Feature interview with Mohammed Kateeb, Group Chairman & CEO, Path Solutions
As demand for Sharia-compliant banking continues, what role is technology playing in this segment?
First, let’s talk in a broader sense; we all agree that technology has long been playing a key role in the financial services industry. It is actually changing the whole industry. It is introducing new players, new business models and giving the power to the customer. For instance, banks nowadays are required to provide 24-hour service using eChannels. For Sharia-compliant banking there is no difference. Sharia-compliant banks compete with conventional banks and have to provide the same level of service, and hence need to deploy the latest technologies and the most sophisticated solutions to gain a genuine competitive edge.
More specifically to the Islamic banking segment, there are many challenges that are no longer existing in the mature conventional banking system like lack of standards; complex new products that are completely different in structure from the conventional ones; and lack of industry knowledge. Technology has to be able to address all these issues and challenges as well.
What are the advantages of Sharia-compliant technologies?
Sharia-compliant banking is very different from the conventional one. Trying to take conventional banking systems and customizing them to address Sharia-compliant banking needs has been repeatedly proven a failure. Many banks are tempted to do it, they go down that path and they suffer. Many banks contacted us for help after realizing they wasted tremendous amounts of money, resources, time and effort.
Sharia-compliant banking systems are designed and built from the ground up based on the Sharia principles. The concept of “interest” that is center of all conventional finance, is prohibited in Sharia banking activities. Same for Gharar and speculative activities. Banks that realize this and build it into their business model are usually very successful. Banks that ignore that fact will eventually fail. Customers are getting educated every day and asking for true Sharia-compliant banking products and services, and banks are required to attend to their specific needs.
Can you elaborate more on the special modes of financing in Islamic banking, such as profit sharing and fee-based financing approaches?
It is very simple model to understand. In Islamic finance, the principle of taking money for no work or effort is forbidden, so money doesn’t produce money, which means interest here. Profit sharing concept relates to what we call “Musharaka products” which means a bank customer takes a percentage of the risk with the bank as partner in selling a product or performing a project. In this arrangement, profits and losses are shared between the bank and the investor. Such sharing contracts promote greater stability in financial markets. For fee-based financing also called “Murabaha”, a commodity is sold by the bank for cost plus profit, and both the customer and bank know the cost and the profit involved, but the customer isn’t financially able to make the purchase directly, so the profit being a mark-up that both the bank and customer agree on upfront, and which will be distributed across a number of payments as agreed.
With the industry demand for Sharia-inspired products in retail, private and commercial banking, insurance and asset management significantly increasing, how does Path Solutions help shape this growing sector?
Path Solutions has designed and built a suite of innovative banking applications that adhere to the Islamic law and in full compliance with industry regulators. The interpretation of Sharia may differ from one country to another and from one region to another. Unfortunately, in Islamic finance there is no set of financial standards till today that forces all banks across the world to adhere to as is the case in conventional finance. This means that the system has to be flexible and customizable to allow these differences in implementation and that’s what we do. We have developed the most comprehensive and integrated modular system to cater to the complex needs of banks worldwide, with the ability to launch new Sharia-compliant products to the market at a very fast pace. We were the first company to develop a pure Sharia-compliant solution for the financial sector and we continue to be the only vendor that is 100% focused on this segment. We cover the entire range of Islamic Banking; Retail and Corporate Banking, Investment and Financing, Treasury, Asset Management, Back-Office, etc. In addition, we provide great supportive modules for business analytics and reporting like Business Intelligence, Risk Management, and Regulatory Reporting.
What impact are regulations having on Sharia-based technologies? How does technology help Islamic financial institutions meet international regulations and compliance?
This industry is a heavily regulated one even though with the barrier to standardization. As I said earlier, it differs greatly from one country to another because of the lack of concurrent viewpoints and a unified Sharia school. For example in Malaysia, they have Sharia board on the country level, and in coordination with the Central Bank of Malaysia they regulate this industry. In other countries, Central Banks set burdensome laws and regulations, and each bank has its own Sharia board to interpret the Sharia and create financial products that fits the board’s interpretation. The only way to adhere to these multiple sets of heavy rules and regulations is to have flexible technologies, all-embracing regulatory reporting tools pre-built in the system, to anticipate and address pending regulatory changes while maintaining compliance in the most cost-effective and efficient manner.
How is Islamic finance developing in key new markets around the world? Where is your current target market?
Islamic finance continues to develop in various parts of the world, each of which is at a different level of development. In some markets, it is mature with very strong fundamentals and in others like in the West, it is just starting to wake up to its potential.
