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Exclusive: What will spur and attract UAE investments and role digital banking plays

At a time where economic uncertainty is looming large, the increase in foreign investment limits (FOLs) could spur foreign capital inflows and investments into the UAE

Regional financial institutions are using blockchain enabled technologies, digitization, reusability and monetisation of data Access to liquidity can be difficult, but using cryptocurrency as the underlying asset can alleviate this problem Banks are more cautious of excessive leverage and are tightening their lending policies, leading to significant tightening of credit for SMEs

With so many variables around investments and banking, AMEinfo had to ask the questions on everyone’s mind in the UAE.

What is the state of capital inflows? Have banks succeeded in attracting investments and customers alike?

We asked Graham Bright JP, Head-Compliance and Operations at Euro Exim Bank Ltd, an innovative financial institution specializing in Trade Finance.

Graham is a regular contributor to trade journals (GTR, TFR), with published thought leadership articles in financial technology press, and a speaker at international trade industry conferences such as SIBOS, GTR and Ripple Regional events.

Graham Bright attended The 2nd Annual Gulf Trade Finance Summit

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Here is the interview

AMEinfo: Could you briefly speak about what other such steps are being taken in the banking sector to attract foreign investments?

Graham: Trade wars and economic uncertainty may be damaging to those in conflict, but this also creates opportunities for businesses in other jurisdictions. Restrictions on imports due to tariffs allow other nations to bid and compete internationally.

Attention is turning to those nations within 4 hours of UAE where a population of 4.4 billion can take advantage of more locally sourced goods, for example from Africa, and major manufacturing centres in Asia, without the need for western currency. Making services easier to access, at a price which is more affordable is key, and financial institutions in UAE are already recognised as having regulation, free trade agreements and information on buyers and sellers which make it one of the worlds easiest nations with which to trade.

Financial institutions in the region are already moving forward with blockchain enabled technologies, digitization of documents enabling standardization, rationalisation, reusability and monetisation of data, all important to improving internal systems and client experience.

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AMEinfo: What are the main trends/changes that you see dominating transaction banking in the coming years? 

Graham: Many industry sectors have already embraced technology and the finance industry is under increased pressure from digitalization, population shifts to industrial bases rather than cash based agricultural economies, banking the unbanked, challengers and disrupters. 

Indeed, banks are no longer defined by number of branches, bricks and mortar, but by technology, client experience and regulatory boundaries.

The financial sector must reinvent itself to satisfy the changing needs of the next generation of banking customers, and this may be achieved through working with FinTech startups and through acquisitions.

Access to liquidity for many smaller nations with limited funds and currency barriers remain difficult, however, innovative service using cryptocurrency as the underlying asset can alleviate this problem, as shown by Ripple xRapid services, which no longer uses USD as the prime currency with its associated costs and access issues.

Customers want convenience and cost-effective services and for clients used to multi-channel access, real-time product simplicity, seamless integration with access to online shops, travel search engines and music streaming services, banking services must move from archaic data delivery to become information hubs.

Companies unable to offer such customer experience are not expected to survive in the long term.

Read: Superior Performance of Digitized Nations 

AMEinfo: How are client expectations changing within transaction banking? (Bespoke value-added services? personalization? seamless connectivity? proactive suggestions?)

Graham: Whilst banks recognise they need deeper customer relationships, customers are more money savvy and less sticky than ever. 

There will be significant costs to improve systems, but as loyalty is dead, clients chase rates and change suppliers at will and demand interactive services through smart phone technologies, adapt or die is the key. Banks must move quickly beyond account verification signature to biometric data, tokenization and encryption, reducing costs and protecting customers identity and funds.

The ultimate driver will be the spending power of the generation know as digital natives, young people who transact their lives through social media and smart technology, who have never set foot in a bank and have no desire to create relationships or loyalty with any institution.

To capture and retain this digital-ready group, appreciating its enormous spending power and technology demands, banks will have no choice but to get their houses in order and re-align their digital strategies with advanced technology implementation. They also need to deliver a client experience with appropriate services to match the ever-changing demands of this empowered demographic.

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AMEinfo: How is FinTech revolutionizing the banking industry?

Graham: As mentioned, adapt or die are the current options. 

Banks can invest and embrace technology, through blockchain enabled infrastructures, incorporate AI and machine learning for better decision making and monetizing of data, digitizing documents for standardization and collaborate in international forums. Or collaborate with companies with new fast technologies which can replace legacy with minimal disruption. 

Or, join the list of failed institutions too entrenched in traditional processes to maintain clients and realise the benefits and opportunities. The choice is stark but real. 

AMEinfo: Could you comment on fears of geopolitical tensions (Brexit, trade wars, China slump, Middle East wars)?  

Graham: The growth of populism, protectionism, nationalism and regionalism continues to cause major disruptions to global trade flows, and ability of companies of all sizes to trade.

We see more tools to disrupt trade such as such as tariff barriers, currency restrictions and import quotas, which immediately decrease sales, promote uncertainty and damage export prospects. 

The recent US-China confrontation and war of rhetoric may be changing daily, and the US has even turned its attention to the EU market, where implementing harsher tariffs (basically taxing all goods at the highest levels) may not only restrict access to goods, but to the provision of essential components to manufacturing industries.

Banks are more cautious of excessive leverage and are tightening their lending policies, leading to significant tightening of credit for SMEs, who in turn drive global trade.  Trade in general and entrepreneurial flair is being restricted as SMEs are being put under increased pressure and demands from regulatory compliance and de-risking policy.  

But from every adversity comes opportunity in that attention is turning to alternative finance providers, sources of goods and suppliers in other jurisdictions. And this may set the pattern for future trade, for example, looking at Africa as a prime source of cost-effective materials and export opportunity rather than merely corrupt nations with little prospect and high risk.