MANAMA: The rapidly changing technology in the banking and financials sector backed by evolving innovations have made possible to transfer over $40 trillion a year by using one cutting edge solution of SWIFT called GPI.
Evolving technology fueled by innovation and creating new realities across the banking and financial landscape such as ePayment channels which have drastically reduced the payment processing time from three to five days to 5-30 minutes, says Khalid Hamad, Executive Director of Banking Supervision, Central Bank of Bahrain (CBB).
In his opening remarks, at the ePay Summit which opens in Manama on Monday, he says SWIFT to counter the alternative offered by crypto-assets, it introduced Global Payments Innovation or GPI reduced from 3-5 days to 5-30 minutes for most payments.
“The target is to achieve real time or near real time payment. This service is enabling payments worth US$ 300 billion a day – and achieved transfer of US$ 40 trillion in 2018 – making it the biggest player by a margin. More than 3,500 banks, accounting for 85% of SWIFT’s total payments traffic, have committed to adopting GPI,” adds Khalid Hamad.
“Payments and especially cross border payments are a favorite area for Fintech companies with a big question what are the prospects for e-payment companies when facing competition from fast and cost-effective service from a payment giant like SWIFT? Unless a Fintech company become a service provider or partner with the incumbent in a revenue sharing or some other mutually beneficial arrangement, it will be difficult to sustain itself on a standalone basis. This phenomenon is not limited to e-payment companies; in all other areas an incumbent ready to embrace new technology is generally more potent and can outrun the start-ups,” he says.
“When Internet arrived, it caused serious damage to the business model of intermediaries and middlemen, e.g. online travel booking flourished at the cost of travel agents. Fintech is expected to do the same in the financial sector by enabling the aggregator model. Nowhere is it more pronounced than in the insurance sector where the insurance broker faces serious competition from insurance aggregators. Think Uber and Airbnb that have become the largest taxi company and the largest accommodation provider without owning a single taxi or hotel. Should we expect something similar for insurance? What about banking services after the introduction of open banking?
E-Pay Summit is the chosen meeting point for leading decision makers and influencers representing enterprises across the GCC from banking, e-commerce, retail and telecommunications. Over 2 days, they will share their latest strategies, challenges and innovative applications which are set to change the e-payment and digital banking landscape in 2019 and beyond!
The Summit supports the industry to enable policy and regulation, talent development, business opportunity and investments capital. By bringing together the most forward-thinking participants. E-pay 2019 will inspire debate through its fully researched, focused and thought-provoking agenda
The ePay Summit 2019 brought together a broad spectrum of stake holders in the banking and financial sector including regulators, bankers, service providers and last but not the least the end-users or customers.
The key areas of discussions cover changes in fintech and e-commerce regulation, blockchain and the expectations of virtual currencies; learn about the threat of fraud and security breach with new payment methods; challenge the future of digital banking and learn about the latest innovations and learn about the new technologies disrupting the industry from AI to open APIs.
The Summit spreads over various sessions and deliberations over the two days will help the participants to understand the key market trends and growth opportunities in Bahrain and the GCC online banking and payments industry and hear how leading banks in the region are planning for long term success. The areas such as building business relations with global fintech start- ups, policy makers and investors and discussions over proven strategies for influencing customers’ behaviour to drive loyalty will be other areas of interest for the participants.
AbdulKareem Bucheery Chairman, Bahrain Bourse and Bahrain Clear Co.; Adnan Ahmed Yousif President and Chief Executive Al Baraka Banking Group Chairman of Bahrain Association of Banks; Shaikh Khalifa bin Ebrahim Al Khalifa Chief Executive Bahrain Bourse, and Sattam AGhosaibi CEO KHCB were the panelists in the first session.
“We are living in a world where recent advancements in technology are disrupting almost everything. Business models are being challenged and transformed at a speed that is quite unprecedented. It is possible for a traditional business to do nothing wrong and still find itself out of business within no time. So, the question is, how do we remain relevant in the age of disruption? What is expected of a regulator, a bank, an insurance company or any other business? And how do we fulfill our customers’ current and future expectations? In my speech today I would like to raise some questions as food for thought and I hope that over the next two days some of these questions will be addressed by the worthy speakers and panelists of this conference.
“The fundamental question facing the regulators globally today is that how to balance regulatory prudence and conservatism with innovation and change being brought about via Fintech? This is a dilemma that every central bank faces every day.
“At the CBB we have had to go through a paradigm shift in our thinking and our approach to risk management, whereby without lowering our guard against future risks, we decided to embrace the Fintech phenomenon, promote innovation and eliminate, as much as possible, opportunities for regulatory arbitrage. We are open to new ways of doing business made possible by Fintech, but we are also assessing the risks posed to the system and are keen to find ways to mitigate those risks. In other words, we decided to embrace innovation and manage the resulting risks rather than stifle innovation in order to keep the risk paradigm unchanged. But is that enough taking into account the high speed at which technological developments are taking place?”
Another question for the regulators, Al Hamad adds, is that what is the long-term impact of lowering the barriers to entry to enable unbridled competition?
“Would it necessarily be a win-win for both the customer and the business in the long-term? What is the guarantee that service quality will not be negatively affected? The telecom industry gives us some interesting insights. When it was deregulated globally in late 1990s many countries opened up to competition. In some cases, dozens of small companies sprang up to offer international calling service, at a fraction of the price charged by the incumbent operator. However, the flip side was that the voice quality also deteriorated as companies opted for cheaper solutions. The lack of profitability prevented them from investing in infrastructure and service quality. The advent of Fintech companies, challenger banks and others casts, a similar shadow on the banking sector,” he said.
“On the other hand, managed competition can do wonders for the customer, the industry and the economy. Take the Bahrain telecom industry as an example. After the sector was deregulated in 2003 the number of telecoms increased from one to four. More competition drove down prices and increased telecom penetration in the country. Despite the reduction in price the growth in the market and introduction of new services resulted in nearly tripling the overall industry revenue from 2003 to 2018. The customer is a clear winner here but so are the operators and the economy.”
“Coming to the industry, the most important question facing the banks is: How to match the service quality, convenience and cost effectiveness offered by Bigtech (Google, Apple, Facebook and Amazon) without compromising on compliance and risk? It seems there is no easy answer. Bigtech has been creeping into the banks’ territory with a more competitive offering for the customers and a much better customer experience. Take the example of Yu’e Bao, a money market fund set up by a Chinese tech company Alibaba as a repository for leftover cash from online spending. The fund emerged as the world’s biggest money market fund within four years, and at its peak was double the size of the next largest fund. Should this trend be allowed to continue or should legislation be used to keep Bigtech away from the regulated financial sector? Should Bigtech be subjected to the same compliance and risk parameters as banks? Or should these restrictions be relaxed for everyone?
“Fintech entrepreneurship is in trend these days. Almost every week we receive applications from Fintech companies for inclusion in the Regulatory Sandbox. While it is heartening to see young talent working hard at their Fintech businesses, the future may be less rosy for a number of these start-ups. When the incumbent banks and other financial sector players fully gear up to embrace Fintech in their respective business areas, they will pose a serious threat to the standalone Fintech companies. Take the example of SWIFT.”