In March, 2020, fresh into the unknown challenges of the pandemic, Qatar Central Bank (QCB) launched the Qatar Mobile Payment System to provide customers with a new and safe method for immediate electronic payment.
It seemed like a simple enough option to allow customers a touch-free experience with the convenience of an electronic wallet to make purchases via mobile interface and check the balance on the go. For vendors, it also came with a QR code to be shared at the point of sale to accept payments. But on the back-end, this involved creating a robust infrastructure, connecting core legacy systems already in use, setting up security to protect the bank and its countless users, and follow State-level compliance protocols. This was no small feat at all.
For Qatar, digital infrastructure offered business continuity and a significant step towards a long-time goal of financial inclusion. All of this and more had been outlined in the Qatar National Vision 2030, a nationwide goal that’s been in the works since 2008. The year 2020 accelerated the pace at which technology was adopted multi-fold in Qatar, as it did in the rest of the world. Qatar’s economic ecosystem seems to be in the midst of a face-lift is driven by the enthusiastic adoption of fin-tech and supported by traditional heavyweights like the Qatar Central Bank and the Qatar Financial Centre.
Early-adopter benefits
Financial services have long been considered early adopters compared to other industries. A recent report by The Economist Intelligence Unit found that the financial services sector was best-prepared to support resilience measures during the pandemic. The sector still faces technological challenges like keeping up with the pace of change and integrating new technology into legacy systems. But respondents were positive about how digital transformation could help open up services to communities and markets that have previously been underserved.
The report suggested that the immediate next step would be skill-building, a necessity for a sector that will require a more data-savvy workforce to build and manage new services, analyse data and remotely guide customers through the process of digital transactions.
Agile as a survival tactic
In their report, KPMG Qatar report outlines the pandemic’s implications for banking in relation to businesses, employees, suppliers and customers. It acknowledges the efforts by the state to soften the blow. These include reducing the lending rate, postponing the instalments of all borrowers for a six month period and extending guarantees to local banks. Yet, it notes that those banks that are agile, flexible and willing to transform business models will be the ones that succeed, and secure their financial strength for future growth. Those that rest on their laurels will be left behind in an increasingly more competitive sector.
Banks will need to maintain the momentum to keep up with customer needs and to stay ahead of the competition. The debate is no longer about whether digital infrastructure is the key or not. Traditional banks are locked to invest more than ever before in technology to accelerate their digital transformation in the next three years.
Still, banks need to follow compliance laws and reinforce legacy systems to integrate with newer technologies. The ability to spot and quickly smooth over any bumps will be key to making the experience better for customers and avoid reputational damage. After all, trust is key to customers choosing banking services.
Also Read: 5 Ways Cloud Is Helping Banks Drive Operational Resilience
Keeping up with the competition
It’s a steady race for banks, starting with improving web channels and personalising experiences. The customer is ready for self-service options. This can be achieved through self-selection navigation, targeted online banking communication, intelligent assistants — all of which reduces the need for more front-end staff. According to a Juniper research paper, the operational cost savings from using chatbots in banking will reach $7.3 billion globally by 2023.
The next step is digesting all the data they are receiving from their digital channels.
Open banking APIs (Application Programming Interfaces) powered by advanced analytics and advanced AI can provide richer real-time personalisation. They also allow for any-time banking with the convenience of reaching your customer through a mobile interface. For the next generation of bank customers, these features are non-negotiable.
Improving customer experience (CX) is seen as the biggest benefit of a digital transformation. But providing improved CX depends purely on how agile banks are with using the newly found data points to predict what customers want, develop products that suit those unmet needs and deliver them quickly. Other functional benefits include lower operational costs, risk mitigation, better security and an easier way to develop and test new products quickly.
Also Read: Digital Transformation’s Impact on Industries: Microsoft Report
Test of digital maturity
PWC’s Qatar report discusses how through a unified approach, Qatar’s eight publicly listed commercial banks (Ahlibank, Commercial Bank of Qatar, Doha Bank, Al Khaliji, Qatar Islamic Bank, Qatar International Islamic Bank, Qatar National Bank and Masraf Al Rayan) have weathered macroeconomic headwinds and demonstrated resilience throughout 2020, with aggregated results being marked by the growth of assets.
In keeping with the national objectives, the State even set up Qatar FinTech Hub, an accelerator programme that chose 24 FinTech start-ups to collaborate with multiple financial institutions in Qatar and the Middle East region. The sweeping tech-first wave in the financial sector is evident in Qatar Islamic Bank’s (QIB) move to launch a conversational virtual assistant, armed with proprietary Al and ML algorithms earlier in May. Zaki, is designed to provide relevant and contextual responses to customers’ queries.
The Islamic Development Bank Institute recently published a report entitled Artificial Intelligence and Islamic Finance: A Catalyst for Financial Inclusion. It talks about how technology can be leveraged to drive sustainable development through the principles of inclusive participation and risk-sharing. A simple example is how it tackles the credit scoring issue for Micro, Small and Medium Enterprises (MSME). In the past, MSMEs faced difficulty accessing financing for their operations through formal institutions due to informational asymmetry. This presented a significant barrier in the absence of a regular, verifiable stream of income or credit history for any loan application.
Recently, access to data from multiple sources and higher computational power has evolved the way credit risk is assessed. The report points out that the adoption of AI results in an objective, well-informed decision. The future is a digital footprint that includes data from alternate data sources like mobile phones, social media, rental payments and psychometrics which will contribute to the assessment of creditworthiness by applying more complex methods for credit risk assessment. The report puts forward how data inclusion will lead to financial inclusion without discrimination.
