INDUSTRY WATCH
Five recommended actions for MENA commercial banks
# 1 Engage with central banks to roll out modern central infrastructure Commercial banks need to work proactively with their central banks , or through consortia , to co-design and roll out a modern central infrastructure and digital payments platform . Such engagement will enable them to capitalise on growing technology disruptions rather than to be threatened by disintermediation , and to increase revenue streams with more compelling market offerings .
# 2 Establish the right balance between bank cooperation and competition While competition enables innovation , the creation of siloed solutions that lack interoperability results in limited consumer pools . Commercial banks in the region need to commit to governance structures that strike the difficult balance between collaboration and competition with their peers . Value can only be created through network effects when sufficient cooperation takes place among a critical mass of commercial banks , which must collaborate to launch a single , interoperable solution that is easily adopted and can be used seamlessly .
# 3 Develop new products and services To compete with regional and international technology players , commercial banks need to start designing and rolling out innovative products and services that meet evolving consumer needs . Governance and cooperation are central components of launching these new products and services , but so too are their product development function ’ s speed , modernisation , and strength of organisational linkages .
# 4 Build healthy consortia Capabilities of non-bank stakeholders should be leveraged and integrated into niche areas of new bank products and services to increase their competitiveness and market appeal . Core competencies of different stakeholders can be better leveraged if the appropriate value proposition is defined upfront . For instance , technology players can extend infrastructure ; telecommunication providers can help strengthen communication security , promotion , and distribution ; payment aggregators can provide SMEs with integrated e-commerce and e-payment platforms ; and national identity authorities can bolster customer authentication services to enhance the overall value proposition of banks .
# 5 Partner with and incubate FinTech startups Banks often lack the agility and IT budgets required to effectively innovate to meet market needs . By partnering with or contributing to the incubation of FinTech startups , banks can offer more competitive products and services while incurring less upfront cost . If executed properly , these partnerships can marry the resilience and compliance of bank-based models with the innovation and entrepreneurship of startups , creating compelling offerings that will create the next waves of revenue streams .
Decreasing cash reliance and addressing growing challenges in retail payments should be leading priorities for central and commercial banks in MENA countries if they are to unlock the significant benefits derived from the creation of an inclusive digital economy .
The fate of central and commercial banks in the MENA region lies largely in their own hands . Inaction will entail the continued predominance of cash-based economies , and result in persistent social costs across the economy , limited controls for central banks , and lost revenue for commercial banks and SMEs .
72 INTELLIGENTCIO www . intelligentcio . com