Ep. 96: Amir Tabch - Tapping Into FinTech in the Middle East
Amir Tabch, Chartered MCSI, MFTA, CFTe, MSTA, Senior Executive, Global Wealth & WealthTech Management, Board Avisor, and finance professional, joins Count Me In to discuss how organizations can tap into FinTech in the Middle East. With co-host Rouba Zeidan, he shares his views on the state of the sector in the region and how finance and accounting professionals can leverage these disruptive technologies to better support and advise the companies they work for. Download and listen now!
FULL EPISODE TRANSCRIPT
Welcome back to Count Me In, IMA's podcast about all things affecting the accounting and finance world. In this special new episode, my co-host Rouba dives into the world of FinTech in the Middle East region through an elaborate discussion with Amir Tabch. Amir has close to two decades of experience as a finance professional advisory board member for multinational companies in various FinTech and wealth tech initiatives. This conversation features the state of the sector in the region, and Amir explains how finance and accounting professionals can leverage these technologies to better support their organizations. Keep listening as we head over to their conversation now.
I mean, you're someone who's acquired a successful career mainly because of your ability to read the trends and the patterns with passion. I mean, looking at the chart, I remember it, one of the stories was that whether it was your wife's contraction monitor or a financial chart, you have an eye for seeing the patterns behind the, when they manifest. So you pride yourself on looking past the complexity to see the certainty. How does one develop such an outlook, especially at a critical time, like now where God knows where the global economy is headed and trends are being accelerated or even annihilated , in some cases overnight?
Well, as much as I'd like to claim that identifying trends and patterns and forecasting is an inherent skill, it really isn't. Of course, on the other hand the creation is. Now there are essentially a lot of things that can take credit for being responsible when it comes to analyzing these prices and trends and patterns either when one's inspecting them in isolation or in totality. So, first of all, when it comes to looking at trends and patterns, it goes without saying that these analytical skills need to be honed. So one has to be in touch with market realities. We have to also look at human behavior industry changes, social and economic forces, and no amount of experience in the industry can make up for constant and consistent research. To be ever updated and in touch, not just with the events they can place in our industry, but all other events, whether it's culture, whether it's fashion. And the point I mentioned earlier, which is inclination. So being inquisitive by nature allowed me to always look beyond the final results and really go into these matters of causation behind those results. That being said, all who believed that being a man of numbers, someone like me, boring is not really accurate, To be able to analyze these trends and immediately place the ones that are not in tandem with the market environment, which requires an extremely creative bent of mind. You have to be able to think outside the box when predicting matters of extreme relevance. And one also needs to be very well versed with consumer behavior and producer behavior trends that are a consequence of human psychology. And you have to have an approachable and inclusive outlook to things which allows you more room to acknowledge the possible mistakes and even benefit in detecting trends that would otherwise go unnoticed. And like you said, in such uncertain times, the only thing we can be certain of is the constant, unpredictable nature of things. And that's when we look at these trends and these patterns and these price formations, we can only doing so by living in the moment. And that is something I learned from, from Master Oogway in Kung Fu Panda, one of my son's favorite movies. He said, yesterday's history, tomorrow's a mystery, but today is a gift. That's why it's called the present. So Master Oogway a fantastic follower and really good at pattern. So basically living in the moment.
If we were to look at this particular area, which is your area of expertise and, you know, something that's been on an evolutionary scale for the past three decades, we see most of e-trading online banking and wealth tech driving it, but there's a recent report by KPMG that stated that over $135 billion were invested in FinTech last year globally. And, that the transactional transaction value is expected to grow to some $10 trillion in 2023. The Middle East financial services revenue will account for 8% of these figures. So experts find that this growth is directly related to the increasing number of FinTech, startups, growth of the Islamic banking sector and the high mobile penetration, which is above the entire planet. I mean the UAE loan has 173% So the UAE also accounts for one third of the total number of FinTech startups. We talk about 46% in the world, but in your opinion, what is really driving such an exponential growth?
