The Middle East boasts some of the highest returns on equity (ROE) globally, with returns fluctuating between 12 and 16 percent. This is in stark contrast to North America, where ROE hovers between 8 to 12 percent, Europe with returns ranging from 5 to 8 percent, and the APAC region at 10 to 12 percent, as highlighted by an industry expert.
“They have reaped higher profits due to elevated oil prices and substantial sovereign wealth investments,” Manish Maakan, CEO of Intellect Global Transaction Banking (iGTB), shared with Khaleej Times in an interview. Maakan noted that the banking sector is undergoing a transformation driven by digital advancements and the emergence of new players such as FinTech entities. “There is a notable shift towards a digital-first approach. Even in the Middle East, particularly in the UAE, banks like ENBD and Mashreq have launched digital-centric services like Liv and Neo, respectively. This transition towards a digital-first model is set to revolutionize customer experiences.”
Traditional banks are now pivoting towards fee-based income and forming alliances with FinTechs and non-banking financial institutions. “Banks must manage both sides of the balance sheet, explore diverse lending structures, and develop more structured products. They are focusing on driving more fee-based income, examining different lending structures, and considering more structured products, including advisory services.”
With the burgeoning wholesale banking sector in the Middle East, financial institutions are increasingly adopting robust platforms like Intellect’s eMACH.ai Wholesale Banking Cloud. These platforms empower banks to leverage AI-driven, autonomous, and cognitive capabilities, facilitating comprehensive digital transformation, operational efficiency, product innovation, and personalized customer service.
The regional shift towards digital-first banking necessitates a platform that can deliver scalability, security, and agility to keep up with evolving regulatory and competitive landscapes. eMACH.ai’s enterprise-grade, cloud-enabled solutions are perfectly suited to support Middle Eastern banks in achieving these objectives and ensuring sustained growth. Intellect currently partners with over 40 banks in the region.
“The most significant development is the advent of real-time payments and instant gratification in both the retail and corporate commercial sectors. In retail, digital wallets are gaining traction, and open banking and ecosystem integration are significantly aiding this trend. We cannot afford to be left behind; we must transform ourselves rapidly. The most prominent trend I observe currently is embedded payments, where transactions are executed instantaneously upon an event. For cross-border transactions, FX management becomes crucial. AI is instrumental in scaling these operations, and there is a lot of activity in this space. The regulatory environment is challenging yet supportive of this migration,” Maakan explained.
In the region, there is substantial support for attracting investments and nurturing AI and tech companies. This includes tailored credit structures, initial VC funding, convertible loans, invoice financing, and various other products to support these ventures. Real-time liquidity management is also critical. These new FinTechs are heavily focused on cross-border transactions, making FX pricing and hedging options essential. Additionally, there is growing support for supply chain capabilities.
Despite technological advancements, the physical bank is not disappearing. “You cannot entirely replace a bank. Instead, focus on hotspots where technology can coexist and help monetize assets. Our philosophy revolves around orchestrating events in a consumer’s or corporate’s life to offer the right services at the right time, creating APIs for connectivity, and scaling these offerings. Banks need to contextualize their offerings to customers,” Maakan emphasized.
Most transformation journeys do not begin by replacing the bank’s core, which is the most challenging aspect, Maakan stressed. “Start at the customer layer, integrating onboarding and customer channels. De-layer the products in the market. Currently, we focus on wholesale banking, offering cash products, deposit products, and lending products. We consider three aspects: helping customers make money (through lending products), manage money (through deposits, investments, and liquidity), and efficiently move money. We hold a significant market share here and continuously challenge ourselves to understand what more customers need. We are heavily investing in R&D, and AI is proving to be immensely helpful,” he added.
Maakan made a crucial distinction that many overlook. “We should differentiate between cryptocurrencies and digital currencies. I believe cryptos are not something banks will readily adopt, nor will regulators permit it. Platforms like Binance facilitate trading, but digital currencies will enhance efficiency, particularly in eliminating idle cash.” He added, “Banks are piloting Central Bank Digital Currencies (CBDCs), with the UAE leading the charge. In India, where we are based, the RBI is running pilots, and we are collaborating with them on CBDCs.”
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