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Insight report: Readiness of Middle East banks for payments modernization

Sashi Mundhra
Regional Lead – Solution Consulting, EMEA, Volante Technologies

The Middle East banking sector is a leader in payments modernization, driven by technological advancements, regulatory mandates, and customer expectations. Volante’s annual Big Survey report highlights key trends, priorities, and challenges in this journey, shedding light on the region’s readiness for next-generation payment systems. Below is a detailed summary of the findings.

Organizational capabilities & readiness

Banks in this region rate themselves highly in integrating corporate treasuries and meeting demands for domestic real-time payments. Specifically:

  • Integration with corporate treasuries: 89% of respondents rate their organizations at 5 or higher out of 7.
  • Domestic real-time payments: 67% rank their compliance capabilities at 6 or higher.
  • Cross-border payments: 39% believe their capabilities for real-time cross-border transactions are robust, though this indicates room for improvement compared to domestic systems.
  • Open banking: Collaboration with fintechs using APIs is gaining traction, with 61% rating themselves positively (6 or higher) in this domain.

However, compliance with the ISO 20022 standard for cross-border and domestic clearing varies, with domestic compliance (67% rated 6 or higher) outpacing cross-border efforts (44%).

Most banks surveyed (67%) reported they plan to implement a new payments solution within the next six months, with the vast majority (94%) stating they plan to adopt Payments-as-a-Service (PaaS) models for payments solutions, underscoring a move away from traditional infrastructures. Banks plan to deploy the following cloud strategies:

  • Private cloud: 50%
  • Multicloud: 33%
  • Hybrid cloud: 17%

This shift toward cloud solutions aligns with the need for scalable, efficient systems that support real-time processing and innovation.

Modernization priorities and budgets

Banks are prioritizing modernization, with two-thirds (67%) reporting increased budgets for this purpose. Spending allocations indicate:

  • The top priorities are the deployment of new technologies (56%) and innovation-driven customer value propositions (50%).
  • Maintenance and upgrades of existing systems receive less emphasis, suggesting a focus on a forward-looking strategy.

In terms of financial commitment:

  • Half (50%) of organizations plan to invest between $1 million and $5 million over the next 12 months.
  • Only 6% anticipate spending below $100,000, highlighting the significant scale of modernization projects.

Customer pain points

Banks are keen on prioritizing technology that will address their most pressing customer concerns, which include the following, ranked by importance: 

  1. Efficiency and speed of cross-border payments.
  2. Synchronization of ISO 20022 messaging formats.
  3. High processing costs and integration challenges with bank systems.
  4. Real-time liquidity management and data transparency.

These areas are pivotal in shaping modernization strategies, as addressing these pain points directly impacts customer satisfaction and operational efficiency.

Adoption of payment networks and rails

The region demonstrates robust connectivity to domestic and global payment networks:

  • 67% of banks are connected to multiple domestic real-time networks, with 83% planning to expand within a year.
  • For global real-time networks, 72% are currently connected to multiple systems, and 78% aim to increase connectivity in the next 12 months.
  • Cross-border networks beyond SWIFT are also expanding, with 55% providing access to three or more such systems.

Additionally, there is strong momentum to adopt new payment rails like SEPA Inst, Fedwire, and FedNow, indicating a globalized approach to modernization.

Drivers of modernization

The leading factors prompting investment in payment systems modernization include:

  1. Cost reduction
  2. Competitive parity and the ability to meet evolving customer demand
  3. Enhancing cross-border payment experiences
  4. Minimizing system risks
  5. Improving the payments suite

Conclusion

Banks in the Middle East are making significant strides in payments modernization, leveraging cloud technologies, enhancing connectivity, and addressing customer needs. The focus on innovation, agility, and global integration positions the region’s banking sector as a leader in payments transformation. However, continued efforts in ISO 20022 compliance, cost reduction, and cross-border capabilities will be critical to maintaining momentum and achieving long-term success.

For more insight into recent global payments modernization trends, download The Big Survey report.

Sashi Mundhra
Sashi Mundhra
Regional Lead – Solution Consulting, EMEA, Volante Technologies

Sashi has over 20 years of professional experience in Strategy and Technology Consulting, Pre-Sales, Business Development and Program Management with specialization in Banking & Financial Services projects.

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