< PreviousCO VER ST OR Y | 20 AB FINANCE March 2023 cate 3.5 percent GDP growth for the Middle East this year and 2.7 percent for 2024. For the UAE, the IMF projects GDP growth of 4.2 percent for 2023. It also forecasts that inflation will fall from 5.2 percent last year to 3.6 percent this year and 2 percent in 2024. These forecasts will provide businesses, investors, and consumers with the con dence they need to continue to spend – and to attract foreign direct investment and talent from other parts of the world. Mashreq is the UAE’s oldest – and probably best-known – bank. Looking back at the journey since launching in 1967, what would you say have been the greatest achievements? Since it was founded in 1967, the bank has witnessed various milestones, these include but are not limited to the following: Best Client Experience: When it comes to client experience, we were ranked number one in the UAE and the region for various corporate o erings voted by the clients globally, aligned to the company’s vision through delivery of best-in-class initiatives such as Corporate level (global transaction platform), Consumer (Mashreq Neo growth), SME (Success of Mashreq NeoBiz with part- nerships and buildup of the ecosys- tem), NEOPAY (Smart Payment solu- tions), Noon strategic partnership for e-commerce. Fastest-growing brand in the Middle East: The bank was ranked Fastest Growing Financial Services Brand in the Middle East in 2022 by Brand Finance, re ect- ing Mashreq’s growing consumer recognition through the best client experience and a determination to widen access to its unique products and services. Best Place to Work: The change that we saw in the operat- ing model with the introduction of centers of excellence and the adoption of the Work from Anywhere model to tap into the global talent pool has proven to be very successful within a short span of time, achieving cost e - ciencies, with the organization being rewarded as one of the top 10 compa- nies to work for by LinkedIn in 2022. Diversity: From a diversity and inclusion perspective, I am incredibly proud of the bank’s extraordinary progress in building a truly diverse, multi-ethnic pool of talent in all the geographies where we work. Our gender diversity also made great progress in 2022. By year-end, gender diversity stood at 34 percent across the Mashreq Global Network (MGN). We also saw a variety of Diversity & Inclusion (D&I) initiatives at MGN in 2022, such as the Mashreq Hope program, People with Determination, and Returning Mothers, with the latter soon being adopted group wide. All this progress – and more – explains why we have been recognized by Economic Times HR World through the Future Skills Award for D&I Learning Initia- tives this year. $15.5BN The amount of sustainable nance that Mashreq helped to facilitate since the end of 2022arabianbusiness.com 21 | AHMED ABDEL A AL ESG: In 2022, we developed a robust sustain- ability framework that is being deployed across the network and consequently we implemented a series of ESG initiatives. We were the only bank from the region to sponsor Egypt’s COP27. Additionally, the fact that we have facilitated more than $15.5 billion of sustainable nance since the end of 2022, stands as a testament to our commitment to this cause. Declar- ing 2023 as the year of sustainability by the President of UAE His Highness Sheikh Mohamed bin Zayed Al Nahyan will accelerate the UAE›s journey towards a greener economy and will act as a perfect segue to COP28, which is set to take place in the UAE this – we adapt to the emerging needs of an increasingly digital economy. The bank has patently changed immea- surably and is a true digital leader. That said, it is important for us to remember that even as society adapts, there are many who risk being left behind. As we evolve, we must ensure that every Mashreq customer has the access that they need to use the services that they quite rightly expect from us – both in the digital and the real world. We recognize that customers’ needs – and expectations – rapidly change; they are always evolving. Consumers are exposed to new channels and ways of living every day, which creates a never-ending impetus for innovation and change. As a bank, we now exist in a perpetual state of adaptation, with one eye on delivering what the customer needs today – and the other actively developing what happens tomorrow. As a successful Group CEO, what advice would you give to aspiring leaders who want to follow in your footsteps? It’s a bit early for me as a Group CEO to start giving advice, but as an indus- try veteran my answer would be what you would expect from any CEO lead- ing a progressive work culture: which is to give the customer what he or she wants, needs, and expects. Never forget that a customer can walk away. If we understand our customers – and that is not always straightforward – then we are halfway there. The second part of the answer I would give is to collaborate with others. No man is an island, and if we believe we have all the answers within ourselves, we will almost always fail. Success comes through collaboration by listening, sharing, and empowering others. Mashreq’s digital success is not my work or the work of any single person – it is the accumulation of a thousand ideas and passions – all steered in the right direction by a company with a clear, uni ed vision. It’s about unlocking creativity, letting people get on with what they do best, and listening to our customers. are very much looking forward to supporting it. Your own career in the industry has seen a lot of changes in the last 20 years. Is this the most exciting/ innovative time to be leading a bank? In my 25 years in banking, I have never seen so much change. So much innova- tion and so much excitement in the banking sector. Our entire purpose as an industry has been revolutionized over the