EP1008: Modern solutions over half a century in the making

This interview features Raji Challita discussing the changing financial technology landscape across the Middle East and North Africa. The conversation highlights how traditional banks and agile BML Istisharat are increasingly working alongside FinTech firms to combine financial stability with rapid innovation. Challita explains that major regional trends include the adoption of cloud-based technologies, open banking frameworks, and the growing use of artificial intelligence to improve credit scoring, customer experiences, and fraud prevention. The interview also explores the rise of digital lending and the need to maintain ethical and regulatory standards within Islamic banking systems. Overall, the discussion shows how digitization is helping financial institutions streamline operations, improve accessibility, and expand financial inclusion for underserved communities in the region and globally.

Transcript

SPEAKER_01 0:00

Have you noticed something, I don't know, a little strange about your bank lately?

SPEAKER_00 0:04

Aaron Ross Powell Like how it suddenly doesn't feel like a bank anymore.

SPEAKER_01 0:06

Yeah, exactly. Think about it for a second. You log into your account and that uh that clunky, gray, old school institution where you literally used to stand in physical lines to deposit a paper check.

SPEAKER_00 0:19

Right, with the little velvet robes.

SPEAKER_01 0:21

Yes. It suddenly feels incredibly different. It feels, well, like a sleek tech startup.

SPEAKER_00 0:26

Oh, totally.

SPEAKER_01 0:26

You're getting real-time notifications on your phone, personalized insights on your spending habits, and you know, maybe even instant approvals for credit. Stuff that used to take weeks of paperwork.

SPEAKER_00 0:37

And physical signatures.

SPEAKER_01 0:38

Exactly. It feels like your traditional bank just got this massive software upgrade overnight.

SPEAKER_00 0:44

Well, the reason it feels like that is because of a massive, basically silent rewiring of the entire global financial system.

SPEAKER_01 0:51

Aaron Powell A silent rewiring.

SPEAKER_00 0:53

Aaron Powell Yeah. I mean, we are way beyond just putting a fresh coat of digital paint on the user interface. The actual plumbing of how money moves, how risk is assessed, and uh how institutions communicate with each other is being entirely rebuilt from the ground up.

SPEAKER_01 1:08

Aaron Powell And that rewiring is the exact mission of our deep dive today. We are looking at a really fascinating interview from the February 2025 issue of the IBS FinTech Journal.

SPEAKER_00 1:18

Aaron Powell That's a great piece.

SPEAKER_01 1:20

It really is. It features a conversation with Raji Chilita. He is the CEO of a company called BML Isti Shiraat. They're a financial software vendor. And get this, they have been building digital infrastructure for banks for over 52 years.

SPEAKER_00 1:33

Aaron Powell, which is frankly an eternity in the tech world.

SPEAKER_01 1:35

Right. So they have this incredibly rare vantage point. They aren't some new kid on the block. They've seen half a century of banking trends, you know, failures, successes. Trevor Burrus, Jr. Yeah.

SPEAKER_00 1:44

And having that 52-year history gives them a very pragmatic view of what actually works. I mean, they aren't just selling some trendy new app, they are providing the core systems that keep national banks running securely, all while trying to integrate these, you know, modern technological leaps.

SPEAKER_01 2:02

Okay, let's unpack this because I want to start with an assumption that seems to be everywhere right now. You constantly hear people say that if traditional banks want to survive, they need to act exactly like tech companies. Like they just need to become fintechs.

SPEAKER_00 2:17

Yeah, you hear that a lot.

SPEAKER_01 2:18

But Cholita completely dismantles that idea right out of the gate. He argues that these two entities have entirely different structural DNA.

SPEAKER_00 2:25

Exactly. He breaks down the financial ecosystem into two very distinct camps and they serve completely different purposes. So on one side, you have the fintechs. Right. And their defining characteristic is agility. Because they often operate with a degree of uh regulatory flexibility compared to traditional banks, they can innovate rapidly. Exactly. They can iterate on their software in real time. They adapt to user demands almost instantly. Their entire architecture is built around customer-centric design and speed.

SPEAKER_01 2:56

Aaron Powell But then you look at the traditional banks, and their defining characteristics are practically the opposite. They are governed by incredibly strict, heavy regulations.

SPEAKER_00 3:05

Aaron Powell Oh, massive amounts of compliance.

SPEAKER_01 3:07

Yeah, and that burden of compliance obviously slows them down, but it also gives them their defining feature, which is resilience. Right. They have stability, they have massive financial resources, and most importantly, consumer trust. They are structurally built to manage systemic risk.

