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Khaleej Times
a day ago
- Business
- Khaleej Times
World moves toward a digital-first financial landscape
The fintech revolution is significantly transforming the financial landscape, providing innovative solutions that enhance accessibility, efficiency, and user experience, but it still requires strict regulations to protect consumer data and financial assets, experts say. Leading executives, analysts and experts said technologies such as mobile banking, blockchain, and artificial intelligence (AI) are enabling seamless transactions and personalised financial services, catering to a diverse range of consumers, including the unbanked population especially in the developing countries. They are of the view that fintech companies are disrupting traditional banking models, offering faster loan approvals, lower fees, and enhanced transparency. However, this rapid growth comes with challenges, primarily concerning security, privacy, and regulatory compliance. 'As fintech expands, the potential for fraud and cyber threats increases, necessitating stringent security measures to protect consumer data and financial assets. Furthermore, the lack of comprehensive regulatory frameworks can lead to inconsistencies and risks in the market,' they said. To ensure sustainable growth and consumer protection, fintech must evolve alongside regulatory developments and policymakers need to adopt adaptive regulations that foster innovation while addressing risks, according to an expert. 'Collaborative efforts between fintech firms, traditional banks, and regulators can create a balanced ecosystem that encourages growth while safeguarding against potential pitfalls. In this way, the fintech sector can continue to revolutionize finance, ensuring that technological advancements align with societal expectations and regulatory standards,' he said. Disrupting Finance Industry Nicholas Wright, Head of Institutional Sales, Saxo Bank, said fintech is all about disrupting the finance industry, and its influence is felt across various sectors, including banking, insurance, and telecommunications, as finance is at the core of every industry. The Middle East, particularly the UAE, is striving to establish itself as a global hub for fintech in the coming years. 'Traditionally, cities like London, New York, and Hong Kong have dominated the financial sector due to their well-established banking systems and infrastructure, which now require modernisation. The presence of these extensive financial ecosystems makes them a natural fit for fintech startups, which often emerge to address inefficiencies or gaps in existing systems,' Wright told BTR. 'What sets the UAE apart is its government's proactive approach to fostering a supportive environment for fintech. The country has established regulatory sandboxes, allowing startups to test their ideas without the usual barriers. This initiative makes the UAE an attractive destination for new fintech companies, particularly as its financial sector continues to expand, offering ample opportunities for partnerships,' he said. A prime example of this transformation is e&, formerly known as etisalat. The company has evolved into a fintech powerhouse, offering a range of services through its platform, from payments to investment opportunities. This shift aligns perfectly with the notion that telecom companies, with their vast customer bases, can collaborate with fintech firms to enhance their offerings and add value to their users' lives. The UAE's future vision includes becoming a leading digital hub by embracing digital currencies, banking, and payment systems. By offering incentives and support for innovation, the country is actively attracting cutting-edge companies away from traditional financial centres. Meanwhile, Saudi Arabia established the King Fahad Financial Centre and also aims to attract more fintech companies to the country. These transitions mark a shift from conventional banking methods to a future driven by digital currencies and blockchain technology. Additionally, fintech is evolving into the realm of 'super apps' — comprehensive platforms that function like supermarkets for financial services. These apps enable users to manage multiple financial activities in one place, from booking flights to handling investments and accessing wealth management services. E& money exemplifies this trend by striving to offer a full suite of financial services through its platform. 'The UAE is betting on the idea that technology and fintech will redefine financial centres, potentially reducing the reliance on traditional hubs like London and New York as the world moves toward a digital-first financial landscape. It's an exciting transformation that could fundamentally reshape how we think about money and financial services,' Wright said. Challenges, Regulatory Issues Arun Leslie John, Chief Market Analyst at Century Financial, said the rapid growth of fintech globally has developed numerous obstacles and regulatory issues for fintech applications. 