have now increased our capabilities in this area and so it was an important learning experience that will benefit our business in the longer term.

What do you think is the next big thing in tech to transform financial services?

Undoubtedly the next area where tech will transform financial services is a wealth management and private banking and we can see blockchain and AI technologies having a large role to play going forward in this segment of financial services.

We are already seeing a shift in the wealth management business with regulators in some jurisdictions beginning to limit the fees that advisors can charge.

This will have a knock-on effect where wealth management companies will need to find efficiencies in their businesses to balance the loss of revenue from the reduction in advisor fees.

The obvious solution is to utilize tech, and blockchain will be a complete gamechanger for financial services in the future. Blockchain will add value by increasing accessibility, providing greater transparency, better security, quicker transactions, and overall reducing cost. Global financial services are becoming more complex with more third parties and intermediaries in a transaction, and blockchain is and will transform the industry for the positive.

We also see the utilization of AI technologies as a big priority in wealth management—AI technology will be

FINANCIAL INSTITUTIONS NOW HAVE EVERY REASON TO PROVIDE MOST ASPECTS OF THEIR SERVICE IN A DIGITAL FORM. critical for institutions to provide curated, personalized services, which is the backbone of private banking. This is especially relevant for the millennials, the next generation of wealth management customers, who will soon be coming into significant wealth and who are perfectly aligned with digital products.

Across our Middle East business, we are seeing a growing interest in our managed portfolios offering, SaxoSelect, which utilizes AI technology and digital tools to make it straightforward for clients to easily choose a portfolio that is aligned with their investment goals and balances their risk profile. They are particularly attractive because of the transparency and control that these portfolios offer to investors – clients can monitor their investments 24 hours a day through our platform and withdraw at any time at no extra cost.

W h a t i s yo u r a p p ro a c h i n collaborating with tech providers/banks in enhancing your digital capabilities?

We have two approaches to collaboration.

Firstly, we outsource some aspects of our business and collaborate with other best of the best providers to keep our platform and service at the highest levels of efficiency and cost. And secondly, we enable our institutional customers – other banks and financial institutions – to collaborate with us, allowing them to provide their clients with our world-class digital trading and investing platform.

Collaboration is an approach close to the heart of our CEO and founder Kim Fournais, and much of the Saxo Bank business has been built on identifying the best organizations to partner with. Saxo Bank is a leading facilitator in global capital markets, connecting private and institutional clients with the world’s leading

global liquidity providers and exchanges to offer access to more than 40,000 financial instruments across asset classes.

By being a facilitator, we source the best from the best by collaborating with many of the top providers such as JP Morgan, BlackRock, and Morgan Stanley to support our business needs. We package the products and the liquidity together using our technology, our platforms, and business processes to give our clients a superior offering. Under our model, we democratize investment for our clients with the lowest cost and complexity, and the highest scalability.

Saxo Bank has been championing collaborations since our first technologydriven white-label partnership with another bank in 2001. In these two decades, much has changed and fintechs like Saxo Bank are now viewed as vital collaboration sources for companies eager to accelerate their digitization.

On the business-to-business side, we work with many institutions across the Middle East, partnering with them to help evolve their offering through digitization.

It is simply not realistic, or feasible, for financial institutions to independently build great technology solutions across their value chains when partnerships can provide instant technology and market access to service end clients.

Our institutional partnerships offering, known as Banking as a Service, provides our institutional clients with unique access and distribution, state-of-the-art products, platforms, pricing and service, and full value-chain support.

We believe that partnerships are inevitable for financial institutions to survive and grow. Institutions reluctant to collaborate on digital transformation will find themselves locked out of an increasingly competitive market post-COVID-19.

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FUTURE OF TECHNOLOGY IN FINANCE

Identifying innovative approaches Maria Vinogradova, OpenWay’s Director of Strategy and Market Intelligence, says that the ongoing changes in consumer habits due to health concerns associated with COVID-19 are opening new opportunities for banks, fintechs, and processors.

Maria Vinogradova, OpenWay’s Director, Strategy and Market Intelligence

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Having learned lessons from the pandemic, what do you think is the most important aspect of digitization for financial institutions?

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he current collapse is changing not just the contents of our shopping carts, but also the way we pay for them. Before the pandemic, choosing between cash, cards, and mobile wallets was a spontaneous decision or a matter of personal preference. But now, personal health concerns are overruling other considerations. New habits relating to safety and hygiene during the payment process are likely to remain for a long time.

Among consumers surveyed in May 2020

by E&Y analysts, 51% agreed that “the way they shop will fundamentally change”.

Many payment providers seem to underestimate the risk of losing customer loyalty, instead of focusing on maintaining the status quo and rearranging their day-to-day operations. At the same time, some agile banks and fintechs have sped up their digitalization and succeeded in protecting their market share—even onboarding new customers. The most attractive payment offerings are usually those that combine card and payment technologies, with value-added services on top such as instant online loans, deposits, and multi-currency operations.

THE ONGOING CHANGES IN CONSUMER HABITS ARE OPENING NEW DOORS FOR BANKS, FINTECHS, AND PROCESSORS.

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We believe that the ongoing changes in consumer habits are opening new doors for banks, fintechs, and processors. But if they want to use these doors, they must have technology in-house that is capable of enabling innovative payment projects like in-browser and in-app checkouts, in-store contactless transactions, digital P2P transfers, and online loans and deposits.

If you had to go back in time, what would you have done differently in your business?

Nothing. As Karl Hampe said, “There are no IFs in history”. We are lucky to have clients all over the world, a fact that allows us to spot innovations and implement them quicker than others. When QR code payments started to appear in Europe, our clients in Asia had already launched them.

When NFC wallets became a hit in Europe, we used our European experience to help our clients in other regions to launch the “Big Pays”. We spotted the need for cloud payments and for the SaaS model in payments, earlier than many other payment software vendors.

What do you think is the next big thing in tech to transform financial services?

It is a tricky question! Maybe when you ask me this question next year, I will give a completely different answer.

Who could have predicted half a year ago the current triple-digit growth in the numbers of contactless and online transactions globally? Another example: in Europe, open banking was supposed to be the Big Bang moment for fintech two years ago with the arrival of PSD2, a regulator initiative to boost open APIs. But players were slow to become compliant, mostly because of the cost of adopting PSD2. According to Tink, who interviewed 442 European banks across 10 markets last March, 41% of the banks were not in compliance with PSD2.

However, I would say that payment service providers are looking into wider collaboration with other service

OPENWAY OFFERS ITS CLIENTS A RANGE OF SOLUTIONS TO PREVENT INTERNAL AND EXTERNAL FRAUD WITH PAYMENT DATA, SUCH AS WAY4 INTELLIGENT FRAUD PREVENTION AND WAY4 3-D SECURE 2.X, WITH A STRONG FOCUS ON MONITORING TRANSACTIONS COMING THROUGH DIGITAL CHANNELS. providers to create super-ecosystems for their customers and go far beyond payments. And all technologies that enable this transformation, such as the cloud, AI, open banking, data streaming, and data analysis in real-time, will help.

We are running some projects in these fields to see how these technologies change the way how we learn about customers and interact with them.

Some years ago, we introduced OpenWay Club, a collaboration and co-creation platform for our clients and other industry thought leaders.

It allows all participants from various g e o g ra p h i e s to i d e n t i f y m a r ket opportunities at early stages, exchange product ideas, and test them, as well as predict coming trends and become prepared for them.

W h a t i s yo u r a p p ro a c h i n collaborating with banks in enhancing your digital capabilities?

As digital adoption increases across the board, what is your strategy in implementing ironclad security measures?

Most of our customers are tier-1 financial institutions and ambitious fintechs. They come to us with their great ideas, and we work together to implement them. A good example would be SmartPay, a financial inclusion digital wallet willing to become the Vietnamese equivalent of Alipay. In the nine months since its launch in May 2019, the SmartPay wallet has picked up a million individual customers and signed up over 100,000 SMEs across the country. Another example is Enfuce, a cloud-based processor in Europe. Enfuce boasts results that might be called “3-33”. In three minutes, it enabled a bank to offer a fully digital onboarding process to its customers so they can make highvalue payments. In just three hours, it migrated five million cards from a legacy platform to their own, and in just three months, Apple Pay was implemented at a large issuer for the first time in Enfuce’s native country of Finland.

Payment security is of paramount importance for OpenWay. It is achieved on multiple levels. Our platform, Way4, is PA-DSS compliant. It means that Way4 has met the requirements for payment application security as defined by the Payment Card Industry Security Standards Council (PCI SSC), the main global body regulating security standards for card payment processing.

By choosing Way4, financial institutions can simplify their PCI DSS assessments and gain regulator y approval to provide payment services within a shorter timeframe.

OpenWay offers its clients a range of solutions to prevent internal and external fraud with payment data, such as Way4 Intelligent Fraud Prevention and Way4 3-D Secure 2.x, with a strong focus on monitoring transactions coming through digital channels.

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COVER INTERVIEW

The future of the banking industry Sonny Zulu, Managing Director of Retail Banking for Standard Chartered in the UAE, talks to MEA Finance about how the bank has steered its way through COVID-19 and the shift towards a cashless society.

By Adrian Murdoch How is Standard Chartered navigating the COVID-19 pandemic?

