- Deloitte: SMEs expenditure on Information and Communication Technology (ICT) services to increase by over $2 billion in the Middle East in 2014
- Deloitte: Expected 15-20% hike in sports rights in the Middle East in 2014
- Deloitte: 10 million Arabian “Massive Open Online Courses” in 2014
Deloitte launched its second annual Middle East Technology, Media and Telecommunications (TMT) Predictions report at Dubai Media City, revealing the latest trends and emerging issues shaping the TMT industries across the Middle East in the year ahead and beyond.
Deloitte’s TMT predictions are built around hundreds of discussions with industry executives, analysts and commentators, along with tens of thousands of consumer interviews. The predictions are also tested with clients, industry analysts and leverage Deloitte’s international and regional TMT project experience in the months leading up to their release.
The launch of the Deloitte Middle East TMT Predictions 2014 report was announced in 3 events held concurrently in Dubai, Manama and Doha during March. The forums provided an opportunity to discuss and debate the latest trends shaping the TMT industries with decision makers across the region.
“Whilst the Global Deloitte TMT Predictions report is currently in its 13th edition, for the second year in a row, Deloitte published a version of the predictions with specific relevance to the Middle East region,” said Santino Saguto, Partner and TMT Leader at Deloitte Middle East. “This time we have taken a more in depth view on the region’s most important themes, such as education, healthcare, small-mid size business, sports and how the most cutting edge innovations such as wearables could help business leaders and government authorities drive the Middle East’s evolution and growth,” Saguto explained.
“Deloitte’s Middle East TMT 2014 Predictions report offers valuable insights into the key trends that will shape the technology, media and telecommunications sectors over the near and long term, and we are committed to supporting research and study into the future of our sector,” said Mohammad Abdullah, Managing Director of TECOM Media Cluster. “Dubai’s media industry is thriving, which is testament to the Emirate’s wider economic growth, and I am optimistic that 2014 will be another positive year for the media industry.”
“In light of the latest trends seen in the Middle East TMT space, we have also sought to highlight and reflect on key challenges which could impact the pace of the region’s wider adoption of new technologies and their development across TMT sectors,” added Saguto.
Highlights and details of Deloitte’s Middle East TMT 2014 Predictions include:
- Wearables: the eyes have it
Smart glasses, fitness bands and watches should sell about 10 million units in 2014, generating $3 billion in revenues across the world. The Middle East has seen a remarkable shift towards the adoption of new technologies. This trend is expected to continue as smart glasses become commercially available in the region. However, smart glasses’ relatively high price point may only be accessible to a wealthy niche. Corresponding smart glass affordability and uptake by the wider Middle East consumer base should therefore be more gradual over the longer term.
- Massive Open Online Courses (MOOCs): not disruptive yet, but the future looks bright
Student registrations in Massive Open Online Courses (MOOCs) will be up 100 percent compared to 2012 to over 10 million courses, but the low completion rates mean that less than 0.2 percent of all tertiary education-equivalent courses completed in 2014 will be MOOCs. The growing awareness of online education will force educational institutions to increase investment in this area, drive more acceptance of online education as it becomes accredited, and increase adoption by corporate training groups. Over the next few years, the Middle East could see the rise of the Arabian MOOC (AMOOC). New local platforms, in partnership with local professors and universities, may emerge to launch new localized AMOOCs, attended by more Arab users than in 2013.
- eVisits: the 21st century doctor’s house call
There will be 100 million eVisits globally, potentially saving over $5 billion when compared to the cost of in-person doctor visits and representing growth of 400 percent from 2012 levels. The total addressable market for eVisits in the GCC is about $2-3 billion and could increase by as much as $230-310 million this year. Although eVisit usage will likely be greatest in North America, where there could be up to 75 million eVisits in 2014; in the Middle East, usage will be more gradual as implementation of national eHealth programs in countries such as Saudi Arabia is planned over a ten-year period. In the meantime, fast developing mobile health (mHealth) will emerge as a more disruptive force in the region’s healthcare systems.
