United we stand, divided we fall
A wave of collaborations between GCC banks and fintechs is expected going forward. A recent survey from EY showed that 60 per cent of bankers believe that fintech innovations could enhance customer service and reduce cost.
The EY survey assessed the views of conventional and Islamic banks in the GCC towards fintech related matters and their perception on the impact that fintechs could have on the GCC banking sector.
Two-thirds of the survey respondents suggested that the GCC banking sector is highly likely to collaborate with or invest in fintech companies to work together with them to meet end consumers’ needs.
Gordon Bennie, MENA Financial Services Leader at EY, in his evaluation of the survey explained that the pace of fintech innovation in the GCC has been extremely rapid over the past few years, but still requires more work on-ground to truly revolutionise the banking industry. The variety of ways in which fintech innovations are being adopted by the banking sector is increasing and we could even see banks collaborating to build ‘shared-cost FinTech solutions’ in the future.
The survey found that 70 per cent of the participants feel that the GCC banking sector is open to integrating fintech innovations that could help enhance consumer experience and streamline their operations. More than 60 per cent of the participants thought that fintech innovations could help them enhance consumer-centricity and reduce cost.
According to EY, participants indicated that the leadership teams in the GCC banking sector generally support digital transformation innovation; 57 per cent of participants stated that they agree with the statement “digital transformation through fintech innovations is a strategic initiative that is championed by the board of directors and the senior management team.” However, the implementation of new technologies to diversify offerings does not seem to have moved as quickly; 79 per cent of the survey participants seemed to be in doubt if fintech players could cause any noticeable disruption in the GCC banking sector in the next one to two years.
The drive towards incorporating FinTech into everyday banking is promising, but there is still work to be done in generating more awareness around FinTech innovations and implementation, added Ashar Nazim, Partner, Global Islamic Banking centre at EY. He explained that this is not surprising given the fact that financial technology is a rather recent phenomenon. Two-thirds of the survey participant banks had either not had any substantive discussions within the organisation or had just begun addressing the issue of digital transformation to prepare an actionable work plan to address the challenges and opportunities posed by fintech innovations.
With the increase of mobile penetration in the region and a young population, there is a clear preference among millennials for conducting their financial services on an end-to-end digital platform. 68 per cent of participants felt that the banking sector might need to evolve toward a digital ecosystem to remain at the forefront in a rapidly changing business environment because of fintech innovations.
EY highlightes that bankers have started noticing that a new generation of customers—one that has an increased trust in online platforms—are keen for real-time and off-site solutions. In fact, between 60 per cent and 75 per cent of the survey participants believe that fintech innovations offer end customers a noticeably better value proposition, in terms of ease of use, cost, speed of service and integration with social media. This shifts the concept of fintech from a possible option for financial institutions to implement, to a significant necessity if they want to continue to gain market share and remain relevant.