This is just the digital beginning
The fintech nomenclature is applied to any technology that has a transformative effect on organisations and processes in the financial sector. Contrary to popular belief, it is not conceptually owned by the start-up community, or defined only by the emergence of new models such as the sharing economy, and technologies such as artificial intelligence (AI), blockchain and more.
Giant contributions in fintech have come from a variety of sources — from individual thinkers to large multinational corporations, and this is definitely a sector to watch as it transforms lives, industries, and the very ways in which governments, organisations, and people transact with each other.
In the Middle East, funding available to fintech start-ups and projects has grown by 270 per cent in 2017 alone, according to Wamda, and we will see the number of regional fintech players more than double, from 105 in 2016 to over 250 in 2020.
I welcome this and also acknowledge it as the challenge it is. I believe that large enterprises have as much — if not more — of a responsibility towards innovation as the start-up ecosystem, and we have the added advantage of innovating at scale without having to personally worry about funding and operational processes. At the same time, we also need to be agile and responsive to changing market trends and demands, to ensure that we continue to remain relevant and trusted advisers.
This brings me to the fact that fintech is not about what the industry can provide, but what our customers — and their customers — need. Just looking at the banking sector, their landscape has undergone significant transformation, as the adoption of new technologies has transformed banking methods to include digital payments, cashless transactions, smart branches, social media banking, and fully virtual banks, to name just a few.
And, as is expected in the UAE, we are not just observers of trends, but active early participants. The Dubai International Financial Centre (DIFC) announced the launch of FinTech Hive, a first-of-its-kind accelerator in the region, which will function as a platform to bring financial firms and technology companies together in a collaboratively innovative supply chain to guide, mentor and customise technology for local markets.
The disruption effect
Dell’s Digital Transformation Index, found that 52 per cent of senior decision-makers across 16 countries have experienced significant disruption to their industries as a result of digital technologies and nearly half of all businesses believe that their company will possibly become obsolete within three to five years. The financial services industry is no exception to this disruption.
In a region with high mobile penetration and a dynamic tech-savvy young population who consistently demand a more convenient banking experience and prefer working from their mobile phones, traditional banks and financial organisations are under pressure to deliver. In a recent survey of bankers by EY, 70 per cent said that the GCC banking sector is open to integrating fintech innovations to help enhance consumer experience and streamline their operations. More than 60 per cent of the respondents thought that fintech innovations could help them enhance customer-centricity and reduce costs.
The agility advantage
Established financial services players face the challenge of increasing their operational velocity to match the accelerating speed of business. The value of technology comes from its ability to accelerate response to market conditions, predict demand, enable faster and better decision making, and make quicker improvements to operational processes. With this, technology has become an engine for driving increased engagement, improved customer experiences, and greater revenue and growth. Without agile cloud solutions, new intelligent analytical tools, a mobile-first approach and Internet of Things (IoT) capabilities, businesses are effectively flying blind, with a wait-and-watch attitude, something that is no longer an option if the aim is to stay relevant.
Fintech providers — across the board and of all sizes — are making significant inroads with customers because they meet them at their point of need with targeted and quick capabilities. In a short while, there will be a steady flow of departing customers from traditional retail banks who are not fully available to customers on mobile applications and m-wallets, money transfer, over blockchain, and even with newer financial models such as crowdfunding.
The co-innovation approach
Open innovation is at the heart of the digital revolution and open-yet-secure banking platforms can create unprecedented opportunities with the help of creative third parties, while also offering customers transparency and a fast evolving financial and transaction experience. Data security and customer privacy issues present a large and valid concern and, to address this, education and training should be an integral part of this evolution to help promote acceptance within organisations.
Embracing these themes create an opportunity for financial services firms to disrupt their own business model rather than be left behind while innovative competitors win the customer over. For organisations that recognise the need for fintech innovation, whether they are in the financial services sector or otherwise, investing in openness and collaboration is a great place to start, and a broader pool of experts and visionaries simply means a better pool of ideas and innovation.
This will probably be the largest collaborative industry direction that we will see in our lifetimes, and my team and I are already gearing up to be players in this. This is not something we’re doing for ourselves — the financial sector is ‘banking’ on each one of us!