- SME adoption of ICT services: catching up but still a long road ahead
Small-to-medium sized enterprises (SMEs) in the Middle East will increase their expenditure on information and communication technology (ICT) services by over $2 billion to $22 billion in 2014, 10 percent over 2013. In 2014 SME share of ICT spending in the region will be just over 23 percent, driven by ongoing expansion in the number of SMEs and their needs for key ICT services, such as web-presence, e-commerce and cloud computing.
The digital economy of the Middle East is expanding, offering SMEs in the region a better platform for development. A number of economic and SME sector indicators suggest that SMEs across the region represent significant growth opportunities in general and in their ICT needs, especially if provided with the right support. As SMEs acquire and build up their web presence, e-commerce and cloud computing capabilities, they will stimulate the region’s economic growth going forward.
- Doubling up on pay-TV
By the end of 2014, up to 50 million homes around the world will have two or more separate pay‑television subscriptions, with the additional subscriptions generating about $5 billion in revenues globally. Over the coming years, the number of households with multiple subscriptions should continue rising, as more content owners make their content portfolios available via subscription video-on-demand (SVOD) delivered ‘over-the-top’ using broadband connections. The pay-TV market in the Middle East is quite small but growth reflects a developing appetite for pay-TV in the region. The fact that viewers in the region, with sizeable online streaming and YouTube penetration levels, have adopted online video in addition to conventional television shows a market potential for SVOD as a secondary viewing service.
- Broadcast sports rights: premium plus
The value of premium region-specific sports rights in the Middle East will increase by at least 15-20 percent, exceeding the 14 percent rise of all premium sports rights predicted globally. Premium sports rights from region-specific sports will outgrow those from American and European leagues in percentage terms. Although American and European leagues will maintain most of their overall share of the Middle East’s premium sports rights in terms of value, they will no longer drive overall growth as they traditionally did in the past. With very limited room for Middle East broadcasters to profitably exploit the broadcast rights of top international leagues, we are approaching an important turning point in the region’s sports rights market. Region-specific sports properties are now growing faster, but compared to their European and American league counterparts are still significantly undervalued. Now with higher growth prospects, local leagues will bridge part of this gap.
- SMS messaging services versus instant messaging: value versus volume
Instant messaging services on mobile phones (MIM) will carry more than twice the volume of messages sent globally via a short messaging service (SMS). Despite the burgeoning volumes of messages carried over MIM platforms, globally SMS will generate more than $100 billion in 2014, equivalent to approximately 50 times the total revenues from all MIM services. In the Middle East, the adverse impact of MIM on operators’ SMS and MMS revenues will be in the range of 5 to 6 percent in the next five years as higher smartphone penetration makes MIM more ubiquitous in the Middle East than anywhere else in the world. Coupled with increased multimedia sharing in the region, MIM is a stronger driver for data consumption and can expand new revenue streams for Middle East operators.
Full details about the Middle East TMT Predictions report are available here: www.deloitte.com/metmtpredictions2014
Taking control of compliance: how FS institutions can keep up with the ever-changing regulatory landscape
By Charles Southwood, Regional VP – Northern Europe and MEA at Denodo
The wide-spread digital transformation that has swept the financial services (FS) sector in recent years has brought with it a world of possibilities. As traditional financial institutions compete with a fresh wave of challenger banks and fintech startups, innovation is increasing at an unprecedented pace.
Emerging technologies – alongside the ever-evolving concept of online banking – have provided a platform in which the majority of customer interactions now take place in a digital format. The result of this is a never-ending stream of data and digital information. If used correctly, this data can help drive customer experience initiatives and shape wider business strategies, giving organisations a competitive edge.
However, before FS organisations can utilise data-driven insights, they need to ensure that they can adequately protect and secure that data, whilst also complying with mandatory regulatory requirements and governance laws.
The regulation minefield
Regulatory compliance in the FS sector is a complex field to navigate. Whether its potential financial fraud or money laundering, risk comes in many different forms. Due to their very nature – and the type of data that they hold – FS businesses are usually placed under the heaviest of scrutiny when it comes to achieving compliance and data governance, arguably held to a higher standard than those operating in any other industry.
