Fintechs begin to raise the bar

An opinion piece by Ahmed Dorra, Customer Experience Solutions - Sales Leader Middle East, Africa & Turkey at Avaya

What do the region’s banks think of fintechs? Are they a threat to their long-term viability, or do they represent an efficient way for banks to improve their own offerings?

Those were the questions Avaya recently sought to answer when we commissioned Davies Hickman Partners to conduct in-depth interviews with 12 senior banking executives from across the GCC.

As we conducted our research, it quickly became clear that the pandemic has compressed several years of digital banking growth into just one year, with banks reporting rapid uptake and increased usage of their apps and online services. Would banks now go further and start opening up their APIs to third parties and integrating fintechs’ offerings into their newly popular banking apps?

The executives interviewed said they are attracted to fintechs because of their ability to deliver new and innovative services at low costs. One Digital Delivery Executive from a UAE bank told us, “We have an innovation team, constantly talking to disruptors, collaborating with lots of different tech companies. Do you build or buy? It can go either way.”

The upside of working fintechs is that incumbent banks can potentially introduce new services quickly, satisfying customers’ demand for an expanded, digital-first relationship. Through open APIs, customers can permit banks to share their financial information with authorized providers as part of an open banking framework. This allows banks to work with third-party loan, credit rating and money transfer companies, enhance their loyalty programs and create new products such as mobile wallets that give customers an end-to-end view of their financial status.

The adoption of open banking to offer innovative services sounds like a no-brainer when it comes to increasing customer loyalty to a bank. And certainly banks in fintech-friendly markets have taken to the practice with speed and enthusiasm.

The catch, however, is that for many of these innovations to work as intended, banks need to share private financial data with third-party fintechs. Are these smaller, often start-up, companies able to provide the level of the security required to handle such data? In some GCC markets, our research suggests that regulators assume that they’re not, and as such have prevented banks from partnering with fintechs in the ways we see in other markets.

Plus, with GCC banks’ profits now on the rebound, is there an immediate financial pressure to embrace open banking? Many of our survey respondents believe there’s not.

But what happens when consumer demand pushes regulators (and we believe it will) towards relaxing data-sharing rules? Then banks will have to decide whether they should embrace fintechs, or be wary of them.