MANAMA: As the global landscape of financial technology (Fintech) is rapidly changing, the global Fintech funding was up $31 billion in 2017 bringing the total global investment in the Fintech sector over the past three years to $122 billion.
Adnan Ahmed Yousif, Chairman, Bahrain Association of Banks (BAB), in his keynote during the annual forum titled ‘Fin tech: Opportunities and Challenges’ said that several factors had stimulated FinTech innovations, such as cloud computing, big data, distributed ledger technology (blockchain), artificial intelligence, as well as smartphone penetration and internet access. Higher customer expectations for speed, lower costs, and user-friendliness, as well as the complexity of regulatory requirements for banks, such as AML/CFT, Basel III, and KYC also contributed to the rising popularity of FinTech solutions.
However, he added, the observed trend in most countries is towards business models of collaboration between FinTech startups and banks rather than competition. Hence, FinTech startups in the region are not seen as disruptors, since many have adopted B2B models providing platforms for incumbent financial institutions.
“With the emergence of FinTech, there will be both opportunities and risks that customers, banks, central banks, and regulators, should consider,” Mr Adnan told the 500 plus attendees of the Forum.
The Forum was attended by Rasheed AlMaraj, the Governor of the Central Bank of Bahrain wherein the technical experts, regulators and the participants discussed the financial technology (FinTech) and its impact on the banking and financial sector.
“BAB is the leading banking industry association in the Kingdom of Bahrain, and the Forum will become an annual event that will each year shed the spotlight on key issues currently shaping the banking sector. In line with the Bahrain’s accelerated efforts to establish itself as a major centre for Fintech innovation, our Forum this year will look at the impact of emerging financial technologies on Bahraini banks and the future of the industry both from the perspective of banks,”Mr Adnan said, adding that the Forum’s agenda consists of high-level keynote speakers and a number of panel sessions addressing Fintech in terms of: Education and Human Capital requirements, Legal & Regulatory considerations, Customer Readiness and Best Practices on the local, regional and international levels.
Talking about the challenges being faced by the banking industry, he said, the financial technology is broadly defined as any technological innovation in financial services. Those engaged in the industry develop new technologies to disrupt traditional financial markets.
“Various start-ups have been involved in the process of creating these new technologies, but many of the world banks have been developing their own Fintech ideas as well either through establishing Fintech arms, launching special funds for Fintech startups, or creating alliances with Fintech startups,” he said.
“The 2008 global financial crisis has fueled the upsurge in Fintech startups as during the crisis three factors led to the raise of Fintech startups that provided financial services directly to customers: banks were busy with regulations and compliance which made them limit their lending to customers; customers lost trust in banks and the technology was advanced.”
Thus, he said, advancement of technology used in Finance industry and fintech startups create both opportunities and challenges at the same time for banks.
“Financial technology (or FinTech) has created a revolution in the delivery of traditional financial services, reshaping the financial landscape as it meets customer demands for inclusiveness, ease, speed and affordability.”
“Banks benefit from financial technology innovations in several ways among those are cooperation between banks and FinTech startups is a win-win situation as it can benefit banks seeking to become more responsive to changing customer needs as well as FinTech startups seeking to expand and grow. For banks, such partnerships will provide a data-driven approach with lower costs, less human error, increased efficiency and speed, and enhanced regulatory compliance. For FinTech startups, partnerships with banks will provide access to capital and funds, a bigger customer base, know-how for dealing with regulations, distribution channels, and may also increase customer acquisition by bridging the trust gap, as banks may lack innovation, but startups still lack trust.
“In addition, FinTech startups can help banks improve their traditional offerings by developing mobile applications, facilitating e-payments, designing loyalty programs, reducing the cost of money transfer and other transaction costs.”
“FinTech innovations, such as virtual currencies, blockchain technology, and P2P platforms, may provide more efficient, transparent, and cost-effective mechanisms for cross-border payments than traditional banks or money transfer operators that depend on correspondent banking relationships. This could ease the challenges posed by the loss of correspondent banking relationships in some countries.
“Regulatory and compliance requirements are becoming more complex, lengthy, and costly. Regulatory Technology (RegTech), defined as “the use of new technologies to solve regulatory and compliance requirements more effectively and efficiently”, could be a real game-changer for banks. Through digitization and automation of routine compliance obligations, Regulatory Technology can help improve efficiency, reporting accuracy, and transparency in the financial sector by addressing a wide array of requirements related to regulatory reporting, effective implementation of KYC and AML/CFT measures, and data protection regulation.”
