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UAE tops in appetite for financial services innovation

The survey by Finastra shows that 71per cent of financial institutions in the UAE regard open finance as a ‘must have’, up from 50 per cent in 2021 while 94 per cent agree it is making financial services more collaborative

The UAE has emerged as a global leader in appetite for financial services innovation with the majority of financial institutions considering open banking as unequivocally important.

The survey by Finastra shows that 71per cent of financial institutions in the UAE regard open finance as a ‘must have’, up from 50 per cent in 2021 while 94 per cent agree it is making financial services more collaborative.

Both figures are considerably higher than any other market surveyed as 94 per cent of respondents note that it is already driving collaboration and having a positive impact in the UAE, suggesting the industry’s increasing appetite for embracing an ecosystem model.

The Financial Services: State of the Nation’s Survey 2022, also finds that environmental, social and governance (ESG) initiatives have become a board-level agenda in the UAE. Some 96 per cent of respondents state that ESG is important and nearly all (99 per cent) agree that financial institutions have a responsibility to support the communities they serve, up from 88 per cent last year. Both figures are higher than the other markets surveyed, emphasizing the region’s commitment to creating a sustainable and inclusive industry. The appetite for green lending is also highest in the UAE, with 94 per cent agreeing that it presents an opportunity for growth and revenue generation.

“Over the years, we have seen open finance grow from an emerging idea to a clear priority for institutions across the world, enabling, as it does, business model shifts such as embedded banking, as well as financial inclusion and equality. This is particularly evident in the UAE this year, with our survey highlighting leading sentiments and remarkable increases, in comparison to last year, in the region’s appetite for openness and collaboration, as well as driving the ESG agenda forward,” said Simon Paris, chief executive officer at Finastra.

The research was conducted amongst 758 professionals at financial institutions and banks from August to September 2022 across France, Germany, Hong Kong, Singapore, the UAE, the UK, and the US. It explores the Open Banking and Finance landscape, the technology and initiatives set to make an impact in financial services over the next year, and the growing importance of ESG.

The UAE is substantially leading the way in the journey to the cloud, with almost two-thirds (63 per cent) having all or most of their software stack on cloud-based solutions and a further 23 per cent splitting equally between cloud and on-premises solutions. The main drivers of technology spending in the UAE were cited as the improved visibility of risk and the agility to adapt to market changes.

The UAE also leads in Banking as a Service (BaaS) and Embedded Finance sentiment as 95 per cent of institutions agree that BaaS and embedded finance are already expected or demanded by customers, higher than the other regions surveyed.

Almost two-thirds (63 per cent) of UAE institutions state that antiquated thinking and/or practices are the biggest hindrance for innovation. Additionally, it is the only region that sees culture as the primary barrier for collaboration, with a ‘change in culture (46 per cent) and ‘internal culture’ (43 per cent) being the two major obstacles, said the survey report.

— issacjohn@khaleejtimes.com