HomeInterviewsAdapt and Adopt: Shifts facing incumbent regional banks
By Economy Middle East
February 9, 2023 9:14 am

Adapt and Adopt: Shifts facing incumbent regional banks

Mehryar Ghazali: “Corporate banking on a slower pace of innovation”
Mehryar Ghazali, financial services leader at PwC Middle East

The PwC Network envisions being the most trusted and relevant professional services business globally, one that attracts top talent and combines the most innovative technologies, to help organizations build trust and deliver sustained outcomes.

PWC understands the urgency to successfully act in the face of the major shifts shaping the world. One important trend is the change taking place in the financial sector, leaving incumbent banks needing to adapt to and adopt new technologies.

In an exclusive interview with Economy Middle East, Mehryar Ghazali, financial services leader at PwC Middle East, elaborated on this trend.

Regional banks

Is traditional banking, as an industry, transitioning smoothly with fintech into a more digital-heavy and hybrid or virtual future?


The third-largest financial services corporation in the world today, surpassing the market capitalization of traditional banks like Goldman Sachs and Morgan Stanley, is the technology giant Ant Group. It has created the world’s largest money-market fund with over 588 million users contributing to it.

Growth, profitability, operating cost, and customer acquisition cost are all significantly leaner than traditional banks. And with this technology-first approach over 98% of customer inquiries are handled by AI, making the system more efficient.

Media describes Goldman Sachs and JP Morgan as having “giant plans to avoid disruption,” but the traditional banking industry has already been disrupted, with further changes to come. Incumbent businesses are being challenged and overtaken in nearly every major industry.

Major banks, like Goldman Sachs and JP Morgan, are creating dedicated ventures teams to identify fintechs and invest in new technology capabilities. On top of partnerships, a funnel of investments is being created with large capital allocations. JP Morgan alone invests $12 billion a year in technology, with 802 investments made.

Traditional banks have made a clear play to partner and invest in a digital and technology-first era. However, breaking away from legacy systems and shifting the focus to customer-centricity and innovation rather than P&L and product-centricity is crucial for their success.

Regional banks

There was a rapid acceleration in digital financial services caused by COVID-19. Are regional all-in-one “super apps” the next trend to dominate e-financial services?


Two key trends are being observed in the global markets and among our clients. These are the rise of Super Apps and Super Platforms. While platforms like Revolut, Monzo, Alipay, and Webank have seen success with Super Apps globally, the Middle East is yet to see a true Super App by a bank due to more complex regulatory infrastructure. Banks in the region are trying to address this by launching Speedboats, digital banking spin-offs that operate outside the traditional banking structure and have the freedom to evolve and compete like fintechs. Speedboats can seize new opportunities without disrupting current operations.

Super Platforms is a way for banks to provide Banking-as-a-Service (BaaS), allowing non-bank players to leverage existing infrastructure to launch financial services with a faster speed-to-market. This service is becoming an increasingly profitable source of revenue for banks.

For banks looking to launch a Super App, the challenge will be to engage customers regularly enough for the app to become a natural hub for other services.

The average WeChat user spends 82 minutes a day on the app, and banks need to consider the way they use this app real estate to engage and create stickiness. This is a naturally obvious route for apps such as Careem Pay or Uber, which already have daily engaged users utilizing a significant part of their lifestyle services value chain.

Arguably these technology-first companies will be in a better position to offer the super app. The key for banks is to partner with these companies first, offering access to the payment infrastructure that only licensed institutions can provide and reducing operating costs to reach new customer segments.

Read: UAE participates in first 2023 meeting of International Financial Architecture

What new products and services can banks in our region introduce to customers and how will it affect their revenue streams?


An interesting trend we are seeing is the accelerated product innovation in retail. Banks in the region understand they have a young digital savvy population with mobile penetration at over 185 percent (two mobile subscriptions for each person in the UAE), an internet penetration of 99 perception and, in the majority, a youthful demographic.

Banks are acquiring fintech companies that cater to the teen segment through fun and loyalty-discount-driven pre-paid cards, enabling them to tap into financial inclusion and reach a younger audience. The retail banking sector is also exploring technologies such as Ecolytiq, a PwC investment, which informs customers of their environmental impact based on their spending habits. These tools aim to increase financial inclusion and promote conscious spending – both key trends in the big success we have seen behind Ant Group’s growth.

Although the pace of innovation in corporate banking has been slower, it is now changing. PwC is launching several corporate venture capital units, venture-building activities, and corporate innovation exercises for clients in the region. The shift towards the WeBank ‘ABCD’ model (AI, Blockchain, Cloud Computing, and Data) is also underway to optimize efficiency and scale.

One major challenge in introducing new products in retail and corporate banking is the current regulatory structure around cloud services. Current regulations require cloud service providers to be based in the country in which they offer services. Once this constraint is resolved, it has the potential to tremendously expand the scope of financial services in the region.

Regional banks

Open Banking is assumed to be a game changer for the industry. Are banks opening up to this idea?


The distinct immediacy with which our digitally savvy population wishes to engage with services is driving banks to rapidly develop capabilities for Open banking.

Over the course of our GCC Horizons leadership meeting, we took some of these hypotheses one step further, such as the integration of business accounting platforms into banking.

A practical example of this integration is seen with Xero and Starling Bank. Xero is a New Zealand-based technology company that provides cloud-based accounting software for small and medium-sized businesses.

Starling is a British licensed and regulated digital challenger bank that provides current and business accounts. Without paperwork, users can now seamlessly link their bank account to both platforms instantly from the bank’s marketplace. This integration manages business finances in real time, allowing predictive cashflows and generating new revenue streams with higher conversion rates and quicker approvals. The integration of open AI also opens up endless opportunities for growth.

Regional banks

With respect to Crypto- and blockchain-based transactions, are regulators confident in the shift to digital assets?


The Crypto winter was a seismic event within the industry. However, crypto bankruptcies have not had the expected repercussions across the wider financial services that we saw during the 2008 financial crisis.

People tend to believe that with the fall of a couple of currencies or tokens, that could be the end of virtual assets. However, without that technology, how can you ever operate a smart contract platform? This is where leveraging CBDCs will become critical as fiat currencies are not enabled for smart contracts.

By 2050, half of trade will be done by AI and that will all be tokenized in ways we can’t even visualize yet. The shift to digital assets, as you put it, is inevitable.

What do you believe will be the next big disruption in FS that we need to be prepared for?


The growth of open banking will certainly be game-changing. Our two Supers – Super App and Super Platform – together create a new FS we hadn’t previously imagined.

Artificial intelligence would be equally game-changing, and then, over the next few years, head-mounted displays, augmented reality, and others.

Other major disruptions that are necessary are based on cultural change. According to Henry Ma, a very important part of the WeBank culture is the idea of letting employees understand that they’re the owners of the business. It’s meant to encourage a lot of bottom-up decision-making from their teams. This includes a “fail fast” mentality where teams can try out new things, and fail at low cost.

WeBank’s CFO says WeBank is built on failures rather than on successes. You need to have a strategy to manage the failures, to be able to fail fast and fail smartly.

Finally, WeBank was able to move from ideation to implementation in 14 days on average. During 2021, with the lockdown period still in place, WeBank was able to go from product initiation to production in just 10 days. That ability is crucial.

Now, with our clients, the real challenge is the manner in which we collaborate and bring this vision to life in our region to make it a reality.

We do this through two channels: Either we’re working with our clients’ biggest problems, or we’re making them market leaders in their chosen areas. If that’s not happening, it could mean that the transformation agenda does not have the right ambition.

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