past decade, particularly in the few years running up to and since the pandemic. Our industry is more dynamic and more complex than it has ever been – partly because we are not only competing with other banks with other industries. This is why our Bank- ing as a Service innovation agenda is so crucial – it revolves around the shift from selling products and services to the creation of experiences. The scale of change is impossible to overestimate because it is truly existen- tial in nature. That is just one reason why Mashreq announced its new brand identity Rise Every Day in 2022. This was a historic brand launch for Mashreq and a pivotal moment in 2022. The new identity represents the very best of who we are and what we set out to do. It represents Mashreq’s strong belief in helping its clients to succeed and to fulfil their aspirations. Moreover, it reflects our role in supporting our people to realize their ambitions and to facilitate building better lives and live- lihoods in society through hard work and innovation, while delivering the best-in-class banking experience. Where do you see Mashreq in 10 years from now – will it be, for example, a completely digital operation? Without hesitation, Mashreq’s role as a digital challenger bank will see it Partnerships will remain a core strategic approach to our digital development in 2023 22 AB FINANCE March 2023 FEAT URE | INVESTMEN T Investment gami cation: The risks, rewards and way forward Against the backdrop of the COVID-19 pandemic, gami cation and social media serve as important drivers in the rise of self-directed trading Gami cation is being increasingly used in the setting of nancial services 20% The amount of retail investors that reported entertainment or specula- tion as the primary reason for using their retail trading accounts FEAT URE | INVESTMEN T BY SIVANANTH RAMACHANDRANarabianbusiness.com 23 INVESTMEN T | FEAT URE The term “gami cation” – the application of game-playing design elements and princi- ples to products or services – is being increasingly used in the setting of nancial services. Alongside the use of behavioural techniques and the rising influence of social media, investment gamification can be a powerful tool for increased investor engagement and literacy, driving positive outcomes. On the ip side, however, gami - cation can potentially be used by rms OK. So, what does investment gami cation actually mean? Gami cation in the context of invest- ment includes adoption of game features and broader behavioural nudges. Game features used by market intermediaries come in vari- ous forms of digital engagement practices, such as points, badges, and leader boards, as well as more sophisticated reward systems. Some examples of behavioural nudges are attractive app designs, pleasant presentation of information and push notifications, news stories based on trading activity, and encour- aging investors to copy popular traders. These features and nudges are backed by business model innovations that increase convenience or reduce frictions, such as zero-commission trading, fractionalisation of shares, increased ease of account opening and fund transfers. From a marketing perspective, advertisements that amplify one’s social status, the use of social in uencers and bonuses upon account-opening and referral also catalyze the process of gami cation. Against the backdrop of the COVID-19 pandemic, both gami ca- tion and social media serve as import- ant drivers in the rise of self-directed trading (SDT). Investment has always been a social activity and tied with social opinion; as famous economist John Maynard Keynes once said, stock investing is just like a beauty contest where “we devote our intelligences to anticipating what average opinion expects the average opinion to be”. In other words, the prevalence of social media has helped investors gure out what the average opinion is, or what it seems to be. Right. So, what are the risks behind the fancy features? Gami cation and the rise of social validation–driven investing have generated ethical concerns, with critics claiming that the addictive qualities of these practices may incentivise individuals to take actions that are against their interests. The general motivations for investors to to drive excessive trading, induce trading in complex or high-risk prod- ucts, or encourage other harmful behaviours, all at the expense of the clients’ best interests. Gami cation can potentially be used by rms to drive excessive trading 24 AB FINANCE March 2023 FEAT URE | INVESTMEN T invest include building financial security, supporting the nurturing of families and expressing values through product choices, but gami- fication may drive investors away from these interests and instead, weight investment decisions toward emotional preferences. According to CFA Institute’s fth biennial Investor Trust Study, nearly 20 percent of retail investors reported entertainment or speculation as the primary reason for using their retail trading accounts. Another concern stems from the transparency of social media activity. There could be clear con icts of interest when in uencers are compensated by a rm or product provider without proper disclosure to users of such arrangements. On top of that, there are risks associated with fake accounts and social media messages driven by bots. It could be troubling to see influencers make questionable product recommenda- tions, not to mention that they may overstate their number of followers for more credibility. In addition to ethical and inves- tor protection concerns, gamifica- tion seems to have increased trading in riskier, popular stocks and strat- egies, bringing risks to market infrastructure. A prominent exam- ple in 2021, was the suspension of activity on Robinhood, a US broker- age, due to margin pressures and system stress caused by the massive trading