Well, the underlying cause behind such results is the foundation really to building Syntech development, by the UAE policy makers. They began to implement these forward thinking policies, regarding the FinTech since 2017. Two leading, financial free zones, I've actually development and some tech space global markets on one hand and the IFC Dubai International Financial Center. Now the IFC created the FinTech hive, which was essentially a a hundred million dollar fund that gave companies access to accelerate a program mentorship from leading financial institutions and insurance partners. And in 2018 IFC I see an Accenture, which is a firm I'm sure everyone knows about, but to those that don't, it's a prominent consulting company. They signed a MOU to foster growth of FinTechs and enabled such types of collaboration in the region. ADGM created the reg lab FinTech sandbox where FinTech participants could actually develop and innovate FinTech solutions in a controlled environment. And obviously the after effect of these efforts have not only provided FinTEch startup much confidence and support, you know, also kind of generated an acceptance from the public, making them popular, so to speak. It's kind of like in football or any other sport for that matter when sponsorships not only provide teams with the financial support they require, but also the added benefit of being part of the sponsors, PR tactics, which can help grow the public state and the team. On another front, the demographics and these kind of things definitely play a role. almost half of the population in the MENA region is younger than 25. And this factor alone allows for growing market of early technological adopters. Now, the younger, the population, the more flexible and adaptable they are to these types of technological investments and UAE in particular acts as a gateway to a wider region, and enables FinTechs to enter emerging markets across Africa, South Asia, and of course the middle East. Now this expanded region along with being an $8 trillion market is home to 3 billion people, with 70% of them, having limited to no access to financial services. Now, although the middle East constitutes about 1% of the global FinTech investment, this sector is growing at a compounded annual growth rate of 30%. This means that for a mere and significantly smaller investments, the growth levels are multifold in amount. Now at the same time as ADJM and BRC created these environments to foster FinTechs and enabled them to grow, the Central Bank of the UAE and the SCA, the Securities and Commodity Authority, they established a dedicated FinTech office to set national regulations specific to the industry. In 2018, they launched the production strategy, which aims to convert 50% of government transactions to e-payment services to allow these FinTechs to partake in the game. And they're also then, different investment funds who have come up over the years, like the, [inaudible] funds, which have raised almost $1.5 billion capital for tech opportunities. And, and this has led to the emergence of startups focusing on digital banking, blockchain, cryptocurrencies, InserTech, and so much more and close to 85% of FinTech friends in UAE region, are all involved in the payments and transfer sector. Now these developments, are inevitably a product of strategic initiative, champion by a variety of stakeholders. And last but not least UAE FinTech sector has been embraced by, and Emirati banks. And there's some BD ADCB must sort of continua few who are now contributing a significant portion of opportunities for the FinTech sector by involving digital payments, mobile banking, and in 2018 FAB and Abu Dhabi they collaborated to launch the Abu Dhabi Digital Authority to help simplify these types of payments. So I guess I have a strong reason to believe that it was the onset of a mix of various investment political factors and focus growth oriented towards policies that it had set the tone for the FinTech startup, the banking sector, and others to help UAE come through, on different tech accomplishments.
I mean, it's, it's brilliant to see also this, exponential growth here in the UAE. I mean, really they're exemplary. I, as a resident and someone who who's been observing, you know, the kind of commitment that the government has had in identifying, you know, the key trends to follow, it's been really remarkable, but you, you mentioned that the banking sector as well. In Australia, there's data that shows that 300 branches of banks closed last year and, 200 and the fiscal year before that in the middle East, the impact is equally staggering with, like, for example, you mentioned Emirates NBD, they've been leading this change. I mean, they've invested some, 1 billion datums, UAE datums, in digital transformation initiatives in, but like improving their tech infrastructure bank offering, customer experience. But would you agree that the banking sector is behind these exponential figures that we're seeing today? And if so, why is that here more than anywhere else?
