Bank Outsourcing Drives Digital Transformation In MENA Financial Services Sector

With decades-old legacy infrastructure and the rise of digital-only players disrupting the banking space, financial institutions (FIs) stand to gain a lot from digital transformation.

But modernizing legacy banking systems is not without its challenges, some of which are the hefty investments and significant delays that can cause significant interruptions in banks’ day-to-day operations.

Learn more: Banks Leap From Legacy Core Systems to Innovation, Real-Time Capability

For example, between 2018 and 2020, Emirates NDB, one of the largest banking groups in the Middle East, spent around AED 1 billion ($270 million) on its digital transformation strategy, which saw the bank deploy Finacle’s core banking solutions across its global operations.

In fact, the expertise required for banks to upgrade old technologies means that FIs are less likely to build their tech in-house and instead look to FinTechs and non-bank developers that cater specifically to banks’ legacy modernization.

“There is more openness to buy and outsource versus build in-house,” Nino Ocampo, chief product officer at Tarabut Gateway, recently told PYMNTS, adding that it is a faster, more cost-effective way for banks to reap the benefits of digitization.

In the Middle East and North Africa (MENA), for instance, companies like Tarabut Gateway, Infinios and Nymcard are among those that have contributed to the region’s increasingly active FinTech ecosystem by offering their services to banks and other players that are encumbered by legacy tech.

Open Banking and BaaS in MENA

The tendency toward outsourcing isn’t limited to upgrading legacy infrastructure and re-platforming core systems either.

As an open banking platform, Tarabut Gateway’s specialism isn’t a bank’s internal mechanics but more its connectivity to other banks and third parties.

Read on: As MENA FIs Adopt Open Banking, EU’s Mistakes Loom Large

In Ocampo’s words, “we make it easier for banks to share and expose their data, whether it’s to meet regulation or to pursue commercial use cases.” Primarily, this involves creating the application programming interfaces (APIs) that banks are increasingly utilizing to enable connectivity and open banking payments with other banks and FinTechs.

Having picked up bank clients in its native Bahrain, Saudi Arabia and the United Arab Emirates (UAE), the case of Tarabut Gateway demonstrates that the practice of banks outsourcing product development is gathering pace in the Middle East region.

It further reveals that a new generation of third-party developers is more than mere contractors. Tarabut Gateway also operates the merchant side of the open banking platform that allows the new interbank payment rails to be deployed in actual commercial transactions.

And Tarabut Gateway isn’t the only MENA company being tapped by the region’s banks to help drive innovation and launch new products.

Earlier this month, Infinios announced a new partnership with the Commercial Bank of Dubai (CBD) to enable payments for digital businesses and drive the take-up of embedded financial services in the UAE.

Related: Bahrain Pins Digital Leader Hopes On New Telecoms Innovation License

Like Tarabut Gateway, Infinios doesn’t just help banks build new digital products. As the term Banking-as-a-Service (BaaS) indicates, outsourced product development is an ongoing relationship rather than a one-off transaction.

So, as MENA’s booming FinTech scene demonstrates, digitizing financial services is a journey rather than an end and will require more productive partnerships going forward.

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