FinTech CEO Committee
Meeting Minutes
Tuesday, May 4, 2021

Opening:

The second meeting of the FinTech CEO Committee was called to order at 4:00 PM Istanbul Time on May 4, 2021 on Zoom.

 

Present:

Dr. Fatin Al Zadjali, Acting Assistant Dean for Academic Support and Student Affairs and Head of Islamic Finance, College of Banking and Financial Studies
Dr. Mustapha Ishaq Akinlaso, Advisory Consultant, Islamic Analytix
Eng. Mohammed Al Rashidi, Founder & Executive Chairman, One Global
Mr. Mohammad Ridzuan Abdul Aziz, Advisory Board Member, FinTech Association of Malaysia
Mr. Mohammed Kateeb, Group Chairman & CEO, Path Solutions
Mr. Mustafa Kuğu, Founder, FASTER Community
Mr. Resul Yesilyurt, CEO, Procenne


Agenda:

FinTech Industry: Landscape, Regulations and Cryptocurrency


Length of the Meeting:

1 hour 15 mns


Meeting Highlights:

COVID-19 turned out to be a wake-up call to switch from traditionally deployed financial services to more sustainable finance and technology platforms. The FinTech industry in the MEA and APAC regions is enjoying a period of substantial growth, following the introduction of new regulations to substantially attract investments into this sector.


Turkey:

The FinTech Turkish market is flourishing. According to the Global FinTech Hub Report 2020, Turkey ranked among the top emerging FinTech hubs globally. FinTech companies in Turkey are fast evolving with innovative products and solutions that appeal to financial customers. However, they still grapple with the challenge of weak brand identity.


Turkey’s Banking Regulation and Supervision Agency (BRSA) has introduced a new regulation that allows Turkish customers to open a bank account remotely via video-based digital onboarding using an NFC-enabled ID document. They are required to authenticate their presence over the video call with one-time password sent by SMS.


However, Turkey’s Central Bank has banned the use of crypto assets in payments as part of the country’s efforts to regulate cryptocurrencies from April 30, as well as the transfer of money to cryptocurrency platforms via FinTech systems, rather than trying to regulate and stabilize this ecosystem to take advantage of the blockchain technology.


The new digital money is mostly used by the country’s tech-savvy younger population seeking to protect their livelihood against Turkey’s recent economic troubles and the falling currency. They were increasingly attracted by cryptocurrencies to protect themselves from the lira’s decline and double-digit inflation. And since no regulations are in place to protect the investors, hundreds of millions of dollars were stolen by cryptocurrency trading platforms. On May 1st, the day after the crypto payments ban went into effect, a presidential decree stated cryptocurrency exchanges would be added to the list of firms that are covered by anti-money laundering (AML) and terrorism financing regulations.


In recent years, Turkish banks were faced with issues relating to the economic efficiency and financial risks of all types of payment transactions, particularly the electronic transfer of money among banks outside of ordinary business hours. Turkish banks have overcome this challenge only after the CBRT enabled the 24/7 money transfers.


Oman:

The Central Bank of Oman (CBO) is formulating a robust and comprehensive FinTech strategy to fuel the growth and adoption of FinTech services in the Sultanate, enabling start-ups, SMEs and technology firms to innovate and test their solutions live in their regulatory sandbox, to prove their viability and appropriateness for the market.


The regulatory department and the FinTech Committee oversee the legitimacy of these solutions, to make sure they are in accordance with international standards as to privacy, security, transparency and data protection.


FinTech is seen as a change enabler in financial technologies, a fast and aggressive disruptor. Watching the high adoption rates, traditional banks must keep up with the pace of innovation and technology in order to stay relevant and competitive in a rapidly evolving and ever-changing environment.


Payment is the most popular area in investment FinTech. An integrated approach for building sustainable Islamic social finance ecosystem would benefit greatly the payments industry. 

Oman is currently implementing a national e-commerce strategy in the public and private sectors, e-payment framework for small businesses. Omani banks have started launching digital wallets. The rush to digitization will see the FinTech sector flourish post-COVID-19, and can have a good impact on the Halal industry.


However, the CBO has not given any license/authorisation to any entity for dealing in cryptocurrencies or similar products. Hence, using, holding and trading of cryptocurrencies and similar products are neither guaranteed by the CBO nor protected by the banking laws. Also, the CBO has not followed UAE to launch its national digital currency and accept digital currency payments, but this might happen in the future due to the availability of the platform, the e-accessibility, and in case of increased demand from customers.


Kuwait:

The FinTech ecosystem in Kuwait is getting very competitive. Kuwait has a well-developed financial sector. Kuwaiti banks are currently going branchless by offering onboarding services, digital lending, Buy Now - Pay Later solutions, digital trading, and are launching robo-advisory investment applications.


There is only one crowdfunding platform for charities in Kuwait called “Bawabet Al Kher”. This marketplace was built to list the projects of all charities that can be funded by the crowd. It is part of FinTech Super-App Of Money and is available only In-App Donation and later this year it will be on a full-fledged Web App as well. 