Definitely the banking sector has played an important role in the emergence of the FinTech sector. As I already mentioned, UAE banks have adopted fintechs innovations with the significant ease, whether it's ADCB, FAB, MSMBD, they have made it one of their primary objectives, so to speak, to actually employ digital modes of payment and other such services, which have a strong implication on securing the future of FinTech. And these banks have also forged very strong partnerships. We've got the ABCB link, partnership with Plug and Play in order to bring the Silicon Valley accelerator to open the offices in Abu Dhabi and integrate some of the best startups with the UAE comparable institution, and the objective of this partnership, because the promote the MENA region and primary as a finance, travel hospitality and healthcare. Furthermore MSMBD, they announced the partnership in order to certify digital FinTech startups that incorporated Emirates NBD is application programming, interface, sandbox. The API sandbox and is a first in three region and has been an important target met individually bank starts permission program. Now this has been a significant large milestone in the coming of age of FinTech, and to be able to garner support from the companies, banks has been quite a victory to the industry. We definitely can't take these investments lightly since they've had such a major impact on fueling a relatively less popular sector, so to speak. They've also been large scale initiatives and partnerships, undertaken by US financial services company. In 2019 Citi, they have their first, MENA FinTech challenge, offering the FinTech community to rise up to the challenge and set forth their innovations into practical solutions. Through my own experience, I can say that such a move can have an immense the motivating impact on the innovators and founders of these startups. I for one can surely relate to the times when I was in business school, when we had to give mock presentations on business ideas and having these discussion forums often helps, when professors would come in and take part in them, it just helps you to, realign your goals and take a leaf out of the notebook of people who've already been there and done all that. Similarly, in 2018, also MasterCard, they conducted their first Start Path Summit in Dubai. They brought together the FinTech startup regimen on the spheres of artificial intelligence, big data, e-commerce, security, financial, including on payments. To pitch their ideas and solutions regarding financial services of the summit. Such partnerships specifically the one providing them with somebody has definitely allowed the banks to capitalize on these ideas and the technical expertise of FinTech. at a time when technology is the only indication of moving forward. And, all of these developments, if we want to call them, we're bound to have a kind of a trickle down effect as local banks begin to partner with FinTech firms in order to digitalize quickly. For example, on a close interaction I had with one of the local banks, I learned that they adopted the FinTech solution and developed, the digital wallet, which stores users' funds allows them to transfer money through the wallet security. Now, when these big players in the market start adopting changes in their operating and business model, and it's, without a doubt that the smaller one, often they begin to follow suit, and the outcome of this domino effect, if you want to call it, cause, uh, an enormous rise in growth, Fintech, especially in the MENA region and so many other parts of the world, like you, you, you, you stated. FinTech the question as to why simply it's kind of a supply and demand the factories supply, and the manufacturers want to call them, advances in computing power have made available and doable, innovations they're sharing data storage, online modes of business operated through lower transaction costs. In addition, in the wake of the previous financial crisis, various services, such as micro-lending have been minimized, by financial institutions, such as banks, however they've been made available publicly by different tech companies. UAE bank, they were quick to embrace such, such a little bit technology transformations and digitization. Well, that being said, there has been a certain degree of, contradiction in the sector is ability to embrace FinTech as well. There are still cases where some banks are reluctant to integrate FinTechs into their strategy. They're following more of a wait and see approach. Obviously these banks are not yet ready, to leverage the full suite of FinTech at the moment, but they need to partner more with FinTech startups to provide a, a better experience to customer at lower cost. However, the surge is on to constantly adapt and stay connected with a much larger global circuit of changing customer preference and the banking sector. (Inaudible) hesitant has definitely engaged in these significant partnerships and investments and ensuring their own future and in the global FinTech market scenario.
