Banking in Emerging Markets

Gulf Cooperation Council (GCC) FinTech Play 2017

The FinTech revolution

The wave of innovation is sweeping through all aspects of financial businesses, such as banking, insurance, asset management and wealth management, and the changes it promises to bring are nothing short of a revolution in the financial services sector.

While there will be benefits for incumbent financial services players and opportunities for innovative FinTech entrepreneurs, the real beneficiary is going to be the user of financial services.

The user will benefit from a significantly improved consumer journey, lower cost of services, increased choice, consumer empowerment, faster transaction speed and a more inclusive financial system.

Familiarity with FinTech innovations is rather modest in the GCC banking sector. Fifty-eight percent of the participants rated their familiarity with FinTech innovations as “low familiarity” or “some familiarity” (one or two on a s cale of one to five) . This is not surprising given that FinTech is a rather recent phenomenon. Even in the leading international financial centers, the proportion of financial sector firms claiming high degree of familiarity with FinTech is not dissimilar to those expressed by the survey participants in the GCC region.

For both participation (Islamic) and traditional financial institutions across emerging markets, the risk of disruption is real. And the finance function of banks is at the center of this disruption.

Advances in new technologies — such as in-memory computing, the cloud, analytics, mobility, artificial intelligence, blockchain and robotic — offer CFOs an opportunity to reimagine what the finance function should look like. Many CFOs are now key players in driving adoption of these technologies more broadly in the organization, and in leading the transformation that ensues from technology innovation.

Highlights

70% of bankers find the GCC banking sector open to integrating FinTech innovations
60% of bankers suggest FinTech innovations could enhance customer service and reduce cost
Global participation banking assets reached US$930 billion in 2015
FinTech innovations could add 150 million new Islamic banking customers by 2021: EY
The GCC region’s share of participation banking increased to 72%
Saudi Arabia, the UAE and Malaysia are the three largest participation banking markets, in terms of assets

“The pace of FinTech innovation in the GCC has been extremely rapid over the past few years but still requires more work on-ground to truly revolutionize the banking industry. The variety of ways in which FinTech innovations are being adopted by the banking sector is increasing and we may even see banks collaborating to build ‘shared-cost FinTech solutions’ in the future.”

Gordon Bennie, MENA Financial Services Leader, EY

“The fact that almost one-third of the US$3 trillion global Sharia-compliant assets are either reported as ‘informal or ‘best estimates’ demonstrates the limitation of participation banks in making sound strategic decisions. CFOs need reliable information and we are seeing a strong desire to improve data management and analytics at participation banks through FinTech innovations.”

Ashar Nazim, Partner, Global Islamic Banking Center, EY