'Venture capital is still one of the biggest hurdles for fintech startups. Investors are sceptical about startups' sustainability in the long term and pose questions regarding the problem the product solves, market size, and probability of success. Convincing the investors takes careful financial planning, long-term perspective, and proof of the idea with figures or user surveys,' John told BTR. Meanwhile, finding the right investor to discover and acquire is also key to a startup's success. Startup business conferences and startup accelerators offer avenues to connect with potential investors. Differentiation from competitors involves a complete pitch deck presentation covering company overview, problem-solving, market opportunities, business models, and financial projections. In addition, competition with established financial and technological giants like PayPal and Amazon is a hard challenge for fintech startups. In order to be successful, startups could consider niches of the market where titans are not so powerful or have fateful problems of digital finance development. In B2C or B2B industries, startups should introduce new solutions in order to be the market leader. Furthermore, regulatory regimes are constantly evolving, and the evolution can facilitate or hinder the growth of FinTech solutions. For instance, regulations like PSD3 in the EU and Consumer Duty regulations in the UK are attempting to enhance consumer protections. 'But there are issues as well. The Buy Now, Pay Later sector is coming under the lens as well, with countries like Australia now requiring formal credit checks for operators. Regulations have always driven innovation, though, as one can see from the UK's open banking platform,' John said. He said the international cross-border payments market is also experiencing dramatic changes, and inefficiencies in the conventional financial system are paving the way for disruption. Fintech players are stepping in and offering simplified transactions, and instruments like stablecoins are offering real-time settlement and reduced charges. 'The question is whether governments will embrace these innovations or focus on protecting traditional banks. With online trade, supply chains, and remote work, efficient international transactions will be vital. Companies that will be in a position to anticipate and adapt to regulatory shifts are likely to succeed in this new world,' he said. Regulations Need to Navigate Wright of Saxo bank said fintech entrepreneurs often come from tech backgrounds, such as software or web development, where regulation is not a major concern. However, when they step into fintech, they quickly realise they are entering a highly regulated space. 'In fact, nearly 80% of entrepreneurs underestimate the complexities of the regulatory landscape they will need to navigate — an issue that is experienced globally. The UAE government is actively working to ease this transition for new fintech companies. Initiatives like the regulatory sandboxes at ADGM and DIFC allow businesses to test their ideas in a controlled environment, helping them refine their models while addressing compliance requirements,' he said. 'For fintech firms to operate effectively, they must obtain a certain level of regulatory approval. Banks are generally reluctant to partner with unlicensed fintech companies, yet regulators often require a working product before granting a licence. This creates a frustrating cycle where companies need a licence to grow but also need a proven concept to secure that licence,' he added. Scaling fintech businesses in the GCC presents additional challenges, particularly due to the region's relatively small populations. While Saudi Arabia offers a larger market, other countries must navigate regulatory differences that impact growth. 'Each nation has its own set of rules, with most requiring that customer data remain within national borders. This poses a challenge for fintech firms, which typically rely on cloud-based services for operational efficiency.' He said the requirement to store customer data on local servers means that many fintech startups cannot leverage cloud hosting — often the most cost-effective and scalable option. 'Instead, they are forced to establish physical infrastructure, which increases costs and slows expansion. While fintech is designed to minimise physical constraints, these regulations push firms toward more traditional operational models.' The path to success in fintech is far more complex than many entrepreneurs initially anticipate. To thrive, they must strike a balance between technological innovation, regulatory compliance, and market adaptability. Transformation to Stay Wright said fintech is at a pivotal moment where nearly every financial process and transaction can be digitised and enhanced. This transformation is ongoing and here to stay. 'Established banks like Emirates NBD, First Abu Dhabi Bank and Saxo Bank, etc., will likely continue to thrive by expanding their digital capabilities and adapting to the evolving financial landscape. As a result, the future will likely see a blend of traditional banking institutions alongside innovative digital solutions,' he said. At the same time, he said significant consolidation is expected within the fintech space. 