It’s not hard to imagine how our economic lives might rapidly evolve with the new technological possibilities. Picture a future where an aspiring Arab freelance journalist rents a flat in Riyadh, works from home, and buys groceries from the corner store and coffee from the café downstairs. She will continue to pay for many of these daily goods in riyal. But she will also use a private stablecoin at no cost and immediately available to send money to family and friends abroad.

Innovation has driven a new era in interacting and transacting from cryptocurrencies and digital wallets to contactless. It’s an exciting evolution for customers and companies—but it all hinges on personalized services and trust.

Businesses are tasked with innovating to meet evolving consumer expectations of personalization without compromising that all-important trust. The consumer is much more demanding of not only how personalized financial services are but also how secure they are.

“People have always enjoyed a personalized experience. What’s changed are expectations of what’s possible, especially at scale. Almost everyone has access to tools like search and social apps showing the value of tailored experiences. People today expect that level of personalization in every facet of their life, where personal finances are among the most impactful,” says Hosam Arab, CEO, and Co-Founder at Tabby.

According to a McKinsey study, banking personalization can reduce acquisition costs by as much as 50%, lift revenues by 5 to 15%, and increase the efficiency of marketing spend by 10 to 30%”. Hyper personalization generates insights into consumer needs by harnessing real-time data, giving primary bank account users the comprehensive digital experience they want.

“Today, hyper-personalization has become an essential part of financial services. Banking users, for instance, are constantly on the lookout for tailored services that match others being provided in other aspects of their lives. As such, banks must continuously elevate their systems and offers to satisfy evolving consumer needs,” says Jayesh Patel, CEO of Wio Bank PJSC.

“Every customer has unique behaviors, needs, and goals, and payment service providers need to nudge customers to do the right things to achieve more than they want for themselves. The trends in digital and analytics can help us achieve this. For example, a transaction in itself adds limited value to a consumer. Payment services can make that valuable to the customer by adding relevant information and context before and after the transaction – e.g., spending insights.”  

And personalized financial service is furthered by open banking, says Dr. Saeeda Jaffar, SVP and Group Country Manager for GCC at Visa. 

“It provides valuable insights into consumer behavior, enabling providers to offer more tailored financial advice, products, and services. This improves consumer satisfaction and helps companies stand out in a competitive market.”

Agreeing with Dr. Jaffar, Patel says, “Open banking creates easy access to product and customer transaction data and offers digital banks the right tools to customize their products, pricing, and services to nurture their customer base. 

But open banking is not the only technology that has the potential to revolutionize financial services. Dr. Jaffar adds that technological advancements such as AR/VR and the metaverse offer opportunities for businesses to connect with younger generations, such as Gen Z and millennials.

“By embracing these technologies, the future of banking and fintech could be transformed, providing a novel way to deliver personalized financial services that meet the needs of the modern consumer.”

Patel says the region is in nascent stages when it comes to personalization in banking, but “banks that do so will win in the long term.” 

SECURITY ON TOP OF MIND

As new payment innovations pop up, so do bad actors. According to industry experts, businesses must approach innovations with security top of mind. 

“Security is crucial. Consumers must know their payment and personal information is protected to trust the payment solution. This can be achieved through encryption, multi-factor authentication, and fraud detection,” says Jaffar.

Payments solutions should be led by a design principle that boils down to two words – trust and simplicity. A layered approach to protection is necessary for all aspects when considering the technology stack, the product experience, and partners, say experts.

“Consumer trust has always played an important role in the financial services industry. However, trust is fundamental for any payment system,” says Patel.

“The inherently personal nature of the products and services provided, coupled with their potential magnitude of impact, puts trust at the center of the consumer relationship in the payments services industry.”

A Harvard Business Review Analytic Services and Mastercard study has shown that Middle East consumers are eager to embrace digital benefits but will not buy from businesses or brands they don’t trust. This reflects how important building trust is to enjoy the patronage and loyalty of consumers.  

Patel adds that companies must actively diagnose and acknowledge weak spots and constantly improve their operational mechanisms to build trust-related outcomes.

“This is an area where many players in the financial ecosystem struggle to meet expectations. The struggles are even more prominent in digital channels – where there is typically less human interaction, greater anonymity, and greater fraud risk. People need to feel secure and trust that their information is protected when it comes to their money, especially when using digital payments.” 

Digital payment adoption in the region has been an uphill journey due to several structural and technological challenges, such as cyber-frauds, transaction costs, communication infrastructure, and awareness. Also, poor digital shopping experiences led to low adoption, and low adoption led to little investment in digital experiences, says Arab.

“But COVID-19 changed all that. While there are challenges around perceptions around security and, more importantly, accessibility – over time, regional governments and companies are committed to helping people navigate their finances in the digital sphere,” Arab adds.

INNOVATION AND TRENDS IN THE SECTOR

Innovation will continue to accelerate. The appetite for digital payments continues to climb, with recent research stating that more than 50% of UAE consumers plan to go fully cashless by 2024. 

“As the world continues to steer towards digital payments, cryptocurrencies and blockchain-based solutions such as central bank digital currencies and stablecoins will play an increasingly important role in supplementing traditional fiat currencies,” says Mohammad Alblooshi, Head of DIFC Innovation Hub and FinTech Hive.

“The rise of payment service providers like Bitpay and PayPal that offer a secure gateway between crypto and fiat-priced products is just the beginning of a shift towards a more inclusive payments system,” he adds.

In 2022, DIFC-based fintech companies attracted more than $615 million boosting economic growth, creating new jobs, and attracting foreign investment. 

“Finance as a sector is experiencing exponential shifts. Looking at trends seen through applications at DIFC Innovation Hub, we can expect blockchain to be adopted more widely, promising more secure, transparent, and efficient transactions without intermediaries,” says Alblooshi.

There are impending infrastructural changes in the region that will unlock the next generation of financial services – open banking, nationwide instant payment systems, and regulation. “While most people focus on digital adoption when it comes to retail, there are also exciting opportunities in using payment technology to blend the online and offline worlds,” says Arab.

Following another year of rising e-commerce adoption, consumer interest in installment-based solutions such as Buy Now Pay Later has rapidly increased. 

Dr. Jaffar predicts growth in contactless payments, with more demand for more contactless payments, such as mobile point-of-sale and facial payments, to gain momentum in 2023. 

“Green payments are a growing trend in response to the climate emergency. Last year, the COP27 meeting drew attention to the climate emergency, raising consumer awareness and demand for sustainable products.” 

The way we shop and pay is changing rapidly, and the payments industry must deliver that progress through innovation, ensuring individualized solutions. But above all, it’s about ensuring they are secure and have consumers’ trust.

“It’s important to keep a finger on the pulse of emerging payment methods and integrate them into the business operations on time,” says Patel.

Fast Company Middle East, in partnership with Amazon Payment Services, is forming a sub-committee on the future of payments. Click here to know more.