We saw some markets go through consolidations in the last few years and other new markets came to existence. Due to the political and economic turbulence in the Middle East and Europe, the last few years experienced tremendous slowdown in key Sharia-compliant financial markets like Iraq, Syria, Yemen, Libya and others. In Europe, many key initiatives either halted or slowed down. On the other hand, Africa continues to grow as an emerging market and we have seen rapid growth markets in several regions there. South East Asia continues to be a stable mature market and Central Asia is a key emerging region, forecasted to be the next centre of Islamic finance, but still at its infancy stage now.
What are the key challenges you are facing in the industry? Is there a big competition?
There are different types of challenges that we are facing in this industry. The first challenge is related to the level of maturity of the industry. Islamic finance is an emerging segment of the financial services industry that lacks standards and witnesses rapid changes, which puts tremendous pressure on IT vendors to keep abreast of the sector’s requirements and developments. The second big challenge is the level of understanding of how different this industry really is from its conventional counterpart. Most of the people working in this industry come from conventional finance and they think they can force conventional processes, procedures and IT systems on this segment. This of course opens the door to any vendor providing conventional banking systems to come and try to compete in this segment, which brings tremendous number of competitors to a segment that they simply cannot serve.
How do you see the sector developing in 2015?
With Dubai willing to join as a global hub for Islamic finance, London getting serious about this segment too and enforcing new banking laws, and Malaysia trying to recreate itself to protect its leading position, I believe these initiatives will accelerate positive changes within the industry in the coming few years. We will see increased pressure towards standardization, Islamic banks will go through consolidations, and the geographic coverage will continue to expand, but I am not sure how much of it can be accomplished in 2015.
Where do you see your strengths as a leader in the segment?
We are by far the number one provider of financial technology and business solutions when it comes to the number of Islamic financial institutions we serve in this segment, according to leading research firms and market analysts such as Gartner, Forrester, IDC and IBS. We cover the segment geographically from as far as Malaysia in the East to Great Britain in the West. We are the only vendor that is 100% focused on this segment and we do not get distracted. This amazing coverage and focus allows us to understand this segment better than any other vendor and allows us to develop and implement software solutions that are flexible to any market and to clients’ specific requirements.
Can you talk about the company’s strategy for this year and its position relative to its competitors?
In 2014, we introduced a new state-of-the-art technology platform with innovations that no other IT vendor can match. The new integrated platform gives financial institutions a single view of their customers coupled with real-time customer analytics, a complete view of risk, a compelling and interactive channel banking experience and the most advanced reporting tools; all while lowering their IT expenditures through greater process automation. We also brought in the mobility and the cloud to our offerings. And have introduced new and improved BI and RM solutions, characterized by flexible technical architectures and an expanding data warehouse built on SQL server. And we focused on upgrading and expanding our eChannels.
2015 will be the year of upgrading our existing clients to this great platform, that we are very excited about, which allows them to offer the best digital services to their customers, run more efficient operations and give them great insight and in-depth understanding of their business. In addition, we will continue to grow our line of Sharia-compliant software solutions, invest and launch innovative modules, thus meeting the highest demands of our clients. Of course, we are determined to continue our geographic expansion to new markets, wherever Sharia-compliant banking may be.
What kind of messages would you like to communicate to your clients and prospects?
The Sharia-compliant finance is a unique segment that is simply different than the conventional one. This also applies to processes, procedures, documentations and IT systems. A financial institution has to understand that it needs a unique and robust solution that is built to address the requirements of this segment specifically. There are many examples in the market where banks tried to implement tweaked conventional banking systems and they failed. Selecting the right technology partner with the right solution is critical to the success of any financial institution.
Q&A with Clare George-Hilley, co-founder, Centropy PR
Clare George-Hilley is the co-founder of Centropy PR
Global Banking and Finance Magazine recently caught up with Clare George-Hilley, co-founder of fintech and financial services specialist PR agency Centropy, as the company toasts to three years of trading. We asked Clare about what life is like running an agency in the city, the trends she is seeing in the financial services space and what the future holds following the Covid-19 outbreak.
Why did you decide to set up Centropy PR?
I was looking for an opportunity to launch my own agency, both my husband and I had been in the public affairs and public relations industry for over a decade and we thought the time was right to go out on our own.
