Dear Reader,
This issue has a most appropriate theme for the New Year – the future. It was summed up by a senior figure at one of the world’s leading banks when, in an exclusive interview with Cash&Trade, she said, “I think banking in general has now come to a crossroads of understanding around the world that ‘banking will never be what it used to be in the past’ when capital was cheap and banks were making a lot of money from lazy deposits.”
She added that she and her team saw “challenge coming from new competitors, new technology, increasingly broad and complex regulations and geo-political risk in an uncertain and increasingly volatile world”.
Amplifying this, she added, “While technology lowers the barriers to entry for alternative payment and currency providers, the need to implement increasing regulatory and operational risk controls requires massive investment in systems that is unlikely to realise a return in the foreseeable future.”
But, despite this “series of trials for both bankers and corporates”, she felt that there were benefits on the horizon.“It’s a brave new world, but…disruption can and does lead to good outcomes; and, as we move forward, I see an interesting journey and a rewarding outcome, both for corporates and banks.”
According to another article, payments and transaction-banking businesses continue to represent vital elements of the industry itself and the global financial-services landscape.
The importance of these businesses both as critical sources of stable revenues and as the foundation of customer relationships and loyalty has grown steadily in recent years and shows no signs of slowing down.
However, the Boston Consulting Group’s Global Payments Report points out that the growth in payments and transaction banking is driving stiff competition among not only traditional players but new entrants as well.
“Consequently”, say the report’s authors, “financial institutions must differentiate themselves, refine their strategies, and raise their execution skills if they want to remain competitive.”
Once again, we are pleased to publish an article by one of our regular contributors, now the author of the internationally available book Financing Trade and International Supply Chains, who looks at changes in trade financing.
He believes that while trade finance has a long history and functions on the basis of well-established principles and practices, “it is apparent to industry observers that this esoteric discipline has undergone an unprecedented period of visibility and even innovation”.
But he wonders if the business of financing international commerce has reached some form of “tipping point”. The feeling is that there are a variety of factors and dynamics at play that are combining to create a “transformational evolution in the financing of international commerce, and even developments that ought to be seen as adverse to the health of global trade finance, such as regulatory pressures, might in the long run prove to be beneficial to the sector”.
The global Islamic finance industry has now entered its 40th year, and continues to assume an accepted niche in the world’s mainstream financial system, although its financial assets account for a mere two per cent of global financial assets.
But, despite the fact that the industry has yet to breakthrough into the mainstream financial system, this edition looks at how its prospects continue to evolve especially regarding its role in contributing to the financial reform agenda, financial stability, GDP growth, intra-Islamic trade and investment, infrastructure development, financial inclusion and wealth management.
In fact, in this issue’s Tajara report, it is made clear that significantly more is now being done in MENA to deliver operational efficiency and trade finance innovation across both Islamic and conventional banking.
KSA corporate banking and trade finance in particular continue to gather momentum because the sector has been prudently capitalised. It delivers crucial liquidity to provide meaningful supply finance to the emerging corporate segment, and trade finance is once again demonstrable as the anchor for the corporate contribution to the real economy.