UAE - Mubasher: Banks in the UAE need to streamline and update their core banking processed before partnering up with fintech firms, according to an analysis conducted by Bloomberg Intelligence.
UAE banks may establish innovation funds to support startups to shift from the seed stage to the scaling stage as an effort to align strategic interest and fill the funding gap in the Middle East and North Africa (MENA) region, the research arm of Bloomberg said.
The analysis highlighted that venture capital arms of banks such as Santander, Barclays, and ING, as well as insurers including Baloise and MunichRe, invest minority stakes in fintechs through creating special funds for such purpose.
Banks in the GCC state need to be more innovative and flexible to gain market share and contribute to fintech growth, and this would require high spending that could lead smaller lenders to consolidate, the analysis based on a discussion with Dubai Islamic Economy Development Centre (DIEDC) added.
With the UAE’s digital transformation mainly focused on improving the customer experience, lenders should digitise their core processes to facilitate fintech, with legacy IT systems representing an obstacle in linking platforms and creating an open banking framework, the analysis said.
“A potential large revenue pool available from digitalizing core banking operation could make business to business (B2B) solutions a target for startups,” the analysis indicated.
The analysis also indicated that the need for passporting across the GCC countries is a key for fintech business to consumer (B2C) oriented solutions to attract private investors’ interest and accomplish scale.
Moreover, fintech firms could reach a successful agreement with banks through a set of standards and collaboration toolkit in line with the UK onboarding guidance “PAS 201:2018”, Bloomberg Intelligence said.
The analysis further noted that Emirates NBD is the first lender in the GCC region to adopt an open banking application programming interface (API), backed by a $272.3 million digital investment budget.
