Bank ABC to launch neobank

09/03/2018 04:36 AST

Bank ABC, a leading international bank headquartered in Bahrain, is planning to launch a neobank early 2019 and is working to get all the approvals from the Central bank of Bahrain (CBB).

Speaking to Tradearabia on the sidelines of the 2nd Middle East and Africa FinTech Forum at the Four Seasons Hotel in Manama, Bahrain, Dr Khaled Kawan, CEO of Bank ABC, said they will provide banking services via a mobile phone app, without the need for brick and mortar branches as in traditional banking.

"We will produce a customer experience based totally on a FinTech solution whereby we will replicate our retail experience to our customer."

Kawan said the neobank will be separate from Bank ABC and will run independently, adding it will leverage the strength of ABC and its core systems, and IT services through its subsidiary Arab Financial Services (AFS) to provide the best services to customers.

He said they aim to leverage the FinTech experience that is disrupting everything and integrate that disruption so that it becomes a momentum. Neobanks are banks that don't have their own bank licence, but use partners to offer bank-licensed services. They make use of apps that facilitate, for e.g., the administration of accounts and credit cards.

Neobanks rely on customers having an account with an underlying bank with a corresponding bank licence, but offer a user- friendly interface. The extent to which customers are aware of the underlying bank relationship day to day may vary.

Sael Al Waary, chairman of AFS and deputy group CEO of Bank ABC, urged banks to take advantage of the current financial disruption and collaborate with FinTech companies to sustain and expand their business.

He said the way people bank has changed; they now no longer want to visit a branch. Customer satisfaction through digitisation is the way forward and big banks are responding by creating neobanks, he added.

About FinTech, Kawan said: "We are on the brink of a historic moment where we are looking an entirely new market for banks and which will change the face of banking forever. Therefore, banks need to be better equipped to embrace this change."

He said we had seen banks adjusting in different parts of the world. Some examples are challenger banks like Atom Bank of the UK and Bank Zero of South Africa. So in a way we are behind. And we need to catch up.

Bank ABC, he said, was leading this change in the region. "One of the immediate projects by Bank ABC is integrating FinTech into banking in Bahrain through AFS."

He said the environment in Bahrain is conducive for FinTech as the Bahrain government had already taken significant steps toward this end by investing heavily in electronic platforms.

"In fact, Bahrain FinTech Bay (BFB) was established in the beginning of March under the auspices of the Economic Development Board as the largest FinTech hub in the Middle East and Africa."

Also, the CBB last year introduced the Regulatory Sandbox - a virtual space for both CBB-licensed financial institutions and other firms to test their technology-based innovative solutions.

About Bahrain's readiness for FinTech, Kawan said if a country like India can convert its society into a cashless one, Bahrain is readier because of the extremely high mobile penetration, high internet usage and high literacy rate.

To a question about the acceptability of virtual banks by customers in the region, Al Waary said they had done an independent survey, in which 63 per cent respondents were all for virtual banks.

Overall, the banking industry in the Gulf region is moving to keep pace with the historic changes in the FinTech industry, said Kawan.

"We have excellent examples in the Gulf that have already launched neobanks, like Mashreq Bank and Emirates NBD of the UAE that have adopted digital platforms to increase productivity and improve customer services. It's all about agility or adjustment, or else you will become fossils."

Kawan said conferences like MEA FinTech are a way to communicate with the community and educate them about the change and its importance, and encourage banks to think about it.

In terms of cybersecurity, he said billions of dollars were being invested in it and customers need not worry. The top priority of ABC Bank itself was cybersecurity.

Adding to that, Kawan said the No 1 threat to a FinTechk bank is technology itself, and for that, you need to be on the cutting edge of IT security to prevent any mishaps.

Al Waary said investment in FinTech last year alone was $27 billion, while it was a total of $100 billion in the eight years before that. Transactions worth $95 billion would be done in 2018 through digital channels.

Al Waary said Fintech will accelerate financial inclusion. "Today there are more than 2 billion unbanked people in the world. And through FinTech we can reach to the underserved, underprivileged and unsatisfied people."

ABC is already in South Africa and is bidding for a project in Ghana.

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