What measures did you take to support your clients in the UAE?

he unprecedented challenges brought on by COVID-19, coupled with the seismic implications presented by depleting oil prices, have had an impact on the economic growth in the GCC region.

At Standard Chartered, while we have not been immune to these headwinds, we have been able to navigate and mitigate the mounting risks of the crises to a manageable degree. The bank takes a two-pronged approach to reinforce its operational resiliency: aligning our external and internal efforts, as well as quickly assessing and subsequently adapting to the developments of the situation.

As an international bank deeply rooted in the financial wellbeing of our clients, we have, and will continue to, prioritise our customer engagement and extend our utmost support during this time. Over the last few months, we have introduced a series of measures that aim to ensure our clients receive relief from the financial burdens imposed by the pandemic, including payment holidays, wavering of fees and financial restructuring options.

Across our 59 markets in Asia, Africa and the Middle East, Standard Chartered is taking action to support clients, colleagues and communities during this challenging time. The bank launched a US$50 million COVID-19 Global Charitable Fund to help those in our communities affected. In March, the bank committed US$1 billion of preferential financing for companies that provide goods and services to help the fight against Covid-19 (and those planning a switch into making such products). The bank also announced the disbursement

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of US$25 million to provide emergency relief in our most affected markets, of which an amount will go to the UAE, and the additional US$25 million will be used to help communities recover from the economic impact of COVID-19.

In the UAE, we have donated 15,000 N95 masks to the Authority of Social Contribution (Ma’an) to aid medical professionals in the fight against COVID19. The Bank has also donated more than AED180,000 to the Emirates Red Crescent and over AED500,000 to three local charities in the UAE, in support of their COVID-19-related emergency response efforts, including immediate medical relief, access to food and assistance for vulnerable families and individuals.

The bank launched a series of measures to help ease the financial burden on our retail banking clients.

These include a three-month repayment holiday for impacted clients on their existing personal loans, car loans and mortgages; interest-only payments for all clients on their existing loan for a period of three months; 0% cent interest and no processing fees for credit card transactions over AED1,000 on hospital fees, school fees, utility bills and grocery payments, purchases when converted into equal monthly instalments; refunding of foreign currency transaction fees on cancelled travel bookings due to the pandemic; and a 50% reduction in cash advance fees on credit cards.

This year digitization in banking proved essential.

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Our efforts complement that of the measures taken by UAE authorities, and we will continue to comply with government directives to ensure our clients and community members are sufficiently supported.

Does COVID-19 signal the need for the end of cash?

Sonny Zulu, Managing Director of Retail Banking, Standard Chartered, UAE

THE BANKING INDUSTRY HAS BECOME AN EVERCHANGING LANDSCAPE, UNDERPINNED BY DISRUPTIVE TECHNOLOGIES AND INTENSE COMPETITION.

As basic hygiene and social distancing take centre stage, there is no question that the migration to cashless transactions will be accelerated. I must hasten to mention, however, that going cashless was a trend that banks were seeing long before COVID-19 became part of the equation. Of course, the virus has expedited this shift and both banks and customers across the globe have turned to digital services to ensure the safety of their customers, as well as the continuation of their services. In fact, apart from the inherent health advantages linked to cashless operations, electronic payments services also bring about a myriad of transparency, efficiency and accuracy benefits.

Banks that already established strong digital platforms are well-positioned to quickly adapt to a COVID-19 world. As people are increasingly avoiding human interaction, digitally savvy banks can continue to provide consumers with financial and banking services, maintain business continuity and mitigate against the spread of the disease. In turn, banks with readily established digital platforms will likely experience a surge of traffic during this period and may even result in a permanent behavioural change amongst consumers.

At Standard Chartered, we are continuously encouraging our clients to leverage our online banking platform or the SC Mobile App. Even before COVID-19, the bank put a heavy focus on investing in our digital offering and this has definitely played a role in ensuring our customers have access to banking services in a safe way, at this difficult time. Everything from checking balances to the application of credit cards is available online, which is more important than ever.

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COVER INTERVIEW

As for the banks that have not necessarily made that shift towards digital yet: there is no better time than the present!

An abrupt move to a cashless business model causes mass disruption. Is the infrastructure in place for businesses to manage such an unparalleled surge in cashless payments?

This situation is very different across countries and geographies. There are some countries that are well ahead and ready. A lot, however, has still to be done in some parts of the world especially in the rural areas. Apart from service providers, there is a huge role to be played by policymakers and government authorities to maintain and enhance infrastructural integrity to fully facilitate the transition to a cashless society.

Given the current environment, digital is no longer one of the available options.

In many cases, it has become the only option. The challenge, therefore, is no longer rate of adoption, it’s availability.

Multiple nations in the Middle East region have made significant strides in this regard. For instance, the UAE has prioritised cashless payments as part of its Vision 2021 and has since introduced numerous efforts to achieve this. These initiatives include the introduction of the Emirates Digital Wallet and the establishment of numerous Smart Cities across the country.

What lessons have the financial ecosystem learned about the shift towards a cashless society?

The banking industry has become an everchanging landscape, underpinned by disruptive technologies and intense competition. As mentioned before, prior to the COVID-19 outbreak, banking players were well aware of the changing dynamics of the industry and the significant interest in digital offerings. To that end, banks have integrated advanced technologies into their core business models to drive increased consumer satisfaction, as this plays a crucial role in maintaining any institution’s bottom line.

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These technologies will certainly aid banks in the current climate we’re in, as they ensure business continuity and service facilitation. The rapid changes we’re enduring as a result of COVID-19, however, are unprecedented and come with a myriad of challenges, such as infrastructural issues.

For Standard Chartered, we’ve continuously championed our digital agenda, specifically in the AME region, and enhanced our consumer offerings with the latest advancements in fintech and digital banking services. For instance, the bank introduced the UAE’s first-ever real-time credit card onboarding service. Through this programme, customers are able to receive a completely automated credit card issuance service through an entirely digital medium. In turn, we are well-equipped to continue to service our clients and provide them with world-class offerings.

We are very confident that the ecosystem will cope with the change. We believe that in the face of a challenge, people always adapt much quicker than expected. The current situation will no doubt accelerate that adoption.

How can banks and fintechs better leverage tech and digital channels to educate and to reach new consumers?

Digital and mobile banking have served as ideal approaches to bridge the financial inclusion gap, specifically in areas such as the African continent, given the high rate of mobile penetration. This is integral when ensuring that individuals living in rural or underdeveloped areas are able to access financial products and services. Through digital and mobile channels, consumers that are unbanked are able to set up a bank account and

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Financial institutions and authorities must lead in educating consumers and advocate for financial literacy on digital channels.

access a full suite of financial offerings, without having to visit a physical branch.

As such, digital offerings allow banks to service an entirely different consumer base, make a significant impact regarding financial inclusion, and contribute to overall economic growth and stability.

There is always a concern that reliance on digital channels may hinder the inclusion of certain consumer bases.

Our observation, however, is that digital adoption is ageless. Of course, the adoption rate may be slow for certain customer bases. However, we have seen adoption across generations. For those that may be living with special needs such as people of determination, there are tools that are available and can help them to access and use the channels safely and effectively.

The first line of defence therefore against financial exclusion that banks

must implement is education. Financial institutions and financial authorities must lead the way in educating consumers and advocating for increased financial literacy on digital channels, services and offerings.

This will ensure that consumers are informed on the digital offerings they are using and enhance consumer awareness, leading to a more robust relationship between banks and their consumers.

What’s more, some consumers are wary of the implications of digital banking services, including the risk of cybersecurity threats. To this end, banks must practice efficient transparency and communicate the effectiveness of the various cybersecurity functions in place that will protect their data and capital.

Standard Chartered has implemented a series of initiatives and programmes aimed at promoting financial inclusion through greater education and insights into its digital banking services. Last year, we introduced Futuremakers by Standard Chartered, a global initiative to tackle inequality and promote greater economic inclusion. Futuremakers aims to empower the next generation to learn, earn and grow.

This is done through different pillars, or what I call the three Es of entrepreneurship, education and employability.

To support the education pillar, we launched a programme called “Goal” to empower young girls through sports and education and which is committed to reaching 600,000 girls by the end of the year. We equip them with the skills they need to be stronger, more confident and to be able to make a difference in the world!

Earlier this year, we partnered with the University Leadership Council (ULC) to support, attract, nurture top-notch university students and have them workready when employed through different initiatives and events throughout the year. This is all done to support the employability pillar.

We pride ourselves to be one of the few global banks, that is committed to improving the gender balance and empowering women across the entire spectrum of the organisation, as we

recognise that it is no longer a business issue, but a moral one.

To further equip entrepreneurs, the bank has introduced women in tech programmes globally – in the US, Kenya, Nigeria, Pakistan, UAE and, last month, in Bahrain.

Last year, we have partnered with Womena on their Womentum project. The whole idea started when we addressed the need to support women-led start-ups and we wanted to be the right champion for this initiative.

What technology will have the biggest impact on the banking industry in the near future?

The biggest impact on the banking industry in the near future will not be determined by any new technology development. The near future will be shaped by what the industry does with the most recent developments: artificial intelligence (AI), machine learning, robotics and cloud-based platforms.

