Per the Central Bank of Kuwait, Global uncertainty, trade tensions, fintech impact banks. Central Bank chief lays out a multipronged strategy to face these challenges. An article dated 23/09/2019 and written by Jamie Etheridge sheds some light on the stressful world trends as witnessed from Kuwait. These on-going trends if contextualised happen at a time when the global energy transition, the historic shift to low-carbon emission economies, is increasingly gaining attraction as more and more countries make the move to sustainable development in all its forms. Would not be this the real reason for the current upheaval in the financial world?
KUWAIT: Financial technologies are disrupting the global banking industry, creating concerns across the globe for what the future holds at a time when the global economy is facing many challenges. To address this issue and hear what senior regulators, policymakers and industry leaders think, the Central Bank of Kuwait organized the International Banking Conference on Shaping the Future yesterday.
In his keynote speech, Central Bank of Kuwait Governor Dr Mohammad Al-Hashel addressed the challenges facing the global banking sector today. “Three challenges are particularly worth highlighting: The state of the global economy; the revolution in financial technology; and the rapidly evolving needs and expectations of customers,” Hashel explained.
He noted that the International Monetary Fund (IMF) twice lowered its global growth projections for 2019 to 3.2 percent, with developed economies expected to grow at a much slower rate of 1.9 percent. A key driver of this slowdown is economic uncertainty brought about by rising trade tensions and protectionist policies. “If trade tensions continue, the IMF may further revise down its economic growth projections,” he said.
The Central Bank chief also explained that “global debt over the past 20 years has grown on average by 6 percent annually, compared to 3.5 percent for global GDP. If these rates continue, we could see global debt over the next 20 years reaching $780 trillion, or 500 percent of GDP. This is clearly unsustainable, and requires urgent action by both governments and financial institutions.”
The threat from Big Tech is also a looming concern for regulators and the banking industry. “What would happen when the likes of Facebook, Amazon, WhatsApp and Alibaba start competing with banks to provide financial services? These technology giants come with large and captive user bases, low online acquisition costs, and a better understanding of their customers through their utilization of big data. Moreover, they don’t face the same regulations and associated costs that banks do,” Hashel pointed out.
Meeting the evolving needs of customer expectations in the fast-paced global environment further adds to the weight of the need for change, and all of this is further exacerbated by heightened geopolitical tensions and trade disputes. To meet these challenges, Hashel laid out a strategy of attack that focuses on five key areas – customer loyalty, value, efficiency, resilience and talent. He also called for greater proactivity on the part of regulators and the banking industry.
“We the regulators must also consider how we should operate in the future. We need to take a proactive and dynamic approach to promote innovation, and act as a catalyst for the industry. We need to promote collaboration and share our experiences with each other to develop frameworks that will fit the needs of our societies. And we need to focus on capacity building to ensure that our staff can meet the future challenges of the industry,” he said.
Held under the patronage of HH the Amir Sheikh Sabah Al-Ahmad Al-Jaber Al-Sabah and attended by Acting Prime Minister and Defense Minister Sheikh Nasser Sabah Al-Ahmad Al-Sabah, the conference brought together central bank chiefs from around the region, banking executives, chief economists and leaders in the industry to discuss what the future holds for banking, the impact of fintech and how banks can better collaborate, cooperate and shape a sustainable future for all.