Fintech’s growing role in the Middle East
Bana Akkad Azhari discusses how fintech is playing a growing role in enhancing the region’s transaction services
FINTECH INVESTMENT IS SOARING. In fact, global figures reached a staggering $31bn in 2017, and although Europe and North America continue to dominate the market, fintech activity in the Middle East is building considerable momentum.
Growing demands from corporate clients and consumers for better transaction services are key factors driving this change. And as the millennial population expands its influence on the business world this trend is only set to increase, creating an ever-real need across the Middle East to deliver quick, efficient and transparent banking solutions.
Enhancing processes
Fortunately, a number of technology initiatives are being developed that could help to enhance existing processes. For example, robotic process automation (RPA) is increasingly being applied to simple, repetitive tasks to help deliver greater efficiency, error reduction and cost savings.
Artificial intelligence (AI) is also being explored as a means of enhancing the transaction landscape. Examples of its potential application include speech recognition, chatbots and OFAC scanning, where it could potentially help to decrease instances of false positives.
Elsewhere, application programming interfaces (APIs) could add value to the client experience. APIs act as a go-between, enabling software programmes to interact. They can, therefore, be used by banks to enable systems to share information effectively and efficiently, creating digital ecosystems that connect different parties to provide value-added services. Meanwhile, blockchain is attracting significant attention in the finance space due to its resilience, irrevocability, open source and shared nature, and its potential for real-time settlement. Blockchain could ultimately help to streamline cross-border payments, improving the efficiency of storing and transferring information, as well as enabling payments to be processed with greater security, transparency and speed. In 2017, the Middle East hosted the World Blockchain Forum, which took place in Dubai, highlighting the growing blockchain activity in the region and helping to cement its position as a fintech hub.
Leveraging innovation
Certainly, the Middle East is abuzz with fintech development. Governments across the region are committed to creating a thriving fintech ecosystem, supporting fintech innovation with favourable initiatives such as the Bahrain Fintech Bay (BFB). Launched earlier this year by the Bahrain Economic Development Board, the initiative supports local and global fintech start-ups and partners in line with the country’s digital transformation plans.
Elsewhere, the government of Lebanon, for example, is also creating a supportive start-up environment by offering a series of financial and non-financial incentives to national and foreign investors. Many exemptions and tax benefits are available to encourage fintech investment and growth.
Overcoming obstacles
Fintech has the potential to transform the Middle East’s transaction landscape, yet a number of obstacles hinder its development. Receptiveness to fintech varies across the region. Much of the Middle East is comprised of family businesses, which often favour more traditional processes. Furthermore, finding the resources to invest in new, pioneering technology initiatives can present challenges for many local banks.
Fortunately, collaborative strategies can solve both challenges. The entities in the transaction banking supply chain that are generally better positioned to substantially invest in fintech initiatives are global banks. And despite non-compete correspondent banking partnerships between local and global banks, local banks can tap in to fintech innovation without the need for significant investment.
Fintech has the potential to deliver real added value to the Middle East’s transaction landscape. By adopting the collaborative strategy of partnering with a trusted, innovative global bank, banks of all sizes and scope can access new capabilities and help to ensure clients can benefit from the growing potential of fintech.
BLOCKCHAIN COULD ULTIMATELY HELP TO STREAMLINE CROSS- BORDER PAYMENTS, IMPROVING THE EFFICIENCY OF STORING AND TRANSFERRING INFORMATION