Fintech & Digital Banking

The importance of a CBDC in a post covid-19 world

Elias Tayeh - International Consultant - Fintech

Mr. Tayeh, please introduce yourself to our readers…

Elias is an expert in Financial Technology, Electronic payments services, Digital Payments, Electronic distribution, Micro-finance, Telecommunications and Technology markets in general. Qualified with a MBA – International Business from the University of Liverpool, UK and a bachelor in Computer Sciences. Elias obtained certifications in Financial Technology from the University of Hong Kong, China, International Organizations MBA (IO-MBA) from the University of Geneva, Switzerland, Political Economy of institutions and development from Leiden University, the Netherlands and a Certification with Honors in Financial Markets from YALE university. Currently, with his capacity as an International Independent Consultant, he is advising on startup projects in Financial Technology, cross-border remittances & payments  and Digital Transformation at national level in the MENA region.

How would you define the overall role of modern technology in terms of business improvement?

Modern technology, in particular digitization and telecommunications, has been the main catalyst and one of the main pillars in recent business improvements especially after the disruption caused by the Covid-19 pandemic. Businesses of all sizes, particularly SMEs, have now the means to reach a broader marketplace while maintaining the OPEX at the lowest but able to increase efficiency, quality, logistics and customer support which in turn affects their pricing and competitiveness. On the corporate level, businesses are now able to maintain their cash flow ratio on the high side and invest more in their R&D which boosts innovation and competitiveness just as well.

In your opinion, what are the essential fintech trends nowadays?

Fintechs are benefiting from the momentum that Covid-19 presented. They are now not just disrupting the day old channels to present a viable alternative but also are able to innovate in the sectors they have sliced, served well and even improved. Looking at the lending sector, which did not even perform well during the pandemic, it still presented countless opportunities for growth. The BNPL model coupled with Loyalty and Payroll is becoming more efficient, resilient and very competitive. On the payments front, fintechs are presenting multiple innovative solutions for the last mile customer, mainly the under banked and the unbanked more efficiently while preserving their risk ratio at very acceptable rates. On the cross-border front, the speed at which fintechs were able to move forced the central banks in many continents to present their immature CBDCs as a EP/DC model admitting they need to do so in order to explore and improve but that is mainly due to the challenge the Fintechs have placed on the table! If a modest startup is able to close a financial / value chain problem then why not a Central Bank? This question is giving headaches for regulators, issuers and middle layer settlement institutions that can now be bypassed due to the efficiency of the technology that the fintechs have developed, used and operated relatively successfully, DeFi is just one serious example. In general Fintechs are now the trend itself.

Can you describe the main perspectives (opportunities) for the digital banking industry? What about the challenges?

The digital banking industry is still very premature and under developed on both ends of the equation. The legacy institutions are not ready and consequently they are left behind and the new emerging completely-digital solutions still have a long way ahead. In concept, the legacy institutions were not built to become digital, at least not in the near future. If we look at the biggest chunk of their internal investments in the last decade, we find out that they were spent on complicated processes that rendered them even more rigid. Their human resources mostly at decision making level don’t even know what a Fintech does and how they are now able to pull the carpet from underneath their legs. The neo-banks have played a huge part in demonstrating that people are willing to utilize a completely digital banking solution but in most markets they are still faced with the challenge that they don’t have nor that they can grant access to cash unless they partner with a legacy institution or that they would need to build their own agents network. Cash is not ideal but is not going to disappear in the near future. If digital banking wants to cater efficiently for the tourism sector alone for example which was once valued at multi-billions USDs (prior Covid-19) they would need to figure out how to provide competitive exchange rates, cash-in / Cash-out low cost solutions. They will get there efficiently once the digital economy gets on the high and the money cycle cost gets on the low and then we can really evaluate a success rate globally for digital banks.

How do you think will the fintech industry change in the next 5 to 10 years?

The fintech industry is going to be in a growth period in the next 5 years expanding horizontally by covering wider geographic areas and vertically by covering wider demographics. In 10 years, the fintech industry is going to be in a quantum leap mode but this is going to be conditional of major advances in 1) the telecommunications sector and 2) in the logistics industry and finally 3) in the energy production sector. Legislatives and regulators will either have to put-up to the challenge and serve this era of novelty or sit in the back seat and enjoy the view because as we have mentioned earlier, the technology now allows fintechs to bypass them. Crypto is one very good example but the most important example is the Blockchain technology itself and in general that is becoming a liberating tool. It is being used in the Agriculture sector, in the health industry, in R&D and AI is just an opportunistic consequence of all this innovative ecosystem. Investors on the other hand would need to keep their fingers crossed hoping not to face another silk/fish war and have their hopes vanish etc…

What advice would you give to your younger self at the start of your career?

On a narcissistic note, I must have branded some of the innovative solutions that we had to create out of pure need in some very challenging markets. We used eWallets way before they were named so for example! Now on a more serious note, I would advice my younger self and everyone else for that matter to be leaner and more risk taker. Young people need to take risks. Its essential for their success. One last advice for they grey hairs, like myself, is to embrace change as early as possible.

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