In fact, research undertaken last month discovered that the General Data Protection Regulation (GDPR) has had a greater impact on FS organisations than any other sector. Every respondent working in finance reported that the changes made to their organisation’s cyber security strategies in the last three years were, at least to some extent, as a result of the regulation.
To make matters even more confusing, the goalpost for 100% compliance is continually moving. In fact, between 2008 and 2016, there was a 500% increase in regulatory changes in developed markets. So even when organisations think they are on the right track, they cannot afford to become complacent. The Markets in Financial Instruments Directive (MiFID II), the requirements for central clearing and the second Payment Service Directive (PSD2), are just some examples of the regulations that have forced significant changes on the banking environment in recent years.
Keeping a handle on this legal minefield is only made more challenging by the fact that many FS organisations are juggling an unimaginable amount of data. This data is often complex and of poor quality. Structured, semi-structured and unstructured, it is stored in many different places – whether that’s in data lakes, on premise or in multi-cloud environments. FS organisations can find it extremely difficult just to find out exactly what information they are storing, let alone ensure that they are meeting the many requirements laid out by industry regulations.
A secret weapon
Modern technologies, such as data virtualisation, can help FS organisations to get a handle on their data – regardless of where it is stored or what format it is in. Through a single logical view of all data across an organisation, it boosts visibility and real-time availability of data. This means that governance, security and compliance can be centralised, vastly improving control and removing the need for repeatedly moving and copying the data around the enterprise. This can have an immediate impact in terms of enabling FS organisations to avoid data proliferation and ‘shadow’ IT.
In addition to this, when a new regulation is put in place, data virtualisation provides a way to easily find and access that data, so FS organisations can respond – without having to worry about alternative versions of that data – and ensures that they remain compliant from the offset. This level of control can be reflected even down to the finest details. For example, it is possible to set up access to governance rules through which operators can easily select who has access to what information across the organisation. They can alter settings for sharing, removing silos, masking and filtering through defined, role-based data access. In terms of governance, this feature is essential, ensuring that only those who have the correct permissions to access sensitive information are able to do so.
Compliance is a requirement that will be there forever. In fact, its role is only likely to increase as law catches up with technological advancement and the regulatory landscape continues to change. For FS organisations, failure to meet the latest legal requirements could be devastating. The monetary fines – although substantial – come second to the potential reputation damage associated with non-compliance. It could be the difference between an organisation surviving and failing in today’s climate.
No one knows what is around the corner. Whilst some companies may think they are ahead of the compliance game today, that could all change with the introduction of a new regulation tomorrow. The best way to ensure future compliance is to get a handle on your data. By providing total visibility, data virtualisation is helping organisations to gain back control and win the war for compliance.
TCI: A time of critical importance
By Fabrice Desnos, head of Northern Europe Region, Euler Hermes, the world’s leading trade credit insurer, outlines the importance of less publicised measures for the journey ahead.
After months of lockdown, Europe is shifting towards rebuilding economies and resuming trade. Amongst the multibillion-euro stimulus packages provided by governments to businesses to help them resume their engines of growth, the cooperation between the state and private sector trade credit insurance underwriters has perhaps missed the headlines. However, this cooperation will be vital when navigating the uncertain road ahead.
Covid-19 has created a global economic crisis of unprecedented scale and speed. Consequently, we’re experiencing unprecedented levels of support from national governments. Far-reaching fiscal intervention, job retention and business interruption loan schemes are providing a lifeline for businesses that have suffered reductions in turnovers to support national lockdowns.
However, it’s becoming clear the worst is still to come. The unintended consequence of government support measures is delaying the inevitable fallout in trade and commerce. Euler Hermes is already seeing increase in claims for late payments and expects this trend to accelerate as government support measures are progressively removed.
The Covid-19 crisis will have long lasting and sometimes irreversible effects on a number of sectors. It has accelerated transformations that were already underway and had radically changed the landscape for a number of businesses. This means we are seeing a growing number of “zombie” companies, currently under life support, but whose business models are no longer adapted for the post-crisis world. All factors which add up to what is best described as a corporate insolvency “time bomb”.
