Using financial services is a life necessity, such as buying insurance or securing a mortgage. Most wouldn’t describe it — the waiting in long lines, or filling in arduous forms — as fun or something that makes us happy.
New technology and government initiatives aim to change this to help people use financial services more efficiently and integrate them seamlessly into their lives. The banking industry is changing to become more customer-centric and convenient.
In 2015, EY found that “the disconnect between what we expect as customers and what banks in the GCC can deliver is more distinct than ever.” Most people bank with a limited number of large banks, and despite being a tech-savvy population, adoption of digital banking services via smartphone was particularly low, in large part as these services weren’t doing what customers needed and wanted.
However, since this research was done, we have seen change starting to happen, and a great deal of optimism about the potential for technology in the region from government, customers and businesses.
The UAE has long stated a commitment to embracing technological change. The government-backed Smart Dubai initiative seeks to create “a city where all resources are optimised for maximum efficiency [and] services are integrated seamlessly into daily life” with the ultimate goal of a happier population.
There are some obvious direct applications to financial services when we look at the pillars of the initiative, which are that it will be efficient, seamless, safe and impactful. Key projects have already included the implementation of mobile payments in 2015 — working towards the ultimate goal of a cashless society.
The blockchain initiative with the Dubai Future Foundation and Smart Dubai will have a large role to play in how the future is shaped, and financial services stands to benefit.
For example, a mortgage process which used to take two months could be significantly reduced through using new technology. Required documentation — such as visa applications, bill payments and licence renewals, which account for over 100 million documents each year — are planned to be transacted digitally under the new strategy, with banks inevitably having to embrace blockchain to participate.
This will save time and money and should also reduce CO2 emissions compared with the trips needed to undertake these activities in the analog world.
The backdrop to this can also play to another strength of banks, who are well aware of the need to keep customer data safe. They should have some of the best systems for doing so. With additional data being shared by customers and other bodies, alongside the need to comply with international regulations as well as local laws, banks will find renewed focus on the way data is held, treated and used to make sure they get the use of new technology right.
Aside from technology enabling banks to better serve customers, and initiatives for governments and public bodies to become more efficient, fintech is also becoming big business across the world. Entrepreneurs are quick to spot the opportunities to become a part of this growing and exciting market.
KPMG found that across 2015 global fintech investment more than doubled to over $19 billion (Dh70 billion).
In the Gulf, the scale is much smaller than in many other countries, but there is an added impetus — the urgent need to diversify away from oil revenues, and government-led initiatives support this. Abu Dhabi’s “Sandbox” programme — the Fintech Regulatory Laboratory — has been conceived to help fintech start-ups test their products.
This model, which is based on similar initiatives in Singapore and the UK, was launched in November and open for applications until January 31, 2017. The programme isn’t specifically business support, but facilitates new companies working with regulators and government to help ensure their future success.
Magnitt, the online MENA community for start-ups and investors, lists over 100 fintech start-ups in the Middle East as a whole, with more than 30 in the UAE as of this month. These include businesses at a range of stages, some funded and some merely ideas.
But it is reassuring to see that they cover many different aspects of the financial services universe — including P2P, payments, personal finance management, comparison sites, and happily, also services which seek to improve financial inclusion. This is particularly so on access to things like health insurance, among people who may be unable to access the mainstream financial providers.
It may be a while before we see a full digital-only bank and are able to say our financial lives work seamlessly with our day-to-day lives. But the wave of change that has already started in the US and Europe is now underway in the UAE.
And it is likely the pace will accelerate in the coming years as the fintech sector and customers’ needs drive further transformation among local banks. How they adapt to these changes remains to be seen.
But it is likely that only those that are willing to innovate will be able to take advantage of the changing finance market.
— The writer is Manager at ICAEW Financial Services Faculty.