We could see that the financial services industry was surging, with challenger brands and new technology transforming traditional banks and setting new standards of customer service. There was a huge market opportunity to create and launch a PR agency that could provider first class comms support, alongside a deep understanding of complex regulations such as AML, KYC, and the GDPR. Likewise, many traditional technology firms are diversifying their offerings, to tap into the growing market opportunity posed by the fintech boom.
So, we worked on a business plan, designed a strategy for winning clients and officially launched in September 2017. Within a few months we had a growing portfolio of clients and a thriving business, since that point, we have never looked back!
How is Centropy doing now and what are you plans for growth?
The last three years have flown by and our client portfolio has grown and diversified quickly. We now manage PR campaigns for clients on everything from cryptocurrency, wealth management to payments and trading software.
We’ve also hosted parliamentary debates with key industry figures, including Members of Parliament (MPs) on topics such as the future of the financial services industry and the impact of challenger banks on traditional providers. The team is expanding quickly and we’re investing heavily in the latest training and support to ensure our team members are equipped to reach their full potential.
How do you see the next 12 months?
The Covid-19 outbreak has crippled the economy, forcing millions of people to work from home due to the very serious health risks. The knock-on effect of this crisis will lead to companies cutting costs where possible to save jobs, so tech will play a vital role in ensuring many businesses stay afloat.
We are already working with contactless payments specialists and other fintech companies that offer solutions to help companies survive and thrive despite the inevitable challenges ahead.
We aim to continue building our portfolio of expertise, testing ourselves with new challenges and delivering the best possible service to clients
This is a Sponsored Feature.
Lessons from past recessions and advice for business owners during the coronavirus pandemic
By Neil Davis, managing director and co-founder of Sterling Networks
What is Sterling Networks?
“Sterling Networks is a professional organisation founded in 2014 which facilitates networking events for businesses across the Midlands, Oxfordshire, Wiltshire and the South West. Over 300 members attend our fortnightly breakfast and lunchtime meetings.”
What is your background prior to establishing Sterling Networks?
“During the 1990s, I worked in the corporate team for Halifax. My wife, Tracey, and I went onto own a manufacturing business, which was also called Sterling, and produced a range of gifts, merchandise and promotional items.
“We soon realised tradeshows were a great way to meet distributors and clients. From there, the business grew exponentially, and we managed to build a network of around 500 distributors. Eventually, we became ground down by the manufacturing business – in part because the local manufacturing sector was being devastated by competition from China – and took the decision to sell the business and relocate to Spain.
“After spending several years living abroad, we moved back to the UK to set up Sterling Integrity (EXPO’S) & Sterling Networks (Networking) We were inspired by a desire to help businesses make meaningful connections with one another, and we haven’t looked back since.”
The UK has recently entered a recession, brought about by the coronavirus pandemic. What have you learned from past recessions and how are these experiences helping you to navigate the current crisis?
“I’ve lived through a number of recessions and have seen the pain that insolvency causes companies on a large scale. It’s taught me that there are those who win and sadly those who lose, and that businesses must adapt to a rise in demand for certain products or services at a time of financial crisis.
“Given the nature of what Sterling Networks offers [an opportunity for business owners to connect and grow together] I decided we could build upon the brand due to the demand for new business during the pandemic. We therefore moved our networking events from face-to-face to virtual via tools like Zoom and have gained a steady stream of new members in recent months, reaching an overall total of well over 300.
“On top of that, we’ve taken new staff on during the crisis and have launched a number of new regional groups across the country. I was determined that Sterling should come out of the pandemic with a head start, so my attitude to the recession has been much more positive than those who are forecasting nothing but doom and gloom.
“We can’t pretend high street retail wasn’t suffering long before the pandemic came along, and thousands of new businesses are sure to start up to meet the demand for the products and services that people require at a time such as this. In order to develop and grow businesses need to focus on where changes need to be made to meet this demand.”
Sterling Networks has been providing emotional support to its members throughout the pandemic. What advice have you been giving to members that could be useful to other business owners?
“I try not to be too opinionated and respect other people’s views when giving advice to members, as there are always two sides to every circumstance. I’ve been careful not to say to people that they should be doing one thing or another, as I don’t know their business and its needs quite like they do. The only thing that I have been telling members is the importance of setting up one-to-ones with one another. By doing so, they can listen to the needs and concerns of other, like-minded business owners and work out ways that they might be able to help one another.
“The pandemic has meant we all have a bit more time on our hands, so the advice I would give to people is to use this extra time wisely. Not having to travel physically from one meeting to another means there is a greater opportunity to connect with more people. It’s important to remember that individuals outside of your business can be just as valuable as those within it.”