The effects of the crisis are already visible. In the second quarter of 2020, 147 large companies (those with a turnover above €50 million) failed; up from 77 in the first quarter, and compared to 163 for the whole of the first half of 2019. Retail, services, energy and automotive were the most impacted sectors this year, with the hotspots in retail and services in Western Europe and North America, energy in North America, and automotive in Western Europe
We expect this trend to accelerate and predict a +35% rise in corporate insolvencies globally by the end of 2021. European economies will be among the hardest hit. For example, Spain (+41%) and Italy (+27%) will see the most significant increases – alongside the UK (+43%), which will also feel the impact of Brexit – compared to France (+25%) or Germany (+12%).
Companies are restarting trade, often providing open credit to their clients. However, there can be no credit if there is no confidence. It is increasingly difficult for companies to identify which of their clients will emerge from the crisis from those that won’t, and whether or when they will be paid. In the immediate post-lockdown period, without visibility and confidence, the risk was that inter-company credit could evaporate, placing an additional liquidity strain on the companies that depend on it. This, in turn, would significantly put at risk the speed and extent of the economic recovery.
In recent months, Euler Hermes has co-operated with government agencies, trade associations and private sector trade credit insurance underwriters to create state support for intercompany trade, notably in France, Germany, Belgium, Denmark, the Netherlands and the UK. All with the same goal: to allow companies to trade with each other in confidence.
By providing additional reinsurance capacity to the trade credit insurers, governments help them continue to provide cover to their clients at pre-crisis levels.
The beneficiaries are the thousands of businesses – clients of credit insurers and their buyers – that depend upon intercompany trade as a source of financing. Over 70% of Euler Hermes policyholders are SMEs, which are the lifeblood of our economies and major providers of jobs. These agreements are not without costs or constraints for the insurers, but the industry has chosen to place the interests of its clients and of the economy ahead of other considerations, mindful of the important role credit insurance and inter-company trade will play in the recovery.
Taking the UK as an example, trade credit insurers provide cover for more than £171billion of intercompany transactions, covering 13,000 suppliers and 650,000 buyers. The government has put in place a temporary scheme of £10billion to enable trade credit insurers, including Euler Hermes, to continue supporting businesses at risk due to the impact of coronavirus. This landmark agreement represents an important alliance between the public and private sectors to support trade and prevent the domino effect that payment defaults can create within critical supply chains.
But, as with all of the other government support measures, these schemes will not exist in the long term. It is already time for credit insurers and their clients to plan ahead, and prepare for a new normal in which the level and cost of credit risk will be heightened and where identifying the right counterparts, diversifying and insuring credit risk will be of paramount importance for businesses.
Trade credit insurance plays an understated role in the economy but is critical to its health. In normal circumstances, it tends to go unnoticed because it is doing its job. Government support schemes helped maintain confidence between companies and their customers in the immediate aftermath of the crisis.
However, as government support measures are progressively removed, this crisis will have a lasting impact. Accelerating transformations, leading to an increasing number of company restructurings and, in all likelihood, increasing the level of credit risk. To succeed in the post-crisis environment, bbusinesses have to move fast from resilience to adaptation. They have to adopt bold measures to protect their businesses against future crises (or another wave of this pandemic), minimize risk, and drive future growth. By maintaining trust to trade, with or without government support, credit insurance will have an increasing role to play in this.
What Does the FinCEN File Leak Tell Us?
By Ted Sausen, Subject Matter Expert, NICE Actimize
On September 20, 2020, just four days after the Financial Crimes Enforcement Network (FinCEN) issued a much-anticipated Advance Notice of Proposed Rulemaking, the financial industry was shaken and their stock prices saw significant declines when the markets opened on Monday. So what caused this? Buzzfeed News in cooperation with the International Consortium of Investigative Journalists (ICIJ) released what is now being tagged the FinCEN files. These files and summarized reports describe over 200,000 transactions with a total over $2 trillion USD that has been reported to FinCEN as being suspicious in nature from the time periods 1999 to 2017. Buzzfeed obtained over 2,100 Suspicious Activity Reports (SARs) and over 2,600 confidential documents financial institutions had filed with FinCEN over that span of time.
