Future of Banking
24 March 2025
The experts discussed the transformation of the banking sector that is already in motion. Regulations, digitalisation, new asset classes, digital banks, new payment systems and decentralised finance.
We are currently undergoing a transitional phase, particularly in the finance sector. Each day, we observe that traditional methods are no longer effective as they once were. This shift has significant economic implications, which we can discuss later. For now, our primary focus is on the transformative period that banks are in – where they stand today, their future direction, and the current stage of this evolution.
Expert Speakers
Peter Schaer, Independent Bank Advisory, UAE: After 39 years in banking and retiring in January, Peter reflects on his career, which includes 25 years at UBS and leadership roles at Julius Baer and LGT. Now, he focuses on advisory work and mentoring smaller firms.
Deepak Mehra, Chief Economist, Commercial Bank of Dubai: With over 30 years of banking experience, starting at Citibank for about 11 years. Deepak helped establish Dubai Bank in 2002, which later merged with Emirates NBD. After a short time at Credit Suisse, he has now been at the Commercial Bank of Dubai for 18 years, currently as chief economist, and have also developed services in private banking, wealth management, and asset management.
Mohamed Abu El Makarem, Strategy Advisor, Global Banking, Policy and Complexity Management, Handle BCG: Beginning his career at the United Nations focusing on international conflicts, Mohamed later worked with the European Commission on crisis resilience and risk management. He engaged with the World Bank and IMF on regulations and banking policies. Currently, he is the managing partner and chairman of Handle Business Consulting Group, specializing in complexity management regulations and investment structuring, assisting corporations, banks, and investors in navigating the UAE and GCC regulatory frameworks.
Darnell Edward, LupaPay, Startup Digital Bank: Having started his career in the oil industry before transitioning to banking, Darnell has, for the past 18 months, been actively involved in a startup that emphasizes digital assets and cross-border payments, aiming to bridge the gap between digital assets and traditional financing.
Moderator: Oliver von Wolff, Founder & CEO, Helion Capital
Oliver von Wolff: We’ve recently learned that technical innovation is a key factor in the banking industry. As an entrepreneur with a startup in digital banking, how do you perceive the landscape of banking today?
Darnell Edward: Digital banking has evolved with the prevalence of screens, emphasizing user-friendliness and interface quality. Current priorities focus on client retention, requiring seamless experiences for tasks like money transfers. Simplicity in digital solutions is now essential for modern banking.
Oliver von Wolff: From a regulatory perspective, the banking industry primarily hinges on key banking practices and anti-money laundering (AML) measures. How do you view the current landscape in this regard, and why do traditional banks seem to be more burdened by these regulations compared to digital banks?
Mohamed Abu El Makarem: The banking industry faces challenges due to outdated frameworks, lagging about five years behind current technology. With technology becoming vital, banks are debating the merits of various digital assets while regulators push for strong compliance frameworks. Historically regulated, banks now need rapid innovation to keep pace with technological advancements. The focus has shifted towards improving customer experience in a competitive digital landscape, while investors seek a regulatory framework that emphasizes customer-centred strategies.
Oliver von Wolff: The AML and KYC procedures are suitable for standard banking activities, but questions remain about their effectiveness in handling cryptocurrency and blockchain transactions. Overall, the banking industry is undergoing major transformations, and blockchain and cryptocurrency are still adapting to the evolving landscape of decentralized finance (DeFi). Your thoughts?
Deepak Mehra: The banking sector has shifted from traditional methods to digital platforms, with banks now emphasizing digitization for efficiency. However, this transition has not resolved many longstanding issues due to reliance on outdated systems, and it has made banking more impersonal. To truly advance, banks must address these challenges and embrace generative AI, which goes beyond simple digitization. Collaborating with fintech companies can enhance innovation, but banks need to fundamentally rethink their offerings and move away from legacy frameworks to remain relevant in the evolving landscape.
Peter Schaer: In today’s technology-driven world, multiple generations coexist with varying levels of engagement with banking. While older generations may have significant financial resources but avoid digital banking, younger generations, like my son, fully embrace online banking. This highlights the need for inclusive banking services that cater to all age groups, emphasizing the importance of user-friendly technology.
Deepak Mehra: Customer needs are incredibly diverse, and digitization hasn’t addressed the underlying issues. In fact, it has primarily created a digital interface that lacks the ability to anticipate customer needs. As a result, digitization has distanced customers from their banks, leading to frustration when they have to interact with an IVR system or chatbot. This sentiment is shared by many, including older generations, who find these automated solutions unsatisfactory. Ultimately, despite years of efforts to digitize banking services, we haven’t effectively resolved any of the fundamental problems.
Peter Schaer: If you have a client with around 20 to 30 million dollars, which is not uncommon today, these individuals prefer personal interaction over communicating with machines. They often face complex situations that require in-depth discussions. They expect their advisors to offer more than just product recommendations; they want guidance on structuring their assets, tax strategies, and navigating various challenges. These advisors are expected to have access to the necessary technology and resources to provide the best possible advice. However, I’m not aware of any wealthy clients today who would choose to converse with a machine instead of a human advisor.