on meme stocks (stocks that gain popularity quickly through social media). In the long term, events like this may impact investors’ risk appetite and attitude towards the stock market – those luckier may mistake their luck for skill and increase their risk taking, but those who lost money may decrease their risk taking or even investment. The recommended approach – principles, conduct and disclosures: In view of the impacts and risks associ- ated with gamification and social media, regulators ought to develop the appropriate set of approaches to maxi- mise the benefits and minimise the Stock Market – gami cation seems to have increased trading in riskier, popular stocks and strategies, bringing risks to market infrastructure Self-Directed Trading apps and platforms should provide credible research on assets from reputable third-party sourcesarabianbusiness.com 25 INVESTMEN T | FEAT URE action risk disclosures in plain English as users are most attentive at that time, increasing the likelihood of them paying attention. The way information is presented matters too – lengthy information on screens tends to discourage users from reading and instead results in users skimming through the information, which suggests the necessity of having a design speci cally for disclosures that is optimized for mobile devices. In terms of transparency, nancial institutions should be fully transpar- ent to users about the remuneration they provide to in uencers for their social media advertisements, helping investors distinguish clear product advertisements from personal views. Regulators could also consider estab- lishing licensing requirements for social in uencers to help investors better distinguish between general advice and personal advice from social in uencers. Market intermediaries should also be transparent about the risks of SDT. For instance, investor education materials and public communica- tions must not mislead or downplay the risks and complexity inherent in investing. Warnings and alerts could also be used to remind users of the risk profile of the assets they are trading before taking actions. Warn- ings could also include general messages that stress the fact that excessive trading may lead to nan- cial loss. The continuous innovation in capital markets, from e-commerce strategies to social media strategies, has contributed to the emergence of gami cation. While this innovation, just like any other, has brought some unintended negative consequences, such as excessive trading and risk taking, the market will continue to innovate, followed by regulators. The principles covered, together with improved conduct and disclosures on the part of intermediaries, will provide the best approach to manage the risks associated with gami cation and enable users to bene t from its positive features. risks. CFA Institute’s recommended approach is three-pronged; comprising principles, conduct and disclosures. First, the reward systems in the gami cation practices of rms should focus on long-term outcomes instead of short terms ones. Instant grati ca- tion and monetary performance rewards based on recent performance or transaction volumes should be avoided, while measurement and reporting on long-term performance along with risk is crucial so that the reward systems are calibrated accord- ingly. Moreover, trading apps and plat- forms should provide credible research on assets from reputable third-party sources. Some platforms share infor- mation and news from social media, and while they may or may not be inac- curate, users should be nudged toward information of stocks and other asset classes from trustworthy sources and research rms. Apart from providing research materials, there is more to be done to allow users to make better informed decisions. Market intermediaries are encouraged to provide point-of-trans- Gami cation can increase zero- commission trading 26 AB FINANCE March 2023 TRENDS | MEN A STARTUPS The rise of industries and the fall of individual hero tales: A deeper look into this year’s MENA startup trends Sustainability and industry impact prove critical for entrepreneurs looking to start and expand in the region TRENDS | MEN A STARTUPS BY RYAAN SHARIF, GENERAL MANAGER FOR FLAT6LABS UAE It goes without saying that 2022 was another strong year for the region’s startup ecosystem. Forbes reports that MENA’s 50 most- funded startups raised around $3.2bn in 2022, up 6.7 percent from 2021. The UAE led the pack, with 18 startups representing 30.1 percent of the total funding. Saudi Arabia was a close second, representing 29.6 percent spread across 12 fi rms. UAE-based agri-tech solutions fi rm Pure Harvest Smart Farms alone raised $387m. As to be expected, fi ntech continued to dominate with 21 companies receiving $1.3 billion between them. The UAE’s Tabby and Saudi Arabia’s Tamara were the top fintech names, raising $275 million arabianbusiness.com 27 MEN A STARTUPS | TRENDS ential factors that investors look at when making investment decisions. This year, founders will have to demonstrate the viability of their business model and how they will generate profits from it. They will need to zoom in on their customer acquisition costs, lifetime value, churn, and retention rates. Investors will favour companies with favourable unit economics early on and seek startups that clearly understand their metrics and the reasoning behind their numbers. Although it may be difficult for early-stage entrepreneurs to achieve this goal, they can create accurate projections of their potential metrics by conducting market research and analysing their competitors to provide investors with an understanding of their potential. and $216 million, respectively. The UAE has become an entrepre- neur’s haven with the UAE leadership committed to continually making it the most futuristic, world-class inter- connected infrastructure with access to a diverse, multi-talented talent pool with mechanisms to funding available across the UAE. Abu Dhabi, in partic- ular, has established itself as a global hub for entrepreneurship. Each change by authorities and regulators re ect the times and seek to shield new businesses from regional and global externalities. The tech industry, as we know, has undergone many changes of late and can see many more on the horizon – hybrid work and rampant platform adoption being two examples of the former and the Metaverse being an example of the latter. And let us not forget that the tech industry is not immune to the prevailing economic headwinds that have knocked so many other businesses o course. As we head deeper into 2023, these are the top ve trends that we predict will continue to have a significant impact on the MENA region’s entre- preneurial ecosystem. 