'While fintech companies excel in technology, they need customers to sustain their business. Post-Covid, the surge in digital banking demand led fintech firms to prioritize customer acquisition over profitability, resulting in inflated valuations based on user numbers rather than actual earnings.' However, with rising interest rates and tighter financial conditions, the landscape is shifting. Raising funds remains possible but is now more challenging, and fintech firms must compete aggressively to attract both customers and investors. Consolidation seems inevitable — fintech companies will increasingly merge or acquire one another to achieve scale and sustainability. 'Looking ahead, we may see two key trends: traditional banks incorporating and collaborating with fintech firms or large fintech players expanding by acquiring smaller firms. These emerging fintech giants could eventually compete directly with traditional banks,' he said. Additionally, fintech has the potential to revolutionise financial inclusion, particularly in Africa and Asia, where large unbanked populations still lack access to financial services. By leveraging technology, fintech can bridge these gaps and democratise banking access. 'This momentum isn't slowing down, especially with the Middle East emerging as a major fintech hub. The rise of fintech in the UAE and beyond is positioning the region as a formidable competitor to established financial centers like London,' he said. Promising Outlook John of Century Financial said fintech is poised for growth in the next five years, driven by technological advancements and increasing digital adoption. 'The fintech market is valued at an estimated $356.79 billion in 2025 and is projected to grow at a compound aggregate growth rate (CAGR) of over 14% in the next five years, reaching $686.85 billion by 2030. North America currently leads the fintech market, while the Asia-Pacific region is expected to grow at the highest CAGR,' he said. He said one of the main drivers of this growth is embedded finance. It involves integrating financial services into non-financial platforms like social media and ride-hailing apps. 'PayPal, Stripe and Square are leading this segment, offering loans and payment options to users right within their daily routine. The Buy Now, Pay Later trend is also rising, changing how people access credit.' Meanwhile, artificial intelligence and machine learning are transforming wealth management, risk assessment, and fraud detection, making financial services more efficient and personalised. John said the fintech landscape is also evolving with the emergence of decentralised finance (DeFi) and central bank digital currencies (CBDCs). 'Innovations in DeFi, like advanced lending protocols and blockchain-based insurance platforms, are pushing for a more transparent financial system. Central banks worldwide are exploring CBDCs to improve financial inclusion, streamline transactions, and reduce the complexities of cross-border payments,' he said. 'As fintech continues to grow and innovate, it's reshaping the global financial landscape. In the future, we can expect financial services to become even more integrated into our daily lives, making transactions smoother, more data-driven, and more sustainable. 'With companies pushing the boundaries of innovation across payments, lending, wealth management, and blockchain solutions, fintech's influence on the future of finance will only grow stronger,' John concluded.
Yahoo
27-05-2025
- Business
- Yahoo
Global Banks Need Bold Transformation to Unlock Growth in a Fast-Shifting Landscape
New BCG report warns that banks are at risk of being sidelined by rising fintech and nonbank challengers Winning banks succeed by growing at scale, increasing their share of fee income, and delivering sustainable improvement of operating leverage Successful strategic implementation of artificial intelligence (AI) could be a game changer, but many banks still struggle in this area BOSTON, May 27, 2025 /PRNewswire/ -- Traditional banks are losing their grip on industry growth, according to a new report from Boston Consulting Group (BCG). The global banking industry has grown at a compound annual growth rate (CAGR) of 4% over the past five years, but traditional banks are ceding the most valuable ground to fintechs, digital attacker banks, private credit funds, and nonbank market makers. Incumbent banks have relied on balance-sheet-driven net interest income to contribute roughly 85% of the growth. Yet they struggle to generate capital-light noninterest income: while it grew by 1.8% in absolute terms, the relative amount generated per asset decreased by 18%. The report, titled Fit for Growth, Built for Purpose, reveals that these shifts pose a structural challenge to traditional banks and calls for bold transformation and a rethinking of the relationships that link banks, regulators, and wider society. "Most banks are frustrated with slow value realization from AI and GenAI. The new technology hits the formidable walls of legacy infrastructure and, more