Equity-based crowdfunding has not been developed yet in Kuwait nor the rewards-based crowdfunding. The regulatory framework is in the process of being finalized by the CMA in Kuwait.


New licenses from the Central Bank of Kuwait (CBK) are given to banks and mobile network operators called Payment Service Providers (PSPs), enabling the agent banking license to match aggregators, and banking services resellers. The aim is to allow innovation to flourish in the country and move quickly toward open banking, promote financial inclusion, encourage the move from cash to digital transactions, and thus, accelerate the growth of the digital financial services ecosystem.


On the other hand, the early-stage InsurTech investment landscape in Kuwait is mainly due to the rigidness in the system itself, the policy issuance, and how to be governed by the Capital Markets Authority (CMA). Whereas in Malaysia, the industry is experiencing growth with the launch of new products next June.


The best scenario is to have instead of Centrals Banks financial services agencies that can act as regulators to develop a FinTech ecosystem where it will be easier to build connectivity between all stakeholders. For instance, the UK is ranked as one of the most ‘FinTech Friendly’ territories in the world, because it is regulated by the Financial Conduct Authority (FCA).


Central Banks’ main role is to ensure economic and financial stability, and the development of the FinTech industry and encouraging banks to use an open digital framework is of least priority to them. McKinsey & Company has however recommended to local banks in its latest report entitled ‘Disrupting the disruptors: Business building for banks’, to benefit from their resources to rapidly adopt digital transformation to ensure business continuity and benefit from improved compliance and security.


To note that the word FinTech describes any technique used to facilitate financial services, and this term exists since ages. Digital finance whether centralized or decentralized will shape the future of banking. And the Tech bar is moving from additive to integrative approach.


To summarize, the regulators in the region are seen as incubators, banks as start-ups, and FinTech as accelerators unless they are backed by big banks, with the exception of China where the FinTech start-ups are bigger than the banks.


FinTech is disrupting the whole ecosystem. Banks have the capital and talent to respond to FinTech disruption through setting up their own FinTech innovation labs to develop their digital services and offerings.


UAE:

In the GCC countries, and particularly in UAE, financial institutions are building subsidiaries to be their digital banks. Three new licenses were given recently by the Central Bank of UAE to independent digital-only banks known as Rizq/Baraka, Zand and Al Maryah Community Bank.


KSA:

In KSA, the adoption of new payment technologies is rising, and customer appetite for new, fast, and flexible digital experiences continues to grow. Banking customers are moving towards contactless tap-and-go payments and online shopping. Saudi Central Bank and CMA continue to develop new regulations and adjust existing ones to new activities and players to support the FinTech sector. 


Particularly noteworthy is the Saudi Central Bank issuance in February 2020 of additional licensing guidelines and criteria to establish digital-only banks in the Kingdom, and a new digital-only bank will see the light soon in the market.


In addition to the above, we note the soaring of cryptocurrency like Ethereum price which has hit record high above $4,000 as of May 10. Ethereum is a public blockchain network allowing banks to build their private networks. This software company is considered much more credible than Bitcoin, because of its close collaboration with Central Banks and financial institutions. 


Given the speed and disruptive nature of financial innovation, Central Banks and supervisory authorities have to accelerate the development of the FinTech ecosystem, by establishing dedicated FinTech & innovation units to develop agile countrywide regulatory frameworks that can foster FinTech and digital innovation. This is the best model to ensure innovative banking and lead on strategic FinTech initiatives, working closely with all stakeholders within the FinTech ecosystem.


The future belongs to banks, and not FinTechs. FinTechs can’t replace the banks because of their decades of trust built through customer relationships. FinTechs can only cooperate with banks.

In today’s open API ecosystem, banks can benefit from the FinTech-led innovations to deliver best services backed by superior experiences to their customers, while enabling FinTech partners to access the bank’s data, and therefore promote the ability to enhance and extend their services. But the most important factor is to have regulated or market-standard Open APIs to further develop the FinTech ecosystem.


Malaysia:

In Malaysia, FinTech start-ups are moving to FinTech associations and through use cases that have proved their efficiency to launch their solutions in the market.


In the past decade, FinTechs have exploded as part of a broader “finance democratization”, and to create/optimize value for the under-served consumers particularly.

So, FinTech must follow the concept of ‘Responsible Innovation’ that stresses on the value created to the society at large, while emphasizing on risk management and corporate governance. The ‘Responsible Innovation’ must have clear roles and frameworks by asking ‘innovation of what’ and ‘responsibility of whom for what’. While financial intermediaries should follow the concept of ‘Value-Based Intermediation’ to enable to create values and reorient the unengaged world to sustainable financial practices.


Closing Remarks:

Whether Centrals Banks, or dedicated FinTech & innovation units, or financial regulators, or FinTech associations regulate the FinTech industry, they have to all collaborate and speed up the development of this fastest-growing sector to be able to balance between supply and demand of FinTech products, and in turn create a healthy FinTech ecosystem for the interest of all stakeholders.


Minutes Submitted by:
Mrs. Danielle Karam
Manager - Corporate Communications
Global Corporate Communications & Marketing Department
Path Solutions