The power and full capabilities of these technologies are still largely underutilised. While AI will shape the data structure and outcomes in the decision-making processes and create better customer experiences, cloud technologies will significantly reduce the cost of transformation efforts and help to improve scalability to move forward and enable new services through digital. Both technologies will enable banks to work as a platform to create an ecosystem for customers with the right third-party partners. They are equally important for the future of the banking industry.

Creating better customer access and experiences

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BANKING TECHNOLOGY

Could Mambu’s composable banking be music to the ears for banks?

In a question and answer session with Miljan Stamenkovic, Regional Director of Mambu, MEA Finance asks about what distinguishes composable banking and the functionality advantages it confers.

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What is composable banking? o d a y, eve n t h e s i m p l est banking service involves a complex orchestration of core systems, transaction processing, decisioning, reporting, analytics, authentication, security and

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more. Instead of locking these functions together for dedicated applications and workflows, composable banking allows for separation of these functions so they can be combined and recombined in new ways to deliver new automated services and customer experiences.

Mambu’s composable banking platform enables financial institutions to use fit-for-purpose technologies to p re c i s e l y c o m p o s e t h e r i g ht infrastructure for customers. It helps b a n ks c re a te m o d e r n c u sto m e r experiences to compete in the fintech era — and constantly evolve them to respond to change. Using an agile core platform, cloud and APIs, banks can be proactive instead of reactive. These tools are key to building a dynamic digital bank. It gives banks the ability to harness differentiated services, choose only the applications that support growth and ease of business, and just as easily change them as technology evolves.

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Composable banking is an approach to the design and delivery of financial services based on the rapid and flexible assembly of independent, bestfor-purpose systems. It helps banks create modern customer experiences to compete in the fintech era —and constantly evolve them to respond to change.

Instead of locking specific functions together for dedicated applications and workflows, composable banking separates the functions so they can be combined and recombined with new partners or services in new ways to deliver new services. This means being able to combine independent components, re-use, swap in or swap out any component and work with best-ofservice providers.

How does cloud enable transformation in the banking landscape?

Cloud allows banks to innovate fast.

Digital technology in the cloud lets them quickly reconfigure products and services to allow for new regulations or temporary circumstances – the fall-out of Covid-19 and the need to waive overdraft

fees or provide payment holidays, for example. Where legacy systems lock backs into specific vendors and require them to carefully plan and time changes over many months, banks working with cloud-native solutions can carry them out on the hoof, often within hours. This makes them more competitive, less costly and lowers risk.

Working with cloud-native solutions also allows banks to align costs to revenues because billing is on a payas-you-use basis. Usage can be scaled up or down according to demand, so expensive technology doesn’t lie idle on-premise. Vendor lock-in costs are eliminated. This means that you could launch a great new customer-centric bank today and scale up to become a $1bn unicorn fast.

Finally, cloud technology helps mitigate risk. By providing flexibility, banks can adapt their products and services as the market evolves. They are not locked into medium and longterm solutions. They can be nimble.

Furthermore, cloud providers invest heavily in their technology, updating and upgrading it constantly and ensuring its resilience and security in a way that individual banks simply could not afford.

So, banks working with cloud providers will have access to the best, most secure, resilient, up-to-date technology.

Why does modular banking not mean composable banking?

Banking systems vendors have been touting modularity for years. What they really mean is a pre-defined suite of

Miljan Stamenkovic, Regional Director of Mambu, MEA Finance

proprietary modules that extend the functionality of their core systems. They are extensible but they are not flexible or open. An apt metaphor is the jigsaw puzzle piece versus the Lego brick.

A modular approach, just like a jigsaw puzzle, combines different pieces into one pre-set picture. It is impossible to swap out pieces for better ones and the platform is locked into one vendor. On the other hand, composable banking combines independent components in any structure to create many different things. It is re-usable, and users can swap in or swap out any component.

Additionally, composable banking follows a best-for-purpose approach with no vendor lock in.

How can composable banking help/have helped during the Covid-19?

In the financial sector, the current global pandemic is forcing the hands of financial institutions to prepare for a post-COVID-19 world. This includes providing the right technology to empower employees to work remotely.

It is important, now more than ever, to use a cloud-native platform that is accessible anytime and anywhere as it ensures being able to serve endcustomers without any interruptions.

- even during times of crisis. Additionally, a cloud platform allows banks to innovate fast. Digital technology in the cloud lets financial institutions quickly reconfigure products and services to take new regulations or rapidly changing circumstances into account.

COMPOSABLE BANKING IS AN APPROACH TO THE DESIGN AND DELIVERY OF FINANCIAL SERVICES BASED ON THE RAPID AND FLEXIBLE ASSEMBLY OF INDEPENDENT, BEST-FOR-PURPOSE SYSTEMS. mea-finance.com

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BANKING TECHNOLOGY

Digital banking for the post-pandemic reality David Shi, President Enterprise Business Group, Huawei Middle East underlines the key role of information and communications technology (ICT) in enabling banks with the progression of their customers’ digitalization journeys and service experience.

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s with many other industries, the financial sector has had to adjust to rapid changes as a result of the spread of novel coronavirus. It is forecasted that COVID19 will change user behavior forever, and that the increased use of digital banking will become an irreversible requirement, making banks move faster than ever to launch an advanced portfolio of online services. This will, for many banks, mean reconsidering their current information and communications technology (ICT) infrastructure in order to support an evolving market environment. While cloud-oriented IT architecture will have seen banks through the pandemic, what

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they need to consider going forward is a hybrid cloud transformation that will provide the most robust, flexible, and scalable solution to meet whatever demands there may be in the near future.

Post COVID-19 demands As a leader in digital technology, Huawei develops solutions that are designed to enable the progression of its customers’ digitalization journeys. This includes increasing automation processes, which is now more important than ever for banks. While for the most part banks in the Middle East have already begun to roll out digital strategies that have made them more accessible to their customers

anywhere and at any time, the exact stage at which they are in their digital journeys varies considerably. The requirements of individual banks to make the transition to meet post-COVID-19 demands – and even to work as seamlessly as possible in the midst of the ongoing pandemic – will be dependent upon their current level of digitalization. The flexibility of Huawei’s solutions, combined with the company’s expertise, make it possible to build custom solutions for any bank, regardless of their current infrastructure.

In terms of internal operations, banks have experienced the same situation as many other workplaces during lockdowns, with employees having to

Banking and Finance news in the MEA market

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such as chat and teleconferencing with customers and colleagues. Establishing a solid and secure ICT infrastructure will ensure that operations can continue as close to normal as possible within the bank, which will boost overall productivity and contribute towards an improved customer experience.

Customer Experience

work from home. For an unprepared environment this can prove massively disruptive. Banks deal with a high quantity of sensitive and secure data and providing access to this to off-site employees can prove risky. Developing a mobile working app will prove highly beneficial in this respect; not only can it provide secure access to sensitive information, it can enhance productivity and convenience for bank employees, while also supporting essential functions

David Shi, President Enterprise Business Group, Huawei Middle East

Customer experience is, at the end of the day, what it’s all about. While digitization can improve all aspects of the banking industry, it can perhaps be most beneficial when deployed in ways that will enhance interaction and engagement levels with customers, especially in terms of meeting their needs for more accessible online banking options. With the increasing roll-out of 5G and the influence of the growing Internet of Things (IoT), customers will come to demand more from all digital services, and banks will be expected to deliver more innovative services that take full advantage of the abilities of high-tech devices.

There are several ways in which digitalization initiatives can be deployed to enhance customer experience, especially during the COVID-19 pandemic, but a major consideration is the customer journey to branch. While lockdowns are mostly lifting throughout the region, people are still reluctant to make unnecessary journeys. Banks should therefore begin to make as many services accessible remotely and zero-touch as possible, considering customers’ preference for digital journey as opposed to the physical journey. Mobile apps are a popular route to achieve this, given the massive levels of smartphone penetration in the Middle East. Datadriven, up to date, and compliant channels are also a strong alternative for remote

wealth management, with information securely accessible to customers and their account managers from wherever they may be.

Developing digital-first services will not only enhance current customer experience, it will also increase a bank’s appeal to potential customers who are looking to transition to more accessible and convenient banking alternatives. There is, therefore, the potential for digitization to enhance customer acquisition.

Ad d i t i o n a l l y, d i g i ta l p l a t fo r m s provide the opportunity for enhanced engagement. Social media platforms will only get you so far, when an app on a customer’s smartphone will provide a direct communications channel regardless of their presence and time spent on social platforms.

Achieving this transition requires a robust and agile hybrid cloud architecture, that combines flexible and quickly scalable data center capabilities, thereby enabling the business to expand with maximum convenience whenever required. A usercentric architecture will amplify business agility, enhancing communication, marketing and notifications for employees, customers and users alike.

As mentioned above, the exact requirements of a bank to overcome the challenges presented by COVID-19 and the post-pandemic reality will vary, depending upon how advanced their current digitization process is. Working with a leader in digital transformation, such as Huawei, will help to determine the best path forward to meet digitalization goals, customized to meet a bank’s unique requirements. As a leading provider of ICT solutions, Huawei is a trusted partner for banks around the world, capable of creating bespoke architecture to elevate the digital experience, at any stage of the digital journey.

