Banking on Fintech in the New Normal

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Partnering with fintechs, banks are able to be more customer-centric and agile. The ‘expectation economy’ has put tremendous pressure on all businesses to up their game in customer service.

Payby is a fintech company based in the United Arab Emirates (UAE)

Payby is a fintech company based in the United Arab Emirates (UAE)

Payby is a fintech company based in the United Arab Emirates (UAE)

PayBy is a fintech company with world-class payment infrastructure that provides a fast, secure, AI-powered, one-stop payment solution.  The company gives insights into banking on fintech in the new normal using their base of Abu Dhabi, United Arab Emirates (UAE) as an example.

Customers expect every company they deal with, whatever the sector, to provide the same levels of smooth, fast and efficient service they have come to associate with companies such as Amazon and Uber. The same level of swift, personalised service is also expected from banks – customers want tailor-made products and financial transactions to be completed in moments, rather than days.

Rising customer expectations are also motivating UAE banks to digitalise every facet of their operations. Retail banking is becoming increasingly competitive, and customer experience is a source of commercial value, driving business results, and a competitive differentiator as well. There is a perceptible demand from consumers for transparency, simplicity and customer-centricity from their banks.

So how are banks responding to this demand?

It’s inevitable that digitalisation will make outmoded service and business models obsolete. However, banks are also burdened with legacy infrastructure. Introducing new and efficient technologies can be a complex, expensive and challenging undertaking. The COVID-19 pandemic brought these issues into sharp focus for banks. Digitalisation and product innovation are imperative for banks to thrive in the “new normal”.

As they transition from complex legacy systems to agile operations, many of the region’s banks are partnering with startup financial technology firms, or fintechs, to pivot their digital transformation. Recognising the potential of fintechs to power the new age of banking, the UAE Central Bank (CBUAE) announced it would launch a fintech office to support financial innovation within the country and position the Central Bank (CB) as the coordinating authority for fintech activities.

By partnering with fintechs, banks can offer their customers innovative products and services, without taking on costly infrastructure upgrades. Fintech startups benefit as they are not subject to the same regulatory scrutiny and do not have to invest in banking licenses. Fintechs also benefit by association from the banks’ reputation and trust bestowed by their current customer base.

The synergy between banks and fintechs is built upon financial infrastructure and powered by technology. Thanks to APIs (application programming interfaces), programmers can build applications so the bank’s infrastructure is opened up to third parties such as fintechs. Emirates NBD, one of the earliest Gulf Cooperation Council (GCC) banks to embark on a digital transformation, launched the ENBD API Sandbox in 2018.

Banks with APIs can thus offer their customers additional products and services that respond to their needs in a single platform. Customers can bank an ‘ecosystem’ of interconnected services through a single platform. It simplifies their lives, creates a superior service experience and drives up customer retention.

Partnering with fintechs also allows banks to leverage the former’s technological agility and bold ideas. Unencumbered by the challenges of legacy infrastructure and regulatory scrutiny, fintechs are able to provide innovative, timely, out-of-the-box solutions. They can quickly market-test new functions to complement the more cautious approach adopted by banks.

Regulators are also permitting new fintech entrants into their financial sectors such as insurance and banking to catalyse industry transformation.

One example of this is mobile money transfers, widely used by the underbanked, and cashless mobile payments. Partnering with a fintech allows a bank to widen its customer base to include the underbanked, while capturing the higher margin business of international remittances. Earlier this year, PayBy joined hands with First Abu Dhabi Bank (FAB) – the UAE’s largest bank and one of the world’s largest and safest financial institutions – to launch secure mobile payment services. Through the PayBy app, customers can easily transfer funds to others for free, regardless of their bank or devices, complete payments for purchases or utilities using a QR code and enjoy financial services without a bank account.

The UAE’s significant number of unbanked population and high smartphone penetration (over 91%) represents a huge opportunity for banks to offer mobile payment solutions, which go beyond basic transactions.

And as leading UAE banks continue to partner with fintechs to enhance their customer experience, their standing in the international market seems to be improving, with the sector in a strong position. Partnerships with fintechs are helping banks grow their customer base and capture lost business opportunities in the COVID-19 altered landscape. Fintechs and banks enjoy a mutually beneficial and collaborative, rather than competitive, relationship – helping deliver financial benefits to customers.

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