Community Blog

How B2B Payments Modernization Will Sustain Growth in the Middle East Banking Sector

Corporate banking plays a major role in the Middle East banking sector, accounting for nearly 75 percent of total banking assets and contributing some 60 percent of total revenues. The COVID-19 crisis is likely to accelerate the digitization of wholesale transaction banking—a set of services that includes domestic and cross-border payments, cash management, trade finance, and working-capital solutions.

As competition strengthens amid ongoing bank consolidation and new fintech entrants, the need for greater efficiency and differentiated services—value-added services on the back of ISO 20022 enriched data, faster connectivity/integration, reduction in manual processes, better liquidity management, etc.—across all B2B payment services intensifies.

In the spirit of collaboration, Onur Ozan Regional Head, Middle East, North Africa & Turkey of SWIFT and Rachel Hunt, VP of Growth at Volante Technologies sat down to discuss the most pressing payments questions in the Middle East and SWIFT’s vision for the future of payments – that  payments and securities transactions should be instant, frictionless and transparent, with end-to-end integrity. The entire process should be driven by smart data, allowing the cooperative to deliver mutualised services that work for customers today and tomorrow. And success will only be possible through a focus on co-creation.

How do you see B2B payments evolving in the Middle East region?

The financial services industry is undergoing significant disruption, driven mainly by a shift in customer expectations, evolving regulation and new technology. As the competitive landscape changes, and challenger banks and non-financial institutions fight for their share of the market, incumbent players are becoming more agile and redefining their business models to tackle these challenges head-on.

To ensure they remain competitive in this rapidly changing environment, financial institutions are innovating, embracing new technologies, streamlining their operations and collaborating with fintechs. All this needs to be done while building on their traditional strengths – a large established customer base and rich customer data; risk management capabilities; balance sheet strength; industry knowledge and trust – to future-proof their businesses.

Customers today are more demanding than ever and improving their experience is the key to future success. They want seamless experiences across channels and highly personalised service offerings.

The Covid-19 pandemic is accelerating many of these trends. In particular, it has driven focus on digitisation and the need to reduce costs, both for financial institutions themselves and for the end consumer. In this environment, it is vital that financial institutions act collaboratively and reduce the investment fragmentation seen today. Crucially, the pandemic increases the demand for co-operative solutions that can help the industry improve products and services and reduce cost.

As a result of these trends, domestic payment infrastructures are redesigning and renewing their systems to deliver the services that customers have come to expect. Real-time gross settlement systems are being modernised and instant 24/7 payments are now a reality in a growing number of countries across the world. In the Middle East, the UAE, Jordan and Kuwait have already or are set to launch payments system modernisation projects; meanwhile, Bahrain is already offering instant payments and Saudi Arabia is expected to launch its instant payments scheme later this year.

Many regions across the world, including the Middle East, have embarked on regional harmonisation and integration projects. Forging regional ties through integration and cooperation can eliminate obstacles to trade and make the region more competitive in the global marketplace. For example, The Arab Monetary Fund, in partnership with SWIFT, has launched ‘Buna,’ a regional payment platform that enables regional financial institutions to send and receive cross-border payments across the Arab region and beyond.

Data-led innovation by existing players is accelerating and serving as a catalyst for new offerings and business models. Rich data and digitisation are key to both reducing friction and enabling better services, and ISO 20022 has a vital role to play here in enabling richer structured data that improves automation and processing to power the services of tomorrow.

Standards that define the content and meaning of financial messages are the key to financial industry automation, ensuring that transactions are processed safely and efficiently. Unambiguous data allows institutions to exchange messages in a more automated way, reducing costs and minimising risks.

The adoption of ISO 20022 lays the foundation for vastly improved payment processing efficiency and interoperability between payment systems. Our strategic vision aims for instant and frictionless transactions where rich ISO 20022 data is the foundation. It will enable the community to reap the benefits of rich data more quickly, while adopting ISO 20022 in a less disruptive way.

What’s next for Middle East payments?

We live in a world of incredible change intensified even further by the exceptional challenge of a global pandemic. New technologies and rapidly changing customer expectations are both challenging existing business models and creating new opportunities for established players. The financial industry needs to keep evolving.

As banks and financial institutions in the Middle East continue to develop their payments strategies, achieving fast and frictionless end-to-end transactions will be key to improving their ability to rapidly adapt to ever-changing market drivers.

SWIFT is already working with banks and technology partners in the region to achieve an instant, frictionless experience for cross-border payments with SWIFT gpi. Many banks in the Middle East are already live or in the process of adopting the service. And we are taking it a step further by integrating SWIFT gpi into domestic real-time payments systems around the world. Through a combination of gpi and domestic real-time payments networks, SWIFT, together with gpi banks, will facilitate real-time international payments with fee and FX transparency for senders, while also ensuring ubiquitous availability of real-time cross-border payments globally.

Together with our technology partners, like Volante Technologies, we have a pivotal role to play in helping the industry benefit from shared solutions that result in far-reaching change.

Learn More

SWIFT Initiatives

Middle East Payments

Payments as a Service

ISO 20022 Migration

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