CUSTOMER EXPERIENCE IS, AT THE END OF THE DAY, WHAT IT’S ALL ABOUT. mea-finance.com

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BANKING TECHNOLOGY

Cost predictability core to banks’ operational recoveries Subscription-based technologies will not only help regional banks strengthen their own recoveries, but prepare them to better support their communities in the future, writes Solange Abou Nasr, Account Director – Strategic Accounts, Avaya

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M

o s t o f t h e s t ra t e g i c decisions banks in the GCC made in response to the Covid-19 outbreak w e re u n d e r s c o re d by b u s i n e s s continuit y, employee safet y, and continued customer services.

Although the banking sector is typically seen as more technologicallyadvanced than many other industries,

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it was only once their branches and contact centres were empty that banks truly recognized they aren’t quite as digitally-adept as they presumed.

Many were prepared to transition staff to work-from-home, but the majority of organizations we engaged had their efforts limited to basic video conferencing software. Others faced the added hurdle of needing to expedite remote work training for employees who had never needed to work outside their office before.

While organisations understood government-sanctioned lockdowns would unwind, it became quickly apparent there wouldn’t be a return to ‘normal’. Many were – and continue to be – uncertain about how their branches, offices and contact centres would operate in the future. And indeed, many banks are now considering permanent solutions for their work-from-home set-ups.

Banks are fundamental to the long-term recovery. But given the sheer number of people they need to support, combined with ongoing spikes in customer engagements and unprecedented personal and professional challenges, the road ahead appears both bumpy and winding, with crossroads aplenty.

Bank executives are completely focused on increasing digital adoption across their organizations to maintain productivity, quality of service and employee wellbeing. However, they have no desire in making large, upfront investments to be able to digitize their operations and provide their agents with best-in-class tools.

U n d e r c u r re n t e c o n o m i c a n d operating conditions, banks, as part of their recovery efforts, are asking: how can we better manage future expenses?

How can we forecast where to invest?

And where is our priority for investing?

Since the early stages of the outbreak, banks across the GCC – including industry leaders in Kuwait, Bahrain, Saudi and the UAE – have highlighted t h e i m p o r t a n c e of ‘c o n s u m i n g ’ technology as a service, particularly the communications tools on which their customer experience (CX) and team collaboration functions rely. As well as helping keep costs down, this model ensures those banks don’t need to limit the usability of their technologies.

Avaya OneCloud Subscription aligns to these priorities, providing almost instant access to comprehensive unified communications (UC) and contact centre (CC) technologies on a subscription basis. As a result, banks can leverage communications solutions as they need them, scaling their usage requirements to cater for operational demands, and making expenses predictable.

This proves especially beneficial in supporting the varying degrees of recovery in the region. With national governments managing their own unique circumstances – with the UAE and Saudi

Arabia well into easing restrictions, for example – banks can align and adapt to those health and safety requirements without jeopardizing their customer service function.

Subscription-based solutions also provide an inroad for cloud adoption to banks that may be very early in their digital transformation roadmaps, p a r t i c u l a r l y t h o s e c a te r i n g fo r consumers who strongly prefer faceto-face interactions and more personal relationships with agents.

Customer experience was first the domain of the Contact Center Manager, and more recently the CIO. This year, however, it has cemented its place as a priority for CEOs and other business leaders. This serves as an opportunity to validate digital budgets to ensure banks are equipped to adapt quickly to changing customer demands.

Subscription-based solutions enable this by stripping away extensive preplanning in order to accelerate time to value for stakeholders.

In short, Avaya OneCloud Subscription will not only help banks strengthen their own recoveries, but prepare them to better support their communities in the future.

Solange Abou Nasr, Account Director – Strategic Accounts, Avaya

mea-finance.com

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ISLAMIC FINANCE

Eskom, South Africa’s electricity utility leads a wave of Sukuk issuance in the country aimed at mitigating the effects of Covid-19 As the Covid-19 pandemic loads countries with additional debt burdens, South Africa is moving into issuing Sukuk to further diversify its sources of funding. MEA Finance looks at the recent history and future role of Sukuk in the country to help it through tough economic times.

By Mushtak Parker

I

t’s not every day that a Minister of Finance is refreshingly forthcoming about his country’s public debt. This is exactly what Tito Mboweni, the South African Minister of Finance did in his Supplementary Budget Speech 2020 to parliament in Cape Town at end June.

“Debt is our weakness. We have accumulated far too much debt; this (Covid-19) downturn will add more. This year, out of every rand that we pay in tax, 21 cents goes to paying the interest on our past debts. This indebtedness condemns us to ever higher interest rates. If we reduce debt, we will reduce interest rates for everyone, and we will unleash investment and growth. Our Herculean task is to stabilise debt,” lamented the Minister.

He has his work cut out. His own projection is that gross national debt will top R4 trillion (81.8% of GDP) by end FY2020/21. Gross tax revenue for the year is revised down from R1.43 trillion to R1.12 trillion thanks to the impact of the

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lockdown on the economy. This against projected spending of R1.95 trillion, leaving a consolidated budget deficit of R761.7 billion, or 15.7 per cent of GDP in 2020/21.

The outlook for 2021/22 is even more dire.

Consolidated budget spending, including debt service costs, will exceed R2 trillion for the first time ever.

So, what are the options for Mboweni?

His R500bn Covid‐19 economic support package launched in March is one of the largest such mitigation packages in the developing world. This has been complemented by a R50bn support package by the South African Reserve Bank (SARB) for banks to continue lending money to customers and to support liquidity in the domestic bond market.

The country is officially in recession but due to the economic and health impact of C ovid-19 its economy is in crisis, forcing President Cyril Ramaphosa and Finance Minister Mboweni to take up a US$4.2bn loan from the International Monetary Fund

(IMF’s) Coronavirus Relief Facility (CRF) in July – the first time an ANC government has accessed funds from the IMF since democratic elections in 1994 and to the chagrin of the radical factions within the ANC coalition which includes the South African Communist Party. The terms for this loan at 1.1% interest to be paid over 3 to 5 years, as Mboweni is quick to retort, is not as onerous as for the regular IMF Standby Facility or Extended Credit Facility.

Diversifying funding sources B u t w i l l t h e c u r re n t e c o n o m i c circumstances dictate whether the CRF becomes a mere precursor to Mboweni going back to the Fund, something which was anathema to Nelson Mandela, South Africa’s first democratic President?

“Without external support,” warned Mboweni, “these (domestic) borrowings will almost entirely consume all of our annual domestic saving, leaving no scope for investment or borrowing by anyone

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else. For this reason, we need to access new sources of funding. Government intends to borrow about US$7 billion from international finance institutions to support the pandemic response. We must make no mistake these are still borrowings. They are not a source of revenue. They must be paid back.”

In his Budget Review in April, Mboweni confirmed that “in 2020/21, the borrowing requirement will be R432.7bn.

To ensure a diversified debt portfolio that spreads risk, the requirement will be met from short and long-term borrowing in the domestic market, and from foreign-currency loans.”

South Africa indeed has already a diversified debt financing approach including external borrowings and global and domestic bonds and Sukuk.

But despite being a major commodity producer, has a low revenue base relative to its GDP which is reflected in its high Debt Service to Revenue Ratio.

Low GDP growth is stubbornly entrenched. In 2019 it registered a paltry 0.2% compared with 0.8% in 2018, and thanks to Covid-19 is forecast by Mboweni in his Supplementary Budget to plummet to minus 7.2% this year – the largest contraction in 90 years.

A potentially interesting development in recent weeks is the growing interest by the Treasury and state-ownedenterprises (SoEs) in issuing Sukuk to further diversify their sources of funding. In this respect, South Africa has hitherto failed to leverage its first mover advantage when in 2014 it became the first and only African sovereign to issue an international Sukuk - a benchmark US$500m Sukuk Ijarah (leasing Sukuk) offering with a tenor of 5.75 years and priced at a fixed profit rate of 3.9% per annum, which matured in June this year.

Sukuk Domestic borrowing through Sukuk, an estimated US$200bn niche ethical ESG instrument, has seen a dramatic uptake during the Covid-19 outbreak in the Middle East and SE Asia. The National

Debt Management Centre (NDMC) of the Saudi Ministry of Finance for instance has raised a total SR46,583.5 million (US$12.42 million), through six consecutive monthly sovereign domestic Sukuk issuances in First Half 2020. The Sukuk issuance calendar of NDMC envisages monthly Saudi riyal Sukuk issuances for the whole of 2020. This excludes any forays by the NDMC into the international Sukuk market.

Turkey, Bahrain, Malaysia, Indonesia and Nigeria are all regular issuers of local currency Sukuk.

The UK Treasury is also in the process of issuing a second Sterling-denominated Sukuk to help mitigate the impact of a potential Hard Brexit, to attract FDI from the Middle East and Asia, and under its financial inclusion policy. Earlier this year the UK Debt Management Office (DMO) of HM Treasury issued an invitation to tender for Sukuk syndication banking services: “This Invitation to Tender relates to the procurement of syndication banking services for the United Kingdom’s sovereign Sukuk issue, through an open and competitive process.”

