Payments Innovation in the Middle East
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9 October 2013Gareth Lodge
In my previous posts about Sibos, I talked very much about Sibos itself. What I didn’t get chance to share was some of the interesting points on the panel that moderated there. The session was called “What global institutions could learn from Middle Eastern Innovations in Payments markets” I'd like to again my thanks to Paul and team at ACI Worldwide for extending the invitation to moderate. At Celent we’ve both helped clients in the Middle East, as well as helped those trying to sell into those markets, and so we have long been impressed with some of things we see, yet never ceases to be a source of interesting conversation. Much of what some of what we’d consider to be innovative banks in the US and Europe talk about innovations that Middle Eastern banks have done ages ago and don’t even realise are innovative! For example, many banks in the region can not only do instance issuance of replacement cards, but can do so at the ATM, and for EMV cards as well. Equally you can subscribe to IPOs at an ATM as well. How has this come about? The story is interesting and informative. Pre 2006, many of the banks were brokerage led, but a combination of issues in the market, and the regulatory response to those issues, saw the brokerage parts of the business spun out into separate, regulated entities. Within a year, one banks revenue fell from around 1.2bn Riyal per annum, to under 30m Riyal. As a result, the banks had to diversify and find new revenue streams, and do so rapidly. This perhaps was the silver lining to the story. Whilst a painful process to go through, the resulting banks have none (or at least, far less) of the legacy or baggage that other banks. The IT systems span both retail and wholesale. Many banks have teams that act as a central resource – in one bank, for example, there is an analytics team that spans both the entire business and process – they are included in the design of the products from the start, and often it’s their analysis that highlights potential products initially. It’s difficult to condense our hours panel discussion into a short blog post, so I took the opportunity to ask the banks on the panel what they thought that banks outside of the region could realistically learn and implement. The first was Customer-centricity. My first thought was, isn’t that what all banks are striving for? But they meant it more as a way of working. Their bank meets with their key corporate clients regularly – at least monthly. These meetings aren’t just 1:1, but include fora where the clients collaboratively help design future products and services, based on their needs. I'm not aware of many banks outside of the Middle East who go quite that far. The second was acting with agility. With a tip of the hat to the company with the swoosh, "Just Do It" was the theme. When Windows 8 came out, they decided to build an app for the bank, and had it live in 6 weeks. We’ve all been on projects where its taken longer than that to organise diaries so all the stakeholders can be together to even start discussions! In part this was to do with organisational design, but also the attitude. It was surprising to see just how surprised the banks were when we relayed our experiences. For a number of years, we’ve pointed banks to Turkey when we talk about innovation. From my conversations last month, I suspect we ought to be looking to the Middle East as well.