banking in emerging markets - gcc fintech play 2017

Banking in emerging marketsGCC FinTech play 2017

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1014

Foreword

Executive summary

The FinTech revolution

The GCC banking sector’s views on FinTech

FinTech’s familiarity and its perceived impact

FinTech’s threats and opportunities

The GCC banking sector’s organizational readiness

Hurdles and limitations faced by the GCC banking sector

Compete or collaborate with FinTech players

Contents17

19

21

23

24

The case for collaboration among participation banks

Global FinTech and opportunities for participation banks

Participation banking sector overview

Country outlook

Bahrain

Saudi Arabia

Malaysia

UAE

Kuwait

Qatar

Turkey

Indonesia

Pakistan

2632

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56

48

58

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60

52

62

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3844

T od ay m ore th an tw o billion ad u lts s till d o not h ave a bank accou nt. T h ere are als o more t an million micro small an me ium si e usinesses it unmet financin nee s e eman or a res onsi le aria com liant financial system is u e

very year lo al slamic an in enter s ares insi ts s a in t e uture o t e in ustry is year it is a out t e financial tec nolo y in ec in ustry ocusin on t e ul oo eration ouncil re ion t rovi es an overvie o

t e lo al slamic an in sector an i li t t e usiness o ortunities o ere y in ec innovations ile ta in into consi eration t e an in sector s vie s

on in ec or ot artici ation slamic an tra itional financial institutions across emer in mar ets t e ris o isru tion is real n t e finance unction o an s is at th e center of th is d is ru ption.

vances in ne tec nolo ies suc as in memory com utin t e clou analytics mo ility artificial intelli ence loc c ain an ro otic o er s an o ortunity to reima ine at t e finance unction s oul loo li e Many s are no ey layers in rivin a o tion o t ese tec nolo ies more roa ly in t e or ani ation an in lea in t e trans ormation t at ensues rom tec nolo y innovation

ile an s o not e ect in ec isru tion in t e s ort term an e ect airly limite usiness loss to stan alone in ec firms in t e me ium term a si nificant ma ority ac no le e t at in ec innovations o er en customers a noticea ly

etter value ro osition More im ortantly t ere is a stron case or colla oration amon artici ation an s or t e mutual enefit rom in ec innovations iven t e nature o t e usiness o artici ation an in t ey can enefit rom evaluatin

in ec innovations in small an me ium enter rises M financin lat orms eer to eer financin lat orms i ital ealt mana ement an ayments relate

innovations .

e ur ose o t is re ort is to ins ire an in orm t e usiness strate ies o financial entities t rou s ecific an actiona le insi ts e o e t at it ill serve as a use ul

ui e or t e uture

Ab d ul az iz Al - S owail imairman an M e ion

Foreword

G C C FinT ech p l ay 2 0 1 74

Na eem afiartner rnst oun l i an l saimi artners

Ashar N az imartner lo al slamic an in enter rnst oun

e act t at almost one t ir o t e t lo al aria com liant assets are eit er re orte as in ormal or est estimates emonstrates t e limitation o artici ation slamic an s in ma in soun strate ic ecisions very craves relia le in ormation an e are seein a stron esire to im rove ata mana ement an analytics at artici ation slamic an s

n t e re ion in ec innovations romise to en ance mar et access an rofita ility o an s ramatically startin oint or artici ation slamic an s is to activate a ol strate y or t e finance unction inclusive o a vance ata analytics ro otic rocess automation t e

clou artificial intelli ence an loc c ain

e elieve t at many senior e ecutives o artici ation slamic an s are in act un erestimatin t e c allen e or t eir s ere is a clear evolution rom a unction ose

rimary role as analy in istorical ata to one ose ocus ill e rovi in or ar loo in insi ts n memory com utin an i ata are t e clear irection or ar it re ictive analytics ein a ey river o t ese c an es

iven t at t ere is more in ec innovation oin on outsi e o t e an s t an insi e t e o ortunity is or artici ation slamic an s to in t rou colla oration nvestment ccount

lat orm in Malaysia an m allet lat orm in t e re ion are encoura in si ns t ill not e a sur rise i t e an o t e uture ill e an amal amation o in ec outi ues un er a sin le brand .

o y oes it matter ell t e ne a en a coul ro el artici ation slamic an s to mainstream across romisin mar ets y u rom mar ets to ay is oul re resent a um rom million customers to million customers over t e same erio

G C C FinT ech p l ay 2 0 1 7 5

Executive summary

n t is re ort e rovi e an overvie o t e lo al artici ation slamic an in sector an i li t t e usiness o ortunities

o ere y in ec innovations ile ta in into consi eration t e an in sector s vie s on in ec

e contents o t is re ort can e summari e un er five ea in s

T he FinT ech revol utione e lain y in ec is vie e as a revolution in an in

G C C b ank s’ views on FinT eche s are t e results o s survey on in ec relate issues

T he case f or col l ab orationW e ad vocate collaboration betw een participation banks and

in ec firms as ell as colla oration amon artici ation an s to enefit rom in ec innovations

FinT ech op p ortunities f or p articip ation b ank se ive an overvie o lo al in ec tren s an i li t at

in ec usiness o ortunities are o en to t e artici ation slamic an in sector

P articip ation b ank ing sector overviewinally e rovi e a lo al artici ation an in sector

overvie as ell as a eo ra ical se mente vie o artici ation an s er ormance

T he FinT ech revol utione ave o innovation is s ee in t rou all as ects

o financial usinesses suc as an in insurance asset mana ement an ealt mana ement an t e c an es it

romises to rin are not in s ort o a revolution in t e financial services sector

ile t ere ill e enefits or incum ent financial services layers an o ortunities or innovative in ec entre reneurs

t e real eneficiary is oin to e t e user o financial services e user ill enefit rom a si nificantly im rove consumer

j ou rney , low er cos t of s ervices , increas ed ch oice, cons u m er em pow erm ent, f as ter trans action s peed and a m ore inclu s ive financial system

ecutive summary

8 G C C FinT ech p l ay 2 0 1 7

G C C b ank ’ s views on FinT echT hreats and op p ortunities: ile t e an s o not e ect

in ec isru tion in t e s ort term an e ect airly limite usiness loss to stan alone in ec firms in t e me ium term

a si nificant ma ority ac no le e t at in ec innovations of f er end cu s tom ers a noticeably better valu e propos ition.

un s trans er an ro era e services are vie e to e at i ris o isru tion an ealt mana ement is i entifie as a me ium in ec isru tion usiness activity

e an in sector sees si nificant o ortunities rom in ec innovations en ancin consumer e erience an

streamlinin o erations is on to o t eir list

O rganiz ational read iness: W h ile th ere s eem s to be a ronounce strate ic intent an oar level su ort or i ital

trans f orm ation, practical s teps to convert th is intent into m eas u reable res u lts d o not s eem to h ave been taken.

H urd l es and l imitations: ere are concerns re ar in t e tec nical a ilities o in ouse resources an t e a ility o t e

an in or ani ations to innovate vis vis international in ec firms

ere are a itional concerns re ar in re ulatory am i uity it res ect to intec innovations t at can ol ac a vances

in th is area.

C omp ete or col l ab orate: e an in sector seems to ave a ra matic vie to ar in ec firms an a ma ority vie

th em as potential bu s ines s partners to collaborate w ith , f or th e oo o t e en consumers

n over elmin ma ority eels t at t ere are enefits in in ustry colla oration to evelo s are cost in ec solutions

T he case f or col l ab oratione an in sector s vie s on colla oration rat er

t an com etition it in ec firms are consistent it international norm s .

