Based on an Op-ed by Heidrick & Struggles, a renowned provider of senior-level executive search, who revealed that bank executives in big financial companies are leaving the sector en masse in favor of crypto endeavors, Economy held the following interview with Shadi El Farr, Partner at the Heidrick & Struggles’ Dubai office. We asked:
1- Do you see the disruption in the financial sector taking place here, specifically in the GCC?
Trading of digital assets like crypto and bitcoin is currently limited in certain parts of the region and may not be widely used for now, but we foresee more disruption and can see signs of immense growth in the future. We’ve seen rising interest from investors and consumers, especially in the UAE and Bahrain. A survey from Nickel Digital Asset Management found that many institutional investors and wealth managers in the region are already planning to include cryptocurrency assets as a part of their portfolios by 2023. Meanwhile, crypto platforms like BitOasis have also seen transaction volumes and user sign-ups significantly spike in 2021.
Similarly in Bahrain, policies from the central bank have encouraged investments and spurred the disruption of financial services. For example, with its regulatory Sandbox, Bahrain has already seen successes like Rain, the region’s first licensed Sharia-compliant cryptocurrency platform.
The regulatory environments in the UAE and Bahrain are very welcoming and supportive of innovation within the financial sector. These markets will continue to attract both crypto players and talents who are keen on venturing into this space.
2- Can you comment on the recent UAE law on digital assets? What does this really mean for the financial sector?
It’s clear that the UAE is making great leaps forward on the subject. A number of financial regulators, particularly within Freezone jurisdictions, are creating meaningful frameworks for start-ups or international firms seeking global growth opportunities in digital assets. For example, the Dubai International Financial Centre, Abu Dhabi Global Market, and the Dubai Multi Commodity Centre have been providing valuable support as hubs that are designed for crypto, blockchain, and digital asset operators and businesses to grow and thrive.
The recently enacted digital assets law is an indication of Dubai taking another step to boost the sector and protect investor interest. It is worth noting that while other countries in the region like Saudi are also advancing, the progress is occurring at a slower pace for now, although in a robust fashion.
3- Understanding that Coinbase recently hired senior executives from Goldman Sachs, Barclays, and Bridgewater, what should the wake-up call for these financial institutions be? What strategies should they have to retain talent and turn the tide in their favor?
For executives who switched from traditional finance to fintech firms, we discovered that the motivations driving their employment choices have changed. Most people in the past might have picked a well-known and established bank for its reputation, brand name, or salary; talent today is on the lookout for more. Key factors pushing them towards fintech, crypto, and blockchain firms include high levels of flexibility, a less controlled business environment, embracing the digital economy, and being part of an innovative and new culture, creating a renewed sense of purpose.
If conventional finance companies want to attract and retain employees, they must connect with and engage their workforce. This means having a purpose beyond profit and creating an inclusive and supportive culture where employees feel that they belong. A competitive paycheck is not sufficient – employees seek challenges that maximize their potential through innovation.
It’s time for traditional businesses to pay attention to what matters most or risk facing more struggles in the road ahead.
4- Many blockchain and crypto industry players shifted from roles in investment banking and asset management companies. But the rules and roles of investment banking and asset management are different for these migrating executives, no?
Certainly, budgets, team composition, and decision-making processes differ, but transferable skills can set individuals up for success in their new environments. The study from Heidrick & Struggles reveals that adaptability, critical thinking, communication, and quick problem-solving are fundamental capabilities that have helped transitioning executives thrive in their new endeavors.
As the sector is also relatively nascent, executives benefit from less rigidity and formal functions. With responsibilities not yet clearly defined, crypto and blockchain firms tend to hire professionals with less experience in a particular role, and then accelerate their promotion process later.
It is important to highlight that given the recent development post the war in Europe, governments have in the past weeks started to show a serious attitude to regulate this new industry going forward. We anticipate this will translate into requirements to hire stronger risk and compliance capabilities out of the traditional banking space.
5- Shouldn’t this migration from traditional to digital finance be school-taught, youth-led, instead of financial incumbents looking for new sources of income?
We have seen great value in government-sponsored national learning programs which are helping to upskill capabilities and develop skills that are relevant to this particular sector.
Reforming conventional educational institutions (schools, universities, etc.) requires not just long-term investments but is also a prolonged process. Partnerships between national learning programs, the private sector, and the traditional education providers within the region will be key to achieving shorter-term impact by promptly right-skilling talent to thrive within the digital economy.
For instance, it’s promising to note that Riyadh is in the midst of establishing a blockchain academy to drive digital transformation. Collaborating with the Switzerland-based BSV blockchain industry association, the initiative aims to equip talent and prepare them for careers in the tech space by providing learning resources and blockchain training.
In 2020, Singapore committed resources to launch the Singapore Blockchain Innovation Programme which includes efforts to grow the blockchain tech talent pool through hackathons, workshops, and seminars. Blockchain has the potential to transform business models with peer-to-peer lending, smart contracts, and digital payment. In fact, by replacing legacy infrastructure, PwC expects that blockchain will help financial institutions save up to $20 billion a year by 2022.
6- Will the Metaverse also change the rules of the game for banks?
It’s likely that the metaverse will provide additional solutions to clients and enhance customer experience overall. I see the Metaverse as a continuation of any bank’s digital journey rather than one which will radically change their course of evolution. It might as well accelerate digitalization within banking areas that have seen less digital advancement than others (particularly within corporate and transactional banking).
According to Accenture, almost half of bankers globally believe that customers will use AR or VR for transactions by 2030. And while that may seem relatively far in the future, the fact is that we are already seeing banks leverage new ways to serve customers. BNP Paribas has launched a VR app for customers and the Bank of America is using VR to train employees in customer service.
In addition to virtual interactions, traditional banks have also started offering and managing virtual assets to their customers. JP Morgan for example, recently launched its Onyx Lounge in Decentraland – allowing clients to purchase virtual plots of land in NFT form and make purchases with Ethereum.
