Regulators are keen to align the UAE’s digital agenda with the country’s banking industry operations. Neobanks, like the homegrown Zand, are focusing on streamlining operations to conduct high-volume digital transactions. This would cater for the rising demand for digitization and identifying necessary hiring requirements to establish their brands. They are actively improving straight-through processing1 methods to enhance customers’ digital experience, and further leverage data to align products and services with customer expectations.

The typical customer is evolving, and banks need to move with the times. Clients with low amounts of investment capital now collectively form a key potential market. These individuals are looking for highly personalized advisory solutions from technologically sound advisors, and advanced platforms and features, to help them manage their family wealth and succession plans. Digitalization has reduced client-retention costs and improved access to their capital. As a result, many banks are working on strengthening their wealth management businesses. In the short term, banks are expecting growing competition from two types of technologically advanced players: emerging WealthTech firms that are developing advanced B2B and B2C digital solutions, and challenger banks – neo banks and payments firms.

Meanwhile, institutional cryptocurrency adoption is driving innovation in core banking services across custody, brokerage, trade clearing, settlement, payments, lending and more. The global crypto market cap has reached USD 2.03 trillion1 —almost 18% of the market capitalization of gold.2 As of 6 January 2022, the total crypto market volume over the last 24 hours was USD 137 billion. Crypto products and services have demonstrated tremendous potential for growth. Three banking segments – prime brokerage; yield generation via lending, borrowing and staking; and payments – stand out for their profit potential. Forbes identified the “cryptofication of banks” as one of the top five FinTech trends of 2022, due to increased demand, supply, and indeed banks’ fear of missing out. It commented: “For banks, crypto will be to 2022 what social media was to 2015.”

The banking sector is also subject to mounting pressure from stakeholders and an ever-increasing list of regulations which require environmental, social and governance (ESG) considerations to be embedded in the way they operate. Financial institutions play a pivotal role in providing funding to combat climate change, challenge and incentivize ESG practices within their customer base, and support organizations as they work toward addressing the UN Sustainable Development Goals (UN SDGs). ESG is no longer a choice: it is an imperative. In fact, in a global survey by KPMG International in 2021, 75% of financial services (FS) CEOs were looking to lock in the sustainability and climate change gains made during the crisis. Thirty-four percent plan to invest more than 10% of revenues in their sustainability efforts. 

Neobanking 101: the evolution of digital banking in the UAE

We were delighted to invite a digital banking sector leader to KPMG’s Dubai office, for a conversation with Abbas Basrai and Goncalo Traquina. Olivier Crespin, co-founder and CEO of Zand, tells us about the rising importance of neobanks in the post-pandemic period.

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Wealth management 2.0: a new wave of digital upheaval

The UAE is emerging as one of the leading destinations for wealth management and private banking globally, driven by a burgeoning HNWI (high net worth income) population that demands technologically advanced and highly customized banking and management solutions. Goncalo Traquina offers insight on trends and recommendations for financial institutions.

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The meteoric rise of cryptocurrency

How banks compete in the digital world has changed forever. Paritosh Gambhir elaborates on the growing market acceptance of cryptoassets, the rapid advancement of cryptocurrency technology, and the burgeoning participation of financial institutions in the this market

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ADGM has been growing its position as a destination of choice for virtual assets and digital assets investors and catering to global demand from the industry. As an International Financial Centre, ADGM is also the first jurisdiction in the world to introduce a thorough and bespoke regulatory framework for the regulation of virtual assets activities, including those undertaken by multilateral trading facilities, brokers, custodians, asset managers and other intermediaries. The Financial Services Regulatory Authority is the regulator of virtual assets activities within the ADGM jurisdiction. Its broad framework facilitates the operation of industry leading virtual asset players in a business-friendly environment. Most importantly, ADGM’s virtual assets and digital assets regulatory framework addresses the full range of associated risks, including those relating to market abuse and financial crime, consumer protection, technology governance, custody and exchange operations. Amongst the many truly unique aspects of ADGM’s Virtual Assets framework, the provisions relating to market abuse and transaction reporting obligations apply.

ADGM Financial Services Regulatory Authority

fadi

Fadi Alshihabi

Partner, Sustainability

ESG in everything we do

Financial institutions play a pivotal role in providing funding to combat climate change, challenge and incentivize best ESG practices, and support organizations in addressing the UN Sustainable Development Goals (UN SDGs). Fadi Alshibabi argues that ESG is no longer a choice: it is an imperative.

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