From cash to cache

24 October 2017
The transformation of the financial services sector will see the end of banks as we know them

Never known for being the drivers of change, the region’s bankers are embracing the digital transformation reshaping their industry.

But for the majority of them, this does not come easy. It introduces new, previously unregulated products and services, such as Bitcoin and crowdfunding, not to mention the threat of cybercrime, all of which are enough to make any lender think twice.

But there are powerful factors both pushing and pulling the banks towards their digital transformation. Pushing them are declining profits and competition from fintechs – the ultra-nimble financial technology firms.

Low oil prices and austerity are stifling credit and deposit growth in the region, while fintechs are threatening to eat away revenue from core business lines, such as foreign currency remittances.

The most powerful factor of all, however, is customer demand. People and businesses increasingly expect services to be available instantaneously. And this is the pull the banks cannot ignore, not to mention the lure of the region’s 86 per cent unbanked population.

The digital transformation of the region’s financial services will see the end of banks as we know them. Banking staff will become online robots able to process data millions of times faster than any bank teller. Branch networks will migrate online and cash could disappear altogether. All of this will happen in just a few years.

But the banks will not do it alone. They will first partner and then meld with fintechs until, in the words of Lloyd Blankfein, CEO of investment bank Goldman Sachs, they will become technology firms that happen to have a bank attached to them.

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