DIFC signs fintech agreement with Accenture

DUBAI: Dubai International Financial Centre (DIFC) has signed a memorandum of understanding (MoU) with professional services company Accenture, to develop Financial Technology (fintech).

Under the MoU, Fintech Hive at DIFC will collaborate with Accenture’s Fintech Innovation Labs in New York, London and Hong Kong, to share resources and knowledge on the latest research and trends in financial technology.

In line with DIFC’s Growth Strategy 2024 and Dubai Vision 2021, Fintech Hive at DIFC aims to fill a void in the market by giving financial companies access to state-of-the art technologies to support their digital transformation.

“What sets us apart is our ability to harness the assets to grow fintech locally that will ultimately create more jobs, attract investments and support the economy as a whole,” said Arif Amiri, chief executive officer of DIFC Authority.

The Fintech Innovation Labs are annual 12-week accelerator programmes that bring together early-stage financial technology companies and the world’s leading financial institutions. Globally, the Labs’ alumni companies have raised more than US$1.07 billion in venture financing after participating in the programmes.

“In today’s hyper-connected world, this type of alliance is critical for maximising talent development and innovation. With surging demand for fintech solutions and Dubai’s increasing presence on the global financial scene, we are confident that this international collaboration will generate incredible opportunities for the region,” said Sushil Saluja, a senior managing director in Accenture’s Financial Services practice.

DIFC has recently announced that the 2018 programme, which is opening for applications in May, will be expanded to include insurance, Islamic finance, and regulatory technology services. First Abu Dhabi Bank, Arab Bank and Noor Bank will join the programme this year, with returning financial institutions to include Abu Dhabi Islamic Bank, Citigroup, Emirates Islamic, Emirates NBD, HSBC, Mashreq, Standard Chartered, UAE Exchange, and Visa.

Source : https://gulfnews.com/business/markets/difc-signs-fintech-agreement-with-accenture-1.2216804

Fintech to have greater impact on retail banking in GCC

Dubai: The financial technology (fintech) revolution that is sweeping across the banking and financial services industry across the world is likely to disrupt the retail banking business in the GCC while the overall impact on balance sheets and bank ratings is going to be minimal in the near future, according to rating agency Standard & Poor’s (S&P).

“Technological innovation in the financial sector is a global trend, reaching developed and developing economies alike. We believe that fintech could reduce the profitability of some business lines of GCC banks and change the way they operate over time.

“While we don’t expect major disruption of lending activity in the GCC,” said S&P Global Ratings credit analyst Mohammad Damak.

S&P analysts believe that fintech could impact retail banking, particularly money transfer and foreign-currency exchange business. This would push some banks to adjust their operations through increased digitalisation, branch network reduction, and staff rationalisation. Conventional banking’s value chain essentially involves functions such as taking savings, providing loans and facilitating payments. In this value chain, at the most risk of disruption is the payments business model because it is the least capital intensive and most tech intensive.

While savings and lending involve the balance sheet and regulation, in the case of payments, business is balance sheet-light and regulations are relatively lower, attracting most innovators to this segment.

In lending and savings, the impact of disruption has been slower compared to payments. S&P analysts don’t expect fintech alone to have a significant bearing on our GCC bank ratings in the foreseeable future. On average, banks in the GCC are still very profitable and efficient by global standards.

“We think that some banks are starting to realise the extent of the threats and opportunities that fintech poses, and are putting in place measures to adjust to the new realities of their operating environment,” said Damak.

Corporate lending

As corporate lending constitutes a major portion of the loan books of GCC banks, analysts believe the impact of fintech on overall profitability of banks are going to be muted.

Corporate lending remains relationship-based and the human added-value remains significant in the GCC, from corporate relationship managers all the way up to decision makers.

“While we acknowledge that fintech might help enhance the efficiency of some of these operations, we don’t think they will be significantly disrupted in the next few years,” said Damak.

Analysts expect fintech to affect GCC banks’ profitability, but not across all business lines. In 2016, the GCC banks generated around one-quarter of their revenues from fees and commission and foreign-exchange gains. The latter contributed around 6 per cent of rated GCC banks’ operating revenues over the same period. While a significant portion of these revenues relates to lending and advisory activity, part of it also relates to money transfer and currency exchange.

GCC countries remain net exporters of capital. Their small populations and significant investments and economic development have brought about a significant need to import qualified and unqualified workforces. As a result, the populations of most GCC countries are dominated by expatriates. According to the World Bank, these expatriates sent $102.5 billion (Dh376 billion) back to their home countries in 2016. Fintech could also disrupt the payment industry as it would reduce costs for end users because of the reduction in the number of participants. GCC banks only started to realise the potential risks and opportunities from the development of fintech recently.

According to EY’s GCC Fintech Play 2017 report, only 42 per cent of GCC banks that participated in EY’s survey were familiar (fairly familiar or more) with the fintech industry, while 93 per cent of GCC banks doubted that fintech players could disrupt their businesses in the short term.

