Virtual banks 'to dominate future banking sector'

The near and distant future of the financial world in general and banking in particular was showcased at the third Middle East and Africa FinTech Forum, which saw industry experts from around the world speak to hundreds of delegates on trending topics such as financial inclusion, open banking, and artificial intelligence (AI) among others, writes Abdulaziz Khattak for Trade Arabia.

The forum was this year hosted by Bank ABC and Arab Financial Services (AFS) under the theme “Banking – Beyond Disruption.”

Officials from the Central Banks of Saudi Arabia, Bahrain, Kuwait, UAE, Oman, Jordan, Egypt, Libya and Tunisia attended along with senior representatives from the Mena region’s banking, finance, telecom and tech industries.

Moderated by Aaron Heslehurst, host of BBC World News programme Talking Business, the conference started with a speech by Sophia – the world’s most famous social humanoid robot – on the potential of FinTech and AI’s contribution to the development of society.

Sael AI Waary, the Deputy Group CEO of Bank ABC and AFS Chairman then spoke about the current state of FinTech and even made predictions for the future.

Al Wary specifically highlighted the potential impact of FinTech on corporate banking, which has till now been overlooked.

He also unveiled Fatema, Bank ABC’s and the region’s first emotionally-intelligent digital employee. Built by New Zealand-based Soul Machines, Fatema engages with customers using cutting-edge digital neurology and AI.

Overall, AI Waary said digital banking would greatly reduce the cost of banking services but will improve their quality.

This was followed by Heslehurst’s discussion with the Central Bank of Bahrain (CBB) Governor Rasheed AI Maraj, who stressed that CBB is not only a regulator but an enabler of innovation and advancement in banking.

Al Rasheed emphasised that a practical approach was needed to find the right balance between enabling innovation and protecting the financial system.

Next off was Brett King, author of Amazon best-seller Bank 4.0 and host of a top-ranked FinTech podcast in the world, Breaking Banks.

Tracing the advancements banking had gone through – from Bank 1.0 until Bank 4.0 – he said there had been radical changes in the industry with much more to come.

King said last year in China alone, more than $22 trillion worth of transactions were made in mobile payments.

He predicted that banking would become ubiquitous with many firms opening their own virtual banks. "Voice recognition will be the primary mechanism of payment in the future and that by 2035 I expect to see more robots than humans," he quipped.

King said the primary advantage AI has over humans is its vast database and this aspect will make, for example, autonomous cars safer.

The top author also predicted that AI in banking will be based on behaviour and that the industry will see a shift from banking products to more of banking experience. There will also be more advice given through AI than through human interactionsm, he added.

Global cryptocurrency expert Henri Arslanian, PwC’s Fintech and Crypto leader for Asia, spoke of the rise of cryptocurrencies and their future development.

He pointed out that the industry would see stable coins – cryptocurrencies backed by real assets – coming up, citing the example of JP Morgan’s JPM Coin.

Arslanian highlighted the increasing importance of Fintech and how governments were dealing with this. To prove his point, the industry expert cited the case of Denmark appointing an ambassador to deal with the big tech firms.

Anthony Thomson, the founder of Metro Bank and Atom Bank (both in the UK) and 86 400 (Australia), in his presentation spoke about challenger banking and his reflections on recent experiences in launching mobile lender 86 400 in Australia.

Later in a panel discussion, Thomas Blood of Amazon Web Services and Steve Kirsch, CEO of open banking software provider Token, spoke on the challenges facing regulators in open banking. They argued that the opportunities are too great for banking executives and regulators to ignore or avoid.

Kirsch said the CBB understands this and "that’s why it is leading the way for others in the region." Seconding him, Blood said the kingdom's central bank had taken a great step forward in embracing the new trends.

In his address, Dr Pippa Malmgren, former chief adviser to US President George W Bush for economic policy and financial markets, outlined the traits required for senior leaders in modern financial services organisations and argued that a narrow focus on analytics and reductionism was insufficient to deal with modern challenges.

She stressed that cognition and not intelligence was the future and how machines were attempting to think biologically through deep learning.

Malmgren also said organisations needed storytellers to give more clarity to their vision in people’s minds.

The forum concluded with an audience poll which was held mainly to get their views on Fintech and the banking industry.

An overwhelming majority of 94 per cent expressed confidence in the future of digital banking; and 75 per cent saying yes to banks becoming more of a utility like water or electricity in the future.

To a question if Sophia or Fatema would replace bankers in the next five years, 54 per cent said no; while 55 per cent emphasised that regulators and not Fintechs would still play a key role in facilitating financial inclusion for all.

The poll on whether traditional banks will cease to exist by 2030 was a narrow escape with 51 per cent believing that they would continue; while 83 per cent thought that imagination rather than knowledge would the most important skill for future leaders.

At the forum, exhibitors had setup a range of stalls to showcase innovative fintech products, giving visitors the opportunity to see the latest in wearable payment tech, mobile applications, and other developments.