By Arvind Kashyap, CEO, NewTech Insurance Brokers

As one of the oldest industries in the world, the insurance sector has weathered exponential global crises by constantly adapting to evolving consumer expectations and technological advancements. Over the years, the industry has succeeded in overcoming key bottlenecks such as lengthy paperwork, cumbersome processes, and limited customer interaction by embracing the power of digitisation. The adoption of InsurTech has revolutionised all aspects of the insurance value chain, from product development and underwriting to distribution and claims management.

The mass adoption of advanced technology such as artificial intelligence, data analytics, blockchain, and the Internet of Things (IoT) has facilitated seamless customer experiences, risk mitigation, and enhanced efficiency. With most Arab countries mandating health and motor insurance, the regional insurance market is flourishing, with the UAE market recording the highest penetration rate in the Gulf region. However, the penetration rate is still feeble when compared to the global standard, which hints at potential avenues of growth for the sector. About half of the region’s total Gross Written Premium (GWP) is attributed to health insurance, which is pegged to rise in 2024 and beyond, due to expatriate influx and burgeoning labour demand. Further, the UAE government will play a pivotal role in expediting health insurance adoption, with its strategic vision to double the economy’s size by 2031. The lucrative nature of the insurance sector as a market teeming with growth avenues, is attracting new and technologically savvy companies, who aim to reshape its landscape with their innovative strategies. These new players hold the power to usher in seminal changes akin to the ones brought about by the fintech revolution in banking.

According to a McKinsey report, the current InsurTech database is dominated by property and casualty insurance, followed by health insurance and life insurance. In the arena of pure risk insurance, InsurTech has developed robust access points to the value chain through innovation. The advent of cutting-edge technologies such as telematics and the Internet of Things (IoT), has facilitated product development across motor, home, and health insurance sectors, bolstering customer engagement and retention.

InsurTech is also attracting customers by incentivising riskminimising behaviours with the aid of smart devices that track car mileage, calories burned, in-home flood, or signal emergency services among others. InsurTech has also brought with it, an unprecedented opportunity to harness vital information in extensive data gathered from smart devices used in automobiles, home systems and wearables. This revolutionary change empowers insurers to provide accurate pricing, personalised offerings, and proactive risk management by harnessing the power of big data and predictive analytics, which reveal key insights about customer behaviours, preferences, and risks. As opposed to traditional insurance which fails to sustain customer engagement beyond the point of sales, technology enabled insurance solutions such as mobile applications, chatbots and personalised portals aid in improving customer retention and satisfaction. While effectively streamlining the purchase process, these tools also bolster ongoing communication, tailor recommendations, and expedite claims resolution, championing brand loyalty.

InsurTech startups are redefining the insurance landscape with a slew of flexible, innovative, and on-demand insurance options targeting underserved, niche, and minority segments. Amidst the clamour of InsurTech’s initial success, critical deterrents such as data privacy and cybersecurity concerns, regulatory hurdles, and resistance to change continue to dampen its pace of adoption by insurers. Moreover, one must also not forget the indispensable role of human interaction in the service sector. It is pertinent to seamlessly integrate automation and personalisation to tailor solutions that resonate with customers while ensuring success in the digital age. Despite the challenges, InsurTech continues to enhance customer experiences and innovate existing business models, ushering in a promising new era for the sector. Insurers need to consistently strive to overcome bottlenecks, leveraging technology to serve clients, while positioning themselves for success in a highly dynamic and competitive marketplace.

By Sid Bhatia, Regional VP & General Manager – META, Dataiku

The GCC always learns its lessons well. Since the 2008 financial crisis, regional governments have reformed their FSI sectors to establish greater transparency and stability. Everything from a tightening of liquidity rules to the broad digitalization of the industry, and even the greater focus on ESG, can be tied to central banks’ desire to never again be at the mercy of a global crisis not of their making. While challenges such as currency pegs and inescapable market connectivity remain, strides have been made towards a sustainable, resilient regional FSI industry. The fintech sector is humming with activity. For example, in December, Saudi Arabia’s BNPL (buy now, pay later) success story Tamara became the kingdom’s first fintech unicorn, reaching its billion-dollar valuation during a US$340-million Series C equity funding round. And as smaller players soldier on, showing everyone else what is possible, even veteran brands are looking for ways to do more. Preferably, with less.

Lately, the “do more with less” proposition inevitably leads to generative AI. With all the swagger of a Hollywood starlet, it strutted into the mainstream practically overnight and showed us what modern technology can now do (cheaply) for those who have data. And FSI entities have lots of data. Now if they can only rest their adoption strategy on the right pillars. Here are the four I would suggest.

