The US financial services company Standard & Poors has published a report to examine the influence of the blockchain and cryptocurrencies on the GCC banks.
According to the data, the contemporary FinTech solutions would reflect on the money transfers and foreign exchanges, which means, they would decrease the profits in the field of consumer banking. However, cryptocurrencies would not impact the abilities of regional lenders to make money.
On the other hand, the report found out that FinTech solutions might also lower the profitability of some business units of the Arab banks and change their operation models in time. Traditionally, the GCC banks would remain focused on the corporate sector. Therefore S&P did not expect adverse changes in the lending activity in the region. However, blockchain might have an impact on the retail banking and more particularly, on the money transfers and foreign currency exchange.
While blockchain and cryptocurrencies were the main competitors of brick-and-mortar banking, the peer-to-peer lending solutions and crowdfunding competed with the banks to fund small and medium-sized enterprises, S&P revealed. In the meantime, the wealth managers started using robots to help them with investment decisions.
In S&P view, FinTech alone would not have a significant impact on the GCC bank ratings in the coming two years. The analysts thought the local banks would cope with the FinTech competition either through collaboration or via cost-reduction measures. S&P noted that the GCC banks had already realized the scope of the threats opportunities of the FinTech. Therefore they were taking the necessary steps to adapt to the new market situation. In addition to that, S&P believed the GCC regulators would ensure the financial stability of their banking systems.
As S&P analysts noted, the FinTech was undoubtedly a new competitor on the financial scene, but it was not a game changer. However, in the future, it would become a factor to take account with. Its potential effect on the bank ratings would depend on the way the banks and regulators respond to the new order.