1 Capital crunch Given the economic outlook, startups will feel inclined to raise capital and better manage their spending. That entails having their costs sync with an accurate growth projection. Resilient founders will need to understand the extent of their runway to optimise their budgets and cut costs on new hires and marketing spending unless it’s vital for growth. Founders will focus more on building sticky products that their users need by going back to the core, concentrating more on the tech, and enhancing the custom- er’s experience. 2 Finance in focus On the other side of the credit crunch is the investor. What is going through their mind? While some bulls remain, the uncertainty of recent years is bound to have Changes in the UAE’s legislation continue to ease the journey for startups, making it more attractive as a location for global and regional HQs brought out the bearish side in most. In 2023, we can expect closer scru- tiny of valuations. This will be a time for founders to show investors more than just an inflated valuation – to craft a compelling narrative that encourages reinvestment without compromising founders’ ownership in their companies. There is no doubt that unit economics are one of the most in u- In 2023, we can expect closer scrutiny of valuations. It will be a time for founders to show investors more than just an in ated valuation 28 AB FINANCE March 2023 TRENDS | MEN A STARTUPS 3 Sustainability will take centre stage In 2023, the UAE will host the 28th Conference on Climate Change (COP28). Global attention will be focused on the country, its leaders, and its companies. It is expected that startups in the sustainability space will receive a great deal of attention, and companies with a strong environ- mental story will attract funding from venture capital firms and venture capital funds that have a net-zero agenda of their own. Environmental sustainability is becoming increas- ingly critical for governments, consumers, and employees. Abu Dhabi has established itself as a global hub for entrepreneurship Resilient founders will need to understand the extent of their runway to optimise their budgetsarabianbusiness.com 29 MEN A STARTUPS | TRENDS that investors recoil from hype and focus more on industries that can drive real impact. The crypto world that gave a welcoming home to FTX is not the only FOMO-encumbered segment. Distorted market signals can be found everywhere. Investors are now likely to laser in on industries rather than indi- vidual hero tales. Fintech is a proven prospect, but others that have done well in the face of regional economic jitters are healthcare, agritech, real estate, and edtech. 5 Relocation of international startups We often talk of the business-friendly environment in the UAE, and changes in legislation continue to ease the journey for startups. Because of this, the UAE is becoming more and more attractive as a location for global and regional HQs. The Abu Dhabi Global Market has established clear regula- tions that support companies seeking to expand in the UAE. In addition, the Abu Dhabi Resi- dents O ce was established to assist new residents in relocating and inte- grating into the UAE’s culture and soci- ety. They currently provide smart services for golden visa applications, which is becoming extremely attractive to founders. Investors have an opportunity to guide foreign-owned businesses through setting up shop in Abu Dhabi and taking advantage of local free- doms, thus enriching the national business climate, and paving the way for local B2B firms to benefit from more customers. Optimistic outlook The mentorship of startups in the UAE is unparalleled. The support functions available steer business leaders towards the right trends, contacts, and programmes, proving that the UAE understands the importance of equip- ping founders with the right prepara- tion and mindset to anticipate change. That said, there is every reason to believe that 2023 will be another year lled with growth and success. Increasingly, laws and regulations related to sustainability are being enacted in many regions. VCs will become more interested in investing in sustainable startups to meet this demand and potentially tap into new markets and opportunities. It is also possible for startups that do not follow any sustainable standards to change by understanding their environmental impact, setting clear objectives, and implementing sustainable practices to positively impact the environment. 4 Less hype, more industry impact Well-funded startups can fail. Case in point: FTX. Expect 2023 to be the year $3.2BN The amount of money raised by MENA’s 50 most-funded startups in 2022, according to reports by Forbes Startups will feel inclined to raise capital and better manage their spending, which includes having their costs sync with an accurate growth projection Investors are now likely to laser in on industries such as healthcare, agritech, real estate, and edtech rather than individual hero tales Next >