DUBAI, UAE — Following the initial wave of innovation sparked by the COVID-19 pandemic, the global financial services sector continues to undergo significant transformations.
A report from The Dubai International Financial Centre, the premier global financial center in the Middle East, Africa, and South Asia, in collaboration with “Refinitiv,” a subsidiary of the London Stock Exchange Group, indicates a rising demand for personalized financial services.
This surge, tailored to evolving consumer preferences, has intensified competition. As a result, new entrants, including fintech firms and major tech companies, are vying for a stronger foothold in this dynamic market.
The report underscores the benefits of automation technologies like artificial intelligence, blockchain, and cloud computing. These technologies have spurred the development of innovative business models and products that cut costs and streamline inefficient processes.
Global FinTech investments are projected to grow at a 17.2 percent CAGR, reaching $949 billion between 2022 and 2030. This growth is spurring innovation both globally and in Dubai, granting access to burgeoning markets in the Middle East, North Africa, Western Europe, Asia, and Africa.
Titled “Prospects for… Innovation in Financial Services,” the report also unveils key innovation trends set to shape the financial services sector over the next half-decade. These trends include the potential of open finance, the rise of decentralized finance, the establishment of digital assets as a sustainable asset class, and the integration of environmental, social, and governance (ESG) practices within banking operations.
Furthermore, the report emphasizes the need for financial institutions to adopt innovative strategies to foster rapid growth and enhance future competitiveness. This includes leveraging frameworks like project studio incubators.
For financial institutions to thrive, they must adopt a comprehensive approach to change. Success hinges on striking the right balance between the pace and breadth of their transformation.
The report identifies five pillars driving this transformation: evolving client preferences (Demand), regulatory measures to minimize innovation risks (Regulation), increased investments in FinTech (Capital), operational efficiency, and shifting workplace cultures (Talent).
Open banking and its benefits
Open banking, an infrastructure that enables the exchange of financial data between banks and authorized third parties via APIs, is gaining traction. This system offers real-time insights into corporate clients’ financials, streamlining decision-making, risk management, and operational efficiency.
Open banking products offer businesses the convenience of real-time financial monitoring across various institutions. They automate key processes like accounting and invoicing, saving time and resources. Additionally, they facilitate the automation of letters of guarantee requests, reducing the risk of disputes and fraud.
ESG finance
Sustainable finance, which integrates environmental, social, and governance (ESG) factors, is a burgeoning concept. With the ‘green revolution’ accelerating, ESG-labeled assets worldwide are anticipated to hit $41 trillion by the end of 2022, as per Bloomberg Intelligence.
The report notes that green and sustainability bonds have seen rapid growth, with annual issuance exceeding the $1 trillion mark in 2021. Sales of corporate bonds with ESG targets are projected to surpass $460 billion in 2023, up from $362 billion in 2022, as per Barclays’ estimates. This 30 percent growth is attributed to robust demand and a plethora of green projects requiring funding. As green bonds become more attractive to investors, companies can secure financing at lower rates compared to traditional bonds.