The necessary alliance: Banking and fintech
The use of technology to facilitate financial offerings, commonly known as fintech (financial technology), has been around for a while, but has gained renewed focus in recent years, in turn impacting the financial ecosystem. Banks across the world have been pushed to adopt digitalisation as a key element for their continuity plans and collaborate with third-party service providers for accessible reform, greater outreach, and longevity. Similarly, regional banks have been forced to acknowledge that fintech will drive change in terms of customer service and product innovation.
In the UAE, Emirates NBD unveiled Liv, a digital banking app targeting millennials centred on lifestyle, Mashreq Bank launched Mashreq Neo, its full-service digital bank, while
Bahrain’s Bank ABC launched ila Bank, a digital, mobile-only bank. Banks have also offered a series of technological innovations to their business customers. Last year, Emirates NBD launched a SmartTrade portal to facilitate transaction banking clients, and in 2020, the bank enhanced the portal by introducing a service that enabled complete contactless processing of export collections.
In March, Dubai International Financial Centre and UAEbased Mashreq Bank jointly launched a blockchain data-sharing platform to support licensed businesses and corporates in the UAE to “instantly” open digital bank accounts. The platform aims to make it easier and faster for new companies to do business in the UAE, removing existing paper-based KYC processes. Additionally, multiple regional banks have executed blockchain-based trade finance transactions across the GCC.
Customer adoption of such initiatives – thanks to greater connectivity, convenience and growing digital implementation – has been impressive. At Emirates NBD, the share of mobilebased digital account openings increased to over 40 per cent of new individual accounts sourced during Q2 2020, while 60 per cent of UAE-based Abu Dhabi Islamic Bank’s customers now bank digitally.
“Fintech has already impacted digital payments services, transfers and trade finance, and it is expected that the number of products and services will also diversify throughout the region, while governments will look to update regulations and legislation to reflect the evolving nature of the industry. The speed at which paperless solutions in trade finance are adopted will accelerate, given current circumstances,” says Asad Ahmed, managing director and head of Financial Services ME, Alvarez & Marsal.
There is no denying that growing digital adoption, transparency, access to alternatives and convenience have all led to a common belief that fintech – in omnifarious ways – is here to stay. But will it replace the bank’s brick-and-mortar structure? And in doing so, will that pave the way for a more engaging, competitive landscape or trigger disruption within the traditional financial industry?
Is the ascendancy of one, the oust of the other?
Experts feel that while fintech entities are shaking up the market and growing their pool of consumers, it may be a long way off before they replace a traditional bank’s key functions.
“The global financial sector has been investing heavily in technology for a number of years in order to improve both operational efficiency and operational resilience. We have seen an increased use of artificial intelligence (AI) and blockchain in addition to cloud computing, advanced analytics, biometrics, and automation. Some of this adoption is new, and some is not,” opines Bryan Stirewalt, CEO, Dubai Financial Services Authority.
“While operational efficiency and profitability are primary drivers of change, a considerable amount of the digital transformation in the financial sector is from the threats of those