Oliver von Wolff: How do you bridge this situation?
Darnell Edward: Digitalization in banking is lacking, and stablecoins are underutilized. Traditional payments can take days and are hard to track, while digital assets allow for immediate transactions. Bank stablecoins could revolutionize this, but their potential remains untapped. Transferring stablecoins enables instant payments without hassle, appealing to users who prefer seamless transactions. However, traditional banks often struggle with efficiency as they rely on customers’ funds.
Oliver von Wolff: We discussed the necessary licenses required for your startup bank. The principle applies globally: for every country, there’s generally one license needed. Could you elaborate on the challenges involved in establishing a digital bank from both a licensing and regulatory standpoint?
Darnell Edward: Obtaining digital licenses in Lithuania and Latvia has become increasingly complicated due to heightened regulations aimed at preventing money laundering and addressing cryptocurrency scams. Previously accessible processes for acquiring licenses for around €30,000 have transformed into lengthy, nearly two-year wait times. Uncertainty remains in effectively regulating the crypto sector, with banks struggling to adapt, resulting in new laws that have disrupted financial services and created further confusion.
Oliver von Wolff: What advice would you offer a young startup regarding regulatory matters? How do you perceive this landscape on a global scale, and how does it specifically relate to the local context of the UAE?
Mohamed Abu El Makarem: The UAE’s local content regulations offer advantages due to its progressive approach to regulation compared to countries like China and India. The recent establishment of VARA provides a supportive environment for crypto licensing, with Binance as the first licensed company. Future regulations are expected to take at least 18 months to develop, focusing on the security of interconnected systems within the crypto ecosystem. The banking sector faces challenges in integrating new technologies and addressing unresolved legal issues, while Regulators need to clarify the definitions around virtual assets and digital IDs to enhance the regulatory framework. Overall, effective regulation and collaboration are essential for improving customer experience in banking and fostering a robust crypto environment.
Deepak Mehra: Bank depositors expect their savings to be protected by banks, and regulators aim to ensure this safety. However, stringent regulations have led to the rise of shadow banking, where assets are increasingly held outside traditional bank oversight, presenting new risks. Private credit funds, like Apollo Global Management, have surged but operate unregulated. In contrast, the cryptocurrency sector has yet to yield practical daily applications despite existing for 15 years. The designation of cryptocurrencies as assets rather than currency raises concerns about their regulatory needs, especially if they enter the banking system. Additionally, the reliance on fiat currency is crucial for implementing monetary policy; the absence of fiat could hinder economic management. Central Bank Digital Currencies (CBDCs) may offer solutions to these challenges, underscoring the importance of central banks in economic stability.
Darnell Edward: The process of change begins with policy and is driven by the central bank’s regulations, leaving little room for public influence. Our role is to showcase effective, user-friendly solutions, which may prompt regulators to adapt. The core issue revolves around government control and the central bank’s regulatory intentions.
Mohamed Abu El Makarem: Regulators play a crucial role in shaping banking policies to align individual banks with central and global frameworks, such as the Basel agreement for international transactions. While governments recognize risks and benefits for stakeholders and depositors, they do not enforce strict compliance measures, focusing instead on a broader policy-making process. A key challenge for regulators is adapting to rapid technological advancements without a structured approach to fulfil their mandates.
Oliver von Wolff: Significant geopolitical changes are underway, impacting the banking sector, particularly with the U.S. working on cryptocurrency regulations and considering Bitcoin as a reserve currency. In contrast, Europe is imposing strict regulations, hindering innovation. This global tension suggests a shifting landscape in finance. Your thoughts?
Deepak Mehra: The rise of protectionist policies due to political changes in the U.S. and Europe is leading to a decline in cross-border collaboration and challenges in self-regulation. European nations face high debt levels, with Germany approaching the EU’s 60% debt-to-GDP stability benchmark. Stricter banking regulations are expected amid rising financial instability. Conversely, Trump shows some support for cryptocurrencies, but significant integration into mainstream banking seems unlikely, especially as regulators tighten measures. In Europe, the outlook for innovation in finance is dim, as attention remains on stagnant growth rather than fostering new ideas. Overall, the regulatory environment for cryptocurrencies and banking is set to become increasingly stringent.
Peter Schaer: Every time we face a crisis or increasing regulation, it’s evident that the situation is dire. You mentioned that if another significant crisis occurs, regulations may no longer be effective. This raises an important question for us as clients and investors: where should we be allocating our assets? Should we invest in cryptocurrency, real estate, or something else entirely? This notion has been on my mind. Turning to Switzerland, it stands as a unique entity in Europe; while we are part of the continent, we are thankfully not part of the EU, which I believe has never been a successful arrangement. In my view, the euro has also faced insurmountable challenges and may ultimately need to be abandoned. As a Swiss citizen, I feel that while we experience the repercussions of Europe’s issues, we are somewhat insulated due to our more global outlook—particularly in terms of exports and market engagement. However, it’s important to recognize that Switzerland won’t be immune to Europe’s troubles; if the continent suffers, we will undoubtedly feel the effects as well.