More im ortantly t ere is a stron case or colla oration amon artici ation an s or t e mutual enefit rom in ec innovations ese enefits ill accrue rom net or e ect economies o scale e ficiency in ointly e lorin emer in

in ec innovations an avoi ance o creatin a t o tier artici ation an in sector ue to t e uneven a o tion o in ec innovations

FinT ech op p ortunities f or p articip ation b ank srom less t an in t e rivate sector investment

in in ec increase to y ver o in ec investments to ate ave een in t e ersonal an M s

usiness se ments

iven t e nature o t e usiness o artici ation an in t ey can enefit rom evaluatin in ec innovations in M len in

lat orms eer to eer len in lat orms i ital ealt mana ement an ayments relate innovations eer to eer

ayments i ital only an s or millennial se ment an multi actor aut entication rocesses to re uce rau ris

P articip ation b ank ing sector overviewe assets o lo al artici ation an in reac e in

e re ion s s are o artici ation an in increase to as t e si e o assets in t e ssociation o out east

sian ations countries ecline urin in terms e ro t rate in all re ions ecline relative to t e previou s y ears .

au i ra ia t e an Malaysia are t e t ree lar est artici ation an in mar ets in terms o assets inancial er ormance ata or ey artici ation an in mar ets is

provid ed in th e report.

M uhammad M uz ammil K asb ati

irector lo al slamic an in enter



in ec stan s at t e intersection o t e financial services an tec nolo y sectors ere tec nolo y ocuse start u s an ot er ne m arket entrants innovate prod u cts and s ervices currently rovi e y t e tra itional financial s ervices s ector.

Mar arney t e overnor o an o n lan says e ave o innovation s ee in t rou t e orl o financial tec nolo y romises not in s ort o revolution it ill c an e t e nature o money s a e t e oun ations o central an in an eliver not in less t an a emocratic revolution or all o use financial services

FinT ech revol ution

I n suran c e

B an k in g

Asse t man ag e me n t

W e alth man ag e me n t

I m proved cons u m er j ou rney

L ow er cos t

I ncreas ed ch oice

E m pow ered cu s tom er

F as ter trans action s peed

More inclusive financial system

FinT ech enhances consumer val ue p rop osition


e in ec revolution romises to accrue nota le enefits to t e financial sector in eneral an t e user o financial s ervices in particu lar.

or incum ent layers in t e financial sector some in ec innovations ill res u lt in s h orter trans action ch ain, red u ced operational cos t, enh anced res ilience of operational proces s es , a ility to access ne customer se ments to increas e revenu e and im proved ca ital e ficiency is ill rein orce t eir strate ic osition an im rove t e bottom line.

ut t e real eneficiary o in ec innovations ill e t e user o financial services in ec s laser li e ocus on consumers is re efinin t e consumer ourney ile con uctin financial transactions y im rovin ease o use sim li yin transaction o an

en ancin t e loo an eel to intro uce a it o eli t in t e consumer ourney

in ec innovations romise to re uce th e trans action cos t, increas e th e ch oice, im prove th e trans action s peed an em o er t e customers y movin control over con uctin a financial transaction rom t e financial institution to th e cu s tom er.

ove all in ec innovations an i enetration o mo ile tec nolo y romise to en ance financial

inclusiveness y rin in in a lar e s w ath e of les s w ell- of f ind ivid u als , w h o currently remain unserve y t e le acy financial sector ecause o its reliance on th e “ ph y s ical” d is tribu tion s tru ctu re and t e resultin i cost o interme iation


The GCC banking sector’s views on FinTech

The findings outlined in this section of the report are based on a FinTech survey conducted in the GCC region during summer 2016. The participants of this survey included conventional and participation banks. Some of the conventional banking survey participants offered Sharia-compliant products through a participation window. The survey elicited the GCC banks’ views on FinTech-related issues.

In the following pages, we will discuss the survey participants’ familiarity with FinTech and their perception of the potential impact FinTech could have on the GCC banking sector. This is followed by the survey participants’ assessment of the threats and opportunities posed by FinTech innovations and the organizational readiness in the GCC banking sector to confront them. Subsequently, the survey findings describe the participants’ views on the key hurdles and limitations that could hinder the introduction of FinTech in the region, the GCC banking sector’s intent with regard to competition or collaboration with FinTech firms and the need for shared-cost FinTech solutions for the fragmented banking sector players in the GCC region.

FinTech in the GCC banking sector

16 GCC FinTech play 2017

L ow f am iliarity S om e f am iliarity

airly amiliar

V ery f am iliar

E tremely amiliar

Y es May e

ot very li ely

ource in ec survey

o

FinTech familiarity and its perceived impact

Q :

Q :

Famil iarity with FinT ech innovations is mod est in the G C C b ank ing sector.

H ow w ou ld y ou rate y ou r f am iliarity w ith in ec an its ey international tren s

o you t in t at t e an in sector ill e isru te y in ec in some

manner in t e ne t years


amiliarity it in ec innovations is rat er mo est in t e an in sector i ty ei t ercent o t e artici ants rate t eir amiliarity it in ec innovations as “ low f am iliarity ” or “ s om e f am iliarity ” one or t o on a scale o one to five is is not

sur risin iven t at in ec is a rat er recent enomenon ven in t e lea in international

financial centers t e ro ortion o financial sector firms claimin i e ree o amiliarity it in ec is not issimilar to t ose e resse y t e survey

artici ants in t e re ion

e survey artici ants seem to e in ou t i in ec play ers cou ld cau s e any noticeable d is ru ption in th e

an in sector in t e s ort term years is is not it stan in t at t ey ac no le e t e

in erent stren t s o t e innovative in ec service propos itions over th os e of f ered by th e incu m bent

an in sector in t e re ion

ne ossi le e lanation o t e ou t in terms o in ec isru tion coul e ecause o t e i

re ulatory arriers or any ne entrant in t e an in sector an t e a sence o any a arent olicy

su ort rom t e an in sector re ulators or in ec isru tion in t e interest o en consumers

n contrast an in re ulators in most o t e international financial centers are e licitly su ortin

in ec isru tion to orce t eir an in sector layers to a o t i ital innovations or ace cre i le

com etitive t reats rom in ec layers

S urvey p articip ants are in d oub t if FinT ech coul d d isrup t the G C C b ank ing sector in the short term.

at o you t in are t e ey stren t s o t e value ro osition o in ec firms vis vis an s lease ran on a scale rom one to five ere one is lo an five is i

E as e of u s e

L ow er cos t

ocial me ia inte ration

aster service

etter client e erience

W id er variety or f eatu res

Pers onaliz ed s ervice

ource in ec survey


S trengths of FinT ech innovations are ack nowl ed ged b y the G C C b ank ing sector.

et een an o t e survey artici ants elieve t at in ec

innovations of f er end cu s tom ers a noticeably better valu e propos ition, in term s of eas e of u s e, cos t, s peed o service an inte ration it social me ia lmost o t e survey

artici ants ac no le e t at in ec innovations also o er a etter client e erience in terms o

cons u m er j ou rney .

ote lo or ratin me ium ratin an i or ratin

L ow Me ium i

Q :

onsistent it t eir ou ts re ar in in ec firms a ility to isru t t e an in sector in t e s ort term an over elmin

m aj ority of th e s u rvey participants es tim ated th at los s of th e an in sector usiness to stan alone in ec firms in t e ne t

five years is li ely to e less t an orty t ree ercent o t e artici ants elieve t at t e loss is li ely to e less t an

ese estimates o loss o usiness to in ec initiatives are su stantially smaller t an t ose e ecte in t e international financial centers ere t e incum ent financial sector s mar et s are loss is enerally ro ecte to reac et een an by 2020.

