Wealth management in the Middle East: The case for embedded finance

An opinion piece by Thomas Schornstein, Head of Middle East Business and Member of the Executive Board, additiv

The average person in the Middle East is getting younger, more affluent, and more digitally savvy. But because wealth management is still largely excluded from the shift towards embedded finance offerings through digital channels, they’re increasingly underserved when it comes to accessing quality financial services or services that meet their full requirements.

With many saving anywhere between 10% to 25% of their salaries and a generational wealth transfer in the offing, there’s a $2.5 billion growth opportunity right there for the taking. And the key to capitalizing on it is to expand your offering by embedding your wealth management services seamlessly into superapps and large consumer platforms like Careem, Yanzo, Halan, Noon or Souq.

At additiv, we’ve partnered with Saxo Bank to create an end-to-end platform that helps you do exactly this.

Here’s a look at the scale of the embedded finance opportunity in the Middle East, and how leveraging orchestration technology can help you do it quickly and cost-effectively.

Embedded finance in wealth management: why now?

If the case for embedded finance in wealth management throughout the Middle East has never been clearer, it’s down to a perfect storm.

Firstly, wealth across the region is exploding.

Over the last five years, the number of ultra-high net worth individuals — people with $30 million or more in assets — grew by 227%. But rising education levels, more women joining the workforce, and a thriving expat community have also expanded the middle class, in fact the number of middle class within the region will rise by 14% until 2022.

Whether it’s high net worth individuals or middle-class customers, there’s rising demand for services that help grow wealth and improve financial well-being. And our research suggests that most customers would prefer to be advised locally.

Secondly, with smartphone penetration at 97% — the highest in the world — the bar for customer experience has become sky high. Customers expect a highly personalized, highly accessible, mobile-first experience as par for the course.

Unfortunately, the perception is that local offerings aren’t always personalized or accessible.

As a result, customers are looking outside their shores. In a study we ran in conjunction with Hubbis, a high proportion of wealthier clients’ portfolios had an international focus.

Piecing the embedded finance puzzle: the importance of an orchestration layer

Growing demand for local, mobile-first wealth management and the perception that local providers aren’t living up to expectations means there’s an untapped market hungry for change, and a risk that many seek products offshore.

But in order to get in on the ground floor, speed is of the essence.

The good news is that embedding wealth management services into third party apps doesn’t have to be a lengthy, high cost, high effort endeavour. With an orchestration platform like additiv’s DFS, it’s possible to create embedded wealth management products straight out of the box.

The biggest value of an orchestration platform is that it brings the supply side and the demand side together. The platform takes care of complex operational and logistical issues, so you can focus on developing the financial product or increase focus on clients where needed.

But using an orchestration platform also has other significant benefits.

Firstly, it provides a system of intelligence that can handle a seamless customer journey — digital onboarding, customer relationship management, order handling, advice — to the digital customer experience standards customers have come to expect.

Secondly, it offers access to an ecosystem of trusted partners you can lean on to add value such as a wider product universe, international market access, global best manager, richer features etc. into your embedded finance products.

And, thirdly, it brings a suite of essential services together into a set of standard APIs, creating a one-stop-shop you can just plug into and play.

Expanding your reach with additiv and Saxo Bank

Needless to say, for an orchestration platform to truly deliver, it must also be able to adapt to unique, country-specific requirements.

Over the past few years, we’ve worked hard to put together the right partnerships to enable us to do this. And, through our partnership with Saxo Bank, we can now combine powerful orchestration with best-in-class international brokerage in one single, easy-to-use platform.

As Nicholas Wright, Regional Head of Saxo Bank’s Advanced Solutions in MENA highlights “With access to 19,000 stocks on 37 exchanges, 3,100 exchange traded funds and notes, mutual funds, and bonds from 26 countries, and thousands of other financial instruments, working with additiv and Saxo means you can offer customers unprecedented access to international markets.”

More to the point, there are five unique operating models that are either undisclosed, for organisations with a license to hold client assets, or disclosed models, where Saxo will take care of the operational work like onboarding and Know Your Customer (KYC) checks. Each of the five models are aligned with your license and preferred outsourcing model.

The solution also provides business-critical admin services, including compliance reporting, liquidity management, custody and back office, and IT and hosting.

A $2.5 billion opportunity awaits

Because wealth management is still largely excluded from the shift towards embedded finance, consumers are often met with friction when they should be getting the user friendly, seamless service they crave.

It’s high time this changed.

Instead of forcing customers to evaluate their needs and then choose one of several highly standardized products, embedded finance presents tailor-made services on the digital apps where customers are most active and, so, most likely to engage. And this just makes sense.

With additiv and Saxo, you can bring all client systems and interfaces together into one true, end-to-end platform, so you can build innovative, market-beating products, delight your customers, and capitalize on the opportunities this fast-growing market is creating.

Learn more about additiv DFS and how we can help you build one-of-a-kind embedded wealth management products