Middle Eastern Promise for Financial Institutions
In this new financial landscape, increased affluence is
helping to stimulate huge investment in commercial real estate, all of which
combined with the world’s continuing reliance on oil, has resulted in the Middle
East becoming a destination for businesses looking to grow and expand into new
ventures. Bearing this in mind, are Middle Eastern financial institutions poised
to lead the transaction banking space in an ever-developing market?
What
Does the Middle East Represent?
To get an idea of the market’s potential,
ACI Worldwide’s research suggests the Middle East will make up 20% of the total
payments account and transaction revenues sector in 2020. That translates to
around US$192.3bn; compare and contrast that with the fact in 2010 the market
generated just US$31.6bn. This mushroom effect provides great opportunity, but
also fosters an environment for more innovative services and products.
It’s now generally accepted that the growth in the Middle East is set to
continue, thanks in part to the Cooperation Council for the Arab States of the
Gulf (GCC). Standard Chartered recently forecast that emerging market trade will
account for more than 30% of global trade volumes by 2030. Emerging market trade
corridors are expected to account for 40% of global trade by 2030, up from 18%
last year.
When you look at more mature markets, gross domestic product
(GDP) growth looks anaemic in comparison. Recent GDP growth in emerging and
developing markets has far exceeded that of the G7 countries. Trade flows have
grown rapidly, as GDP in emerging and developing markets expanded by 31.4%
between 2008 and 2011, compared with just 5.3% for G7 countries during the same
period.
All the metrics you want to look at point toward a healthy future
for the region.
Identifying the Right Opportunities
With so much
happening in the region, and seemingly with so many avenues to explore, the
temptation for businesses is to leap before looking. For financial services
companies, the trick will be cutting through the hype and strategically making
the right decisions about which opportunities to pursue.
To do this they
can look at where other businesses are going, namely down the convergence path.
Achieving as much as possible with the resources they have and eliminating the
wastage of duplication is right at the top of the agenda. For financial
organisations, this can relate back to their core infrastructure. In many cases,
these will be relatively old systems that have become a patchwork of bolt-on
improvements and upgrades.
In the Middle East, where these systems are far
less embedded, the opportunity is there to consolidate infrastructure and make
for a far more efficient system. It makes sense that all aspects of back-end
components, especially when it comes to payments processing, are working in
unison.
Technology should make it agnostic in terms of allowing for a
financial services company to process any payment type, any channel, any
currency and any network. Bridging what is there now and what we see in the
future will be the trick, but it seems hard to imagine anyone disagreeing that a
streamlined organisation is a better one.
With the Middle East still a
relatively blank canvas, the future should be one encompassing platform that
provides all the services a company would need – a ‘one-stop shop’ that makes
the entire ecosystem run that much smoother.
Setting the Pace
It’s an
exciting time to be involved with Middle Eastern institutions. The rate and pace
of change is astonishing. But as the old adage goes, you can sometimes run to
stand still. The clever companies will take a step back from this expressway of
change and rationally think about how they can manage growth to the best of
their ability.
Where companies in the region have a big advantage over
those in other markets is that they are less reliant on older systems. They can
use the technology available to refine, hone and improve what they already have.
There is no need to rip it out and replace, simply consolidate and evolve.
Wealth is rising in the area, organisations are flocking to do business here,
and key metrics point to a sustained burst of growth, but it is essential to
have the core infrastructure in place if the region is to rival other
international financial hubs.