n your estimate at ercenta e o t e an in sector s usiness is at ris o ein lost to stan alone in ec firms in t e ne t five years

is rela e attitu e may re ect t e an in sector s elie t at t e re ulators oul continue to rotect t e incum ent financial sector layers

interests it i re ulatory arriers to entry an oul not rovi e olicy su ort to in ec

isru tion in t e manner t eir counter art financial re ulators ave rovi e in ro ressive international financial centers

o ever some an in sector o servers elieve t at t e enefits o in ec innovations or en consumers are so reat t at t e re ulators may very s h ortly d evelop a policy s tance th at actively encoura es in ec innovation in t e financial sector

t at ere to a en t e incum ents amon t e an in sector may ace a i er t reat rom

in ec layers t an t ey currently estimate

Up to 5% 10%–15%

43%

15%–20%

7%

5%–10%

36%

20% and above

7%

7%

FinTech threats and opportunities

ource in ec survey


E stimated l oss of b usiness to stand - al one FinT ech firms in t e ne t five ears

Q :

n over elmin ma ority o t e survey artici ants almost elieve t at e osits an len in oul remain very

lar ely una ecte rom t e in ec isru tion is erce tion in t e

re ion is si nificantly i erent rom t eir international cou nterparts , w h o believe th at consumer an in e osits an len in is one o t e i est ris area rom in ec d is ru ption.

n t e ot er en o t e s ectrum a ro imately o t e survey participants believe th at f u nd s trans f er services ill e t e rimary tar et o in ec

isru tion ollo e y o t e survey artici ants o consi er ro era e

services to e a i ris activity is is roa ly consistent it t e e ectations

o incum ents in t e international financial s ectors .

ur risin ly only o t e survey artici ants consi ere ealt mana ement

to e a i ris line o usiness ollo e y o lace it as a me ium ris rom t e ers ective o in ec isru tion nternationally ealt mana ement is i ely consi ere to e a i ris o

d is ru ption” activity th at clos ely f ollow s consumer an in an un s trans er t e t o ey erceive tar ets o in ec firms

I n a noticeably pos itive s tance tow ard in ec innovations t e an in sector

s eem s to be bu llis h on th e potential of opportu nities it of f ers to incu m bent play ers .

lmost o t e survey artici ants state t at in ec innovations coul el t em en ance consumer e erience an streamline t eir o erations More t an o t e artici ants t ou t t at in ec innovations cou ld h elp th em enh ance cons u m er- centricity and red u ce cos t.

e an in sector s ositive stance to ar in ec innovations coul e lain w h y th e s u rvey participants believe th at th eir los s of bu s ines s to s tand - alone

in ec layers is li ely to e rat er m od es t com pared w ith th eir international cou nterparts .

ource in ec survey

an you oresee some o ortunities arisin as a result o t e rise o in ec in t e re ion

lease ran on a scale rom one to five ere one is lo an five is i

e an ing sector sees significant o ortunities f rom FinT ech innovations.


ic art o t e an in sector is li ely to e t e most isru te y in ec over t e ne t

five years lease ran on a scale rom one to five ere one is lo an five is i

Fund s transf er and b rok erage are viewed to b e most l ik el y to b e d isrup ted .



un s trans er

ro era e

M usiness

ealt mana ement

ommercial an in

en in

D epos its

L ow Me ium i

onsumer e erience

treamlinin o erations

ost re uction

onsumer centricity

e ro ucts revenue

L ow Me ium i

Q :

Q :

ource in ec survey

GCC banking sector’s organizational readiness

S enior management sup p ort f or d igital transf ormation through FinT ech innovations.

e survey in icates t at i ital trans ormation t rou in ec innovations is enerally su orte y t e lea ers i teams in t e an in sector i ty seven ercent o t e survey

artici ants state t at t ey a ree or some at a ree it

t e statement t at i ital trans ormation t rou in ec innovations is a strate ic initiative t at is c am ione y t e

oar o irectors an t e senior mana ement team in my or ani ation

ree S om ew h at a ree

eit er a ree nor isa ree

ome at isa ree isa ree

lease in icate to at e tent you a ree or isa ree it t e ollo in statement i ital trans ormation t rou in ec innovations is a strate ic initiative t at is c am ione y t e oar o irectors an t e senior mana ement team in my or ani ation

as an in ivi ual een s ecifically ele ate t e res onsi ility or innovation in your or ani ation it a clearly efine man ate

ot it stan in a strate ic intent or i ital trans ormation an t e lea ers i team s s onsors i of th e initiative, practical s teps to convert th e intent into res u lts d o not s eem to h ave taken place in m os t of t e survey artici ant an s in t e re ion

A maj ority of the survey p articip ants d o not have a singl e p erson in charge of innovation.

Y es o

I n a m aj ority of th e s u rvey participant banks , th e s ecific res onsi ility or i ital innovation in t e or ani ation as not yet een ele ate to a senior e ecutive it a clear man ate associate aut ority and accou ntability .

Q :


Q :

ell t ou t out plan read y

lan rea y to a reat e tent

Ma in oo ro ress

ot yet a su stantive iscussions on in ec

ust e un a ressin in ec issue

ource in ec survey


I n ad d ition, tw o- th ird of th e s u rvey participant banks h ad eith er not h ad any s u bs tantive d is cu s s ions w ith in t e or ani ation or a ust e un a ressin t e issue o i ital trans ormation to re are an actiona le

or lan to a ress t e c allen es ose y in ec innovations nly o t e survey artici ant an s s tated th at th ey h ad an actionable w ork plan in place to a ress t e c allen es ose y in ec innovations

Q : n your o inion to at e tent oes your or ani ation ave a lan in lace to res on to t e c allen es as a result o t e e ecte rise o in ec in t e re ion lease select one option:

• ell t ou t out lan is in lace

• o a reat e tent our lan is rea y

• e are ma in oo ro ress

• e ave ust e un a ressin t is issue

• e ave not yet a su stantive iscussion on in ec

M ost G C C b ank s d o not seem to have a cred ib l e work p l an in p l ace f or d igital transf ormation.

ource in ec survey

Hurdles and limitations faced by the GCC banking sector

E stimated l oss of b usiness to stand - al one FinT ech firms in t e ne t five ears

irty five ercent o t e survey artici ants rate t eir an s in a isa vanta e osition vis vis in ec firms on ot tec nical a ility an or ani ational a ility ile o t e survey artici ants elt t at t ey ere on a ar it in ec firms on ot counts o ever it as interestin to note t at

es ite t eir su stantial tec nolo y u et year a ter year only o t e artici ants elt t at t ey ere in an a vanta eous

osition in terms o tec nical a ility vis vis in ec firms

oncerns on or ani ational a ility it re ar to i ital innovation inclu e t eir or ani ation s lac o ocus lac o un erstan in o in ec at t e eneral mana ement level or ani ation s a ility to co e it c an e an a ervasive culture o inaction unless orce y e ternal events i it is not an imminent t reat it is not a riority

t er ur les an limitations i li te y t e survey artici ants inclu e re ulatory am i uity it re ar to in ec innovations an t eir erceive re ulatory restrictions

t at may create in rance in im lementin a success ul i ital trans f orm ation.

e survey artici ants also i li te t e issue o lac o scale ue to t e i level o an in sector ra mentation in t e re ion it out an a ility to ain economies o scale t ere ere concerns on t e an in sector s a ility to a rove investments in i ital trans ormation initiatives t at coul

ecome a ite ele ant in terms o u etary e en iture

L ow ir ani ational a ility

Low

iTe

chni

cal a

bilit

y


e survey artici ants i li te a nu m ber of h u rd les and lim itations ace y t e an in sector

t at can t art a success ul i ital trans f orm ation initiative.

e i est amon t e ur les and lim itations w as th eir bleak as s es s m ent of th e tech nical ability an a ility o t eir or ani ational systems total o o t e s u rvey participants f elt th at th eir

an as in a isa vanta e pos ition, in term s of tech nical a ility to innovate vis vis in ec firms an a same amount o

artici ants elt t at t eir an s or ani ational a ility to innovate vis vis in ec firms as lo

