(MENAFN- Muscat Daily) Muscat -
Banks in the GCC countries are fast catching up with latest financial technologies (fintech) as retail banking in the region faces disruption in money transfer, foreign currency exchange and payment services, according to S & P Global Ratings.
S & P finds that, as in other banking markets, the main risk of technological disruption for retail banks in the GCC is changes in customer preference.
In a report released last week, S & P said that compared with other emerging markets and particularly the Middle East and Africa, the GCC countries enjoy a more favourable environment for fintech adoption. 'The good news is that these technologies come under the main objectives of some GCC governments' national transformation plans, which aim to diversify their economies by moving progressively away from hydrocarbons.'
S & P said the adoption of big data, artificial intelligence (AI) analytics, and voice and facial recognition tools could enable more effective and cost-efficient customer profiling, enhance marketing to new customers, and improve risk management and fraud detection at GCC banks.
'We expect some GCC bank business lines to remain protected from fintech in the medium term. These lines include corporate lending, where human added-value remains significant in the region. Therefore, even if customers' preferences continue to evolve, we think that risks to these banking systems remain contained, at least in the next two years. This is because regulators continue to protect them and the share of current activity at risk is small,' the ratings agency said.
According to S & P, retail banking in the GCC faces disruption in money transfer, foreign currency exchange, and payment services. In 2018, the GCC banks generated about 20 per cent of their revenue from fees and commissions and foreign exchange gains.
'In our view, fintech could disrupt the money transfer operations of banks and exchange houses in the GCC. Fintech companies, by definition, focus on lowering transfer fees and reducing transfer times. Payment services is another business line that fintech is disrupting. A closer look at fintech operations being launched in the region shows that some are developing alternative payment methods, with a focus on contactless payments and securing transactions through blockchain,' the ratings agency said.
It said that retail lending could benefit from enhanced risk analytics, which determine the credit quality of clients using advanced analytics and available data (for example, bill payment habits, and spending patterns). 'Although we acknowledge that fintech might help enhance the efficiency of some banking operations, we do not think they will be significantly disrupted in the next few years.'
Collaboration between GCC banks and fintech firms could help enhance efficiency at the incumbents, allowing them to redeploy resources and staff on higher added-value transactions, S & P said. It noted that the GCC regulators have also encouraged the use of blockchain to enhance the security of transactions.
S & P said the demand for fintech solutions is expanding in the region thanks to large expatriate and youth populations. 'We believe demand for fintech solutions is present and expanding, driven by the lower costs for service provision and speed of execution. Fintech firms are also benefiting from the region's high smartphone penetration and 4G coverage, and top-notch physical infrastructure.'
MENAFN1809201901410000ID1099022865
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.