With the UK Debt Management Office (DMO), on behalf of HM Treasury, appointing HSBC and Clifford Chance LLP as structuring and legal advisors “to assist with the UK government’s second issue of sovereign Sukuk,” the issuance would have gone to the market had the Covid-19 disruption not occurred. The issuance will now go ahead depending ultimately on the right market conditions and whether the Sukuk is “value for money for the UK taxpayer” and whether it satisfies HM Treasury’s own impact assessment for bonds and for Sukuk.

South Africa’s debut Sukuk in 2014 was preceded by a few months when the UK became the first Western country to issue a 5-Year Sukuk Ijarah in June 2014, raising £200 million in the process. The transaction paid a profit rate of 2.036% in line with the yield on gilts of similar maturity. The issuance was 10 times oversubscribed with the order book exceeding £2 billion. The challenge for HM Treasury is whether it will merely

issue a similar size Sukuk or make a statement of intent with a much more aggressive volume and tenor with its proposed second Sukuk.

In the South African context, are the winds of change finally sweeping through the National Treasury? The Treasury, confirmed Mboweni in his Budget Review in April, is preparing to issue a debut rand denominated Sukuk in 2020/21.

“The intention,” says Siyabonga Shange, Director, Debt Issuance and Management at the Treasury, “is to develop and help grow the rand Sukuk market while potentially diversifying the investor type.

The need to develop the domestic market at the moment was greater. We feel the market is big enough to warrant attention and potential development.”

Given the Covid-19 disruption, the timing and size of the Sukuk will depend on market conditions and pricing.

The government might also return to the market later with a second US dollar Sukuk if the pricing and market conditions are right, added Shange.

Domestic Sukuk could become an increasing feature of the debt market in South Africa going forward because there is pent-up investor demand for

Abdullah Ameed, Al Baraka Bank's Financial Director

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ISLAMIC FINANCE

such issuances from the lone Islamic bank, Albaraka Bank South Africa, a subsidiary of the Bahrain-incorporated Albaraka Banking Group; the Islamic banking windows of Absa, First Rand Group, Standard Bank and Nedbank; institutional investors such as pension and annuity funds; high net worth investors including from the country’s 3 million or so Muslim community; and the growing cadres of investors interested in ethical, ESG, sustainable and responsible investment.

A sovereign rand Sukuk would also pave the way for local corporates and banks to start tapping the market. It’s a far cry from the days when Columbus Steel in South Africa accessed a syndicated Murabaha facility arranged by inter alia Kleinwort Benson in the 1980s.

In fact, Albaraka Bank South Africa to its credit set the ball rolling in 2016 when it became the first South African financial institution to issue a Tier 2 Sukuk, raising R200m to boost its capital. This was followed by a R107m Sukuk in January 2020, with the bank aiming to raise a total of R400m by the end of 2021 “from South Africa’s retail market to fund bank growth and an extension of its reach to a broader market.” The bank has raised some R307 million through its Sukuk issuance to date, which leaves R97m outstanding f ro m i t s c u r re n t R 4 0 0 m S u k u k issuance programme.

“Uptake,” stressed Al Baraka Bank’s Financial Director, Abdullah Ameed, “has been quite phenomenal. This, coupled with the fact that our initial issuance was fully subscribed, with additional prospective investors indicating their interest in the concept, our Sukuk offering has clearly caught the attention of South African investors.”

South African SoEs have long toyed with the idea of issuing Sukuk. The troubled electricity utility, Eskom, first contemplated issuing a Sukuk way back in 2012 and the highway utility Sanral similarly expressed interest in 2014. But the country’s dire economic fundamentals, mismanagement of

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SoEs, structural issues relating to toll road and electricity pricing and the Treasury’s reluctance to provide guarantees, put paid to Eskom, Sanral, TransNet and even the beleaguered national carrier South African Airways going to the market.

Regular issuances would instil investor confidence and build up a Sukuk yield curve for other issuers including SoEs, corporates and banks, which ultimately reduces the cost of finance.

Eskom Sukuk Eskom surprised the market on 24 June 2020 when it issued a tender inviting “credible” law firms to bid “to provide legal services for a rand Sukuk issuance.” The electricity utility’s revised Funding Plan for financial years (FY) 2020/21 to 2024/25 “seeks to diversify funding sources and execute cost effective funding at acceptable risk. The execution of the Funding Plan requires sizeable funding that can provide diversification and longer tenors at reduced finance costs. Eskom has assessed the viability of an innovative Local Currency South African based Sukuk funding solution that would enable Eskom to further develop its Borrowing Plan.

Eskom currently has 30 (including 1 nuclear) operational power stations with a nominal generating capacity of 44,172 MW. Its debt is approaching R450bn. The utility concedes that “it is unable to service this debt from its ordinary operations, which necessitates borrowing from the financial market. Out of desperation, the ruling ANC government is targeting pension funds to finance an ambitious infrastructure programme and to bankroll the beleaguered electricity utility to the tune of R200bn.

The size of Eskom’s proposed Sukuk will depend on market conditions, pricing and investor appetite.

“The financing of Eskom’s multiyear funding requirements,” said the utility in a statement, “necessitate issuance of debt in the domestic and

international debt capital markets.

Domestic bonds are issued under our registered Domestic Multi Term Note (DMTN) programme as guaranteed by the Government of South Africa.”

Local investors would be attracted to the issuance subject to central government guarantees. The obligor is Eskom Holdings which has a track record of issuances both in the international and domestic conventional debt markets.

The tender documents require the appointed legal advisory: 1. To provide pre-transaction Sukuk structuring and asset identification; 2. To engage with the Johannesburg Stock Exchange (JSE) on the structure of the Proposed Transaction once the structure paper has received sign-off from the Shariah scholars with a view to a listing on the JSE; 3. To draft the Government Guarantee and the application to be submitted in respect of the Framework Agreement, as well as assisting on the approval process; and 4. To assist with the transaction implementation including drafting the offer documents, term sheet and prospectus; overseeing the Shariah Governance process; establishing the relevant SPVs (special purpose vehicles); and arranging a series of domestic investor road shows.

Market sources stress that Eskom’s debut Sukuk could be R1bn or higher. This will depend on whether it is successful in getting the Treasury guarantee. It is opting for a Rand-based Sukuk as opposed to an international offering which will mitigate the currency risk for investors.

Eskom could well emulate Nigeria’s highly successful and impact driven sovereign domestic Sukuk, the latest of which was issued in June this year – a 150bn naira Sukuk – ring-fenced towards financing the construction or rehabilitation of 25 arterial roads in the country and which had a strong financial inclusion component in that a quarter of the subscription is allocated to retail investors.

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04/08/2020 10:11 PM

ISLAMIC FINANCE

Sukuk helps build the road to Nigeria’s economic growth The Federal Government of Nigeria’s inclusive approach to Sukuk issuance, providing a direct stake in funding their country’s infrastructure while earning an investment return, stands to bring economic benefits to the country.

By Mushtak Parker

I

magine a section of the Sheikh Zayed Road in Dubai with a sign stressing: “This section funded by Sukuk.”

In Nigeria thanks to the Debt Management Office (DMO) of the Ministry of Finance this has been the norm in recent years on the Kaduna Eastern Bypass Road, the KanoMaiduguri Highway or the ObajanaO ke n e Ro a d . T h e s e s i g n s h a ve coincided with the issuance of the Federal Government of Nigeria (FGN) sovereign domestic Sukuk, the latest of which was issued in May - a N162.557bn (US$420m) Sukuk Ijara (Leasing Sukuk) with a tenor of 7 years and a rental rate of 11.2% per annum payable half yearly.

N i g e r i a ’s S u ku k i s s u a n c e programme is unique in that it is ringfenced to finance road infrastructure construction or rehabilitation, and has a strong sustainable financial inclusion component, making it one of the most effective social and development impact debt financing in infrastructure. The DMO allotted N162.557bn to investors in the third Sovereign Sukuk. Originally it aimed to raise N150bn but due to the robust demand the issuance was upsized to N162.557bn. The issuance of this Sovereign Sukuk following the debut issuance of N100bn in September 2017 and a second issuance

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of another N100bn in December 2018, says Patience Oniha, Director General of the DMO, “is based on the DMO’s commitment to using borrowed funds to finance infrastructure. The Sukuk issuances are project-tied and are used to finance specific projects which are disclosed to investors.”

As Director General of the DMO, Patience Oniha oversees the country’s public debt strategy through bond issues in the local and international markets.

The proceeds of this latest issuance will finance 44 critical Road Projects across the six Geopolitical Zones of Nigeria. The benefits from the earlier Sukuk issuances, says the DMO, “include improved safety on the roads, faster travel times, access to markets for farm produce and opening up parts of the country for development. Other important benefits are job creation and increased level of activity for many of whom are small businesses.” The good news is that the “DMO expects to continue to raise funds through Sukuk to support improvement in infrastructure and development of the domestic capital market.”

The DMO unveiled its plans for 2020, based on the New Borrowings in the 2020 Appropriation Acts, which comprises of N850 billon and N744.99 billion for

External and Domestic Borrowings, respectively. The New D omestic Borrowings will be raised through FGN Bonds, Sukuk, FGN savings Bonds and possibly Green Bonds. For External Borrowings, the strategy is to first seek concessionary and semi concessionary loans due to the lower interest rate and longer tenors. Any shortfall may be raised from commercial sources.

