Middle Eastern Financial Sector: A Frontrunner in Driving GenX Tech Trends
Updated 10/15/2023 12:07:00 PM
Amid market uncertainty and the ensuing impact of global events, the financial sector in the Middle East has been witnessing the winds of digitalization. Embracing fast-shaping digital trends, financial organizations in the Middle East are tackling external challenges and swiftly creating sustainable brands for the future. On the back of technology, data, and the power of people, the sector is ready to showcase its might to the world. Here are some fast-shaping trends in the Middle Eastern financial sector.
As the financial sector braces itself to capture immense opportunities waiting to be tapped, trends such as immersive experiences, modern customer engagement strategies, and AI adoption are slowly becoming an integral part of this transformation. Being a frontrunner in embracing change to enable a hassle-free banking experience for customers, financial institutions globally have rejigged IT initiatives to cope with changes to operational procedures, new ways of collaboration with internal and external stakeholders, and an increased focus on digital self-service. This digital revolution in financial services has resulted in a record surge in the number of people having access to financial services in the Middle East. The region is steadily forming its fintech might. According to an industry study, GCC countries have moved decisively into fintech. In fact, some of the GCC fintech hubs have carved out a presence on the global fintech map.
Finance as an Ecosystem and Banking as a Service (BaaS)
The financial services industry is experiencing rapid growth, leading to the development of a sound ecosystem of players, including banking, insurance, and asset management. Customers are demanding greater flexibility and agility in the way banking systems operate, and banks and corporate clients are realizing the importance of open banking and an ecosystem-based approach. The BaaS model integrates the digital banking services of financial institutions directly into the products of non-bank businesses. Cloud-based solutions are the key to this revolution, enabling a seamless experience for users and an efficient process between banks and their outside industry partners.
Forward-looking banks Must strive to build an ecosystem for their clients if they want to stay competitive. This approach facilitates increased interactions and engagement, resulting in stronger customer satisfaction and higher revenues. Many established banks, as well as new players in the market, have already joined the ‘open revolution’. Saudi Arabia is leading the Open Finance initiative in the Middle East by adopting a unique use-case-first approach. In line with this, last year, the Saudi Arabian Monetary Agency (SAMA) published the open banking framework. Furthermore, the Central Bank of the UAE (CBUAE) is also drafting a high-level regulatory framework on open finance and has launched a Financial Infrastructure Transformation Program (FIT Program) with nine key initiatives, one of which is Open Finance, projected to be fully implemented by 2026.
The Booming Metaverse
Metaverse is attracting a great deal of interest from the finance sector in the Middle East, a region known for its early adopter status in technology and automation. With the early adoption of the metaverse, Dubai aspires to become one of the top 10 metaverse economies and a global frontrunner in adopting digital solutions. The government of Dubai has estimated that the metaverse could add as many as 42,000 virtual jobs and upwards of $4 billion by 2030.
The Central Bank of the UAE plans to introduce digital currency within the next three years. Commercial Bank International has delivered an immersive, personalized banking experience by launching the GCC’s first virtual Metaverse location in Decentraland. In tune with changing paradigms, Dubai International Financial Centre (DIFC) launched the DIFC Metaverse Platform to attract technology innovators from across the globe. With all these impressive projects in place, the metaverse is projected to create $1.8 billion in value for the GCC’s banking and financial services sector.
A Scalable Cloud Strategy
Businesses are increasingly implementing a poly-cloud strategy, which helps them cherry-pick services from multiple cloud providers and achieve an optimal combination based on their requirements. Agile cloud-based services provide additional technology resources whenever required, adhering to organizational computing needs and dealing with sudden spikes in demand. They use Infrastructure as a Service (IaaS) or Platform as a Service (PaaS) to build applications, which enhance design and functionality flexibility and assist banks in coping with the regulatory burden by ensuring regulatory compliance, auditability, transparency, and security.
In 2023, a cloud-neutral hybrid approach is slated to build higher availability and resilience in banks’ system designs while addressing data residency requirements based on geography. Shaping up trends in cloud include hyperscale offering native-managed services optionally on cloud-ready CPUs, facilitating banks to capitalize on the cloud-native hardware and interoperability of the managed services interfaces and SLAs. For instance, in the year 2021, Emirates NBD utilized Kubernetes container orchestration, integration, and management to build their private cloud with technology on par with cloud-native companies.
Striking the Right Balance
With customers’ evolving aspirations, financial institutes need to embrace the transition from being product-centric to customer-centric, delivering financing solutions that offer maximum value to stakeholders. Financial Institutions (FIs) need to evaluate the business vision of their organization, IT investment, innovation strategies, capabilities, and expertise of their teams and accordingly prioritize the execution and delivery of their digital strategy.
Cross-sector collaborations and partnerships strengthen trust and long-term agility in the financial sector. The financial services market in the Middle East has the potential to surpass the US and Europe and serve as a model for other international markets by embracing these technology trends.
By Ram Ramachandran, Senior Vice President and Head - Middle East and Africa at Tech Mahindra
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