Poised for Competitive Advantage in the Middle East
An Interview with Phil Cantor, Chief Marketing Officer & Head of PreSales, iGTB
TMI recently published some of the highlights of iGTB’s February 2015 Middle East Client Advisory Event. At this event, a survey revealed that 93% of participants believed that Middle East banks would capture a significantly larger portion of the transaction banking market in the region over the next decade. Helen Sanders, Editor talks to Phil Cantor, CMO and head of pre-sales, iGTB, to discuss the event and its findings in more detail.
“Firstly, it was encouraging to see so much demand for an event like this, with very senior level participation, including COOs, product management heads, and leaders in cash management and transaction banking”.
Based on discussions during the event, he outlines the reasons why such a high proportion of participants believe that Middle East banks are poised to build their market share so significantly: 62% believed it would increase by more than 25%, and 23% more than 50%,
“The discussions were held against a backdrop of falling oil prices, although most expect these to stabilise in due course. However, in an environment where there will inevitably be winners and losers, many participants observed that commercial organisations in the Middle East are becoming increasingly sophisticated in their financial activities. In addition to a focus on trade finance, many are shifting their attention to cash, liquidity and receivables management, and an integrated view of cash and trade.”
While the ‘headlines’ may be the same as treasurers’ concerns in other parts of the world, the specific issues are often quite different. For example, while liquidity management is a global issue, obtaining access to funding is the primary concern for many corporations, while in the Middle East, finding a safe haven for surplus cash is often a greater consideration.
“There seems to be an underlying view that many banks and corporations in the west have become so big that it is difficult to implement holistic solutions that are specific to each customer. ‘Too big to change!’ In contrast, banks headquartered in the Middle East often have the scale, energy and infrastructure to develop solutions that have the breadth and depth that their customers require, but are small enough to deliver a more personalised, integrated offering.”
One of the areas in which participants illustrated that global banks are often not doing enough in the Middle East, where regional banks can potentially gain competitive advantage, is to focus more on sector-specific solutions. Cantor gives the example of shipping in Dubai, where “a ship is effectively a very slow international payment” which has specific cash and treasury management implications. Furthermore, while it may make sense for banks to differentiate between trade finance and cash management, this same distinction applies far less amongst corporate customers. Each industry’s value chain is quite different, so they need support in buying and selling, according to their own business model: the point is not simply how to make payments, but how to trade more effectively. Participants expressed a view that regional banks in the Middle East may be more agile and creative in their ability to meet these specific needs than larger international banks.
Technology innovation was almost universally identified by event participants as a key enabler for a growth in market share, and 61% said it would be extremely important. However, in a largely UAE-dominated discussion, participants noted the risk of over-generalising, given the diversity of markets and degree of digitisation that exists in the region. Even so, it is important that banks and vendors are focused on developing solutions that meet customer needs rather than their own needs.
Cantor concludes by discussing the potential competitive disadvantage that Middle East banks have compared with their global peers, namely that they lack substantial coverage outside the region,
“The large multinational banks have largely stopped trying to achieve full global coverage and are typically focusing on countries and regions in which they offer particular depth of solutions and expertise. Consequently, regional banks are not at so much of a disadvantage so long as they have a competitive offering.”
Similarly, it is not necessarily in corporate treasurers’ interests to bank with a single global bank, whereas a regional approach often enables them to balance their risk and operational objectives.