Inclusion and diversity The DMO has stipulated that there must be an allocation of up to 25% to retail investors. The subscription for the debut Sukuk amounted to just under 5% given the nascency and unfamiliarity of the product but increased sharply to 17.33% for the second issuance following a

Patience Oniha, Director General, DMO

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marketing campaign. Encouragingly there was participation of a wide range of retail investors irrespective of ethnicity and faith. “Have you invested in the FGN N150 billion Sukuk offering” stressed the marketing of the DMO, to the country’s growing cadre of retail investors in government bonds and Sukuk under Abuja’s financial inclusion policy of giving ordinary people a stake in the country’s economic development.

This increased retail participation in the Sukuk offering “indicates that the stated objectives of financial i n c l u s i o n a n d d e e p e n i n g of t h e investor base for FGN securities, in addition to infrastructure funding are being achieved.” The latest offering confirmed the DMO “attracted a high level of subscription from investors with total subscriptions of N669.124bn, representing a subscription level of 446%. The impressive demand for the Sukuk came from a wide range of investors which included Ethical Funds, Insurance Companies, Fund Managers and retail investors amongst others, in line with the DMO’s objectives of diversifying the investor base for Government Securities and promoting financial inclusion.” It gives Nigerians a direct stake in funding their country’s i n f ra st r u ct u re w h i l e e a r n i n g a n investment return.

The rationale, says Oniha, “is to enable the government to diversify its sources of funding, deepen the market for domestic securities and improve financial inclusion. Sukuk has a role to play in future government public debt programmes subject to the government’s funding need and portfolio management strategy.”

THE “DMO EXPECTS TO CONTINUE TO RAISE FUNDS THROUGH SUKUK TO SUPPORT IMPROVEMENT IN INFRASTRUCTURE AND DEVELOPMENT OF THE DOMESTIC CAPITAL MARKET.

managed by FBNQuest Merchant Bank Limited and Lotus Financial Services Limited. The transaction involved several Nigerian financial institutions as receiving banks and placement agents, including the country’s two dedicated non-interest banks namely Taj Bank and Jaiz Bank, and local subsidiaries of the UK’s Standard Chartered Bank and South Africa’s Standard Bank, namely Stanbic IBTC Bank.

The Sukuk was priced ver y competitively at a rental rate of 11.2% per annum payable half yearly. This compared to 15.743% for the 2018 issuance and 16.47% for the 2017 Sukuk. This despite the outbreak of the Covid-19 pandemic, the sharp fall in crude oil prices and their impact on the global economy, let alone Nigeria’s oil revenues and public finances. This indicates sustained investor confidence in Nigerian sovereign debt risk and the country is building up a Sukuk yield curve independently of the regular FGN bonds. It also indicates that the DMO is comfortable with Sukuk as part of the public debt raising universe, especially from a value for taxpayer perspective, and that Sukuk issuance is here to stay.

Widening uptake

Transparency and efficiency

This third N162.557bn Sukuk Ijara matures in June 2027. The certificates were issued through FGN Roads Sukuk Company 1 PLC (FGN RSCI), a special purpose company wholly owned by the Ministry of Finance, on behalf of the federal government. The transaction was

The market, investor community and construction companies linked to road and transport projects have been lobbying the government to continue issuing Sukuk in this sector. The structure includes several corporate governance features pleasing investors,

the retail community, and contractors, viewing Sukuk as a transparent fundraising instrument.

T h i s i n c l u d e s a n a r m s- l e n g t h independent audit body to oversee the draw-down of the funds against work completed and commissioned to preempt any corruption and mis-use of funds; ring-fencing the funds specifically for the project and work stated in the offer documents; contractors receiving payment promptly and Sukuk certificate holders getting paid on time on a semiannual basis.

The impact of FGN Sukuk especially in its role in the financing of the rehabilitation of key arterial road projects is implicit. This, explained the DMO, “has brought reprieve to road users, improved travel times between major commercial cities, linked borrowing and government expenditure to specific critical projects, helped increase the flow of cargo and passenger traffic across major cities, and improved infrastructure delivery across the country.” According to the offer document, the Sukuk certificates qualify as securities in which trustees can invest under the Trustee Investment Act; and as Government securities within the meaning of Company Income Tax Act and Personal Income Tax Act for Tax Exemption for Pension Funds, amongst other investors. They are also classified as Liquid Assets by the Central Bank of Nigeria.

The Sukuk certificates are also listed on The Nigerian Stock Exchange and FMDQ OTC Securities Exchange.

mea-finance.com

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ADVISORY VIEW

Surviving the storm Matthew Escritt, banking and finance lawyer, and partner at Pinsent Masons, looks at the effects of the Covid-19 pandemic on the UAE and what it means for its banks.

T

he UAE headed into 2020 with renewed confidence. After several years of below par growth there was considerable expectation that 2020 would be a better year for the country encouraged by Dubai’s hosting of Expo 2020 which was expected to bring upwards of 25 million visitors to the to the country.

However, that initial optimism had already begun to fade by the end of January when the UAE announced its first case of Covid 19. As elsewhere the

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announcement was not given much attention at the time, but it marked the beginning of the unprecedented crisis that was to follow. A crisis that has completely upended the country’s hopes and expectations for the year ahead.

The twin effects of the Covid 19 pandemic and the collapse of crude oil prices have caused huge economic disruption across the oil-rich Gulf.

The main economic drivers of the region and the UAE in particular— trade, transportation and logistics,

tourism and retail and real estate —have been particularly hard hit by extensive lockdowns, a virtual end to international travel and the severe economic consequences arising from governments’ efforts to reduce the health impact of the pandemic.

During the initial acute phase of the crisis the UAE’s financial response was led by the federal government. In March, the UAE Central Bank outlined a package of measures worth AED 100 billion designed to help banks support

Banking and Finance news in the MEA market

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BANKS WILL NEED TO RETHINK THEIR MODELS FROM THE GROUND-UP AND DEVELOP FALLBACK PLANS THAT WILL ALLOW THEM TO NAVIGATE A CRISIS OF THIS NATURE MORE EFFECTIVELY IN THE FUTURE.

their retail and business customers and mitigate the effects of the lockdown and the resulting economic disruption.

The ‘targeted economic support scheme’ (TESS) launched in March 2020 has three main features. A zerocost facility through which up to AED 50 billion is accessed by banks and used to provide temporary relief to customers in respect of debt service.

The second element gives the banks temporary relief from their ‘capital buffer’ requirements and allows them to tap into their capital reserves to provide additional support to their customers thereby encouraging economic activity.

A third element provides that banks taking advantage of this scheme must support their customers by deferring l o a n re p a y m e n t s , wa i v i n g fe e s , penalties and interest in respect of such deferrals and ensuring that there

is no credit impact for customers taking advantage of such reliefs. In April, the UAE doubled the size of its stimulus package from AED 126.5 billion to AED 256 billion and allowed banks to extend deferrals until the end of 2020.

In May the country took the first tentative steps out of lockdown.

However, businesses across the country were already reeling from an unprecedented collapse in consumer demand. Their focus since then has been on preserving cash through a variety of cost-cutting measures including cutting salaries and deferring payments to creditors (including banks) in the hope that there will be a recovery in the autumn. A survey carried out by the Dubai Chamber of Commerce in late April had revealed that up to 70% of Dubai companies expected to go out of business within six months as a direct consequence of the pandemic.

Moreover, this dire prognosis was compounded by fears of a population contraction with government officials anticipating a decline of up to 10% for the year.

The International Monetary Fund’s latest report on the region has revised downwards its growth projections for the region with the energy producing economies of the Gulf projected to see real GDP fall by up to 7.1% in 2020.

Moreover, downside risks remain, notably the real risk of an uptick in infections arising from the lifting of the most stringent measures and the subsequent need to reimpose containment measures as well as the prospect of lasting labour

market scars resulting from the collapse in employment.

What does this crisis mean for the UAE’s banks?

The path ahead is uncertain but as the UAE moves beyond the acute phase of the crisis and takes tentative steps to reopen, it is clear the country’s banks will be front and centre in that recovery. The good news is that the UAE’s banks came into this crisis in better shape than the financial crisis of 2008/9. Much needed consolidation in the market in recent years and strong capital buffers —even by international standards—mean that the UAE’s banks are better placed than many

Matthew Escritt, banking and finance lawyer, partner, Pinsent Masons

mea-finance.com

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ADVISORY VIEW

financial institutions to come through this crisis. However, the global financial crisis of 2008/9 was by comparison more limited in its global impact and in the UAE was primarily contained within certain sectors of the economy. Moreover, the recovery during that period was bolstered for Gulf economies by high oil prices. The economic crash unleashed by the Covid 19 pandemic has by comparison effected every part of the economy and its impact has been truly global, and the impact of the crash has been compounded for the Gulf economies by historically low oil prices. For banks, the impact on capital, revenue and liquidity positions has been severe. However, the universal nature of this crisis provides an opportunity for truly transformative change in the sector as banks rethink all aspects of their businesses not only to ensure their survival, but to allow them to emerge from the crisis stronger and more resilient than before.

Transformative change The transformation unleashed by this crisis is expected to impact all areas of the banks’ operations: • i n t h e reta i l e nv i ro n m e n t t h e acceleration towards digitisation and online banking and the rise of cashless transactions will cause banks to take a hard look at their branch and ATM distribution and there will almost certainly be rationalisation in respect of both.