Q : o oul you rate your an s tec nical a ility to innovate li e in ec start u s o oul you com are your an s or ani ational a ility to innovate li e in ec

start u s lease rate on a scale rom one to five ere one is lo an five is i

e survey artici ants res onse su est t at t e an in sector is li ely to ta e a ra matic a roac to ar in ec firms t at rin innovative ro ositions into t e re ion

ma ority o t e survey artici ant an s state t at t ey vie in ec firms as a otential artner in eliverin an en ance usiness ro osition to en consumers nly o t e artici ants consi ere in ec firms as com etitors

ma ority o t e survey artici ants o t e survey res onses seem to su est t at t e an in sector is i ly li ely to colla orate it in ec firms or invest in in ec firms to or to et er it t em to meet en consumers nee s nly o t e res on ents su este t at t eir res onse to t e in ec c allen e oul e to uil in

ouse solutions to com ete it t e in ec innovations

ource in ec survey

G C C b ank s’ p ercep tion of FinT ech L ik el y strategies of the G C C b ank s

olla orate o not in

B u ild in- h ou s eI nves t

Partner

I rrelevant

om etitor

S urvey p articip ants’ views on the b ank ing sector’ s evol ution toward a d igital ecosy stem.

ere as a i e ree o consensus amon t e survey s artici ants eit er a ree or some at a ree t at t e an in sector mi t nee to evolve to ar a i ital ecosystem

levera in i ital ca a ilities o multi le artner entities to remain at t e ore ront in a ra i ly c an in usiness environment as a result o t e in ec innovations

ree

eit er a ree nor isa ree isa ree

ome at a ree

Compete or collaborate with FinTech players


T he G C C b ank ing sectors’ p ercep tion of FinT ech and their l ik el y strategies to comp ete with them

Q :

Q :

Many financial sector e erts elieve t at t e an in sector mi t nee to evolve to ar a i ital ecosystem levera in i ital ca a ilities o

multi le artner entities to remain at t e ore ront in a ra i ly c an in

usiness environment o at e tent o you a ree it t e a ove oint o

view ?

o are you li ely to vie in ec firms tar etin your usiness t rou innovative ro ositions at is t e li ely strate y o your an or com etin it in ec firms

ource in ec survey

ree

eit er a ree nor isa ree

ome at a ree

T he need to b uil d “ shared - cost FinT ech sol utions” in the G C C region.

P otential col l ab orative shared - cost FinT ech sol utions in the G C C region.

Q :

Q :

e an s s oul colla orate to uil s are cost in ec solutions t at can serve t e entire an in sector to en ance sector level cost e ectiveness an re uce time tomar et o at e tent o you a ree it t is lease ran on t e ollo in scale

ree ome at a ree eit er a ree nor isa ree ome at isa ree isa ree

n your o inion ic an in sector activities len t emselves to a colla orative initiative amon t e an s lease ran t e ollo in on a scale rom one to five

ere one is lo an five is i


ue to t e i e ree o ra mentation in t e an in sector t e survey artici ants

stron ly su orte t e notion t at erever ractical t e an s s oul colla orate to uil s are cost in ec solutions t at can

serve t e entire an in sector to en ance s ector- level cos t- ef f ectivenes s and red u ce time to mar et i ty si ercent o t e survey

artici ants ree or ome at a ree th at th ere is a need to s et u p s h ared - cos t

in ec solutions

W h en as ked to prioritiz e a s h ort lis t of potential s are cost in ec initiatives t e survey participants rated au th entication and biom etrics ,

i ital an mo ile ayments cy ersecurity an a utility at t e to o t eir list

B eh ind th is top priority lis t, th e s u rvey artici ants ave me ium riority to e ficient

re ulatory re ortin solutions an i ital ealt mana ement

ut entication an iometrics

i ital an mo ile ayments

y ersecurity

utility

S m art s u rveillance s y s tem s

e ulatory re ortin

i ital ealt mana ement

L ow Me ium i on t no

Case for collaboration among participation banks

The case for collaboration among participation banks

N etwork ef f ect

ey ar ument in su ort o colla oration amon artici ation an s is to enefit rom net or e ect y usin consistent stan ar s an rotocols

ile a o tin no n in ec solutions in ord er to broad en its ad option and u s e.

e case or artici ation an s colla oration it innovative in ec firms is ell ma e y t e in ec urvey res on ents state t eir intent to

colla orate y or in it in ec firms or investin in t em as ell as t e acce te norms in t e an in sector aroun t e orl

or e am le a lea in multinational an in an financial services ol in com any in th e U nited S tates h as j oined h and s w ith a non- bank s m all bu s ines s lend er, w h ich

as elivere illion to small usinesses lo ally imilarly a ritis an an a utc multinational an in an financial services cor oration ave investe in a

ase in ec t at rovi es un in to small usinesses an consumers t rou an automate len in lat orm ne o t e ain s lea in an s as investe in a

i ital only an mo ile ase c allen er an in t e cottis retail an is or in it a ase eer to eer len in lat orm t at len s money to M s

n a ition to t e colla oration it in ec firms t ere is an e ually stron case or artici ation an s colla oration amon t emselves on a consortium asis

ile a ressin t e c allen es an o ortunities o ere y in ec innovations

Joint venture Peer-to-peer platform

6 M al ay sian p articip ation b ank s

IAP integrated ( owner and op erator of

IAP )


The case for collaboration in the GCC banking sector

ne nota le e am le o colla oration an evelo ment o consistent stan ar s or roa a o tion in artici ation an in sector is t e artici ation nvestment ccount lat orm launc e recently in Malaysia sin ell esta lis e in ec innovations t e acilitates e ficient interme iation y t e s onsorin an s to matc financin re uirements o ventures

w ith inves tm ent f rom retail and ins titu tional inves tors via nvestment ccount as launc e initially y a consortium o our artici ation an s in Malaysia it t o more an s oinin in later on

E conomies of scal e

n e ually stron ar ument in su ort o colla oration amon artici ation an s is to ac ieve enefits o t e economies o

scale y usin a utility entity a roac to ar t e a o tion o certain unctional in ec solutions ere a ro riate it can

e ar ue t at t is colla oration s oul e e ten e to inclu e conventional banks .

oo e am le o an in ustry colla oration initiative to ac ieve econom ies of s cale and broad m arket ad option is th e m W allet

recently announce y an s in t e inclu in artici ation an s ne o t e ey o ectives o t e m allet lat orm is t e financial inclusion o t e un an e se ment o

t e o ulation o ill enefit rom access to asic financial services suc as receivin un s or ma in ayments

E x p l oring emerging FinT ech innovations

e s ee o in ec innovation as een i yin urin t e ast e years an s o s no si n o a atement e variety

o ays in ic in ec innovations are ein a o te y t e an in sector is ever increasin ven some o t e lar est

international an s it e icate teams or in ec innovation are fin in it i ficult to ee trac o t e evelo ments in

in ec

K ey obj ectives

• Mo ile ayment

• inancial inclusion

• Mo ile un s trans er

Mo or a consortium m allet lat orm

e ulate y t e entral an



ne can ar ue t at t ere is a reat enefit in colla oration amon artici ation an s on evaluation o in ec tren s

oolin o researc an i eas evelo ment o rototy es an “ proof of concept, ” and th e d evelopm ent of com m on s tand ard s or sector i e e loyment in artici ation an in

n e am le o in ustry colla oration to e lore emer in in ec innovations is t e set u o a loc c ain tec nolo y

firm y a consortium o nine o t e lar est international inves tm ent banks as d epicted below . W ith in one y ear f rom its

set u in e tem er t e num er o consortium an s increase to more t an institutions

is a financial innovation firm t at lea s a consortium artners i to esi n an eliver a vance istri ute le er

tec nolo ies to t e lo al financial mar ets colla orates it its artner institutions on researc e erimentation esi n an en ineerin is ro els t e ultimate users o t is

ne tec nolo y into t e esi n an ro uction rocess rom th e ou ts et.

