Mena banks urged to speed up adoption of FinTech

Abu Dhabi: Banks and financial institutions in the Middle East and North Africa (Mena) need to accelerate the pace at which they adopt financial technology (FinTech) or risk losing market share and profits, industry experts said.

They estimated that the region’s banks were two to three years behind the rest of the world in their technology integration and digital innovation.

“I think everybody realises the potential [of digital transformation]. Five years ago, I would have probably said the industry is five years behind [the rest of the world], today I would probably say it’s two to three years behind, and in five years, maybe we will say it’s on par. There are now in the West internet-only banks that don’t have any physical presence. Just like there are low-cost carriers in aviation, you can have a full-service bank and a no-frills bank both owned by the same parent company,” said Faisul Hussain, chief executive officer of Synechron Technologies, a New York-based technology services and consulting firm.

Hussain pointed that lower oil prices and the resulting slowdown in the GCC’s banking sector could also help fuel the transition to FinTech as banks work on cutting costs.

“The population will be mobile and digital first, and physical second, and I think that shift will continue to happen in the next five to 10 years to a point where [banking transactions are] 90 per cent digital... and some banks are already experiencing that in Europe and the US,” he said.

For that to happen in the Mena region, however, banks need to reinvent their structure, integrating more modern technology into their services.

“If you look at ATM machines today, they are very old. There’s so much more that you can do just on the ATM; there’s a lot of scope to bring the technology up to pace — better hardware, faster processors, touch screens, and the amount of banking transactions that you can do from the ATM rather than just withdraw and deposit cash. That technology exists today but it just needs to be rolled out,” Hussain told Gulf News.

He was speaking at the Middle East Financial Technology conference and exhibition, which kicked off on Tuesday in Abu Dhabi highlighting innovative technology in the banking sector.

Also speaking at the event was Peronet Despeignes from the special operations department at Augur, a California-based prediction market foundation, who said that the global financial system currently faces “serious challenges.”

He added that banks have no choice but to reconsider their operations and adopt.

Similarly, David Milligan, CEO of Matchi.Biz, a Hong Kong-based business connecting FinTech buyers with innovations, said that another challenge facing the banking sector was start-up companies providing cheaper, easier FinTech services to consumers.

“What FinTech is doing is disrupting particular segments of banking but those tend to be the most profitable areas; wealth management, lending to businesses, Forex payments and remittances, which is a very high-margin business for banks, and they’re losing share to other services that can do this at a fraction of the cost and much more efficiently,” he said.

Milligan pointed that merely setting up online and mobile banking services was not enough as banks need to leverage FinTech to raise efficiency.