Middle East banks need a complete change of mindset if they are to seize e-banking opportunities, according to Hassan Abdou, Chief Investment Officer of Cairo-based EFG-Hermes Private Equity, an investment bank managing assets in excess of $200 million. Abdou cites the Egyptian experience when highlighting the unique challenges the Middle East faces compared to that of the west. He believes both a top-down and bottom-up approach is needed to effectively meet the challenges facing regional e-banking.
"There are several challenges unique to the region's e-banking sector. Just getting customers on-line is a major challenge in its self. Then engendering an environment of trust and allaying the fears people have regarding Internet security and convincing them to conduct transactions over the net is a difficult process," said Abdou. "Getting consumers accustomed to using credit cards is a vital step. This requires a credit rating agency to conduct the required level of risk assessment analysis, something, which does not exist in Egypt presently."
He added that the back-offices of banking institutions need to be e-enabled. "A difficult process when many large banks in Egypt are state-owned with poor, and sometimes, non-existent Information Technology (IT) infrastructure," he said. "To change this calls for a complete switch of mindset. In some instances a drastic remodeling of a bank's modus operandi will be required. Banks will need to use open networks on open platforms with other banks and merchants. These banks will not be able to own the process from end-to-end, and this in itself requires a change in philosophy.”
"In Egypt, each bank wants to own an individual ATM network, acquire and issue its own credit cards, have a separate clearing system etc. This can't happen, we work within an economy of scale business. No single bank can succeed unless there is co-operation,' said Abdou. “On a national level, independent banks, supported by central banks, have to upgrade their IT infrastructure to meet a minimum set standard. Then a neutral third party agency must be developed and tasked with establishing a credit rating service," he said.
Abdou believes banks must be encouraged to issue standardized credit cards with reasonable interest rates in a competitive market driven environment. He highlights the importance of the effective, countrywide roll out of point of sale devices as well as ATMs. "The roll out of an effective network will increase the numbers of transactions exponentially as more devices are deployed. Once a compelling and cost effective solution appears, the consumer will begin spending and transacting on-line and through ATMs and eventually over mobile devices," he explained.
Abdou warned that total regional transition to e-banking could be some way off yet with some banking laggards losing market ground. "There is no doubt that some regional banks have been incredibly quick in their acceptance of emerging technology and its subsequent implementation into their service offerings to customers, but on the whole the regional transition to e-banking will be a slow process. One by one banks will come on-line or face the prospect of serious loss in market share.”
"The Middle East banking industry's late arrival on the e-banking scene gives it the luxury of being able to learn from the mistakes of others. We know what works and what doesn't, meaning we can get it right first time around," said Abdou.
Abdou will address delegates on the third day of Arab Banking Technology Exhibition and Conference (ABTEC), which takes place at the Jumeirah Beach Conference Center from April 22-24. Organized by the Olive Group, ABTEC 2002 is aimed at being an interface between world leaders in banking technology, e-banking, data warehousing, analytics, e-security and fraud. — (menareport.com)
© 2002 Mena Report (www.menareport.com)