Similar such leaks have occurred previously, such as the Panama Papers in 2016 where over 11 million documents containing personal financial information on over 200,000 entities that belonged to a Panamanian law firm. This was followed up a year and a half later by the Paradise Papers in 2017. This leak contained even more documents and contained the names of more than 120,000 persons and entities. There are three factors that make the FinCEN Files leak significantly different than those mentioned. First, they are highly confidential documents leaked from a government agency. Secondly, they weren’t leaked from a single source. The leaked documents came from nearly 90 financial institutions facilitating financial transactions in more than 150 countries. Lastly, some high-profile names were released in this leak; however, the focus of this leak centered more around the transactions themselves and the financial institutions involved, not necessarily the names of individuals involved.
FinCEN Files and the Impact
What does this mean for the financial institutions? As mentioned above, many experienced a negative impact to their stocks. The next biggest impact is their reputation. Leaders of the highlighted institutions do not enjoy having potential shortcomings in their operations be exposed, nor do customers of those institutions appreciate seeing the institution managing their funds being published adversely in the media.
Where did the financial institutions go wrong? Based on the information, it is actually hard to say where they went wrong, or even ‘if’ they went wrong. Financial institutions are obligated to monitor transactional activity, both inbound and outbound, for suspicious or unusual behavior, especially those that could appear to be illicit activities related to money laundering. If such behavior is identified, the financial institution is required to complete a Suspicious Activity Report, or a SAR, and file it with FinCEN. The SAR contains all relevant information such as the parties involved, transaction(s), account(s), and details describing why the activity is deemed to be suspicious. In some cases, financial institutions will file a SAR if there is no direct suspicion; however, there also was not a logical explanation found either.
So what deems certain activities to be suspicious and how do financial institutions detect them? Most financial institutions have sophisticated solutions in place that monitor transactions over a period of time, and determine typical behavioral patterns for that client, and that client compared to their peers. If any activity falls disproportionately beyond those norms, the financial institution is notified, and an investigation is conducted. Because of the nature of this detection, incorporating multiple transactions, and comparing it to historical “norms”, it is very difficult to stop a transaction related to money laundering real-time. It is not uncommon for a transaction or series of transactions to occur and later be identified as suspicious, and a SAR is filed after the transaction has been completed.
FinCEN Files: Who’s at Fault?
Going back to my original question, was there any wrong doing? In this case, they were doing exactly what they were required to do. When suspicion was identified, SARs were filed. There are two things that are important to note. Suspicion does not equate to guilt, and individual financial institutions have a very limited view as to the overall flow of funds. They have visibility of where funds are coming from, or where they are going to; however, they don’t have an overall picture of the original source, or the final destination. The area where financial institutions may have fault is if multiple suspicions or probable guilt is found, but they fail to take appropriate action. According to Buzzfeed News, instances of transactions to or from sanctioned parties occurred, and known suspicious activity was allowed to continue after it was discovered.
How do we do better? First and foremost, FinCEN needs to identify the source of the leak and fix it immediately. This is very sensitive data. Even within a financial institution, this information is only exposed to individuals with a high-level clearance on a need-to-know basis. This leak may result in relationship strains with some of the banks’ customers. Some people already have a fear of being watched or tracked, and releasing publicly that all these reports are being filed from financial institutions to the federal government won’t make that any better – especially if their financial institution was highlighted as one of those filing the most reports. Next, there has been more discussion around real-time AML. Many experts are still working on defining what that truly means, especially when some activities deal with multiple transactions over a period of time; however, there is definitely a place for certain money laundering transactions to be held in real time.
Lastly, the ability to share information between financial institutions more easily will go a long way in fighting financial crime overall. For those of you who are AML professionals, you may be thinking we already have such a mechanism in place with 314b. However, the feedback I have received is that it does not do an adequate job. It’s voluntary and getting responses to requests can be a challenge. Financial institutions need a consortium to effectively communicate with each other, while being able to exchange critical data needed for financial institutions to see the complete picture of financial transactions and all associated activities. That, combined with some type of feedback loop from law enforcement indicating which SARs are “useful” versus which are either “inadequate” or “unnecessary” will allow institutions to focus on those where criminal activity is really occurring.
We will continue to post updates as we learn more.
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