Dubai
The Middle East, Africa, and South Asia region (MEASA) will be the next big growth area for the financial services industry, according to a study by Economist Intelligence Unit (EIU) commissioned by the Dubai International Financial Centre (DIFC).
The MEASA region is already poised to shape financial innovation. With a combined population of over three billion, deepening mobile connectivity, and growing prominence as a trade and investment hub, MEASA will be a source of both demand and supply for more and better financial services. For companies that move quickly, this is a multibillion dollar opportunity to bank on the future of a diverse region.
The region has relatively large unbanked populations — particularly among women and young adults — growing mobile connectivity and increasingly prominent finance and investment hubs, the opportunity across MEASA has never been so promising.
Gaps in financial services present an opportunity for financial companies — both traditional and non-traditional players. A growing young population across MEASA is increasing demand for digitally delivered financial services. In addition to this, women’s access to finance substantially lags males, particularly among low-income groups, as regulations for accessing formal finance, such as official ID or billing documentation, bias against them. Even among wealthier segments of the population, many remain underbaked.
Taken together, these present an attractive opportunity for companies providing financial services. As trade and investment increases in the MEASA region, there will be a growing market for wholesale banking and capital markets.
Overcoming a strong preference for cash in the MEASA region will be imperative to move towards a cashless economy. Across the region, the majority of utilities, school fees and even wages are paid in cash. Building trust in digitally-delivered finance will take time, despite a growing preference for it among the younger generation. A fully cashless economy may be decades away, said the report.
“This report effectively illustrates the shifting dynamics shaping the future of finance across the MEASA region, demonstrating how this part of the world is pivotal to the sector’s development. As the world reaps the benefits of the digital age, the financial sector in emerging and developing economies are well positioned to succeed by embracing a combination of technology, innovation and smart policymaking,” said Arif Amiri, Chief Executive Office of DIFC Authority.
The report in three sections covers the state of finance, the future of finance and the enablement of finance through regulation and best practices — within the broader MEASA environment. Among the key findings, the report reveals there are significant opportunities in traditional and non-traditional financial services especially for women and the youth. It also notes that the drive towards a cashless economy will be difficult but very beneficial, and explores the huge prospects Blockchain has to offer.
According to the EIU report new technologies like the Blockchain has the potential to change the financial architecture in MEASA, particularly for wholesale banking. Blockchain is helping reduce high money transfer and exchange costs by bypassing intermediaries, and blockchain-based digital registries could tackle other problems, like land expropriation. While these are experimental and pose regulatory challenges, the core technologies help to overcome some of the challenges of the existing financial system, such as money laundering and corruption in a cash economy. More importantly they are expected to reduce costs to financial institutions, particularly with Anti-Money Laundering (AML) and Know Your Customer (KYC) compliance.
The findings of the report set the stage for discussions at the Global Financial Forum (GFF) to be hosted by the DIFC on 14 November 2017, where over 300 prominent executives from across the world of finance will deliberate on the future of financial services industry in the region.