Avoid a two- tier p articip ation b ank ing sector

ecause o a i e ree o ra mentation i ital trans ormation an a o tion o in ec innovations in a com m ercially viable m anner m ay be ou t of reach f or m any s m all and m ed iu m - s iz ed participation banks . T h is is eith er becau s e of t eir small si e o usiness or ue to s ortcomin s in t e e t an rea t o t eir tec nolo y teams

U nles s th ere is a proactive collaboration, th ere is a ris k th at w e may en u it a t o tier artici ation an in sector e lar est artici ation an s may succee in a o tin in ec innovations , w h ereas s m all and m ed iu m - s iz ed participation banks m ay end u p as s econd - tier play ers w ith a com petitive

isa vanta e relative to lar e artici ation an s as ell as t eir muc lar er conventional counter arts

R oc c ain tec no og consortium firm

onsortium artners increas ed to m ore th an

lea in international financial institutions

g o a oun er financia institutions — S ep temb er

2 0 1 5


GCC FinTech play 2017 31

avin an ealt


rom ali ornia to ina t e uro e an n ia t e an in sector is ein c allen e y in ec isru tions

o a lea in multinational an in com any as e resse is vie s on

in ec startu s notin “ S il icon V al l ey is coming. T here are hund red s of start-up s with a l ot of b rains and money work ing on various al ternatives to trad itional b ank ing. ”

enture ca ital firms an cor orate venture initiatives in some o t e lar est

an in institutions aroun t e orl ave investe in in ec s a result lo al investment in in ec as ro n

ra i ly ccor in to a researc re ort on in ec et een an lo al in ec investments er year amounte

to lo sin le i it illions o ollars n t is um e to an t en

u t o t ir s to an estimate in

e in ec entrants are tar etin s om e of th e m os t attractive and valu able

rofit ools in an in to ay ccor in to a researc re ort ersonal an M

an in account or a out al o t e an in sector s rofit ool an a i er ro ortion o t e sector s e uity value ot sur risin ly over o t e in ec

inves tm ents to d ate h ave been in th e ersonal an M usiness se ments

P rivate investment in gl ob al FinT ech comp anies ( U S $ b )

C ap ital d ep l oy ed in p rivate FinT ech comp anies b y b usiness area

en in

I ns titu tional tools

uity cro un in

I ns u rance

i ital currency

Pay m ents

2 2 2


FinTech overview and opportunities for participation banks

P otential op p ortunities f or the p articip ation b ank ing sector

o tion o in ec innovations is not an o tion ut an a solute im erative or artici ation an s to continue to ain m arket s h are.

onsumer tec nolo y enetration mo ile one ta let la to in t e re ion is no com ara le it t at o consumers in m os t of th e d eveloped cou ntries . B as ed on th eir f am iliarity an use o consumer tec nolo y t eir e avior atterns are mo i yin it increase e ectation to interact it an s usin i ital c annels

ome o t e lea in conventional an s in t e re ion ave ac no le e t e c an e in t eir customer e ectations y announcin si nificant investments in i ital trans ormation initiatives artici ation an s cannot realistically e ect to

ain sustaina le uture ro t in t eir mar et s are i t ey la e in t eir conventional counter arts in i ital trans ormation

t rou t e use o in ec innovations

ome o t e ey areas o in ec innovations relevant or artici ation an s are i li te as ollo s

S M E l end ing p l atf orm

mall an me ium enter rises o ten re resent a ove o t e usiness enter rise in a country n t e r anisation or

conomic o o eration an evelo ment an uro e

M s create et een an o t e ne o s e avera e M contri ution to in t e uro ean nion is

almost t ice t at o most countries in t e re ion

stu y con ucte y an international financial institution ic e amine t e levels o an len in to M s in t e

Mi le ast an ort rica M re ion oun t at t e s are o M loans amon t e total an loans is ust in t e

re ion amon t e lo est in t e orl e avera e or t e M re ion is ile t e level o len in in non countries in M is ic is su stantially i er

n evelo e countries it muc i er ro ortion o loans to M s an s are a o tin in ec innovations to en ance t eir

len in to t is im ortant sector ritis an an a utc multinational an in an financial services cor oration ave ma e si nificant investments in an automate len in lat orm or M s e errin to t ese in ec initiatives or M s

a rominent o a ase multinational an in com pany noted : “ W ork ing with a FinT ech comp any cal l ed O nD eck , we wil l b e p il oting a new work ing cap ital p rod uct. T he p rocess wil l b e entirel y d igital , with ap p roval and f und ing general l y received within one d ay vs. the current p rocess that can tak e up to one month or more. T he l oans wil l b e C hase b rand ed , retained on our b al ance sheet, and sub j ect to our p ricing and risk p arameters. ”

T o id entif y innovation characteristics and emerging areas of innovation, E Y has d evel op ed the f ol l owing f ramework : 1

S ou rce: UK FinTech — On the Cutting Edge, An Evaluation of the International FinTech Sector, EY, 2016

an in an pay m ents

re it an len in I ns u ranceetail

inves tm ents and pens ions

I nves tm ent mana ement olesale an in and capital

m arkets

a i ly evelo in

uture innovations

nte rate ayments

ontactless ayments

P2P pay m ents

Money mana ement tools

entity mana ement

inancial inclusion

rail ayments

len in

ro un in

en ata S m art contractsB lockch ain

T elem atics

S ocial ins u rance

W earables

nternet o in s

utonomous ve icles

n a e investin

V is u aliz ation tools

l orit m a vice


ere is a stron case or artici ation an s to evaluate o automate M len in lat orms can e ma e to or or t em in t e re ion

P eer- to- p eer l end ing p l atf orm

rofit an oss arin account is commonly use in artici ation an in e usiness mo el currently in use

results in t e investor e ositin un s in is account an leavin t e artici ation an to ma e investment or cre it

u ments on is e al e resultin rofit or loss is t en s are et een t e account ol ers ase on t e rofit s arin olicy o eac artici ation an ic o ten i er

et een an s artici ation an s are o ten critici e on t eir rofit s arin olicies or

e recently launc e slamic initiative in Malaysia as emonstrate o eer to eer len in lat orm a o ular in ec innovation coul a ress some o t e criticisms ma e

on th e cu rrent PL S bu s ines s m od el.

e eer to eer len in mo el c an es t e role o artici ation an s rom t e mana er o t e account

on e al o investors e ositors to a rovi er o in ormation on investment o ortunities to investors e ositors T h e participation bank cond u cts s u itability evalu ation of investors ue ili ence on investments ut on t e lat orm and m onitors th eir perf orm ance. H ow ever, th e res pons ibility to ch annel f u nd s to ventu res of th eir ch oice is m oved to th e inves tors .

ere is a case or artici ation an s in t e re ion to evaluate t e ros an cons o usin t e eer to eer len in approach f or th eir PL S accou nt.

D igital weal th management

e current norm in artici ation an in is to consi er ealt mana ement as a service suita le or t e ealt y e le acy

usiness mo el an or in assum tions relatin to ort olio mana ement services elivere usin client account mana ers means t at t e service can only e elivere rofita ly to

ealt y artici ation an in clients

e in ec innovation o i ital ealt mana ement commonly no n as ro o a vise or its al orit m riven

ort olio mana ement an lat orm riven interaction it clients is revolutioni in ealt mana ement orl i e imilar to t e ealt y investors i ital ealt mana ement as

ma e it ossi le or mass a uent in ivi uals to ain access to ort olio mana ement services t at allo t em to evelo an

internationally iversifie ort olio o securities re ectin t eir s ecific investment o ectives an ris a etite

nternational an s orl i e are intro ucin i ital ealt mana ement to t eir mass a uent clients in to t e

enefits to retail investors some o t e international re ulators h ave d ecid ed to provid e a policy s u pport to s et u p au tom ated

ort olio mana ement services e inancial vice Mar et evie M a ro ect ointly le y t e inancial on uct ut ority an treasury in t e recommen e t e

set u a s ecial unit to el firms set u i ital ealt mana ement

e a o tion o i ital ealt mana ement coul allo participation banks to of f er th e PL S accou nt h old ers y et anoth er w ay to inves t th eir f u nd s in a S h aria- com pliant m anner.

