How are banks in the Middle East responding to the emergence of fintechs? Khalid Saad of fintech hub Bahrain Fintech Bay gives his view.
Khalid Saad runs Bahrain FinTech Bay, the leading fintech hub in the MENA region, dedicated to enabling, fostering and ultimately building a complete fintech ecosystem, as well as driving innovation and future-proofing Bahrain’s financial services industry. Bahrain FinTech Bay partners with governmental bodies, financial institutions, corporates, consultancy firms, universities, associations and fintech startups to bring the full spectrum of financial market participants and stakeholders together.
Saad says banks are in the middle of a transition period: “They are not only starting to overhaul their infrastructure but also accepting the reality that the financial services industry and the modus operandi has changed.
“Banks in our region are no exception and are now either starting or are in the middle of this process. Many banks are overhauling their core banking systems, moving to the cloud and looking at innovation and investments in technology as a strategic imperative.
“This is a fundamental shift. Consumer behavior has changed – they are demanding information in real-time and looking for experiences as opposed to services. Shifting from a productcentric organization to one that is experiential is the challenge that faces banks.”
Where does Bahrain FinTech Bay fit into this picture?
“Our platform is focused on fintech ecosystem building,” says Saad. “We work with both the public and private sector to help facilitate innovation within the ecosystem in Bahrain and beyond. We have over 50 partners representing public agencies, financial institutions, technology companies, fintechs, educational bodies and others all collaborating within one platform to not only help promote further development in the fintech ecosystem, but also advocate for further innovation.
Bahrain FinTech Bay’s physical premises are home to over 35 companies that are operating in the fintech space and are bringing innovative technologies to the region. “We are heavily focusing on research, fintech-related events, talent development and being the access point for innovators looking to enter the Bahrain or regional market,” says Saad. “This all ties in to making the market more agile and innovative.”
According to Saad, banks are evolving in response to several new realities. “Chiefly the rise of fintechs and the development of innovationenabling regulations by regulators,” he says. “The fact is that not only are fintechs looking to disintermediate existing banks and financial institutions by providing enhanced real-time and experiential services, they are now encouraged to enter the market by those new regulations.
“Additionally, customers in general and especially millennials relate to the new fintechs more than they ever did with their banks. This has forced the incumbent banks to look at overhauling their operating and business models to maintain market share.”
Collaboration is the key, says Saad. “Fintechs have the innovative solutions, agility and enhanced customer experience while banks have the scale, customer base and regulatory set-up.
“At first, many fintechs were aiming to eliminate the banks, whilst the banks did not want to work with fintechs. Now we are seeing increased collaboration between both to achieve mutual objectives.
“To ensure increased collaboration that will help spur further innovation, fintechs need to develop a better understanding of how to approach and work with banks alongside providing products and solutions that are practical and sustainable. From a bank’s perspective, the internal culture needs to change to be more adept at dealing with fintechs while also realizing that development does not always have to be done in-house. Collaboration and innovation that permeates all levels of the organization are essential to staying relevant in the future.”
And what does that future hold?
“The market is changing, and five years is a long time when it comes to the rapid technological change that is underway,” says Saad. “Things will look very different by then. As wider themes such as artificial intelligence, data analytics, blockchain and the ensuing transformation due to the fourth industrial revolution take further hold, banking will be deeply embedded in our technology and will become more seamless and ubiquitous.
“Banks that fail to do so will be seriously disrupted and diminished, or might not even exist.”
If you want to know more about retail banking in the Middle East, please download the 2019 Efma Middle East review