The Shock and Awe of the New

In its report Oman banking perspectives 2018, Transforming horizons, KPMG reveals that 77% of banking CEOs canvassed worldwide ranked the implementation of disruptive technologies third on their list of priorities, right after greater speed to market and fostering innovation. According to the Mena Fintech Association, a hub for innovators across 16 countries, the region is rife for fintech uptake, boasting 350 million people and 76% smartphone penetration. Narrowing it down to the GCC, digital device penetration is all but on par with developed markets. Familiarity with consumer technology means that vast swathes of consumers are ready, if not keen, to leverage digital channels for financial transactions. Bricks-and-mortar banking then, for many currently excluded, or for those simply coming of age, may never be relevant in the digital era.

Adopt or die

To be sure, Oman’s banks are aware that in the unfolding digital economy a customer-centric business model is vital for profitability. Consumer choice is by now the well-worn, yet accurate mantra of the banking, telco, and wider commercial world. In March, Omani consumers saw the launch of the nation’s first comprehensive e-payment platform, Thawani Pay. The fruit of the nation’s pioneering fintech industry, it is a 100% Omani platform with a foreign technical partner. Beyond the payment capabilities that empower the consumer, the platform also enables detailed market analytics that determine business strategy. At the time of launch, the company announced that AI capabilities would be incorporated over time. Meanwhile, Oman’s relatively newly participating banks now want to steal a march on their conventional cousins in the concentrated banking arena. Fintech solutions, notably those addressing low participation and small business lending, are one way of doing this.

Existing laws suffice for now

The respective regulators of the GCC have lagged behind international financial markets in rolling out fintech regulations. This has compounded reluctance, and hence delayed the take-up of digital systems that will shortly become the indispensible norm. There is optimism, however. In Oman, fintech-specific legislation is absent, with no announced plans to fill the gap. That said, existing legislation, namely the Commercial Code of Oman, the Civil Transactions Law of Oman, Omani Banking Law, the Electronics Transactions Law (ETL), the Anti-Money Laundering and Terrorism Law (AML Law), and the Consumer Protection Law do substantively apply. For example, fintech transactions are subject to ETL, as are all other forms of electronic transactions. As such, authentication standards for core fintech transactions, including payments made through apps or e-wallets, are already covered. Ultimate responsibility, in simple terms, lies with the Information Technology Authority and Central Bank of Oman. Sector research however, indicates that Oman notably lacks specific legislation for blockchain-enabled financial services and cryptocurrencies, or crowd-funding activities.

Many of the world’s central banks and other regulators continue to take a dim view of bitcoin. Regardless, as of the start of 2018, the six major crypto-currencies in circulation had a combined value of USD125 billion, which, according to the Switzerland-based Bank for International Settlements, was close to 2.5% of the total value of money in circulation of USD5 trillion. That’s a lot of cuckoo clocks, given that we have only used the word bitcoin since 2009. Meanwhile, the AML law speaks for itself in stipulating procedures to be followed by all financial institutions in their transactions, which encompasses fintech applications. The consumer protection law, too, balances the rights and obligations of the consumer in the fintech arena.
We might conclude that the digital era is definitely here for the world’s financial universe. Yet, despite stubborn concerns over its rollout, the spoils need not be mutually exclusive to banks and fintech firms alone. Ultimately, given a sound regulatory environment, banks retain the advantage of scale, which fintechs, though flexible, in many cases still require to demonstrate positive results in the field and grow. Overall though, KPMG’s 2018 Oman banking report makes the argument that where adoption of key fintech components such as blockchain and AI is concerned, waiting is not an option.