Investorsource o un

• I nd ivid u al, corporate and ins titu tional inves tors

V enturessers o un

• S im ilar to cu rrent an in usiness

• ar et ventures can e M s an ventures

in innovative and new ro t areas it

viable proj ects

Isl amic b ank s

tron roles laye y I s lam ic bank, in line w ith t eir fi uciary uties

• ue ili ence an continuous monitorin on ventu res

• S u itability as s es s m ent on inves tors

P rovid e financing

C hannel f und s to ventures of their choice


B ank ing and p ay ments

e an in an ayments arena o er a num er o otential in ec initiatives in colla oration it s eciali e in ec firms or t e artici ation an in sector to consi er

P 2 P p ay ments: i to retail an s announce t eir intention to or to et er to launc a real time erson topers on pay m ent s olu tion to th eir clients .

e errin to t is innovative consortium initiative a ase m u ltinational com pany s tated th at, “ T his new P 2 P sol ution wil l securel y mak e real - time f und s avail ab l e through a singl e consumer- f acing b rand . C hase and the p artner b ank s rep resent 6 0 % of al l U S consumers with mob il e b ank ing ap p l ications. W e intend to k eep P 2 P f ree f or consumers and the network consortium is op en f or al l b ank s to j oin. ”

ecause o t e u i uity o mo ile ones in t e re ion th e lau nch of a s im ilar cons ortiu m - bas ed P2P pay m ents solution coul el artici ation an s ac ieve t eir strate ic

oal o rovi in financial services to many o t e currently un an e in ivi uals in t e re ion

D igital - onl y b ank f or the mil l ennial s: e millennial eneration as a clear re erence or con uctin t eir financial services on

an en to en i ital lat orm sin in ec innovations an s orl i e are ste in or ar to o er i ital only an in

s ervices to m eet th e d if f erentiated need s of th is cu s tom er se ment

n t e t e launc o a num er o i ital only c allen er an s as een announce ecently a lea in slamic an ase in t e announce t e lanne launc o a i ital

only an tar etin t e millennials in t e in alliance it a G erm an online bank.

i ital only an in coul ecome a si nificant client se ment f or participation banks in th e d u e cou rs e. T h ere is a cas e f or participation banks to evalu ate collaborative ventu res w ith

in ec firms to launc i ital only an s in t eir res ective cou ntries .

M ul tif actor d igital authentication: urrently most artici ation an in layers e loy a username or ass or

d riven au th entication protocol f or th eir clients .

in ec innovations in i ital aut entication no allo an s to use multi actor aut entication rotocol n t is conte t t e username or ass or at you no is consi ere one o th e th ree f actors in client au th entication. T h e oth er tw o f actors an verification o t e i ital evice mo ile ta let la to use y t e client to access t e an at you ave an

iometric aut entication o t e client o you are t rou acial iometrics iris scan fin er rints or voice reco nition

Multi actor aut entication o clients si nificantly re uce t e ris o rau in an in



Participation banking sector overview

40 International participation banking assets40 Regional market contributions41 Participation industry footprint42 Participation banking country contributions42 Leading 20 participation banks by capitalization43 Profitabilityinfocus

International participation banking assets*

ource entral an s an analysis nternational artici ation an in assets e clu e ran ic as a uni ue omestic in ustry inclu es or an y t u an an out rica

ource entral an s an analysis nternational artici ation an in assets e clu e ran ic as a uni ue omestic in ustry

US$

b

13%

572

930

2011 2012 2013 2014 2015

G CC A S E A N T u rkey and R O W S ou th A s ia

385 455 515 606 663

117 143

153 159 142

53 69

84 89 91

17 20

24 28 33

S hare of p articip ation b ank ing assets* International p articip ation b ank ing assets* ( U S $ b )

Regional market contributions

2011 2012 2013 2014 2015

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

35%

GCC ASEAN Turkey and ROW

South Asia

ur ey an

out sia

Par

tici

pati

on b

anki

ng m

arke

t sh

are

Banking penetrationSize of circle = Participation banking assets

KSA

UAE

Kuwait

Qatar

Turkey

Bahrain

Indonesia

Bangladesh

EgyptPakistan

Jordan

0%

10%

20%

30%

40%

50%

60%

70%

0% 50% 100% 150% 200%

Malaysia


out sia

ur ey an

I s lam ic onventional Malaysia

R egional contrib ution to growth in 2 0 1 5

G rowth rate b y region B ank ing p enetration and p articip ation asset mark et share

Participation industry footprint Share of markets

Source: Central banks and EY analysis * International participation banking assets exclude Iran, which has a unique domestic industry.

Global

National

34%

17%

9%

2%

2%

54%

24%

27%

3%

11%

13%

9%

5%

2%

22%

43%

5%

29%

Pakistan

Saudi Arabia

UAE

Qatar

Indonesia

Malaysia

Kuwait

Turkey

Bahrain

GCC FinTech play 2017 41

Participation banking country contributions

Leading 20 participation banks by capitalization

C ountry contrib ution in 2 0 1 5 ( U S $ b )

C ap ital iz ation of top 2 0 b ank s

Year on y ear ( YoY) growth rate of assets, 2 0 1 5 ( in l ocal currency )

en t o ars re resents o ro t rate o assets in in local currency

Malaysia

14%

KSA

Kuwait Qatar Turkey

Indonesia Bahrain Pakistan

37%

10% 10% 5%

2% 2% 2%

UAE

18%

Pakistan

Bahrain

Indonesia

Turkey

Qatar

Kuwait

UAE

Malaysia

Saudi Arabia

CAGR2011–15

Conventional Islamic

16%

13%

17%

7%

17%

21%

17%

4%

26%

–10% 0% 10% 20% 30%

ources om any financial re orts niverse an analysis ote o artici ation an s ata e clu es ran ountry a s re resent t e ome mar et o t e artici ation an

ource entral an s an analysis

2012 2013–15

CAR2015

CAR2014

Capital Adequacy Ratio (CAR)

US$b 1 2 3 4 5 6 7 8 9

10 11 12 13

21% 16% 23% 17% 14% 15% 19% 20% 47% 16% 17% 16% 16% 17% 16% 14% 14% 22% 16% 14%

20% 15% 26% 16% 15% 14% 18% 19% 44% 14% 17% 16% 17% 21% 17% 14% 13% 24% 16% 15%


ProfitabilityinfocusT op 2 0 p articip ation b ank s

ources om any financial re orts niverse an analysis ote o artici ation an s ata e clu es ran ountry a s re resent t e ome mar et o t e artici ation an

vera e

vera e as s ets

vera e ro t

ea in artici ation an s y assets

om ara le conventional avera e

0% 4% 8% 12% 16% 20%

Average ROE 2011–15

– 20 40 60 80 100

Total assets 2015US$b


Country outlook

Total banking assets Total financing assets Total investment accounts

37

15

0

10

20

30

50

40

2011 2012 2013 20152014

US$

b

27% 29%

21

13

0

10

20

30

50

40

2011 2012 2013 20152014

US$

b

32% 38%

23

13

0

10

20

30

50

40

2011 2012 2013 20152014

US$

b

30% 35%

4% 6%

– 25%

– 5%

– 15%

5%

15%

2012 2013 20152014

Investment accounts YoY growth* Financing YoY growthAssets YoY growth 4% 1% 4% – 3% 8% 1%