I mean, all of these things are mainly driven by, you know, digital disruption. So when we look at this universe that we're living in currently, you know, a highly digitalized world where all sectors, I mean, nobody's exempt has been either a disrupted or in some cases, knocked off, you know, upside down. This includes the finance and accounting profession, which is, you know, this mainly the audience that we address here at Count Me In and where many of the road tack tasks that, you know, have been taken over by automation are, you know, putting a big question ,ark on what is really the future skillset that people need to kind of maneuver. But if you were to look at the two sides of this coin of this transition, meaning what are the negative implications of say, FinTech on finance and accounting, and on the flip side, how do you think this is actually improving the profession?
Well, as we know, the government has reinforced for pushing for digital transformation with regard to the financial service industry. And that is in order to remain competitive in the global arena, as well as stay on the forefront of evolving customer prime. Now, the Metro region, for example, Middle East, Turkey, Africa is expected to invest $20 billion on digital transformation this year. And up to $40 billion by 2022. And in fact, 30% of the, of the MENA FinTech firms are based in UAE. It goes without saying that such a campaign of this stature is bound to have a major impact on the main industry targeted by the growth of FinTech, whether it's the banking sector and the effect is either direct or spillover effects. Now, if you asked me specifically about the job market, I'd say that it is expected that a considerable shift will take place, with the average age of UAE employee being under 30. Revenue forecasting is seeing the crucial component of planning, and as a result, there have been become a demand for financial planning, analyst, financial managers and developers in 2019. It was just a game of demand. For example, as more and more people switched from traditional cable TV to avidly watching content streaming platforms like Netflix, it obviously created a demand for such platforms to pop up in the near future. The same is true with the job market and demand for financial analysts. And if we talk about the banking sector as more and more customers visit their premises toward digital services, banks have interned also begun to restructure and digitally transform their departments. This has led to a surge in hiring of mixed talent and recruitment of, overseas talent, to the region and the key changes we're witnessing and that these banks are focusing on retraining, redeployment of employees as automation trends, make its way to the banking sector, which is allowing UAE to move towards a more efficient and improved workforce in the long run. However though, the long term effects of this structural shift are positive in the immediate scenario, a majority of your workforce is employed in relatively rote tasks. and this shift has definitely taken a toll on that specific section. And even it kind of created considerable pressure on the current shortage of skilled employees in the market. The ambiguity, the ambiguity of the result is obvious, and I think only time can tell just how well FinTech has allowed for the positive restructuring of the banking sector workforce. But in terms of looking at the banks, the profitability of the banks, I'd say the, the, the FinTech revolution could actually reduce the profitability of some lines of DC banks and change the way they operate. However, major disruption in their lending activity is not expected. That being said, there are some definite negative effects of the same on retail banking that is money transfer and foreign currency exchange as blockchain and cryptocurrencies pose a serious competition for these services. And of course, banks in the UAE you have not been oblivious to the, the growing technological trends. They've invested actively in areas of digital and artificial intelligence. Now their profitability has been, on the down low since the biggest oil slump took place after the 2009 financial crisis. But for the time being, the bulk of the banks main business and the region that is lending, but I think would remain kind of insulted for a significant period of time as it is relationship based on the human added value significantly from corporate relationship managers to decision makers. Yet we can't deny that most or the most of this disruption is the payment business model, since it is more technology intensive and thus it can cause banks to adjust their operations through, staff rationalization, and, brush up reproduction. Now on average banks in city are still extremely profitable and efficient by global standards. When in fact, I believe that FinTech may even continue to be conducive in enhancing efficiency of lending operations rather than disrupt them as a significant proportion of the bank's revenues related to lending, and to advisory activity. Now, statistically speaking, 86% of the banks estimated that no more than 15% of banks, a business would be lost to FinTech in the next five years and allowing for fund transfer and brokerage to be the main business line that will account for the disruption.
