Technology innovation is set to disrupt banking

Technology innovation is set to disrupt banking
Visitors interact with Pepper, a humanoid robot, at Emirates NBD's branch in Dubai.

dubai - It will improve operational efficiency, increase revenue and reduce risk


Issac John

Published: Wed 28 Mar 2018, 6:17 PM

Last updated: Wed 28 Mar 2018, 8:19 PM

Artificial Intelligence (AI), blockchain and FinTech have emerged as the major technological disruptors that will not only change the way banks operate but also help them achieve cost optimisation and enhance customer services.

KPMG's third edition of the annual UAE banking perspectives report reveals how technological innovation and strong corporate governance will enable banks to transform into robust financial institutions.

According to the report, robotic process automation can be combined with AI to differentiate customer engagement. "Some banks are even exploring automated decision-making based on sentiment analysis by extracting data from millions of e-mails and other data sources," said the report.

The report also analyses the validity of exploring and implementing blockchain applications to achieve 3 objectives - improve operational efficiency, increase revenue and reduce risk.

Emilio Pera, partner and head of financial services, KPMG Lower Gulf, said banks in the UAE are operating in very dynamic times. "The introduction of new laws and tougher regulations is putting tremendous pressure on banks to re-think their business models. Furthermore, the introduction of VAT has impacted profit margins."

"All these factors are encouraging banks to embrace technological innovation like never before and use it to engage with customers in new and creative ways," said Pera.

The KPMG report examines each of these factors against an evolving backdrop - including cybersecurity and corporate governance - and presents the road ahead for the next 9 months.

According to the report, as new IFRS standards impact banks across the world, it has brought about far-reaching changes in many areas such as financial reporting, risk management, capital management, regulatory reporting, data sourcing and collection, governance framework and IT systems.

As banks grapple with the new VAT regime and the high compliance costs associated with mandatory VAT registration and the inability for banks to claim all input VAT due to a large proportion of their services being exempt, the report states that banks could be forced to increase their fees to compensate for the additional costs.

The report said cybersecurity has emerged among the top priorities in the board room, as any breach could undermine the trust that customers have in their bank, and affect the future profitability and sustainability of the organisation. The report urges the UAE banks to formalise their response strategy and to consider investing in cyber security.

The report also reinforces that a strong and positive corporate culture will go a long way in helping banks manage regulatory and innovation challenges in 2018.

Pera said last year has seen the emergence of an increasingly disruptive banking sector which has heightened the degree of both opportunity and threat. "Despite this, the general picture is a healthy one, with the sector continuing to surpass that of the wider UAE economy in 2017: the top 10 banks' total asset growth exceeded 5 per cent."


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