In the same survey, 86 per cent of GCC banks estimated that no more than 15 per cent of banks’ business could be lost to fintech in the next five years, believing fund transfer and brokerage to be the main business lines most likely to be disrupted.

“In our view, the sooner GCC banks understand fintech’s potential threats, the better they will be able to implement defensive measures or develop collaborative strategies with new fintech players.

“Collaboration could take the form of partnering with some fintech companies for specific services, for example, allowing fintech companies to use the banking system infrastructure for clearing and settlement operations,” Damak said.

Defensive measures would primarily take the form of strengthening mobile banking services, rationalising branch networks, and refocusing staff on value-added services rather than repetitive and less-profitable operations.

Role of regulators

The role of regulators and authorities lies between protecting banks and seizing opportunities.

Clearly, regulators in the GCC are looking closely at fintech, not only from a perspective of financial stability, but also from one of collaboration.

Fintech Hive in the Dubai International Financial Centre (DIFC), and the regulatory “sandboxes” set up by the Dubai Financial Services Authority (DFSA), with similar initiatives in Abu Dhabi and Bahrain, are examples of how regulators are approaching the fintech industry.

While Fintech Hive helps fintech companies benefit from collaborations with top executives at the DIFC over a 12-week accelerator programme, the regulatory sandboxes allow fintech companies to test their innovations in the real market in a restricted regulatory environment.

In Dubai, the DFSA launched its regulatory framework for loan- and investment-based crowdfunding platforms earlier this year, and it has licensed one company for peer-to-peer lending and another for equity-based crowdfunding.

What is Fintech?

Fintech is a collection of financial technology that describes an emerging financial services sector in the 21st century.

Originally, the term applied to technology applied to the back-end of established consumer and trade financial institutions. The term has since expanded to include any technological innovation in the financial sector, including innovations in financial literacy and education, retail banking, investment and even crypto-currencies like bitcoin.

Source : https://gulfnews.com/business/banking/fintech-to-have-greater-impact-on-retail-banking-in-gcc-1.2110407

Fintech firms to benefit from DIFC $100m fund

Fintech Fund (DIFC)

Dubai:  Dubai International Financial Centre’s (DIFC) new $100 million (Dh367 million) FinTech fund, which will come from internal resources, will support Fintech Hive start-ups in Artificial Intelligence, blockchain, robotics, DIFC governor Essa Kazim said on Tuesday.

He was speaking at the Global Financial Forum, which was opened by Shaikh Maktoum Bin Mohammad Bin Rashid Al Maktoum, Deputy Ruler of Dubai and the president of DIFC.

DIFC thinks that fintech is “underserviced” and the allocation of funding going into this new business is “very very limited” in the MEASA region, accounting to less than 1 per cent of the total.

DIFC Fintech Fund

“We are ready to spend the money. But it will depend on opportunities and if it makes commercial sense,” Kazim told reporters. “We want to consolidate the position of the DIFC and to be at the forefront of the changes that may happen in the financial sector.”

The fund can grow bigger, Kazim said.

“We have been talking with some government departments at federal level, or local level. If the interest materialises into anything then definitely the structure of the fund will be different,” he said.

“We don’t mind having other entities mainly government or semi government entities to participate in this fund. Today the fund is sufficient to support our own initiatives whether it is development of Fintech hive, the type of companies that are going to be supported by accelerator,” Kazim added.

Importance of Fintech

The 2024 strategy, which was a 10-year plan of the DIFC to triple its size, was launched 3 years ago, but Kazim didn’t envisage that Fintech would have been a part of the strategy, when the announcement was made.

“There is a new order that global financial services industry needs to navigate … the new alliances are being forged. The rapid emergence of advanced technology in all areas of finance is creating shifts like never before in the industry,” Kazim said.

Updating on the achievements made so far in the 10 year strategy rolled out in 2015, Kazim said “We are on track (in terms of meeting targets for the 10 year strategy). In certain areas we have passed our targets, but other areas we are lagging behind in area of employment. Although the number of licenses are on track attracting companies, but there is a little lag (not significant) in terms of employment,” said Kazim.

Falling oil prices has not been a negative for the center to attract businesses. Before the drop in oil price, the DIFC licensed 150 companies a year on an average, after that the average jumped to 300 companies.

“That (funding) element has encouraged banks to really expand their balance-sheet and provide credit to regional governments. Governments have been active in issuing bonds and sukuk and that also encouraged financial activities in the DIFC,” Kazim said.

DIFC also hopes to attract more asset managers, financial institutions from India and China.

Regarding competition from other financial centers, Kazim said “competition is always there. The UAE was built on competition and on market forces. We have 5 airports, and 7 ports, and financial activity is one of those things. We don’t fear competition, and it is always good.”

Source :
https://gulfnews.com/business/markets/fintech-firms-to-benefit-from-difc-100m-fund-1.2124444