By HABHAJAN SINGH / Pic By BAHRAIN DEVELOPMENT BANK
Three major Middle Eastern banks have come together to launch the world’s first global financial technology (fintech) consortium, to accelerate the rollout of Shariah-compliant fintech solutions, while spreading across them innovation cost.
Kuwait Finance House (KFH) Bahrain, Al Baraka Banking Group and Bahrain Development Bank (BDB) are the founding members of the consortium called “Algo Bahrain”, with eight more banks expected to join the consortium in the second phase.
The consortium is seen as a strategic initiative to position Islamic banks for the forthcoming paradigm shift of the recent fintech innovations in the banking industry.
Inaction is not an option, said Al Baraka president/CEO Adnan Ahmed Yousif in a statement shared at the bank’s website.
He attended the consortium launch last week together with BDB group CEO Sattam Sulaiman Al Gossaibi and KFH Bahrain MD/ CEO Abdulhakeem Alkhayyat. All three banks offer Islamic finance products and services.
Algo Bahrain’s stated mission is to launch innovative financial solutions that are suitable for the digital economic ecosystem. “Every aspect of our current Islamic banking business model is being disrupted by technology, where customers’ lifestyles and expectations are fundamentally changing.
Where some see disruption and risk, we see an opportunity for Islamic banks to transform smartly, by saving billions through cost efficiencies and unlocking revenue sources through a collaborative ecosystem,” the consortium said in a statement on its website, which is populated by a couple of statements only at this point of time.
The company said four out of 10 customers in the Gulf Cooperation Council (GCC) are ready to switch to a digital-first relationship.
“Our aim is to lead the digital revolution in the GCC through launching next generation technology platforms such as crowdfunding, robo-advisory, payment solutions and more. Algo Bahrain collaborates with regulators, governments and financial institutions to drive the fintech industry revolution,” it added.
Digital disruptors are attacking the banking industry, redefining customer expectations and reshaping industry boundaries, suggested a report released last year by global consulting firm Accenture, entitled “Being Digital: Digital Strategy Execution Drives a New Era of Banking”.
From competitors to customers and processes to people, banking leaders who want to lead in a digital economy need to make fundamental changes to how they operate, the report added.
In June, the Central Bank of Bahrain had announced new regulations to create a regulatory sandbox to allow startups and fintech firms to test and experiment their banking ideas and solutions.
The Bahrain Economic Development Board had also announced a partnership with fintech incubator and ecosystem builder Singapore Fintech Consortium, and asset management and advisory firm Trucial Investment Partners, to develop a fintech ecosystem and regulatory framework for Bahrain.
On Malaysian shores, Bank Negara Malaysia had in July 2016 issued a discussion paper on fintech regulatory sandbox to “further encourage innovation and improve the delivery of financial services”.
In May 2017, the Malaysian central bank announced the approval of four firms to operate within the regulatory sandbox, and also the creation of the Financial Technology Enabler Group unit to oversee the entry of technological innovations in financial services.
Algo Bahrain, which badges itself to be the world’s first fintech consortium of Islamic banks, is positioned to launch 15 banking industry platforms by 2022 across the GCC and emerging markets, according to the same statement.
The GCC is a political and economic alliance of six Middle Eastern countries: Saudi Arabia, Kuwait, the United Arab Emirates, Qatar, Bahrain and Oman.