4% 5%

– 25%

– 5%

– 15%

5%

15%

2012 2013 20152014

3%0%

– 25%

– 5%

– 15%

5%

15%

2012 2013 20152014

Participation bankingConventional banking

Conventional banking CA G R 2011– 15

Participation banking s h are

Participation banking CA G R 2011– 15

%

ources entral an s com any financial re orts niverse an analysis o selective an s or t e a raini mar et analysis is ase on omestic an in assets

P articip ation b ank ing p enetration in B ahrain B ahrain


Return on assets Return on equity Cost to income ratio

1.2%

1.1%

–1.0%

0.0%

2.0%

1.0%

2011 2012 2013 20152014

9%

9%

–5%

0%

15%

10%

5%

2011 2012 2013 20152014

56%

39%

0%

20%

100%

40%

60%

80%

2011 2012 2013 20152014

Nonfinancing income ratioRevenue asset ratioLeverage

7.77.7

2011 2012 2013 20152014

6%

3%

0%

4%

2%

6%

8%

10%

0

4

2

6

8

10

2011 2012 2013 20152014

35%29%

0%

40%

20%

60%

80%

100%

2011 2012 2013 20152014


ources entral an s com any financial re orts niverse an analysis o selective an s Mar et s are calculate e clu in ran

S hare of gl ob al mark et* S hare of p articip ation b ank ing growth in 2 0 1 5



273316

0

100

200

300

500

400

2011 2012 2013 20152014

US$

b

43% 54%

179

269

0

100

200

300

500

400

2011 2012 2013 20152014

US$

b

50% 60%

428

0

100

200

300

500

400

2011 2012 2013 20152014

US$

b

10%

– 2%– 10%

10%

0%

20%

30%

2012 2013 20152014

Investment accounts YoY growth* Financing YoY growthAssets YoY growth

T otal banking s ector CA G R 2011– 15

16% 4% 17% 5% 10%

8%

- 2%– 10%

10%

0%

20%

30%

2012 2013 20152014

2%

10%

10%

0%

20%

30%

2012 2013 20152014





T otal banking s ector

%

ources entral an s com any financial re orts niverse an analysis o selective an s au i ra ia s e osits are or t e entire an in sector as t e s lit is not availa le

P articip ation b ank ing p enetration in S aud i Arab iaS aud i Arab ia



2.0%

1.8%

0.0%

1.0%

4.0%

2.0%

3.0%

2011 2012 2013 20152014

13%

12%

0%

10%

40%

30%

20%

2011 2012 2013 20152014

48%

35%

0%

20%

100%

40%

60%

80%

2011 2012 2013 20152014


6.9

6.6

2011 2012 2013 20152014

4% 4%

0%

4%

2%

6%

8%

10%

2011 2012 2013 20152014

32%33%

0%

40%

20%

60%

80%

100%

2011 2012 2013 20152014


0

4

2

6

8

10





296

93

0

100

200

300

600

500

400

2011 2012 2013 20152014

US$

b

20% 24%

426

123

0

100

200

300

600

500

400

2011 2012 2013 20152014

US$

b

18% 22%

242

89

0

100

200

300

600

500

400

2011 2012 2013 20152014

US$

b

20% 27%

– 5%– 14%

– 40%

0%

– 20%

20%

40%

2012 2013 20152014

Investment accounts YoY growth* Financing YoY growthAssets YoY growth 5% – 1% 10% 0% 3% – 2%

– 11%– 16%

– 40%

0%

– 20%

20%

40%

2012 2013 20152014

– 18%– 17%

– 40%

0%

– 20%

20%

40%

2012 2013 20152014





%

ources entral an s com any financial re orts niverse an analysis o selective an s

P articip ation b ank ing p enetration in M al ay siaM al ay sia





1.2%

0.9%

0.0%

1.0%

4.0%

2.0%

3.0%

2011 2012 2013 20152014

13%

11%

0%

10%

40%

30%

20%

2011 2012 2013 20152014

53%

41%

0%

20%

100%

40%

60%

80%

2011 2012 2013 20152014


12.3

10.9

2011 2012 2013 20152014

3%4%

0%

4%

2%

6%

8%

10%

2011 2012 2013 20152014

13%

34%

0%

40%

20%

60%

80%

100%

2011 2012 2013 20152014


0

8

4

12

16

20



270

131

0

100

200

300

600

500

400

2011 2012 2013 20152014

US$

b

24% 33%

516

159

0

100

200

300

600

500

400

2011 2012 2013 20152014

US$

b

18% 24%

243

134

0

100

200

300

600

500

400

2011 2012 2013 20152014

US$

b

30% 36%

15%5%

– 40%

0%

– 20%

20%

40%

2012 2013 20152014

Investment accounts YoY growth* Financing YoY growthAssets YoY growth 17% 9% 14% 6% 17% 5%

5%

– 40%

0%

– 20%

20%

40%

2012 2013 20152014

15%

– 1%

– 40%

0%

– 20%

20%

40%

2012 2013 20152014





17%

%


P articip ation b ank ing p enetration in the U AEU AE





1.7%1.7%

0.0%

1.0%

4.0%

2.0%

3.0%

2011 2012 2013 20152014

13%

12%

0%

10%

40%

30%

20%

2011 2012 2013 20152014

39%

31%

0%

20%

100%

40%

60%

80%

2011 2012 2013 20152014


8.0

7.1

2011 2012 2013 20152014

4%3%

0%

4%

2%

6%

8%

10%

2011 2012 2013 20152014

28%31%

0%

40%

20%

60%

80%

100%

2011 2012 2013 20152014


0

8

4

12

16

20



54

74

0

20

40

60

120

100

80

2011 2012 2013 20152014

US$

b

50% 58%110

84

0

20

40

60

120

100

80

2011 2012 2013 20152014

US$

b

43% 43%

5258

0

20

40

60

120

100

80

2011 2012 2013 20152014

US$

b

64% 53%

– 18%

33%

– 40%

0%

– 20%

20%

40%

2012 2013 20152014

Investment accounts YoY growth* Financing YoY growthAssets YoY growth 5% 5% – 1% 12% 8% 0%

