We are entering an exciting era of AI-driven innovation within Middle East banking. Recently, the region’s governments have taken steps to create an environment where AI innovation can flourish. After much hype around the transformational benefits of Generative AI for banks, it's time for a new cycle of positive disruption in financial services driven by diverse AI technologies.
Few regions can match the Gulf Cooperation Council’s (GCC) enthusiastic embrace of AI in recent years. In 2017, the region introduced the world’s first government Minister of AI in the UAE followed by the world's first AI university in Abu Dhabi.
More recently, with AI looked at as an enabler of economic diversification, large investment funds have been allocated in the region for further AI ventures. GCC governments have invested huge sums in creating a network of innovation hubs and incubators across the region, along with special visas to attract AI talent. They have also issued national AI strategies, and several GCC central banks have published AI guidelines for the financial sector.
As large, young, tech-savvy nations, there are plenty of opportunities for financial innovation, evidenced by a surge in the Fintech sector. According to analysts at UnaFinancial, Fintech is expected to add $506.7 per capita to GDP by 2030 – mostly driven through collaboration with banks.
AI: Boosting the banking sector
The use of AI in the banking sector is predicted to contribute as much as 13.6% to the region’s GDP by 2030. Around a quarter of the region’s AI investments are predicted to be made within the financial sector. The sector may also see some of the most significant product enhancements overall from utilizing AI, according to an analysis by PwC.
McKinsey estimates that AI technologies could generate up to $1 trillion of additional value each year in the global banking sector. According to PwC, AI could contribute $320 billion to the Middle East’s economy in 2030.
Banks in the GCC benefit from forward-thinking agile regulators, robust digital infrastructure and more permissive customer attitudes towards new innovations. There is also a growing focus on developing so-called sovereign AI in the region, with countries building their own AI infrastructure and capabilities in parallel with skilling citizens and attracting expertise from different parts of the world.
All of the above provide foundations for banks in the region to leverage AI to boost workforce productivity, reach new segments of clients, fill unmet needs of existing clients, better manage risks and expand geographically more dynamically.
Using Agentic AI to elevate financial services
Traditional AI and machine learning helped to transform financial services in the past, from technologies to bolster fraud detection to improved customer experiences and mass personalization of financial services.
The next opportunity is to integrate Generative and Agentic AI – autonomous AI systems that are able to make decisions independently – with guardrails into customer experience, product design and operations to transform the way banking services are consumed. True effortless experiences, new levels of financial advisory and more end-to-end instant services can be delivered by banks operating new and traditional AI capabilities together.
Generative AI has ushered in a new era of economic productivity with the potential to transform industries. Early recognition of AI’s transformative potential in banking led to initiatives – such as Fatema Digital, an AI-based customer service chatbot by Bank ABC said to be emotionally intelligent – that use traditional conversational AI.
As Agentic AI progresses rapidly, enabled by Large Action Models (LAMs), banks will need to be ready to handle automated transactions between AI-powered, intelligent banks, businesses and individual customer AI assistants. This will necessitate the adoption of new digital banking technology, particularly for handling deposits, loans and investments.
From Fintech disruption to FinAI disruption
As we move into the AI age, new business models, products, services and partnerships will be needed in the financial sector. Trusted with vast troves of data, the banking sector is uniquely placed to develop new use cases for using new AI innovations. For example, through payments services, banks have a window into the habits of individuals and corporations. As such, AI will enable banks to provide very relevant mass personalized financial guidance in more effective ways, tailored to meet their customers’ specific goals and needs.
However, capitalizing on the new wave of AI innovation requires a fundamental shift for incumbents that goes further than redesigning products and services. Banks must look at how they organize themselves, strategize, collaborate, upskill their workforce and how customers interact with their products in an increasingly multi-experience world with human-machine interactions increasing fast.
The proliferation of mobile and cloud technologies led to the emergence of Fintech startups, which have disrupted traditional banking and financial institutions. But now many of these Fintechs are themselves established institutions with outdated operating models and processes.
The GCC has already demonstrated its readiness for financial innovation through the launch of several digital-only banks, such as ila Bank in Bahrain and E20 in the UAE. Building on this foundation, a new generation of AI-native financial services companies – FinAIs – will likely emerge to challenge both banks and Fintechs.
Existing banks and financial companies can embrace FinAI as they compete with a new wave of AI-only financial-service startups. The coming years promise significant financial innovation, and the GCC is poised to be among the leading regions in this transformation.
The FinAI era presents an opportunity to transform financial services in the region and beyond, with the GCC’s regulatory environment and supportive ecosystem creating a fertile ground for future innovation. This financial landscape will help inspire like-minded initiatives across the GCC, and the region is now ready for the next wave of AI-driven financial innovations.
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