FinTech Is the Key to Stronger, More Profitable GCC Companies: Expert

Published May 7th, 2017 - 08:17 GMT
Financial institutions worldwide are realizing the need for different sort of innovation and better technology to survive in today's competitive market. (Pexels)
Financial institutions worldwide are realizing the need for different sort of innovation and better technology to survive in today's competitive market. (Pexels)

The digital economy is "the single most important driver of innovation, competitiveness and growth". We need to give people the tools to help them thrive in the digital economy. Financial institutions worldwide are realising that they need focus on a different sort of innovation, better technology, modernise infrastructure and improve customer experience.

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Banking business models are changing globally from being old traditional branch business to highly-advanced automated customer-centric experience for performing day-to-day banking activities. The forces of digitisation and the rapid adoption of advanced Internet technologies are increasingly resulting in the international establishment of a flexible and proven corporate architecture that is increasingly being referred to as a "digital ecosystem".

When it comes to banking, the open business model enabled by APIs (application programming interface) promises much. Open business is going to be the new channel through which banks engage with the digital world, and API-based open banking is a development on par with the emergence of the online channel.

Open banking refers to evolution of banking, leading to more transparency, customer choice and customer control over personal data. Various industries are getting redefined, robotics and artificial intelligence are going to play important roles and the customer will be more empowered in the digital environment. These developments will encourage open banking. FinTech, the Internet of Things, blockchain and artificial intelligence are some of the major technological developments that will support open banking.

Exploring and uncovering multiple channels of communication to customers and other banking partners will be critical for GCC banking industry growth. GCC banks should invest wisely to understand customer analytics, as this can help derive efficient channels. As digitisation of all industries continues, consumers will expect banking experiences to replicate those in other industries. The banks should focus on innovation, core modernisation, being asset light and analytics heavy, scalable, simple and safe.

The adoption reduces cost of compliance, fines, penalties and time. Regulators are encouraging banks and corporates to be innovative in technology and helping them to identify ways to integrate new technologies into their business models. Service differentiation and customer experience will increasingly become the major deciding factors, with the ability to deliver real-time insights and offers, transparency and integrated commerce opportunities becoming more important. However, banks and financial regulators should address the trade-off between convenience and security when it comes to digital banking.

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From compliance perspective banks and the regulators have to deal with questions arising from digital banking and also address challenges from digital security. Significant global FinTech investments targeted new ventures catering to personal and SME banking. Advanced and emerging economies are witnessing a trend in embedding FinTech's role in banking. Leading non-financial services are looking to exploit financial services. Customers are also comfortable banking with retailers and telecommunication providers.

There has been little investment in the GCC FinTech industry, but this is expected to change in the coming years. GCC governments can play the role of a facilitator in terms of policy and regulation, and in providing the right environment for innovation to flourish to enable private sector to come up with solutions. On account of the increase in Internet and smartphone penetration, digital payment systems are gaining prominence in the region. GCC banks are allocating resources to adapt their business models to the FinTech revolution as they run the risk of losing market shares to technology innovators.

The GCC population are the fastest-growing globally with increasingly consumer expectations. There are leading signs to adoption for digital banking - high smartphone usage and growing mobile data usage. Regional banks are keen to respond to disruption. The regional banks see significant opportunities from FinTech innovations and fund transfers/payments to be most likely disrupted and the open banking and FinTech developments will contribute to the development of digital ecosystem and promote growth across industries in the GCC.

By Dr. R. Seetharaman

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