Oliver von Wolff: One major topic is trust – specifically, whether people still have confidence in their national currencies and the overall system. From a global and regulatory standpoint, how can the UAE position itself most effectively in the global economic system?
Mohamed Abu El Makarem: The world is experiencing disruption, particularly marked by political changes that have led to a significant capital influx into the UAE, especially Dubai. The city’s traffic congestion has increased, influenced by the post-Expo boom and global shifts, including approximately 2.8 million people relocating to Dubai, including many Europeans and Americans. While traditional investments are thriving, tech innovators are adapting to regulatory challenges. The UAE’s political stability and regulatory environment make it attractive for investors and economists, and for creating a nurturing environment for future generations.
Audience Question 1: By the end of 2009, the oil sector shifted from fixed fuel pricing to monthly updates. The dollar’s devaluation has led to soaring gold prices, which may soon reach $5,000 per ounce, impacting outstanding debts to banks. As banks work to collect these debts, they may confront a credit shortage due to fluctuating gold prices and the dollar’s decline, suggesting a need for an approach similar to OPEC’s oil price adjustments. What are your thoughts?
Deepak Mehra: Viewing gold as a foundation for currencies is outdated, especially since fiat currencies, like the US dollar, have operated independently of gold since 1974. Gold’s total value is insufficient to support the global economy, which is why fiat currencies are necessary. The US dollar remains stable and is tied to oil pricing, affecting economies like the UAE where the currency is pegged to the dollar. The strength of the fiat system benefits individuals with modest savings. Additionally, the banking sector is expected to see more mergers and acquisitions as smaller banks face challenges, leading to a landscape dominated by larger institutions, which regulators appear to favour for better risk management in economic downturns.
Audience Question 2: What are the biggest risks that you see?
Deepak Mehra: The primary risk in banking stems from regulators’ focus on lending, which is the core revenue source for banks. This regulatory environment has made banks hesitant to lend, leading to the growth of the shadow banking sector with its own risks. Increasing regulatory costs are also burdening small and medium-sized banks, suggesting a need for mergers to achieve greater scale and sustainability. The situation is expected to worsen with evolving technology introducing additional risks.
Audience Question 3: Newer banks have potential but older banks that blend physical branches with digital services are better situated for long-term success, as they have a more stable foundation and lower bankruptcy rates. What do you think?
Darnell Edward: It all depends on how well traditional banks adapt and transition to the changing landscape. If they embrace the new era and support emerging startups and the younger generation, while simplifying processes, they will likely thrive. On the other hand, newer banks are already in tune with the needs and preferences of Gen Z and other financially savvy individuals. Ultimately, it’s a 50/50 situation; their success hinges on the paths they choose to pursue.
Audience Question 4: I have a question regarding self-custody and its regulations. We’ve discussed the shortcomings of self-regulation, yet we also recognize that when individuals are entrusted with their own funds, they tend to take their responsibilities seriously, including adhering to KYC regulations. After all, it’s their money and their business. What are your thoughts on self-custodial wallets in the crypto space and their potential to work in tandem with stablecoins?
Mohamed Abu El Makarem: There are challenges in the non-regulated areas of international transactions and a gap between rapid innovation and traditional banking practices. Banks generate profit by lending but have become more stringent in their lending practices post-financial crisis due to regulatory pressures. While some improvements have been made, significant sectors still depend on substantial bank loans, which poses risks, especially given the incomplete regulatory frameworks. The is a need for the incorporation of regulatory technology (regtech) and innovative teams into banking policies to address these gaps.
Audience Question 5: How do you view deregulation in relation to fiat and currency systems?
Deepak Mehra: The German elections highlight a lack of clear political mandates, resulting in confusion among voters and the election of inadequate politicians. This trend is seen globally. The importance of the fiat system for effective economic governance cannot be underestimated, and a defined monetary policy and independent fiscal policy are crucial for stability and management. The issuance of debt and interest rates are vital components influencing the economy. The potential chaos of competing currencies reinforces the need for a central bank, which must remain independent to prevent a return to past financial crises.
Audience Question 6: Generation Z is reshaping the financial landscape with higher earnings and a distrust of traditional banking. They prefer immediate, innovative solutions like cryptocurrencies over traditional banking methods. Banks need to adapt to these changes in Europe over the next decade by attracting older clients while integrating modern financial trends to remain relevant.
Mohamed Abu El Makarem: Regulators and policymakers must heed the needs of Gen Z, as they are shaping the future and driving innovation. Collaboration between banking and fintech regulators over the next decade is essential to effectively address and satisfy the demands of this generation.