1. PREPARE, PREPARE, NOW GO

Clean your data. Organize your data. Train your people and determine who will have access to what. Establish governance policies. Draw up a roadmap of priorities that includes any necessary cloud migrations. What KPIs will you use? How will they be measured and how will they tie to goals in order to tell you whether you are succeeding or failing? All of this goes together to form the horse on the AI journey. The cart, full of AI models, comes later. Without preparation, most complex endeavors are doomed to fail. That said, the preparation should not stall the work. FSIs already have a strong mindset for data gathering and analysis that pervades the workforce. And it benefits nobody to spend all your time feeding and grooming the horse while the cart sits idle. So do not reinvent processes for the sake of reinvention. As you move along the road, everything from the design of workflows to the tolerance for risk may change. You may bore the precious talent waiting to innovate if you spend too much time planning. So, yes, plan diligently, but then get on the road.

• SPIN PLATES

Banking and risk go hand in hand. And modern risks are appreciably higher than ever. Institutions must protect privacy and their own proprietary interests. Data, analytics, and AI all have direct bearings on regional FSI organizations’ reputations and their obligations to regulators. But again, we must be mindful of the implications of a stationary cart. Banks must be daring enough to act but be cautious enough to do so safely. Your people are your innovators, so they need access to data. Ownership must be granted under the right framework and IT setup. Teams must learn how to balance action with safety — how to spin plates, if you will. They should test, evaluate, and learn from results instinctively while understanding the goal they are pursuing. For example, anti-money-laundering (AML) is an obvious target for AI, with clear benefits, but an inaccurate model could lead to a false positive and, if managed ineptly, could result in a damaged customer relationship at best and widespread brand excoriation at worst.

• NAIL IT DOWN

At some point, it is time to stop testing the water and commit to a swim. The goal of Everyday AI is a culture change, which requires the embedding of technology in everyday processes. Workflow owners must be empowered to drive their own change, albeit in consultation, or even collaboration, with others. Indeed, it is these traditional silos that so often stall progress on AI journeys. But if culture change has been achieved then all stakeholders will know the metrics, goals, workflows, and governance restrictions in play. This interconnected, collaborative ownership of projects is a path to success but is only possible after the AI culture has been nailed down.

• GIVE THE NEW KID A SHOT

Generative AI is, to FSI entities, as much a potential boon as it is a bane. While the privacy downsides of certain products may rule them out as adoption targets, the raw technology is extremely powerful for meeting banks’ content-production needs. Costs will plumet while the potential for scalability skyrockets. Some FSI organizations have been attracted to generative AI because of its relatively low data-dependency. It also has the capacity to be a virtual assistant to customer facing human agents, boosting their real-time performance in any number of ways, from proactive information gathering to upselling and cross-selling opportunities. Outside of the customer arena, generative AI can support urgent operational issues such as sustainability. It can sift through thousands of documents and come back with insights on how portfolios are affecting carbon-impact goals. Generative AI has a prominent role to play in the digitalization of the FSI sector. Its applications are extensive and any player not evaluating it may risk being left behind.

THE ROAD TO EVERYDAY AI

Horses and carts aside, it is the journey that matters. Every milestone passed, every project delivered is another step towards the data culture that sets a bank apart. Customers want individualization. They want quick turnarounds on applications and requests for information. And they want security. AI can be an analyst of markets, a valet to customers, and a guard dog for data. Generative AI may be monopolizing the limelight, but no matter which you choose, there are plenty of tools out there that can give regional businesses a leg up, an eye on the horizon, or a fresh new voice.

By Luka Celic, Head of Payments Architecture – MENA, Endava

Banks and payment services providers (PSPs) have been the region’s engines of economic growth for as long as anyone can remember. It is therefore jarring to imagine that this dominance is now under threat. After all, venerable banks and credit card companies have elegantly embraced the Internet, mobile banking, and the cloud to deliver self service banking to millions of customers. But consumers, especially digital natives, have never been known for congratulating an industry for a job well done. Instead, with each convenience, their expectations only grow. The siege reality of the pandemic accelerated a shift in consumer behaviour, and Middle East banks and PSPs now face challenges on three fronts.

