This is the first installment of a series that highlights how banks in the MENA region are opting for digital investment solutions to cater to its young and tech-savvy population.
In the heart of bustling financial districts across the MENA region, a subtle yet seismic shift is underway. Traditional banking institutions, pillars of economic stability for decades, are embarking on a journey of reinvention, especially evident in the realms of investment and wealth management. With the advent of digital technology, the finance landscape is maturing, compelling these venerable institutions to adapt or risk obsolescence.
“The digital investment landscape in MENA is rapidly evolving, fueled by a flourishing tech ecosystem, growing investor interest, and strong government backing for innovation and entrepreneurship,” Mike Breen, Head of Commercial at audax, a digital banking solutions provider, told Forbes Middle East.
The widespread internet access, given the mobile internet penetration reaching 51% in MENA in 2023, combined with the region's estimated unique mobile subscribers exceeding 450 million in 2024, as per GSMA, has created a conducive environment for the adoption of digital investment solutions, Breen noted.
In fact, Suvo Sarkar, founder and CEO of 3D Advisory, highlighted significant forecasts. According to Altrata’s Family Wealth Transfer 2024 report, it is estimated that 30,672 individuals will pass on $1.3 trillion in wealth in the Middle East by 2033.
“We can expect a very rapid growth in digital investing in the region going forward,” Sarkar said. “Millennials and Gen Y-ers in the region will increasingly prefer a digital interface rather than a human one when making their choices in managing their wealth.”
Individuals and institutions across the MENA region are increasingly favoring digital platforms for their investment needs, according to Breen. These platforms have reduced entry barriers, particularly benefiting the young, mobile-first demographic and the sizable unbanked population in the region as they feature lower minimum investment thresholds and offer diverse investment options, making investing more accessible than ever before.
“They are especially advantageous for young investors with limited financial resources who want to begin investing,” he warned. “Globally, young people are excited about retail investing as a way to grow their wealth now, as well as a way to prepare for their financial future,” explained Breen.
While Sarkar concurred, he explained that millennials expect digitization at every touch point and demand personalized experiences. “They (millennials) do not prefer the one-size-fits-all approach for their wealth management services, and would want advice in a “Netflix-style” data-driven and hyper-personalized model. An intuitive mobile app and online platform will be key to serving them effectively,” he elaborated.
According to an EY report, the MENA banking sector is set to grow, driven by rising demand for banking services and digital transformation.
Artificial intelligence (AI) is enhancing the sector with faster, more personalized services via chatbots. Key trends include digital banking, mobile payments, open banking, blockchain, and sustainable finance.
However, the EY MENA H1 2023 Banking report also warns that banks must modernize to stay competitive and secure. Emphasizing the need for updated strategies, the report highlights the importance of increasing connectivity and digital payments to boost competition, operational efficiency, and cost management.
“An increasing proportion of [net private wealth, around $500 trillion] will be owned by adults under 40 in the coming years. Wealth managers both regionally and globally have to prepare themselves to cater to a new and different cohort of wealthy individuals who are tech-savvy, inquisitive, risk-seeking, socially aware, and generally considered more independent and tolerant,” Sarkar stressed.
With lower barriers to entry, there's a shared responsibility among all stakeholders to promote financial education and awareness, alongside regulatory efforts to safeguard consumers.
"Investors worldwide are increasingly prioritizing transparency and accountability in financial reporting for effective and ethical investment management," he stated. "In the MENA region, home to 190 Islamic banks, there's a significant preference for investments aligned with Islamic and ethical finance principles. As a result, many investors in the region choose to place their investments with established Islamic banks and financial institutions."
Sarkar from 3D Advisory shared the same sentiment. He acknowledged that young investors are more open to taking risks than older generations and are willing to invest in speculative assets, such as cryptos, digital and alternative assets, for higher returns.
“They prefer to be independent and self-reliant, and therefore technology plays a key part in their investment decisions,” he said, adding that they take an active interest in ESG issues and proactively incorporate these philosophies into their investment decisions.
The Middle East's digital economy is projected to reach a staggering $780 billion by 2030, reflecting a growth rate of almost 20% annually, according to UBS. This signifies a significant increase from the $180 billion reported in 2022.
The second installment of this series reviews the latest efforts by MENA banks to provide digital investing solutions.
