Says Tariq Alusaimi, Head of Digital Strategy, Central Bank of Kuwait while speaking about the recent trends in the Banking and Financial Services Industry, in a candid conversation with Kanchi Shah, Head of Production, Exibex. Tariq Alusaimi is responsible for driving the digital strategy for Central Bank of Kuwait, the Kuwaiti banking sector, and oversees the development of the Kuwaiti Fintech eco system. He is also a member of the Technical Advisory Committee for Finnovex Middle East 2019.

He is responsible for setting the Central Bank of Kuwait digital strategy by converting traditional analog supervision of the Kuwait banking sector to digital supervision technology (SupTech) using the potential of modern technologies, analytics and big data, and overseas Kuwaiti banking sector regulatory technology (RegTech) in the rapidly changing financial technology sectors like mobile applications, e-payment, Blockchain and Central Bank Digital Currency (CBDC) and related applications.

Tariq: As opposed to traditional banks newer organizations are better positioned for the future only if they stay away from the traditional banking culture and start a new culture. The other advantage that newer organizations has is a new information technology infrastructure and they don’t have to deal with legacy system and legacy data.

Tariq: In the next 5 years the Banks will be pushed back to be custodians of money, just as they started out, in the year 1300, and every other service they provide will be a commodity that any FinTech can provide better cheaper and more relevant to the local culture of the customer.

Banks that want to be positioned for the future should start with their culture and their human capital. As for what technology they need to use or what product they need to sell are the same for all banks today and in the future. The first role of digitalization is catering for the need of the local culture they are trying to serve. If legacy bank or financial institution want to weather the coming digitalization storm, they better cater to the rule number one of digitalization.

Tariq: Islamic financial technology products are going to be the biggest disruptors in near future whether it’s the Islamic InsureTech, Islamic InvestTech, or Islamic FinTech. As the door for innovation is wide open for introducing new product and services for serving the Islamic financial market. On the other hand, there are not many traditional technology companies serving the Islamic Insurance and Islamic financial market. The combination of room of innovation and lack of traditional technology companies serving the Islamic financial market will make it a fertile ground for Islamic FinTech, Islamic InsureTech and InvestTech to grow exponentially.

Tariq: Currently the big tech company are moving in to the payment area of banks such as Apple pay and Google pay. Traditionally, the payment area was dominated by Visa and Mastercard and it was never a core business of banks, the concept of payments was shared, and they used a shared revenue business model as well.

Tariq: The open banking initiative, as I foresee, will slow down to a stop in the near future. With the rise of data leakages, such as British Airways data breach in August 21 of 2018 where 380,000 card information was leaked and Marriott data breach in December 2018 of 500 million recorded was leaked and it was going on since 2014 undetected. The open banking initiative will make investigating data leakage and securing data almost impassable even if the data was masked and anonymized. The API banking is one of the solutions that the banks must adopt to keep themselves relevant in the future as Fintech are crawling in to the banking space and banks are pushed back to be a custodian of the money only. Over the next three years, we will see an adoption of API in the area of Payment and Remittance. Also, API banking will allow the banks to move the back-office function to front office and generate revenue from the growing Fintech. Some of the function that can be moved to front office are AML as a service and Risk as a service.