Thriving economies, diverse, young populations and the availability of skilled labour characterise the MEA region. These are driving the demand for modern banking solutions, including fintech services that are seamlessly woven into customer transactions. Since incumbent banks have tended to focus on wealthier communities, there is an opportunity for neo-banks to tap into the unbanked and underserved segments such as blue-collar workers or laborers. Banks and fintechs are working to reduce operational costs with the help of technology and plugging the gaps to prepare the path ahead for banking.
Here, are the top 3 banking trends to be on the lookout of in the MEA region:
- Recomposing Business Models
Traditional banks have to recompose legacy business models and technology systems to remain relevant and viable and compete with new-age banks by offering digital-first solutions, embedded finance services and Banking-as-a-Service (BaaS). In 2023, we expect greater adoption of these emerging models.
Brands and fintechs are anticipated to collaborate with banks to establish frictionless contextual banking for customers on top of commoditised financial offerings and derive significant returns from BaaS. In the MEA region, brands can reshape banking experiences in the coming year, through embedded payments, cards, lending, insurance and more. Banks are also expected to scale their business growth at affordable costs.
Since the pandemic, financial institutions are under pressure to improve margins and cut costs by adopting new-age utilities. APIs, event-driven architectures, blockchain and cloud are advanced technologies that have already helped lower the cost of leveraging infrastructure utilities in the region. Morocco, for instance, is emulating the India Stack example to build a modular, open-source identity platform that provides public utilities with innovation capabilities at population scale. This trend is expected to strengthen further in 2023.
- Recomposing Money
The role of banks has evolved to facilitate seamless transactions rather than controlling the whole financial transaction lifecycle. Embedded finance is an emerging trend that enables banks to tie up with digital platforms and extend their customer base, without adding extra costs for distribution. In the MEA region, embedded finance revenues are expected to grow to USD 39.82billion by 2029.
We are also witnessing the rise of decentralised finance (DeFi), which involves a set of financial applications, including lending platforms and exchanges, built on decentralised financial networks. Through community-driven financing, trading of digital assets and financial tools, and insurance for digital currencies, DeFi applications promise speedier, more secure and more cost-effective peer-to-peer transactions.
What is more, there is growing interest in central bank digital currency (CBDC), with several African central banks showing keen interest in issuing their own digital currencies. The trend of adoption of CBDCs can improve financial inclusion, make transactions faster and cheaper, streamline cross-border transactions and revive economies.
- A composable cloud strategy for scalability, agility and innovation
Escalating numbers of digital channels, transaction volumes and the critical need for resilience are overtaking concerns around security, compliance and skilling as banks sense a greater urgency for cloud adoption. Businesses are increasingly adopting a poly-cloud strategy that enables them to cherry-pick services from multiple cloud providers and achieve an optimal combination best suited to their needs.
In 2023, a cloud-neutral hybrid approach is expected to build higher availability and resilience in banks’ system designs, while addressing data residency requirements based on geography. Hyperscales offering native-managed services optionally on cloud-ready CPUs, allowing banks to immediately capitalise on the cloud-native hardware and interoperability of the managed services interfaces and SLAs is expected to boom in 2023.
Containers and service meshes have entered the mainstream with more than 60% of organisations globally, reportedly employing Kubernetes to manage, scale and automate computer application deployment. UAE’s leading bank (Emirates NBD) utilised Kubernetes container orchestration, integration and management to build their private cloud with technology on par with cloud-native companies.
As the banking world prepares for future opportunities, trends gaining traction in the industry, such as immersive experiences, modern customer engagement strategies, AI adoption and more are expected to transform the landscape of the banking industry for the better.
For deeper insights on these trends, get a copy of Infosys Finacle’s latest report “The Future of Banking: Trends For 2023.”