Leaving aside the Covid-19 pandemic, what have been the other main drivers of the digital banking revolution in the region?
In the dynamic landscape of Middle East and Africa, the digital banking revolution continues to be catalysed by a confluence of three factors:
- Regulations: Central banks promote healthy competition by welcoming new entrants while enforcing strict regulations on security, reliability and efficiency. This approach benefits consumers with more options, enhanced services and innovative financial solutions. We see this trend in the digital wallet space with players like M-Pesa across African countries, STC Pay in Saudi Arabia, Paga in Nigeria and initiatives like Emirates Digital Wallet. Numerous countries have established regulatory sandboxes, introduced digital banking licenses, implemented open banking regulations and reinforced Data Protection Regulations, consumer protection and cybersecurity standards to create a balanced and competitive financial landscape.
- Consumer Expectations: Rising customer expectations have reshaped the banking paradigm, demanding seamless, secure and convenient services accessible anytime, anywhere. We see this trend in real-time payments where markets like India have set a new benchmark, and customers across the region now demand faster and more seamless payment transactions. Banks have understood that the network and infrastructure facilitating these transactions are the backbone for enabling customers to pay and receive money quickly. So, tier 1 banks are spending to have the required infrastructure and business ecosystem.
- Technology: The maturing of modern technologies, such as cloud computing, artificial intelligence (AI), and application programming interfaces (APIs), has been a game-changer. Cloud enables cost-effective scalability, allowing banks to expand their digital infrastructure swiftly. Recent developments in generative AI-powered solutions hold the promise of scaling personalised customer experiences, predictive analytics and fraud detection, elevating service quality. APIs continue to facilitate seamless integration between banks and third-party services, fostering a vibrant fintech ecosystem.
This convergence of regulatory pressures, customer demands and advanced technologies has propelled Middle East and Africa into a digital banking revolution. Financial institutions embracing these changes are not just meeting current expectations but also positioning themselves at the forefront of innovation, ensuring a future-ready and customer-centric banking experience.
After intense digitalisation in recent years, what is the outlook for banking technology providers in the region?
The disruption in banking resulting from digitalisation is significant. But the outlook remains positive, and there is scope for growth. Some trends point to this:
- More and more markets are seeing new entrants, such as telcos with banking licenses. With access to a large customer base in every corner of a country, these telcos are also tying up with banks to work in a regulated environment.
- The advent of challenger banks or neo banks is another: banks focusing on a niche such as retail, corporate, consumer and wholesale operations. These banks compete with traditional banks with disruptive technology and faster time-to-market as key differentiators.
- Incumbent banks are taking a comprehensive approach to digital transformation to enhance their competitiveness in the evolving banking ecosystem across the region. If we look at broad heads for transformation spends, they are typically across four key areas:
- Elevating digital customer experience to drive growth
- Digitising and automating ubiquitously to cut costs
- A cloud-first approach to bring scale and faster go-to-market
- Leveraging the power of open APIs, enterprise event manager and gen AI to unlock new possibilities
What is coming over the horizon in digitalisation and technology’s role in the regional banking and finance space?
In the last two decades, a rapid and transformative fusion of advanced technologies — cloud, APIs, AI, blockchain, IoT and mixed reality — has reshaped industries globally. Small businesses can swiftly establish their digital footprint through cloud platforms, while APIs empower diverse players to innovate, giving rise to models like Banking as a Service. Blockchain systems and mixed reality are on the brink of merging physical and digital realms in the metaverse.
These integrated technologies are profoundly altering how individuals and businesses operate and bank. Among these, the cloud has shifted from a technological tool to a vital force enabling business transformation, offering agility and scalability crucial for financial institutions leading digital transformations. APIs simplify the creation of innovative business models, with initiatives like open banking driving standardisation. Meanwhile, AI is driving automation to new heights, significantly reducing the cost of personalisation and enabling tailored offerings.
This transformative trio — cloud, open APIs, and AI — is revolutionising industries and setting new standards for innovation, customer experience and business efficiency.
How do you see the use of cloud services in banking and finance developing in the coming years?
Today, banking on the cloud is no longer about adoption but acceleration. Banks realise the critical importance of moving to the cloud, and many have taken the plunge. However, different banks are at various stages of their cloud journey. Several factors influence their maturity, including their digital investments, strategic vision, innovation appetite, talent pool and regional regulatory landscape. We expect accelerating adoption due to the significant value that banking in the cloud offers.
In some countries where regulations around the cloud define the adoption curve, banks will look to make the most of the cloud by moving their non-production environments to the cloud as a first step, followed by module-by-module movement of production systems in line with the evolving regulatory guidelines. It is important to note that the full value of cloud investments can be unlocked when banks move not just the peripheral but also the mission-critical systems to the cloud. As the journey unfolds, we are confident that banks will navigate these steps and expedite their transition to the cloud.
How can hybrid cloud and AI capabilities help business growth and the productivity of banks and financial institutions?
Hybrid cloud and AI offer a potent combination of agility, scalability and intelligence that are key to driving growth and productivity for banks.
Today, the cloud is the biggest fulcrum in banks’ digital transformation initiatives, and the hybrid cloud is a pivotal enabler for them to streamline and accelerate their cloud adoption journey. With a hybrid cloud, banks can dynamically scale their infrastructure, optimise costs, strengthen resilience through diversification of cloud environments, and gain the much-needed flexibility to drive a seamless cloud adoption journey.
AI, on the other hand, equips them with data-driven decision-making capabilities.
It also unlocks a plethora of possibilities around risk management, fraud detection, transaction monitoring, anti-money laundering (AML), compliance and more.
Together, hybrid cloud and AI create opportunities for banks to harness cutting-edge AI tools from public cloud platforms, reinforcing their drive towards innovation and efficiency.
How do you see the role of generative AI in shaping the future of the regional financial market?
The region is anticipated to grow substantially in the generative AI (Gen AI) market. Gen AI, known for its immense potential, is poised to catalyse innovation, stimulate economic expansion and open avenues across sectors, including the banking industry.
- For instance, Gen AI can create highly personalised customer experiences. Powered by gen AI, Chatbots can provide instant customer support, answer queries and even help with financial planning.
- MEA is a diverse region with multiple languages spoken — here, Gen AI can assist in providing multilingual customer service and support.
- Gen AI can also play a pivotal role in expanding financial inclusion. By leveraging alternative data sources and innovative credit scoring models, banks can provide financial services to individuals and businesses that were previously underserved.
- Multiple use cases are currently being built by various application providers and cloud-hosting partners. Banks can leverage this ecosystem with close collaboration of multiple vendors and create a repository to address all the key areas.
Gen AI has many other essential applications, like automated document processing, augmented fraud detection and prevention, bolstering cybersecurity and more. However, there are challenges to consider: data privacy, regulatory compliance and the need for skilled generative AI professionals to implement and manage this transformative technology effectively. The ethical use of Gen AI in banking will also be critical.
