Financial Services leaders in the Middle East: Here are five priorities for your reinvention agenda based on responses from our 27th CEO Survey regional findings.
Optimism around regional transformation offers opportunities for growth
Almost half of Middle East FS CEOs (47%) are optimistic about global economic growth, compared to 40% of their global peers. Moreover, as the region continues to transform at pace, we find the confidence in economic growth across regional markets is even higher, with 66% of survey respondents in the financial sector indicating that they believe this will improve over the next 12 months, compared to 47% of their global peers reflecting on their local economies. This optimism can largely be tied to the ongoing developments in the region around economic diversification and investing in human-centric innovation, while also exploring opportunities offered by emerging technologies, as local economies move away from their focus on fossil fuels and into other revenue generating opportunities.
A clear signal of this optimism is the fact that more than half of the CEOs in FS (53%) are likely to increase their headcount in the next 12 months, compared to 42% of their global peers.
Aligned with the regional growth, survey findings have also indicated that 69% of Middle East l FS CEOs have seen their market share increase in the last three years, compared to only 49% of their global peers. Despite this, regional CEOs in FS exhibit lower confidence in the revenue growth prospects of their businesses for the next 12 months, with only 34% feeling confident compared to 43% globally.
The low regional confidence can be attributed to several factors, such as the ongoing geopolitical risk in the region potentially contributing to business and investor uncertainty, as well as high interest rates, negatively impacting demand for credit.
Regional leaders in financial services are more cautious about acquisitions, with only 31% saying that they have made a major acquisition of more than 10% of assets in the last three years, compared to 25% of global FS CEOs.
This slowdown was indicated at the end of 2023, with a total of 447 FS Merger and Acquisition (M&A) deals recorded in the region, a 30% decline from the previous year, as analysed in our 2024 TransAct Middle East report.
Geopolitical threats, cyber risks and inflation can influence business models - remain agile as you navigate these challenges
Over the next 12 months, leaders in financial services in the Middle East - much like CEOs across other sectors - will be primarily concerned about geopolitical conflict, cyber risks and inflation.
The war in Gaza and other wider conflicts may constitute a significant economic challenge for the region, with nearly half (47%) of our FS leaders indicating geopolitical concerns as a major threat, compared to only 19% of their peers globally. A quarter (25%) of them consider cyber risk as the next big threat, followed by inflation (22% ).
Reinvention on the cards - consider long-term viability of business models
CEOs in the financial services industry anticipate increased pressure over the next three years due to factors such as technological advancements affecting the way they generate, deliver and capture value.
Regional CEOs across all sectors are more concerned than their global peers about their future evolution with more than half (59% compared to 40% globally) revealing they’re not confident that their business will be economically viable in a decade if they stay on their current path, underlining the need to evolve, identify opportunities and stay ahead of their competitors.
Over the past five years, the primary actions influencing how regional FS leaders would create, deliver, and capture value, include the adoption of new technologies (50%), the creation of innovative products and services (41%), and forming strategic partnerships (38%).
The launch and growth of digital financial services in the Middle East has resulted in an unprecedented increase in the number of people who have access to financial services. With mobile wallets and digital payment cards becoming more readily used, there is vast potential to promote financial inclusion in the region.
Moreover, fintech has been a cornerstone for financial innovation in recent years. Fintech hubs have emerged across the region and some of these are now so large that they are on the global fintech map. Now, the challenge for fintech in the MENA region, especially the GCC, is to remain competitive in a fast-developing sector.
Financial institutions are also open to partnering with innovative startups to shape the future of finance. Key trends include open finance, which empowers customers and businesses with greater control over their financial data; advancements in blockchain technology and the rise of cryptocurrencies that are driving a shift from traditional centralised financial systems towards more decentralised models; and the recognition of new digital assets as legitimate asset classes are creating new investment opportunities.
In the next three years, 63% of FS CEOs globally anticipate that technological change will continue to remain among the top three factors influencing how companies create, deliver and capture value. Emerging technologies, such as blockchain, AI, and big data analytics are expected to be at the forefront of new business models, applications, processes, or products, benefiting consumers with enhanced transparency, speed and lowered costs. This is in line with the overall Middle East sentiment, where 69% of CEOs across industries have also identified that tech changes are likely to have an impact on their business models.
