The global banking, financial services and insurance sector is in the midst of a sweeping transformation, embracing customer-centric, personalised and digital-first services everywhere. In the Middle East, industry players are not just taking note. In many ways, they’re taking the lead, driven by tech-savvy consumers, flourishing technology hubs and an extremely nurturing regulatory climate.
Amidst this landscape, Finnovex Middle East 2023 emerged as a much anticipated opportunity for local industry leaders and experts to talk about what the ongoing fintech revolution means for them and their customers as well as to set the tone for what’s next. So did the 4th Annual Future Banks Summit and Awards KSA, which showcased the latest thinking and best practices to future-proof banking in the Kingdom of Saudi Arabia.
Here are five key thoughts that I’ve taken home from the events.
1.Financial health is now a family matter
If Mashreq Neo has a say in it, that is. Radu Topliceanu, executive vice president and head of the Dubai-based, mobile-only financial service provider, talked extensively about Neo NXT, a current account specifically designed to teach 8-18 year olds essential budgeting and saving skills. Mashreq customers can simply log in to their app and set up Neo NXT for their children in 5 minutes or less. The app allows parents to schedule allowance payments and monitor account activity and kids to track their spending and save towards their goals.
What this signals is that banks are ready to go beyond functional convenience when it comes to building digitalisation strategies and implementing technology solutions. Granted, fast digital onboarding and overdraft alerts might be enough to keep customers happy and loyal today. But what about the next generation? How can financial institutions prove their relevance to a breed of consumers who’ll probably never see pocket money in its physical form, let alone the inside of a bank? Mashreq Neo’s move is a great example of how to do just that.
2.Digitisation vs. digitalisation: more than semantics
People in the industry often use these terms interchangeably. They shouldn’t. Digitisation refers to converting something that exists physically or done manually into a digital form. Digitalisation means improving business operations and finding ways to create value and generate revenue using digital technologies. Another thing they shouldn’t do is confuse “digital transformation” with any of these concepts. At its core, the region’s banks are now learning, digital transformation is neither – and both.
Before anything else, going digital requires a mindset that puts the customer at the centre and reinvents how things are done within the organisation from scratch around it. It starts with setting specific digital transformation goals and laying them out on a digital transformation roadmap to make sure they’re aligned, understood and ultimately, achieved. Can digital transformation be broken down into stand-alone digitisation and digitalisation projects? Certainly. But it shouldn’t be mistaken for them.
3.Generative AI: the new frontier of customer experience design?
To the surprise of absolutely no one, generative AI was front and centre at both events, especially in the context of predictive modelling. Experiments on how it can enhance banks’ fraud detection and credit scoring efforts are well underway, insiders volunteered. However, the area where they see the technology become a real game-changer is customer experience design. More specifically, how artificial intelligence can make interactions between banks and customers more human-like, of all things.
If their prediction is to be trusted, chatbots are about to become more capable, intuitive and proactive – and less like a PEZ dispenser of predetermined answers. Improving call centre efficiency metrics was also cited as a reason for banks to enter the generative AI race. What makes this area particularly ripe for AI disruption is the sheer amount of data sets available for machine learning models to be trained on. This way, such solutions can also be deployed to identify and assist low-performing agents.
4.Traditional banks to fintechs: “You can sit with us”
If there’s something that both conferences drove home for me is how differently industry incumbents view newcomers, and what they can bring to the table in terms of innovation, efficiency, resilience, agility and brand recognition, now compared to the past. Gone are the days when fintech startups were dismissed or distrusted – or even looked at as just another vendor.
Established financial institutions, one of the speakers pointed out, used to hire fintech companies to provide a service or deliver an application as a one-off project – not unlike how one would hire a contractor to build a house. These days, this “contractor” is more like a trusted advisor, who gets asked about everything from the layout plan to the bathroom tile colour.
5.Open Banking Framework: big data has just become (much) bigger
Banking industry players in the Middle East are shifting their focus from spending more on digital solutions to exploring how they could better monetise their existing technology investments. Analysing large amounts of data to spot trends and patterns in customer behaviour is a key part of this strategy. For example, using machine-learning algorithms to find out how long people typically rent a flat in Dubai before becoming homeowners and then target customers with a mortgage offer based on this criteria.
But that’s just the beginning. In line with its mission to foster economic growth and safeguard monetary stability in the Kingdom, in 2022 the Saudi Central Bank (SAMA) launched its Open Banking Program to make sure Saudi financial service providers and consumers alike can tap the open banking opportunity. This means who has what data isn’t what banks are competing on anymore. Who can translate it into better business decisions, personalised customer experiences, new revenue streams and ultimately, long-term growth is.