How Middle East financial services is embracing digital

06 November 2023 3 min. read

Over the past years, the Middle East’s financial services industry has been getting on with digitalisation – embracing the opportunity to adopt tech-enabled operating models and digital products of all sorts. A discussion with Ram Ramachandran (Head of the Middle East & Africa at Tech Mahindra) on notable developments in the sector.

The digital revolution seen in the Middle East has resulted in a surge in the number of people having access to financial services in the Middle East. Several research reports have shown that financial inclusion has been increased, and that the maturity of digital products has enhanced.

“The financial services industry is experiencing rapid growth, leading to the development of a sound ecosystem of players, including banking, insurance, and asset management,” said Ramachandran.

How Middle East financial services is embracing digital

The drive to digitisation is driven by a number of factors, with consumer preferences at the outset. With experience in other sectors such as retail, e-commerce and telecom, “customers are demanding greater flexibility and agility in the way services are provided.”

In the banking sector, this includes being able to open, view and manage bank accounts through digital apps, overseeing savings and investments online, and having 24/7 self-service options through digital platforms – all with a hassle-free experience. To meet these mounting consumer expectations, banks should “pivot to a customer-centric rather than product-centric model that delivers maximum stakeholder value.”

In terms of meeting those expectations, “banks need to evaluate the business vision of their organisation, IT investment, innovation strategies, capabilities, and expertise of their teams and accordingly prioritise the execution and delivery of their digital strategy,” advised Ramachandran.

“Banks should also embrace the power of alliances. Cross-sector collaborations and partnerships strengthen trust and long-term agility in the financial sector. “Banks are realising the importance of open banking and an ecosystem-based approach,” said Ramachandran. “Forward-looking banks must strive to build an ecosystem for their clients if they want to stay competitive.”

Regulators meanwhile are keen on promoting collaboration within the wider financial services landscape.

Saudi Arabia is leading the open finance initiative in the Middle East by adopting a unique use-case-first approach, said Ramachandran. Last year, the Saudi Arabian Monetary Agency (SAMA) published the open banking framework.

The Central Bank of the UAE is also drafting a high-level regulatory framework on open finance and has launched a Financial Infrastructure Transformation Programme (FIT Programme) with nine key initiatives, one of which is open finance, projected to be fully implemented by 2026.

Cloud driving digital transformation

Much of the advancements in digitalisation depends upon the cloud and Ramachandran said businesses are increasingly implementing a poly-cloud strategy – choosing a la carte services from multiple cloud providers to create a bespoke solution.

“Agile cloud-based services use IaaS (Infrastructure-as-a-Service) or PaaS (Platform-as-a-Service) to build applications, which enhance design and functionality flexibility and assist banks in coping with the regulatory burden by ensuring regulatory compliance, auditability, transparency, and security.”

Ramachandran also pointed to Banking as a Service (BaaS) and how this model is integrating digital banking services of financial institutions directly into the products of non-bank businesses.