I mean, these are, by the way, some that's pretty mild. I mean, 15% is, is mild in contrast to the larger figures that we're seeing on, on AI taking over and the automation just overruling. Most of those wrote tests, which you mentioned, I'm sure that they, they represent more than 15% and that's scale. So when we look at the online collaboration, that's becoming the new modem operandi, realistically we're talking about an entire ecosystem that's been potentially founded in the cloud, you know, with even financial management systems becoming cloud-based, but despite the new laws being applied by regulatory bodies, the GCC naming the net, for example, in the UAE and Saudi, those were the more, most mature markets really at that scale. There are major concerns about around security and data protection when it comes to Findex solutions, amongst other things. this is validated for example, through a substantial increase in the number of cybersecurity focus, FinTech companies, how can accounting and finance professionals ensure that, you know, it's not just ethical, but also secure integration and implementation when it comes to incorporating these technologies in their day to day, once of course, you know, aligning with regulatory compliance and mitigated risk.
Oh, threat of cyber attacks is now everywhere. Be it some using social media networking sites, or even something that my wife and son, sorry, with this online shopping. on average though, they exist almost 45 to 50% and trading of personal information through these social media sites. So really, how safe can this, all banks be in all of this as well? According to a study I read that was conducted by, immune Hub. They are a Geneva based application security company. They stated that approximately 98% of the top 100 global FinTech startups are vulnerable to cyber attacks. Now you can really see just how serious are the threat they pose to financial institutions to risk of data breach, cloud environment, security, risks of innovative curriculum systems and even application security. And now we do with the economy trying to slowly pay its way through the pandemic this year, FinTech innovations deform, a crucial element of the survival. If my years of forecasting and trend analysis has taught me anything, is that the future of the financial system or the financial system itself lies in building a cyber risk free ecosystem, and although it is largely the FinTech startups, that must be responsible to maintain the security, finance and accounting professionals can contribute significantly to strengthening the system o various ways to adapt. And often the question arises as to why our finance and accounting professionals well-placed to type of cyber crime. I know it sounds strange, but it's actually true, and there are three main reasons that I know of when in the field are absolute winners for why these professionals can contribute in battling cyber crime. The first of them is the accountants to assess professional qualification that allowed them to actually quantify costs and perform comparative measures on the cost effectiveness of different security measures. And secondly, finance professionals possess required industry knowledge and extensive strategy input all about not directly in the IP field. And lastly, mitigating and ensuring that risks are managed and come a second nature for accounting and finance professionals. Who've been, who can assess and identify the threats and risks that may endanger their clients and even their organizations. Now with these professionals, think from mine, finance and accounting professionals can become actively involved in planning their company's strategy with regard to countering cyber crime, beginning from the very top of the hierarchy. So CFOs can become and integrally acquainted with the roles and responsibilities of the chief information security officer, and similarly, professionals can also tend to bridge the finance and IP department of their organization and even students, they can opt for streams and their coursework that links to both these fields. It is my understanding that within the organization, finance professionals can determine and analyze the financial impact, even cyber attacks by advising leadership on matters of company-wide preparedness. Defining risk management strategies and other important tasks that can be carried out along with identifying where to best utilize resources, to actually counter cyber threats. Accountants, they can leverage their familiarity with compliance issues, in order to stay on the forefront of legal and regulatory measures that increase liabilities and penalties for organizations in the event of data breaches. And along this thing on the frontline of protecting the company's valuable financial data, complying with protocols and regulations initiated by various organizations and governments to ensure cyber security systems is the bare minimum that any professional within the organization can do. Now UAE banking. And finally security innovation drove the GCC cyber security market to an $8 billion market in 2019. And as a result, finance and accounting professionals who can actively manage it, issues will have an edge over their peers and be in high demand.
This has been Count Me In IMA's podcast, providing you with the latest perspectives of thought leaders from the accounting and finance profession. If you like, what you heard, and you'd like to be counted in for more relevant accounting and finance education, visit IMA's website at wwwimanet.org.