Understand and embrace the power of GenAI
In the region, GenAI presents immense opportunities for efficiency, innovation and competitiveness. It is being widely adopted across different sectors in the region to drive efficiency, innovation and overall growth, despite concerns around cybersecurity risk and bias.
In the Middle East’s financial services sector, GenAI can significantly enhance the quality of a company's products within the next 12 months, necessitating the majority of the workforce to acquire new skills over the following three years. Be it for predictive analysis, chatbots, fraud detection, anti money laundering or risk management, GenAI has enormous potential improve cost efficiencies, security, and customer services.
Almost three-quarters of FS CEOs in the region (75%) expect GenAI to improve the quality of their products and services over the next year, significantly higher than 59% of global FS peers. An equally significant number of FS leaders in the region (69%) believe that GenAI will enhance their company’s ability to build trust with stakeholders, compared to less than half of their global peers (47%).
However, regional FS leaders seem to be less enthusiastic about the impact of GenAI on their business models and competitiveness over the next three years, when compared to their overall industry-wide peers in the Middle East.
66% of FS leaders in the Middle East (compared to over 70% of their peers across all industries in the ME) have indicated that GenAI will significantly change the way the company creates, delivers and captures value. They also anticipate that the significant progress of GenAI in the region will require most of the workforce to develop new skills, and agree with their industry-wide peers that GenAI will increase their competitive intensity in their industry (both at 72%).
Regional CEOs in the financial services sector are more enthusiastic about how GenAI will drive improved efficiencies than their global peers, including their own time at work.
Three quarters (75% vs 59% globally) believe that in the 12 months GenAI will increase their efficiency at work, while more than half (69% vs 65% globally) believe that it will increase their employees’ time at work.
A significant number of FS leaders in the region (69%) also anticipate GenAI will help in revenue increase, compared to less than half of their global peers and around two thirds of their peers across industries in the Middle East. While more than half (59%) have indicated an expected rise in profitability over the next 12 months.
There is progress in improving energy efficiency, but greater efforts needed to tackle climate change
Survey results have indicated that slightly more - 19% - of regional FS leaders consider climate change as a key threat, compared to 14% of their peers globally. But despite this, less than half (44%) of regional FS CEOs have indicated that their company is making progress on improving energy efficiency, compared to a significant 62% of their global peers. Also, 41% of regional financial services leaders are innovating new climate-friendly products, services or technologies, which is lower than the global 50%, and only 44% are planning to incorporate climate risk into financial planning, painting an overall picture of lower engagement from regional FS leaders on this critical agenda.
The challenges facing FS in implementing the sustainability agenda can be attributed to several factors: climate risks are indirect and may not be as immediately visible as principal risks; there is still a lack of regulatory pressure to set net-zero targets and report on climate risks; a lack of skills, and capacity within banks to fully integrate and implement the ESG agenda across their organisations may be impacting engagement; and cultural resistance within business functions stands as an impediment to integrating climate considerations. There are also concerns that factoring in climate risks might lead to allocating capital to less profitable, low-emission sectors rather than more lucrative, high-emission ones.
On a positive note, nearly half of regional FS leaders (47%) are more likely to accept low rates of return for climate-friendly investments, compared to 32% of their global counterparts. This suggests a strong awareness and appetite among FS leaders for driving the region’s decarbonisation agenda by investing in sustainable projects.
The financial services sector in the Middle East is at a pivotal juncture, where innovation is driving efficiency, competitiveness, and sustainability. Rapid changes in consumer behaviour, new regulatory demands, the rise of fintechs, and the emergence of advanced technologies are accelerating the sector's evolution. To adapt and thrive, the sector is developing new capabilities to meet emerging demands, prioritising tech advancements to enhance services and embedding sustainability into operations and strategies. This transformation aligns with the region's broader focus on diversification and decarbonisation. Challenges, such as climate change and the rise of GenAI, are still significant, but they present unprecedented opportunities for those willing to adapt and lead.
Contact us
Sanjay Jain