• h o w b a n k s re s p o n d t o t h e i r customers’ distress in the present environment is likely to impact how their brand is seen by both retail and corporate customers in the years ahead. While the immediate focus – as it should be - will be on customer relief and remediation which has been facilitated in the UAE by government programmes such as TESS, the key message from most banks is that their focus is on maintaining strong client relationships over near-term revenue risk.

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THE GOOD NEWS IS THAT THE UAE’S BANKS CAME INTO THIS CRISIS IN BETTER SHAPE THAN THE FINANCIAL CRISIS OF 2008/9.

• it is likely that banks will begin to see their capital and liquidity buffers come under pressure. Balance sheet decisions will become particularly difficult for banks when they are faced with requests to renew revolving credit lines and extend new credit. Banks will clearly wish to stay above minimum requirements for capital and liquidity but pressure from both central banks responding to political pressure and customers will mean they will need to consider getting much closer to the minimums than they may be comfortable with.

• banks will be looking for ways to cut their costs quickly. This will require a forensic analysis of all functions from the client-facing parts of the business to back office functions, including marketing, procurement, and IT. New working practices and the rise of homeworking will also cause many banks to reconsider the size and the extent of their real estate footprints.

• in the short to medium term banks will need to recalibrate their revenue expectations. The earnings impact of Covid-related emergency interest rate cuts will be severe. Moreover, today’s near zero-rate environment for US dollars and other major currencies is reviving discussion of a negative policy rate scenario.

This scenario has multiple impacts on bank’s risk models and indeed presents legal and operational complications.

• while few business leaders in any industry will have predicted a global economic shutdown of this magnitude, the models that banks rely on are designed to predict a

stable future and they simply did not make allowance for a crisis of this nature. Banks will need to rethink their models from the ground-up and develop fallback plans that will allow them to navigate a crisis of this nature more effectively in the future.

• banks will also need to completely rethink their overall business models in response to lasting social and economic changes brought about —or indeed accelerated by—the current crisis which is likely to involve revisiting long-held assumptions that have underpinned these models; and • banks will need to be seen to be part of the solution whether that it is in relation to an increasing fo c u s o n i n n ova t i o n s u c h a s promoting the cashless future or by supporting a sustainable and socially-orientated recovery through product diversification. In this regard the growth of sustainable lending and green bonds are an example of banking innovation whose time has most certainly come.

The UAE will bounce back While there have been tentative signs of recovery in recent weeks the road to recovery here as elsewhere is likely to be long and relatively painful. However, the UAE’s capacity for reinvention proven over decades and the fact that the country remains a magnet for millions across the Middle East, Africa and indeed the rest of the world gives confidence that it will defy its sceptics once again and bounce back perhaps a little leaner and greener than before. And the UAE’s banks will surely still be there to support and underpin that recovery.

Banking and Finance news in the MEA market

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04/08/2020 10:07 PM

HEALTH CARE PRIVATE EQUITY

Post Covid-19 Investor Trends in Healthcare Private Equity With the world amid the greatest global healthcare crisis in more than a century, MEA Finance hears from Orhan Osmansoy, Operating Partner at TVM Capital Healthcare, a globally active specialist investment company, with his thoughts on how the healthcare investment landscape could look following the crisis and how they will be going forward following the events of this year.

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t is fair to say that in 2020 health and healthcare has become foremost in most people’s dayto-day considerations, be them personal or commercial. The Covid-19 Coronavirus pandemic has brought the healthcare sector, already a major global growth prospect, to the forefront of the minds of investors.

Indeed a report by Businesswire in June 2109 before the Coronavirus outbreak states, the global healthcare market reached a value of nearly $8,452 billion in 2018, having grown at a compound annual growth rate (CAGR) of 7.3% since 2014, and is expected to grow at a CAGR of 8.9% to nearly $11,908.9 billion by 2022. What will the effect of the 2020 pandemic be on investment in this important market sector?

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Covid-19 will accelerate the move away from hospital-centric care models Covid-19 is likely to accelerate a global trend towards a patient-centric model of care, and away from hospital-centric models, the former being driven by favorable patient outcomes and constraints in hospital capacity. In MENA and Southeast Asia, this transition is in its infancy, but will gather pace as patients become more inclined to avoid hospital stays, whenever possible. We believe there will be a growing separation between ancillary functions such as imaging and lab tests, and core hospital operations focused on inpatient care. Patients will also choose ambulatory care settings rather than hospitals for increasingly complex care and procedures.

Specialism is the way forward Ambulatory centers, labs and specialist inpatient facilities are all taking root in the region and proving popular. This trend will be complemented by increased provision of specialist centers, for example for pediatrics, obstetrics and gynecology, and in response to demand for high quality post-acute care for chronic diseases, such as diabetes and cancer. Home-based care is also likely to gain traction due to the region’s rapidly aging demographic profile, and in line with traditional practice of caring for the elderly in a family setting. We see private investment heavily complementing public investment – including through innovative partnerships between private and public sectors.

Digital applications in healthcare will accelerate Covid-19 pandemic has already increased the use of telemedicine through video consultations, and we believe it is here to stay. Growing urban communities and aging populations are spurring demand across Southeast Asia and MENA for better chronic healthcare quality and delivery, especially in postacute and home-based healthcare. We expect to see increasing provision of online consultation activities, requiring more input of clinical information from specialized facilities. Telehealth and home healthcare services will also gain ground. These will require investment in AI-based diagnostics and digital tools, including cloud-based storage of medical

Banking and Finance news in the MEA market

07/08/2020 8:55 PM

WE EXPECT TO SEE INCREASING PROVISION OF ONLINE CONSULTATION ACTIVITIES, REQUIRING MORE INPUT OF CLINICAL INFORMATION FROM SPECIALIZED FACILITIES.

Orhan Osmansoy, Operating Partner at TVM Capital Healthcare

records, and integration of information across the care continuum.

Investor interests change and demand customised investment models With the transformation of the healthcare industry globally, we expect to leverage these trends in our investment strategy.

Simply put, our strategy is to invest in transformational healthcare companies, bringing their innovative solutions to markets where we see high demand for such services. We are expanding our footprint geographically, as we have learnt that our unique perspective as a

global healthcare investor with bespoke pan-emerging market expertise enables us to access and improve the quality of healthcare services in MENA and the GCC as well as Southeast Asia.

We aim to make our portfolio companies internationally competitive by adding operational and strategic value, ultimately driving shareholder value and growing topline. Our captive Operations Group helps develop our portfolio companies into internationally active centers of healthcare excellence. We are convinced that regional know-how and dedicated industry expertise are key factors of success in private equity investing.

However, over the last couple of years, private equity investors have developed a variety of investment interests that we find need to be achieved through bespoke and tailored capital vehicles.

We are witnessing a convergence between permanent capital and thirdparty AUMs allocators. Pensions funds, family offices and sovereign wealth funds are investing via General Partners, but also directly and on their own. Shadow capital private equity exposure through co-investments and/or direct investments will continue to grow. At the same time, as institutional investors seek to rationalize their relationships with private equity managers, General Partners must find ways to meet investor criteria.

As such, we are working on alternatives to blind pool funds and conventional private equity fund structures by putting together tailored programs that meet investor criteria via separate accounts and bespoke co-investment arrangements, which we feel will empower our investors to be more than just passive partners in private equity funds. Thus, with our combination of unique deal flow opportunities, an operations heavy approach, tailored capital vehicles, and our experience as a dedicated healthcare private equity investor, we feel we can increasingly capture healthcare-focused PE allocations.

mea-finance.com

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OPINION PIECE

Open Banking’s open secret Tabrez Surve, Regional Director – Gulf, Levant & Turkey at F5 Networks, describes why holistic API management is the key to unlocking open banking’s vast potential.

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n the age of digital banking, financial data now stretches way beyond traditional banks.

Last year was rife with hype and speculation about open banking’s disruptive credentials, and it is easy to see why.

Customers are becoming increasingly receptive to alternative payment methods from established technology firms such as Apple Pay, Samsung Pay, Amazon, and Google.

There are already a growing number of people who are transacting mainly via PayPal or bitcoin.

This rapidly advancing technology has taught consumers to demand everyday information instantaneously and with little effort—and now consumers want more control over their money. that is where open banking comes in.

Essentially, it is the practice of sharing financial information electronically, securely, and only under conditions that customers approve of.

Open banking chatter persists because it is can be a significant innovation catalyst, enabling better user experiences, streamlining lending, automating accounting, and pioneering new payment options.

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It opens the way to new products and services that could help customers and small to medium-sized businesses get a better deal. It could also give you a more detailed understanding of your accounts, and help you find new ways to make the most of your money.

Here in the GCC, Bahrain is taking an early lead in the introduction of open banking systems, and the rest of the region appears poised to follow.

Pent-up demand for digital banking services also points to a need for open banking in the region. Indeed, recent research from McKinsey on urban consumers in UAE and KSA showed that at least 80 percent of consumers prefer digital banking, yet only 20-25% of them have acquired a product digitally.

Looking elsewhere in the world, Asia is already enthusiastically embracing the concept, buoyed by a slew of countries digitalising in real-time, a large base of tech-savvy consumers and digital payment platform ubiquity.

