Shaping The Future Of Middle Eastern Banking

Global Finance reports on the Central Bank of Kuwait’s "Shaping the Future" conference.

Kuwait city.

Over 1,000regulators, high-profile bankers, tech entrepreneurs, finance consultants and support organizations gathered in Kuwait City on September 23 at the Central Bank of Kuwait’s International Banking Conference to discuss whether banks or technology companies will gain the upper hand in shaping the future of digital banking.

The event touched on four themes:

•How does the current state of the global economy reflect on the banking industry?

•What is the impact of technology and innovation on financial services?

•What are the key trends in today’s banking industry?

•What does the future hold for banks?

Banks Have the Upper Hand, for Now

So far, banks remain dominant players in the MENA region. No Fintech or disruptive innovation has managed to upset that balance of power, but the existing balance of power may not last forever.

“We have a brand, a global footprint and trust. That is crucial. When you give your personal information and money you need trust,” said Martin Tricaud CEO of HSBC MENA and Turkey.

“Cybersecurity will be a factor pushing clients from traditional to digital banking. For now, people have tried with little amounts but the minute they see it is secure we will witness a big switch. So I’m telling banks: ‘shape up or shape out’,” explained Mubarak Rashid al-Mansouri, Governor the Central Bank of the United Arab Emirates.

Citi’s Global Chief Economist Catherine Mann pointed out that small customer-facing institutions are more directly threatened than global lenders offering a vast array of services like trade finance, bonds, investment and foreign exchange. “No fintech has replicated the set of activities that a large multinational institution has,” she noted.

More Digitization, More Partnerships

Although fintech has been around for more than 10 years, the vast majority of speakers agreed that MENA lenders still have a long way to go in taking advantage of new technologies and innovations.

“Data for example is a fantastic opportunity for the industry. Banks have a lot of information but the issue is how are they using it today?” asked James Cliffe managing director Europe and MEA at Refinitiv.

“There has been a lot of change but we still need more e-KYC, more sandboxes, more cashless ecosystems,” said Otto Williams VP, head of Strategic Partnerships, Fintechs and Ventures, CEMEA Visa.

One of the main obstacles to growing innovation seems to be difficulty to scale. Although several lenders said they were open to partnerships with tech entrepreneurs and other players such as telecom providers, scaling geographically continues to be a challenge.

“Cross-border is still an issue, yet there is great potential in our region and the more we do it, the less we need big technology companies in the future,” argued al-Mansouri.

Think Like a Tech Titan

Giant tech firms such as Apple, Amazon, Facebook, AliPay or Wechat are stepping up to grab their share of the global financial sector. It is a reality banks will have to face sooner than later, in all parts of the world. In his keynote speech, Governor Al-Hashel from the Central Bank of Kuwait stressed that “banks could find themselves sidelined by big-techs.”To counter the storm, he says, lenders should overcome five challenges: customer loyalty, value, efficiency, resilience, and talent.

“Customers are all asking us when is Apple Pay coming in,” says Adel Abdul Wahab Al-Majed, vice chairman of Kuwait’s Boubyan bank.

Regulators admit they have little power to supervise the newcomers. “Big Techs offer services to your people yet they are beyond your juridisdiction and you have no control over them. This will ultimately change the role of the regulator,” argued Rasheed Mohammad Al Maraj, Governor of the Central Bank of Bahrain.

“For banks to survive we have too change the mindset. We need to think like a big tech with a banking license,” said Abdul Aziz al Ghurair, CEO of Mashreq group.

Human Capital Key

Throughout the different panels, speakers highlighted the crucial role of human resources in changing the mindsets.

“Today we need 30%-40% of banks’ staff to have a tech background. There are so many new jobs like head of digital strategy, head of cloud or data scientist… Those jobs did not exist three years ago and [the] talent [they require]is hard to find,” said Abdul Aziz al Ghurair, CEO of Mashreq.

Here as well, countries have a responsibility to educate—not only the youth butcurrent employees as well.

“Cybersecurity is as important as any living skill. It should be taught at primary school,” said Governor Datuk Nor Shamsiah Mohd Yunus from the Central Bank of Malaysia.

“We need to prepare our graduates for a shift in the labor market,” argued Hashel stressing the importance of offering training to current staff members as well.

Education can go both ways. “It can be difficult to teach a regulator technology but maybe it should be the other way around. We could bring tech savvy people in and teach them regulation,” says Mubarak Rashid al Mansouri Governor the Central Bank of the United Arab Emirates.