1%

– 40%

0%

– 20%

20%

40%

2012 2013 20152014

– 6% – 2%

– 40%

0%

– 20%

20%

40%

2012 2013 20152014





– 6%

%


P articip ation b ank ing p enetration in K uwaitK uwait





1.1%

1.1%

0.0%

1.0%

4.0%

2.0%

3.0%

2011 2012 2013 20152014

10%

8%

0%

10%

40%

30%

20%

2011 2012 2013 20152014

45%

34%

0%

20%

100%

40%

60%

80%

2011 2012 2013 20152014


8.6

7.5

2011 2012 2013 20152014

5%

3%

0%

4%

2%

6%

8%

10%

2011 2012 2013 20152014

24%29%

0%

40%

20%

60%

80%

100%

2011 2012 2013 20152014


0

8

4

12

16

20



125

54

0

50

100

150

300

250

200

2011 2012 2013 20152014

US$

b

24% 30%

222

84

0

50

100

150

300

250

200

2011 2012 2013 20152014

US$

b

23% 27%

147

59

0

50

100

150

300

250

200

2011 2012 2013 20152014

US$

b

22% 29%

24%

11%

– 40%

0%

– 20%

20%

40%

2012 2013 20152014


8%

– 40%

0%

– 20%

20%

40%

2012 2013 20152014

13%6%

– 40%

0%

– 20%

20%

40%

2012 2013 20152014





17%

%


P articip ation b ank ing p enetration in Q atarQ atar





1.9%

1.6%

0.0%

1.0%

4.0%

2.0%

3.0%

2011 2012 2013 20152014

14%

13%

0%

10%

40%

30%

20%

2011 2012 2013 20152014

29%

27%

0%

20%

100%

40%

60%

80%

2011 2012 2013 20152014

Nonfinancing income ratioRevenue or asset ratioLeverage

8.1

7.1

2011 2012 2013 20152014

3%3%

0%

4%

2%

6%

8%

10%

2011 2012 2013 20152014

18%24%

0%

40%

20%

60%

80%

100%

2011 2012 2013 20152014


0

8

4

12

16

20



402

250

300

600

1,500

1,200

900

2011 2012 2013 20152014

US$

b

6% 6%

737

420

300

600

1,500

1,200

900

2011 2012 2013 20152014

US$

b

5% 5%

1,219

380

300

600

1,500

1,200

900

2011 2012 2013 20152014

US$

b

6% 3%

15%

123%

0%

80%

40%

120%

160%

2012 2013 20152014


– 5%

– 40%

0%

– 20%

20%

40%

2012 2013 20152014

– 11%– 6%

– 40%

0%

– 20%

20%

40%

2012 2013 20152014





– 8%

%


P articip ation b ank ing p enetration in T urk eyT urk ey





1.1%

0.3%

0.0%

1.0%

4.0%

2.0%

3.0%

2011 2012 2013 20152014

11%

3%

0%

10%

40%

30%

20%

2011 2012 2013 20152014

54%

49%

0%

20%

100%

40%

60%

80%

2011 2012 2013 20152014


11.6

9.3

2011 2012 2013 20152014

5%5%

0%

4%

2%

6%

8%

10%

2011 2012 2013 20152014

29%28%

0%

40%

20%

60%

80%

100%

2011 2012 2013 20152014


0

8

4

12

16

20



421

160

100

200

300

600

500

400

2011 2012 2013 20152014

US$

b

565

200

100

200

300

600

500

400

2011 2012 2013 20152014

US$

b 373

150

100

200

300

600

500

400

2011 2012 2013 20152014

US$

b

3% 4%3% 3% 3% 4%

– 7% – 4%

– 40%

0%

– 20%

20%

40%

2012 2013 20152014


– 3%

– 40%

0%

– 20%

20%

40%

2012 2013 20152014

– 11%– 5%

– 40%

0%

– 20%

20%

40%

2012 2013 20152014





– 9%

%


P articip ation b ank ing p enetration in Ind onesiaInd onesia





3.4%

1.3%

0.0%

1.0%

4.0%

2.0%

3.0%

2011 2012 2013 20152014

25%

16%

0%

10%

40%

30%

20%

2011 2012 2013 20152014

72%

45%

0%

20%

100%

40%

60%

80%

2011 2012 2013 20152014


12.1

7.2

2011 2012 2013 20152014

8%

10%

0%

4%

2%

6%

8%

10%

2011 2012 2013 20152014

18%24%

0%

40%

20%

60%

80%

100%

2011 2012 2013 20152014


0

8

4

12

16

20



92

80

30

60

90

150

120

2011 2012 2013 20152014

US$

b

121

16

0

30

60

90

150

120

2011 2012 2013 20152014

US$

b

40

60

30

60

90

150

120

2011 2012 2013 20152014

US$

b

8% 8%8% 11% 6% 13%

– 40%

0%

– 20%

20%

40%

80%

60%

80%

60%

2012 2013 20152014

Investment accounts YoY growth* Financing YoY growthAssets YoY growth 29% 3% 9% 10%

12%

– 40%

0%

– 20%

20%

80%

60%

40%

2012 2013 20152014– 22%

13%

– 40%

0%

– 20%

20%

40%

2012 2013 20152014





24%

%

53%


P articip ation b ank ing p enetration in P ak istanP ak istan





1.7%

0.5%

0.0%

1.0%

4.0%

2.0%

3.0%

2011 2012 2013 20152014

16%

10%

0%

10%

40%

30%

20%

2011 2012 2013 20152014

76%

43%

0%

20%

100%

40%

60%

80%

2011 2012 2013 20152014


17.5

9.1

2011 2012 2013 20152014

4%

6%

0%

4%

2%

6%

8%

10%

2011 2012 2013 20152014

18%30%

0%

40%

20%

60%

80%

100%

2011 2012 2013 20152014


0

8

4

12

16

20


EY leadership team

Our industry awards

Best Islamic Advisory

Firm, 2014

Euromoney Islamic Banking Award


Firm, 2013, 2011, 2010,

2009

10th International Real Estate Finance Summit Awards —

London

WIBC Leading Islamic

Financial Services

Provider, 2008

World Islamic Banking Awards,

Bahrain

Best Islamic Finance

Advisory Firm, 2009, 2008,

2007

World Islamic Banking Awards,

Bahrain

Best Takaful Advisory

Firm, 2011, 2009

3rd International Takaful Summit,

London


Firm, 2014

8th International Takaful Summit

2014

ADIB — Appreciation Award, 2013

1st Annual Global Islamic Economy Summit, Dubai

Thought Leadership

Award, 2013

20th Annual World Islamic Banking

Conference Awards, Bahrain

Ashar Nazim

Nadeem Shafi

Gordon Bennie

64 GCC FinTech play 2017

e ort met o olo y an tools lo al artici ation an in assets are estimate ase on u licly availa le ata rom artici ation an in mar ets

e researc an insi ts are rimarily ase on artici ation an in niverse niverse ic is

proprietary , bas ed on s am ple and is not m eant to be f u lly e austive

e niverse analysis covers artici ation an s an conventional an s across t e artici ation an in

m arkets .

or t e ur ose o t is re ort t e analysis e clu es t e ranian mar et ecause o its uni ue c aracteristics

niverse covers a ro imately o t e estimate international artici ation an in assets e clu in ran mar et

nsi ts are also ase on intervie s it an in e ecutives and ind u s try obs ervers , to id entif y key trend s , ris ks and priorities .

imite isclosures on artici ation an in in o s su si iary o eration an o s ore usinesses as a limitin f actor.

e niverse is cate ori e as ollo s

• M atar n onesia au i ra ia Malaysia t e and T u rkey

• a rain u ait man atar au i ra ia an t e

• Malaysia an n onesia

• out sia a istan an an la es

• ur ey an rest o t e orl y t or an ur ey out rica u an etc

e rea o n o an s or eac country is as iven elo

• atar artici ation an conventional an s

• n onesia artici ation an conventional an s

• au i ra ia artici ation an conventional an s

• Malaysia artici ation an conventional an s

• artici ation an conventional an s

• ur ey artici ation an conventional an s

• a rain artici ation an conventional an s

• u ait artici ation an conventional an s

• a istan artici ation an conventional an s

• an la es artici ation an conventional an s

• runei arussalam artici ation an

• y t artici ation an conventional an s

• or an artici ation an conventional an s

• man artici ation an conventional an s

• out rica artici ation an

• u an artici ation an s

• artici ation an an conventional an s

• e ten s its a reciation to inocracy or t eir valua le inpu t on th e report.


Fawad L aiq ue ( B ahrain/ K S A)

or uestions an comments lease contact

Ashar Nazim as h ar.naz im @ bh .ey .com tw itter.com / @ as h arnaz im

Muhammad Muzammil Kasbati m u z am m il.kas bati@ bh .ey .com

N ad er R ahimi( B ahrain)

Imitiaz Ib rahim( Q atar)

M uhammad S y ariz al( M al ay sia)

W aj ih Ahmed( B ahrain)

J ahanz aib M uk htiar ( B ahrain)

K en E gl inton ( U K )

K hurram S id d iq ui ( U AE )

M erisha K assie ( S outh Af rica)

S y ed H assan S agheer ( U AE )

Yasir Yasir ( Ind onesia)

S hoaib A Q ureshi ( S aud i Arab ia)

Anthony O ’ S ul l ivan ( U AE )

S el im E l had ef ( T urk ey )

M uz ammil K asb ati ( B ahrain)

R ashid Al R ashoud ( K S A)


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