The first is FinTechs. from Saudi Arabia’s BNPL (buy now, pay later) pioneer Tamara and Qatar’s unbanked oriented platform cwallet, to online financial services, Klarna, tech startups have been able to tap into rapidly changing consumer markets. New companies find it easier to pivot. And like speed boats racing against aircraft carriers, they weaved effortlessly to fulfil a range of desires amid high smartphone connectivity rates and a range of other favourable market conditions. By one estimate from 2022, BNPL alone accounted for US$1.5 billion (or 4%) of the Middle East and Africa’s online retail market.

The second threat is open banking, which comes in many forms, but one example is the instant-payments platforms being introduced by central banks such as those in Saudi Arabia and the United Arab Emirates. To get a sense of how this could play out, we need only look to Europe, where players who once relied on payments through card schemes are now pivoting towards open banking enabled payments. Closer to home, Al Ansari Exchange recently announced its customers can now transfer money and settle bills via the recipient’s mobile number, enabled by the UAE’s Aani IPP.

And finally, comes big tech. To augment its e-wallet service, Apple has signed up to an open banking service in the UK. The open banking framework which banks enabled through their investments is being exploited by a Big Tech firm that has access to 34% of UK smartphone users. Unsurprisingly, this sparked a fierce antitrust complaint by UK’s banks. Other big names will surely follow as they continue to craft ways of offering the digital experiences that garnered them user loyalty in the first place.

THE BALANCE

Apple Wallet is aimed at blending payment methods, loyalty cards, and other services into a single experience. But such moves have raised regulators’ eyebrows regarding a lack of interoperability and the preservation of competitive markets. Hence, Apple’s open banking foray — a gesture to calm the nerves of a finance market that fears having to compete with a company armed with countless millions of user transactions from which to draw insights. The massive user bases of tech giants will give any FSI CEO goosebumps. How does a traditional bank lure an Apple user? Open banking initiatives open the door to greater competition and innovation, both of which are good for consumers. But the only way to ensure both is by building an ecosystem that balances innovation with regulatory oversight.

FROM INCUMBENT TO INNOVATOR

Yes, smaller businesses have freedom of movement that larger incumbents do not. But that does not mean that there are no paths for banks and PSPs. There are, in fact, several strategies that larger FSI companies can employ to capitalise on the open banking revolution.

The first of these is collaborating to create ecosystems that provide users with frictionless experiences. Established FSIs already have access to a wealth of information about their customers and must now consider how to integrate data sources to create highly streamlined and frictionless workflows. A customer applying for a loan could then see their details auto populated, and credit history already accounted — all without the hassle of lengthy phone calls, application forms, or submission requests. In an age when instant is everything, it’s easy to see why the former approach could foster loyalty, while the latter would only serve to drive customers towards more capable competitors.

Card companies and issuer banks could also work with acquirers to smooth out the rough landscape that has arisen from the advent of digital payments. Acquirers traditionally acted on behalf of the merchants that accepted payment methods to recoup funds from the PSP through the issuing bank. This system has served the industry well, but with more payment methods emerging, acquirers have branched out into mobile wallets, QR codes, and gateway services. Gradually the relevance of established players has dwindled as their lack of representation at the critical checkpoint has diminished their significance. Incumbents must work to turn back the tide by recognising that acceptance and acceptance ownership are becoming increasingly important for maintaining market relevance.

Another strategy is diversification. Veteran FSIs may feel like they’ve lost ground to nimble start-ups and Neo Banks, but history shows value in patience — established FSI players now benefit from the investments of early innovators, and double down on payments innovations which have already shown the most promise. Moreover, if they diversify their portfolios through acquisitions, innovations, and partnerships, they can secure their future. Mastercard presents an excellent example with their US$200m investment into MTM payments. This single move has given the company access to MTM’s 290 million strong subscriber base, allowing these customers to become familiar with Mastercard products before getting entrenched with mobile wallet alternatives.

WHO’S ON TOP?

If we look at the rise of BNPL services, we see an origin story with — at least — major supporting roles for large card providers. But open banking has sidelined them in just a few years. BlackBerry was a stock market darling just five years before it sought a buyer. Traditional FSI players must innovate; they must collaborate with emerging disruptors; they must diversify. They can survive and thrive if they do these things — after all, they already have much of the infrastructure, and experience required for success. Middle East banks and PSPs have the existing user bases, so they have the scale to get out in front in the era of open banking. All they lack is the kind of compelling use cases that will entice the banking public. PSPs and their issuers could offer embedded payments, for example. The right services at the right time will be warmly received by consumers, no matter the scale of the offering institution, so there is every reason to believe that incumbents will come out on top against FinTech and Big Tech.