What makes you hopeful for the future and are there any words of encouragement you can give to budding entrepreneurs?
“The key events that have happened to this country during my lifetime – whether wars, recessions, or the pandemic – have enabled me to take stock of things. While these experiences are certainly challenging, we all become stronger for living through them, and it gives me great confidence that the world will ultimately improve as a result of the pandemic.
“The whole world is effectively rebooting right now, as is the business community. I like to think entrepreneurs will recognise this opportunity to take better care of their peers, and this translates to greater collaboration between organisations. Speak to as many people as you can, ask all the questions that you need to and do your homework. This might well be a difficult time for us all but planning for the future must start now if it is to become as prosperous as I know it can be.”
Exclusive Interview with Ugo Loser, CEO of ARCA Fondi SGR
Arca Fondi SGR is a mid-sized Italian active asset management company. Founded in 1983 by a consortium made up of 12 regional banks, the company has grown in time, expanding its network of distributors and its client base. Nowadays Arca manages Mutual Funds, Pension Funds and Institutional Accounts with total AUM exceeding 30 € bln, reaching more than 100 banks and financial institutions and serving more than 800,000 final clients.
What are the key contributors to ARCA Fondi SGR’s success over the past 35 years?
Arca has always put clients and distributors first. That is to say we have always privileged fair pricing for funds and developing high quality products and services for our customers. This requires constant innovation as an objective and looking for people’s talent to be free to produce its effect
Why are people the founding element of ARCA Fondi SGR and how have you sustained this vision over the years?
We work in small teams, people are young and motivated and can perform duties with a high level of autonomy and responsibility. Innovation is asked to everyone, everyday
What makes Arca Fondi SGR different from other asset management firms in Italy?
Arca is a company focused on doing what it can do very well, that is to say mutual and pension funds, services for clients and banks. We never follow short term trends but always look for long lasting impact on the industry, like we’ve done may times in the past
What products/services has ARCA Fondi SGR pioneered?
Arca has been the inventor of “Arca Cedola”, fixed-horizon, coupon paying funds, which have been with no doubt the greatest product innovation of the past 12 years on the Italian market. This type of funds, at first strictly based on bonds and later as a balanced product, has encountered an enormous success both with clients and distributors due to its simple and effective value proposition. Arca is a market leader also in the “PIR” segment of funds, a range of product focused on mid and small sized companies, that have been the best performers in the Italian stock market for the last few years. In services, Arca is a leader in technology applied to asset management. Our website, app and digital services for clients and banks are award winning, state of the art combination of data, technology and channels, and the best is yet to come on this side.
What strategies do you have in place to sustain your market position and withstand professional competition in the country?
As I mentioned, we do not waste resources on projects with dubious results, instead we constantly invest on people, products and services. The high level of profitability that Arca has been able to maintain even in difficult years for the markets of the banking sector is a further testimony that this strategy works very well
How do you use technology to create meaningful experiences for your customers?
First of all, we have created a whole new division, Arca InnovAction Lab, dedicated to technology, data and processes. This ensures projects are delivered quickly and they are free to leave bad past practices behind. Arcaonline.it, Arca’s website, provides distributors with detailed information on clients’ portfolios, asset under management and subscription/redemption requests. It monitors aggregate selling data offering to our partners a suite functions and analytics to track commercial campaigns. And if the banks branches need assistance, they may ask Sara, our digital chatbot. A broad and timely multimedia production, covering exclusive reports, comments, presentations, videos, webinars and newsletters is also available on the website.
Customers, subscribing Arca’s funds through its distributors’ network, may access Arcaclick, a dedicated area on Arcaonline.it. With Arcaclick the client can easily browse through her portfolio of funds, analyze its characteristics, view transactions and historical funds’ performance in customizable views. Arcaclick is also a powerful source of information on Arca product range: Prospectus, KIIDs and other literature is easily accessible along with news, comments and reports. Arcaclick may also be accessed via Arca Fondi App, a free application for mobiles and tables, running on both iOS and Android. Available 24/7 and in mobility, Arcaclick gives clients the opportunity access information, news and details of their personal portfolio anytime and anywhere.
What key trends will drive pension growth in 2020 and beyond?
The Italian market for pension funds is still very small and therefore there is a great opportunity to grow. Arca Fondi manages the biggest open ended Italian pension fund and it’s been constantly at the top of its rankings. As people and workers are looking for yield and to weather short term volatility, the pension fund is very well poised to profit from this trend.
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