importantly, legacy culture," said Saurabh Tripathi, a BCG managing director and senior partner, global leader of BCG's Financial Institutions practice, and a coauthor of the report. "At the same time, regulators must modernize the regulatory context in which banks operate so that productivity is a shared priority—and it is time to ask if the mandate for banks is broader than maturity transformation." Eroding Dominance of Traditional Banks In retail banking, challenger banks and fintech platforms are gaining ground in both customer share and investor confidence. In some markets, the customer bases of digital-first banks are now on par with those of traditional players. In corporate and investment banking, nonbank liquidity providers and private credit funds are capturing significant parts of the revenue streams that traditional banks have long dominated. Meanwhile, the rapid rise of stablecoins and tokenized assets signals that a broader realignment of financial infrastructure is looming on the horizon, as stablecoins alone processed roughly $4 trillion in transaction volume in 2024. Banks also face internal pressures. Despite significant technology spending, many are not realizing expected productivity gains. In several major markets, including Europe and the UK, elevated tech investment has not translated into greater efficiency. And while challengers continue to scale, many traditional banks still use cost-to-serve models that are up to ten times as expensive to operate. Lessons from the Winning Banks Looking at leading banks, the report notes three patterns that the market rewards: scale (not size), specifically in terms of domestic market leadership; the ability to generate a superior share of fee income; and market-leading productivity. The report also highlights four strategic approaches that today's banking leaders pursue: front-to-back digitization; customer centricity; focused business models; and M&A champions. Banks can take more than one of these approaches, but all require strong digital capabilities. "Banks need to look boldly at their business portfolio and make hard calls to focus on fewer areas where they can win," said Andreas Biffar, a BCG managing director and partner and a coauthor of the report. "Simplification of products and processes with comprehensive front-to-back digitization is a nonnegotiable element in the current context." In addition, successful strategic implementation of AI could be a game changer, although many banks still struggle on this front. According to the report, banks need to adopt a vigorous and focused approach to AI implementation. If AI has not yet delivered for all banks, that may be due more to challenges in scaling and lack of holistic adoption by employees and customers than to issues with the technology. As agentic AI and machine voice emerge as even more powerful productivity levers, winners will take effective action to incorporate them. Nevertheless, AI alone may not be sufficient. Much of the potential value may be captured by nonbank players, which are currently better positioned to benefit from its applications. A New Social Contract Between Banks, Regulators, and Society The report argues that the banking industry's long-term viability requires banks, regulators, and policymakers to conclude a new grand bargain that fosters bold experimentation, digital asset integration, and access to synthetic scale for smaller institutions. Download the publication here: Media Contact:Eric Gregoire+1 617 850 About Boston Consulting Group Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. BCG was the pioneer in business strategy when it was founded in 1963. Today, we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholders—empowering organizations to grow, build sustainable competitive advantage, and drive positive societal impact. Our diverse, global teams bring deep industry and functional expertise and a range of perspectives that question the status quo and spark change. BCG delivers solutions through leading-edge management consulting, technology and design, and corporate and digital ventures. We work in a uniquely collaborative model across the firm and throughout all levels of the client organization, fueled by the goal of helping our clients thrive and enabling them to make the world a better place. View original content to download multimedia: SOURCE Boston Consulting Group (BCG) Sign in to access your portfolio
Bloomberg
19-05-2025
- Business
- Bloomberg
What Will Central Banks Do When Tokens Replace Money?
With mainstream investment products increasingly finding a second home on the blockchain, it's a good time to ask what role central banks would play if everything they have learned while policing double-entry bookkeeping over the last 350 years becomes irrelevant. The techno-anarchist vision behind cryptocurrencies like Bitcoin was to free the financial wellbeing of individuals from the clutches of large custodial institutions — and the monetary mandarins supervising them. That utopia never materialized, but the embrace of the underlying technology by traditional banks and asset managers has taken off.
