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Middle East ROE is highest in the world

Banking is evolving in response to digital transformation and new players

The Middle East enjoys some of the highest returns on equity (ROE) in the world, with returns ranging between 12 and 16 per cent. This compares to North America, where ROE ranges between 8 to 12 per cent, Europe with returns between 5 to 8 per cent, and the APAC region at 10 to 12 per cent, a an industry veteran said.

“They have enjoyed higher profitability due to high oil prices and sovereign wealth investments,” Manish Maakan, CEO of Intellect Global Transaction Banking (iGTB), told Khaleej Times in an interview.

Banking is evolving in response to digital transformation and new players in the field, like FinTech and other similar entities, he said. “There is a shift towards a digital-first approach. If you look even in the Middle East, even in the UAE, ENBD started Liv, and Mashreq started Neo. This move towards a digital-first model can fundamentally change the customer experience.”

Traditional banks are now focusing on fee-based incomes and partnerships with FinTechs and non-banking financial institutions. “You got to manage both sides of the balance sheet, explore different lending structures, and develop more structured products. They are driving more fee-based income, look at different lending structures, look at more structured products around their, look at driving more fee based income, look at FX as banks began handling out look at advisory services.

With the Middle East’s growing wholesale banking sector, banks are increasingly seeking robust platforms like the Intellect eMACH.ai Wholesale Banking Cloud. Such platforms enable financial institutions to harness AI-driven, autonomous, and cognitive capabilities for a complete digital transformation, enhancing operational efficiency, product innovation, and customer personalisation.

The regional shift towards digital-first banking calls for a platform that can deliver scale, security, and agility to keep pace with evolving regulatory and competitive landscapes. eMACH.ai’s enterprise-grade, cloud-enabled solutions are ideally suited to support Middle Eastern banks in meeting these goals and realizing sustained growth. Intellect currently is trusted by more than 40 banks in the region.

“The biggest thing is on real-time payments and instant gratification is coming in both retail and corporate commercial world. In retail, digital wallets are growing quite well, and open banking and ecosystem play is really helping all of this. We have no choice to sit out but to be part of this journey, got to transform yourself faster. The biggest one I am seeing right now is embedded payments when an event happens and time you are able to execute to it. For cross-border transactions, FX becomes a core aspect of being able to leverage. AI is really helping to scale all this, there is a lot happening. I think the regulatory environment is challenging but also supportive to migrate towards it,” Makaan said.

In the region, there is a lot of support on bringing inflow of investments and giving support to AI and tech companies over here. Tailored credit structures products, helping with initial VC funding, how does it happen, helping drive convertible loans, invoice financing, and different products to support them. Real-time liquidity is able to manage, how are you able to look at all your products and leverage and manage your balance sheet and these is also critical. These new FinTechs are focusing a lot on cross-border transactions, so FX pricing and hedging options are vital. Look at support for supply chain capabilities. There’s a lot happening right now in the market on this Some banks are really moving forward, while others are still on outdated infrastructure. ESG is also playing a big role now. How do you promote sustainable loans? All of those plays are in there,” Makaan said.

Despite all the improvements in technology, the physical bank will not go away. “You can’t just replace a bank entirely. You need to focus on hotspots where technology can coexist and help monetize assets. Our philosophy is about orchestrating events in a consumer’s or corporate’s life to offer the right services at the right time, creating APIs for connectivity, and offering these at scale. Banks need to contextualize what they offer to their customers,” Makaan said.

Most transformation journeys don’t start by replacing the bank’s core, which is the hardest part, he stressed. “You start at the customer layer, integrating onboarding and customer channels. You de-layer the products in the market. Right now, we focus on wholesale banking, offering cash products, deposit products, and lending products. We think about it in three aspects: how to help customers make money (through lending products), manage money (through deposits, investments, and liquidity), and efficiently move money. We have a significant market share here, and we continue challenging ourselves, asking, “What more does the customer need?” We are investing heavily in R&D, and AI is helping us tremendously,” he added.

Makaan made a critical distinction most people don’t realise. “We should distinguish between cryptocurrencies and digital currencies. I still believe that cryptos are not something banks will easily jump into, nor will regulators allow it. Exchanges like Binance provide platforms for trading, but digital currencies will bring efficiency, especially in removing idle cash,” he said. “Banks are piloting CBDCs, and the UAE is leading the way. In our home market of India, the RBI is running pilots, and we’re working with them on CBDCs as well,” he added.