E u ro p e a n s a re s l i g h t l y m o re circumspect. The biggest hurdle to date is consumer sentiment. There is still a reluctance to share personal information, which is partly a cultural

mindset but also a reaction to the prevalence of data breaches.

Awareness is another pressing concern. According to a Splendid Unlimited study on the state of open banking, a mere 22% know what it is. Open banking services were used by just 9% of survey participants.

Ernst & Young’s Open Banking Opportunity Index predicts it will take around three to five years to really get going. That can change fast, however. Recently, the Open Banking Implementation Entity (OBIE) – the body set up by the Competition and Markets Authority (CMA) to deliver Open Banking in the UK – said the number of users has doubled in the past six months. More than 1m customers have made use of open banking technology in the two years since the tool came into effect.

Meanwhile, regulations continue to drive the pace of open banking rollout.

In Europe, the European Union’s Second Payment Services Directive (PSD2) will continue to resonate. In effect since 14 September 2019, the directive aims to promote innovation, help banking services integrate new technologies, and ensure payments are secure. The UK’s Open Banking Directive is effectively the

Banking and Finance news in the MEA market

06/08/2020 8:50 AM

country’s implementation of PSD2, though timeframes for full implementation have recently been extended.

Importantly, PSD2 includes new requirements for multi-factor authentication when executing bank operations. The value of EU consumers’ data is further elevated by the EU General Data Protection Regulation (GDPR) that came into effect in May last year. Markets such as Australia, Canada, New Zealand, Mexico, Argentina, Nigeria, Hong Kong, Japan and Taiwan are all monitoring the situation closely and poised for regulatory shifts.

Yet, while regulations clearly play an important role, open banking will only be sustainable if it makes a genuine difference to customers. It is their demands for greater agility and improved user experiences that push service providers to compete and innovate at pace.

Banking on holistic API management This is where Application Program Interfaces (API) come in.

In simple terms, an API is a set of routines, protocols, and tools for building software applications. An API basically specifies how software components should interact.

In the banking realm, the use of open APIs enables third-party developers to build foundational technologies for applications and web sites that provide greater financial transparency options, ranging from open data to private data, for the financial institution’s account holders.

Notably, Open Banking Europe – operated by European Banking Subsidiary Clearing subsidiary Preta – published a directory last November that intends to list all publicly available bank APIs in the EU. The PSD2 Transparency Directory meets the need of third-party providers (TPPs) and account-servicing payment service providers (ASPSPs) for a repository storing all key information on bank APIs a single place. It currently contains information on over 1,500 bank-related developer portals. Input is expected from additional banks and financial institutions in the coming months.

The onus is now well and truly on infrastructure, operations and DevOps teams to define, publish, secure, monitor, and analyse APIs. API management solutions enable authors to publish APIs to various environments such as production, test, or staging. This ensures consistency for each environment and prevents misconfigurations. Key examples include: A P I g a tewa y s . A P I g a tewa y s secure and mediate traffic between backend API consumers. API gateway functionality includes authenticating API calls, routing requests to appropriate backends, applying rate limits to prevent system overloads. It can also mitigate DDoS attacks, offload SSL/TLS traffic to improve performance, and handling errors and exceptions.

M i c r o g a t e w a y s . Tr a d i t i o n a l API gateways may be inefficient when handling traffic in distributed environments (for example microservices or handling IoT traffic to support realtime analysis). An additional software component – a microgateway – is required to process API calls in these types of scenarios. Microgateways are still API

gateways but are more lightweight and suited to microservice architectures.

Analytics. Today’s solutions can provide deep visibility into operational metrics on a perAPI basis, enabling new levels of troubleshooting and performance optimisation.

Security. There are no shortcuts here. API infrastructure security should encompass authentication, authorisation, role-based access control (RBAC) and rate limiting (imposing a limit on the number of requests a caller can make during a defined period).

Developer portals. A welldesigned developer portal is pivotal to the success of any API program. It should facilitate rapid onboarding of consumers and include a catalogue of external APIs, comprehensive documentation, and sample code. Some solutions also provide a mechanism for developer interaction.

D eve l o p m e nt a n d d e p l oy m e nt demands are more pressurised than ever, especially as DevOps methodologies s t a r t t o p e r m e a t e m a i n s t re a m operational processes.

Despite some relative regional sluggishness, open APIs are definitively the future and virtually impossible for anyone with open banking aspirations to ignore. Watch this space.

Tabrez Surve, Regional Director – Gulf, Levant & Turkey at F5 Networks

mea-finance.com

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OPINION PIECE

88% of finance industry decision makers believe business growth hinges on digital performance Mena Migally, Senior Director, MENA at Riverbed discussed how IT decision makers (ITDMs) and business decision makers (BDMs) should appreciate the importance of coming together to discuss where the visibility challenges in their businesses lie and assist them in identifying which solutions will help tackle these challenges

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s businesses adapt to the new normal, new research, conducted by technology company, Riverbed, has found that the majority (86%) of business decision makers (BDMs) in the financial sector see digital performance as vital to business growth. Moreover, almost half of financial sector BDMs stated that slow running and outdated technology is currently impacting their businesses’ ability to commercially develop.

Drawing attention to the link between strong IT infrastructure and financial institutions’ success, Mena Migally, Senior Director, MENA at Riverbed, said: “During these unprecedented times where maintaining business continuity is essential, it is more important than ever for financial organizations to have the strong IT infrastructure they need for effective business operations. In particular, the shift to a more distributed workforce as a result of COVID-19, has emphasized the importance of visibility across network and application performance to ensure that employees can remain productive whilst working from anywhere.”

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“Given the links between IT performance, staff productivity and competitive advantage, it is encouraging to see financial decision makers recognize the importance of visibility in optimizing network infrastructure,” he added. Despite the importance of strong IT infrastructure in finance, three-quarters of all finance groups surveyed reported frustrations with the performance of their networks.

The technology financial companies depend on must evolve in line with the constantly changing requirements of the sector. It is positive to see that financial ITDMs and BDMs recognize this necessity – 83% of BDMs and 77% of ITDMs argue that investing in nextgeneration technology is vital. With a further 78% of ITDMs recognizing their IT infrastructure will need to actively evolve in the next five years to support new ways of doing business. Additionally, 97% of all respondents stated innovation and breaking boundaries is crucial to the success of financial businesses.

Elaborating on these findings, Migally said, “In any situation, but especially

during times of disruption, poor network performance has a serious impact on productivity. This has a significant knockon effect on the efficiency of business operations, potentially resulting in client loss and an inability to attain new contracts. But it can easily be prevented, if finance businesses are willing to rethink what’s possible through technology.”

Mena Migally, Senior Director, MENA, Riverbed

Banking and Finance news in the MEA market

06/08/2020 8:51 AM

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LIFESTYLE

Strap Lines Today, almost every device near you shows the time but watches still fascinate, with an enduring appeal coming from a place where precision engineering meets jewellery and practicality joins status. Here, Panerai describes the provenance and processes bringing you one of the key components on their highly desirable products, the strap.

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ore than keeping your watch attached to your arm, what is in a watch strap? A refreshed new look, character and a quick and simple way to personalize your watch. Ever since Panerai first presented their watches to the public, they offered owners great versatility for their prized time pieces with simple and quick strap interchangeability to suit their personal preferences.

Owners are now able to pick additional straps from a variety of materials including leather and rubber, in a wide range of colours and varying buckle

in Louisiana, U.S.A. Our suppliers are committed to the highest standards of responsibility in accordance with the CITES agreement, giving their assurance that such farms themselves contribute to the stable growth of wild alligators, thus protecting this endangered species.

Panerai Submersible and rubber strap

Reworked textile NATO strap

styles. Straps are increasingly important to watch owners and in response.

Alligator Straps The parts of the hide used in creating a strap are those with the most even square-scale pattern (TEC = Toutes Écailles Carrées), taken from the head, the belly and parts of the tail of the animal, yielding about four to five straps per skin. Following harvesting it takes a further eighty steps, some carried out by hand to produce a finished alligator strap. The leather used by Officine Panerai is carefully sourced from farms

Rubber Straps Caoutchouc straps are high-tech products derived from natural rubber, guaranteeing the best quality and a lengthy durability. They provide invaluable technical properties such as water resistance, form stability and skinfriendliness combined with long-lasting comfort when worn. It is the ideal strap material for sports and leisure activities with the caoutchouc straps available in many different designs and colours.

Thanks to the characteristics of this material, rubber straps are particularly suited to the submersible watches and to watch lovers who prefer timepieces with a more sporting and dynamic look.

Textile Straps Canvas is a synthetic material with a typical linen look. The fabric owes its typical linen structure to its warp and weftthreads, together with a material-specific beige colouring to lend a classic sporty touch, making it the perfect companion for Panerai watches. This material has a firm yet soft to the touch texture, guaranteeing lightness but high resistance to wear. This material is reworked to offer customers NATO straps to freshen up the look of their watch.

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

Dubai office: #404, Building B, Al Saaha Offices, Old Town Island Burj Khalifa District PO Box 487177, Dubai, UAE Email: info@mea-finance.com

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

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Banking and Finance news in the MEA market

07/08/2020 8:31 PM

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