Dubai: The Middle East region is witnessing a big leap in banking sector digitisation and sustainable finance as the UAE moves closer to becoming a cashless economy, Sunil Kaushal, CEO of Standard Chartered Africa and Middle East told Gulf News in an interview.
Going cashless
Consumer behaviours in the region have undergone a massive change in recent years according to Standard Chartered. A recent survey conducted by the bank found that two-thirds of consumers in the UAE expect the country to become fully cashless by 2030. The apparent shift will eventually spur a reconfiguration of physical [bank] branches, which are evolving from being transaction-oriented to focus on advisory services.
“From wealth management to personal banking, we have been experiencing a shift to digital for years. It was a conscious choice for Standard Chartered to adopt a mobile-led digital strategy and to invest in an affordable, easy to roll out end to end digital bank offering but that choice was also driven by changing consumer behaviours and preferences,” said Kaushal.
While the pandemic served as a large-scale, abrupt test drive of these technologies, it has reinforced the importance of championing digital. As an international bank that is deeply rooted in this country, Standard Chartered is investing heavily in technology as it wants to help position the UAE as a beacon of technology for the wider region.
Digital priority
The banking industry in the region has evolved over the past few years, underpinned by disruptive technologies.
“Today’s consumer wants access to a highly personalised and inclusive experience, as well as access to a wide variety of services from the comfort of their homes,” said Kaushal.
The bank sees great potential in disruptive technologies that make banking more accessible, efficient, and convenient. Keeping services in silos is no longer feasible, with consumers demanding all-inclusive experiences from their banks. Open banking, for instance, allows the financial services sector to seamlessly integrate with that of the retail and lifestyle sector, providing consumers with a dynamic blend of services through a singular platform.
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Standard Chartered has been an early adopter of technology in retail and mobile banking, to digital-only banks.
“We vigorously monitor trends across our markets, in order to effectively address consumer demands. A great example of this is the launch of our digital banks across Africa, first launched in Côte d’Ivoire in 2018. Since then, we have rolled-out eight digital-only banks across key African markets,” said Kaushal.
Green financing
Sustainable financing is fast becoming popular among governments, government related entities and financial institutions in the region.
Green bond issuances have picked up over the second half including in the region, Qatar National Bank and Saudi Electric Company both coming to market with first ever green transaction for each respective country.
A further surge in sustainable issuances in the region is expected as banks continue to lend to sustainable projects and companies take advantage of opportunities presented by the energy transition.
“Even before the onset of the COVID-19 pandemic, sustainable finance had already begun to gain significant traction in the region, with sustainable and ESG considerations playing a crucial role in various national strategies, such as Saudi Arabia’s Vision 2030 and the UAE’s ‘Towards the Next 50’ strategy,” said Kaushal.
The volume of debt issuances has remained robust in 2020, despite market disruptions caused by the pandemic. “We initially saw a surge in social bond issuances in the first half of the year, with the proceeds from COVID response bonds going towards areas such as healthcare or other business support measures, such as the Islamic Development Bank’s $1.5 billion issuance in June,” said Kaushal.
International demand has been a significant driver for the green bond market, with European investors in particular offering dedicated green funds that are providing a new source of demand.
Kaushal sees significant number of investors in green bonds coming form from conventional funds universe who are interested in the credit story of the company and see the green element as an added extra – the additional governance and transparency around a green bond can only be a positive.
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Performance outlook
Globally, the Standard Chartered Group delivered a resilient performance beating analyst expectations in Q3 2020, despite challenging macroeconomic conditions.
In the Africa and Middle East region, the bank continues to have a good operating performance, coupled with its strong capital position to help it weather the challenges resulting from low interest rates which will likely to remain low for the foreseeable future.
In the next few months bank expects to see a reduction in operating expenses which will help it increase investments in digital capabilities as well as in our affluent business.
With over six decades in the UAE, the bank has committed its portfolio of proficient financial resources to reinforcing the country’s position as a thriving investment hub. “The UAE will always play a major role in achieving the growth strategy for the Bank; being a major trade hub and gateway to Africa and the Middle East,” said Kaushal.
“We won a banking license in Saudi Arabia in 2019 which enables us to offer commercial banking services in the Kingdom, adding to the robust investment banking operations that we previously ran,” said Sunil Kaushal, CEO of Standard Chartered Africa and Middle East.
The Kingdom is an attractive market for banks given its ambitious diversification efforts which directly translate to large-scale opportunities in areas that we are traditionally strong at. These include project finance, capital markets, trade finance and cash management, among others.
“We take a longer-term view for Saudi to assess key economic drivers whilst also unlocking opportunities for facilitating trade and capital flows. Given the strength of our global network, the bank is uniquely positioned to act as a bridge to facilitating inward and outward investments from Saudi into overseas markets and vice versa,” he said.
The bank expects the opening up of Saudi economy should continue to encourage private sector participation, and investments, especially in sectors that were largely the domain of public sector funding. This provides its global and regional customers an opportunity to participate in attractive sectors such as healthcare, education, entertainment, and infrastructure, among others.
To further reinforce bank’s plans for the Kingdom it appointed Yazaid al-Salloom, in July this year, as Chief Executive Officer of its business in Saudi Arabia, as the bank seeks to expand in the kingdom.