In an exclusive interview, Banker Middle East sat down with Diebold Nixdorf’s Chief Executive Officer, Andy Mattes, and Habib Hanna, Managing Director, Middle East and Africa, to discuss the future of banks in an era of aggressive technological development
How do you envision banking and finance in the next five years?
Andy Mattes (AM): I see a lot of innovation taking place in the banking world. The main theme for banks around the globe today is to take their digital initiatives to the next levelówe call it connected commerce. Connected commerce is the notion of connecting the physical world of cash with the digital world of cash to create the experience of, ìa bank for oneîóa bank that interacts with each consumer individually according to their needs, the way they like to be communicated with, and does so in a way that is proactive and customer centric, while automating the bankís back-end processes. We as consumers want and will expect to have this kind of interaction with our bank.
What is your view on the technological development of financial institutions in the Middle East?
AM: Interestingly enough, the Middle East has the whole gamut. On one end of the spectrum financial institutions are still modernising, and on the other end there are highly advanced banks driving the change. I believe the Middle East will be in a leading position in the next five yearsóthere is a lot of innovation taking place there to not take notice of the region. I also believe that financial institutions who are still trailing, are catching up at a rapid pace. The Middle East is one of the regions in the world where our industry has a double digit growth rate. Itís a very exciting market for us.
Can you provide an overview of recent developments in financial technology in the region?
HH: We can see five dimensions that are changing the way the financial services industry is progressing. Many financial institutions (FIs) have moved from being product centric to consumer-centric. Consumer centricity is the single most important reason for FIs to invest in financial technology, to enable them to enrich the encounters between consumers and FIs, and make their experience much more enjoyable. Furthermore, many banks are investing in innovations to position themselves as leaders in the technology front, and to simultaneously deliver an elevated consumer experience.
Another thing is the way that fintech is coming to the market, progressing and delivering a digital platform and competing with traditional legacy banks on customer relationships. This adds to the complexity but it is also has positive momentum because banks have realised that they need to position themselves not only through the content of the service but also through the context of the service. These two go hand-in-hand and I think this is an important drive for innovation and investments.
Another major differentiator for the Middle East is how financial institutions are expandingówe believe the ratio of digital branch expansion to traditional branch expansion is about four to one. Youíll witness many financial institutions expanding presence points by delivering or establishing a digital self-service branch that mimics traditional branch services, which were only conventionally present in a branch. One example of this is remittance services which can be provided on a multifunctional terminal. Printing a debit card or credit card, as well as cheque book printing, on a multi-functional terminal takes just under two minutes, whereas it used to take several minutes to days to complete these transactions on the traditional channel. This is a major game changer in consumer interaction and speed of service.
The emergence of multifunction terminals and services, therefore, is something that will continue to rapidly develop moving forward.
The last two dimensions are efficiency and security. A lot of banks, while they are expanding, want to do more with less to make sure they drive productivity gains and automation all the way from the branch to how cash is being handled. Today there is a convergence between financial institutions and retailers to not only deliver a better consumer experience, but also achieve greater operational efficiencies in their processes. This is where the term ëas a serviceí comes in, where banks partner with specific institutions that have the expertise in this and are able to assist them in this aspect.
But innovations are only useful if they are secure, because trust plays a critical role in banking. That is why we support many banks in the region in implementing the latest security mandates and becoming PCI-compliant, and provide them with anti-skimming and malware protection solutions.
What do you think is the biggest challenge in technological progression in banking and finance in the GCC?
HH: Specific to the Middle East, one area that needs to be worked on is the regulatory framework. The regulatory framework needs to evolve as fast as technological innovation and adoption. For example, digital signatures are not recognised in some jurisdictions and this could be a problem for banks that want to provide digital onboardingóas theyíll still need a customer to ink a document and this document would have to be retained for seven to 10 years in certain countries and in others sometimes for an indefinite period.
The other challenge is consumer adoption, which varies from country to country depending on consumer digital fluency and demographics. There are still places where consumers are not as digitally savvy as in other places. In this context, technological simplicity is extremely important in any service that comes to the marketóthe ease of using a service should be well thought of before it hits the market. Consumer adoption is not just the technology but it is also about the ease of using this technology.
AM: From a global perspective, the challenges are the same. However, the manifestations are different. For example, in Europe, the biggest challenge now is the PSD II initiative. The fact that banks need to share data about their clients with another bank is a huge change for the market.
Another issue is the remittance marketóit is a huge marketówith hundreds of billions of dollars sent back and forth. But the way that it is being done today is still very much archaic. While the regulation between countries adds a layer of complexity, there is a huge opportunity to innovate here, as Habib mentioned earlier, through the use of multi-function kiosks.
Dubai aims to become the first blockchain-powered government by 2020 to utilise the technology for all of its transactions. Can financial institutions also leverage blockchain for transactions on the self-service channel?
HH: Blockchain is basically the platform for cryptocurrencies, and the UAE has recently launched emCash, a cryptocurrency for the country to operate in parallel with the current ecosystem we have. The ability for that to be used for small and high value payments, from things such as coffee to rent, can enable closing of the gap between digital currency and the physical currency ecosystem. This enables the convergence between cryptocurrency and physical cash. Self-service plays an important role in how we advance the use of blockchain, as an enabler for elevated consumer experiences and relationships.
As financial institutions launch various initiatives to capture millennial customers, how effective do you think these digitisation efforts are in boosting bank profitability?
AM: Digitalisation efforts boost a bankís sustainability more than profitability. We talked about cryptocurrency and digital wallets. How many digital wallets do you think consumers can digest? How do you keep track of these things? This situation is one that is parallel to credit cards. Right now, digital wallets are still new and exciting. But once, for example, your shoe store has a digital wallet, your bank has a digital wallet, your grocery hypermarket has a digital walletóit gets very confusing.
Therefore, this means banks need to drive digital innovation. If they leave this to someone else, theyíll just become background utility providersólike a power company. Banks are at a very pivotal momentódo they stay relevant to the consumerís life? Or do they go back to the role that a power company or a telco plays? And this depends on where you want to take your financial institution. If you want to stay relevant, digital innovation is the only way to get there. Additionally, all this has to be done in the context of security while abiding with the laws and security of the country.
Itís either you become a consolidator in this game, or you get marginalised.
What is your outlook on the development of financial technology in the region over the next three to five years? How do you see things evolving?
HH: A major driver in the financial technology movement would be mobilityónot as a standalone but part of the ecosystem. There is a need to enhance the ability of the consumer to start a transaction on a mobile device and to transfer it onto another channel seamlessly, providing a unified experience and fulfilling a transaction in a seamless manner. I believe this is something that will greatly evolve as we go forward.
The second outlook is the use of big data and smart analytics to understand consumer behaviour and spending patterns. So, by leveraging big data, banks can push customised and personalised marketing on self-service terminals. We will see a lot of banks continue to expand into digital branches and move more services that are conventionally performed at the branch to self-service platforms. Finally, if we look at the customerís perspective in the next few years, artificial intelligence is going to play a major role in driving better customer connection and interaction.
It’s either you become a consolidator in this game, or you get marginalised.
– Andy Mattes, Chief Executive Officer, Diebold Nixdorf –
A major driver in the financial technology movement would be mobility—not as a standalone but part of the ecosystem.
– Habib Hanna, Managing Director, Middle East and Africa, Diebold Nixdorf –
© Banker Middle East 2017