Yahoo
10-05-2025
- Business
- Yahoo
Why infrastructure now defines banking success
There is a reason embedded finance has shifted from industry buzzword to a business model. At its core, it is about convenience — pure and simple. The ability to pay, borrow, or insure something directly within the platforms people already use is a core consumer expectation now. Just think back to the pre-digital era: paying bills in person, endless queues, forms, office hours. That world is gone, replaced by a swipe-and-go mentality. And yet, while the customer has evolved, much of the banking infrastructure has not. While fintech-native platforms like Revolut or Stripe are pushing the boundaries of what is possible, traditional banks are being held back — not by poor UX, but by their own outdated infrastructure. In a market driven by APIs, plug-and-play services, and no-code integrations, legacy core systems are proving to be retail banks' Achilles' heel. Most traditional banks still operate on platforms developed decades ago. These monolithic systems were not built for the API economy or for embedded models where banking becomes a feature, not a destination. Changing that, unfortunately, is no small feat. Migrating a bank with tens of thousands of employees and millions of customers to a new core platform is a billion-dollar project, both financially and culturally. You are not just swapping out IT systems, you are untangling decades of regulatory, operational, and organisational legacy. Add to that strict compliance standards, slow-moving regulators, and deeply conservative leadership — and you begin to understand why traditional banks are moving at a fraction of the speed of fintech challengers. What makes embedded finance truly disruptive is not just where the services appear but also how they are delivered. Instant KYC, real-time underwriting, and automated compliance workflows are replacing weeks of manual reviews. Embedded infrastructure providers now offer everything from core banking modules to AML checks and payment orchestration as APIs, effectively turning what used to be complex operations into simple plug-ins. This shift allows for the rise of modular banking ecosystems where services can be mixed, matched and deployed in days — not months as earlier. A startup can launch a neobank with lending, savings and payments capabilities without owning a banking license, simply by plugging into a regulated infrastructure provider. Meanwhile, platforms like Shopify or Uber are turning financial services into revenue streams by embedding payments, insurance, or credit into their user journeys. This is the future retail banks must contend with: a model where banking is invisible, but ever-present — triggered by context, not channels. If retail banks want to stay relevant, they need to take a page from fintech's playbook. Now, it is all about orchestrating partnerships and modular solutions to create embedded experiences. And that starts with a mindset shift: moving from product-first to infrastructure-first thinking. Take Revolut. What started as a prepaid travel card has grown into a full-fledged financial super app — not by reinventing every wheel, but by smartly integrating services under one roof. Consumers now expect this marketplace-like functionality: open a bank account, get a card, buy crypto, apply for insurance — all in one app with full transparency and instant execution. Traditional banks, by contrast, still often operate in silos. Even basic services like currency exchange require manual confirmation, or worse — email. This kind of friction is not just inconvenient, it is a competitive liability. And the challenge is deeper than tech. Often, it is about culture. Many banks are still led by executives whose digital literacy does not match the demands of today's market. Add to that layers of security and regulatory protocols, and innovation becomes a bureaucratic maze. The most forward-looking banks understand that embedded finance is a structural shift in how financial services are consumed. And it is also a major monetisation opportunity. When platforms integrate banking-as-a-service (BaaS) into their offerings, they are both increasing stickiness and creating entirely new revenue streams. Shopify, for example, makes nearly half its revenue from embedded financial services — not subscriptions. That is a truly powerful signal. Embedded finance is not eating banking but expanding it. The implication is clear: banks that cannot enable embedded, automated experiences risk becoming utilities — back-end providers with shrinking margins and little brand visibility. The winners will be those who re-architect their infrastructure for speed, flexibility, and scale — or who partner with those who already have. To remain competitive, retail banks must ask themselves: are we building for the next generation of customers, or maintaining systems for the last? The path forward will not be the same for everyone. Tier 1 banks with the resources to reinvent themselves may build modern, API-first cores. Others will need to partner, leveraging third-party infrastructure to power embedded use cases within platforms, marketplaces, and apps. But what is certain is that the era of standalone banking is ending. Customers no longer want a separate place to 'do finance,' they expect it to happen automatically, wherever they already are. In that world, banking must be embedded, automated, and above all — invisible. Arthur Azizov is founder and investor at B2 Ventures, a private fintech alliance that encompasses a portfolio of groundbreaking financial and technology projects "Why infrastructure now defines banking success" was originally created and published by Retail Banker International, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Bloomberg
08-05-2025
- Business
- Bloomberg
Private Credit Eyes $22 Trillion Total Credit Pie, Barclays Says
Private lenders that have already established themselves as fierce rivals to traditional banks by extending credit to shaky companies are now making major inroads with blue-chip borrowers as well, according to a research report from Barclays Plc on Thursday. The $1.6 trillion private credit industry established its position with heavily indebted companies by offering quicker loans with more flexible terms than Wall Street banks. They are now increasingly funding loans to companies with top-notch credit ratings as well, the report said — something that was unheard of just a few years ago.