SPEAKER_00 3:24

Aaron Powell Because if a tech startup fails, because you know it moved too fast and broke things. Trevor Burrus, Jr.

SPEAKER_01 3:30

Which happens all the time.

SPEAKER_00 3:31

Right. Private investors lose their capital. It's a bummer, but it happens. But if a major national bank fails, the broader economy shutters. Businesses can't make payroll, and everyday people lose their life savings. So fundamentally banks cannot act like startups.

SPEAKER_01 3:48

Aaron Powell It actually makes me think of um the maritime shipping industry.

SPEAKER_00 3:51

Aaron Powell Oh, how so?

SPEAKER_01 3:52

Well, it's like if the traditional bank is a heavy, heavily fortified cargo ship, the fintech is an agile, lightweight speedboat or like a delivery truck. Aaron Powell Okay. I like that. You wouldn't want the massive cargo ship carrying the world economy to be light and flimsy, you know, trying to take hairpin turns at top speed. You would capsize. Exactly. And you certainly don't want the agile delivery truck weighed down by a million tons of freight. You just want them to coordinate effectively. Trevor Burrus, Jr.

SPEAKER_00 4:21

Yeah. And to take that analogy a step further, the way you get the cargo ship and the delivery truck to coordinate is by using a standardized shipping container. Right. It doesn't actually matter what vehicle is carrying the goods. The container clicks perfectly into place so the cargo can move seamlessly from the ship to the truck.

SPEAKER_01 4:38

Aaron Powell And in the software world, those standardized containers are APIs.

SPEAKER_00 4:42

Trevor Burrus Exactly. Application programming interfaces.

SPEAKER_01 4:44

Trevor Burrus, Jr.: Those software bridges are what allow a fintech app on your phone to securely, you know, read your bank balance, categorize your budget, or instantly verify your funds for a transaction.

SPEAKER_00 4:55

Aaron Powell All without actually holding your money.

SPEAKER_01 4:57

Aaron Powell Right. So Cholita makes the argument that synergy rather than competition is the ultimate goal.

SPEAKER_00 5:02

Yeah, they shouldn't be fighting each other.

SPEAKER_01 5:04

When you combine the bank's deep well of trust, their regulatory know-how, and their massive funding with the fintech's agility and innovation, you create a drastically superior value proposition for the consumer.

SPEAKER_00 5:18

You get the safety of the traditional vault combined with the speed of the modern app.

SPEAKER_01 5:22

Okay, so if APIs are the shipping containers connecting the old legacy code of the banks with the agile code of the tech companies, where is this integration actually happening the fastest?

SPEAKER_00 5:33

Well, according to the source, the infrastructure required to handle this communication is absolutely exploding right now in the MIDI region.

SPEAKER_01 5:41

So the Middle East and North Africa.

SPEAKER_00 5:43

Yes. The transformation happening in the MiniCore banking landscape right now is honestly staggering. We are witnessing a systemic shift away from legacy on-premise servers.

SPEAKER_01 5:54

Like the physical server rack sitting in the basement of a bank branch.

SPEAKER_00 5:58

Exactly. Moving away from those and toward cloud-based core banking solutions. And what is really unique here is that the government regulators themselves, specifically the GCC central banks, are actively driving this cloud adoption.

SPEAKER_01 6:12

Wow. So it's not just tech companies pushing their products.

SPEAKER_00 6:16

No, not at all. The regulators want this because moving to the cloud offers tremendous cost efficiency. But more importantly, it provides enhanced security and the ability to process real-time updates.

SPEAKER_01 6:27

Aaron Powell And the interview also points out a sustainability angle, right?

SPEAKER_00 6:31

Yeah. Cloud infrastructure optimizes energy use significantly compared to, you know, thousands of isolated legacy data centers that are all running their own separate cooling systems.

SPEAKER_01 6:41

Aaron Powell That makes total sense.

SPEAKER_00 6:42

And the mechanism driving all of this is open banking. Governments in the region are introducing mandatory frameworks to force banks to open up their architecture.

SPEAKER_01 6:50

They're making them use those shipping containers.

SPEAKER_00 6:53

Exactly. They are mandating the use of those APIs we just discussed. And this is having a massive ripple effect on how money physically moves through the economy.

SPEAKER_01 7:02

Yeah. The techs outlines some huge innovations in payments stemming from this. We're looking at real-time payment systems that provide instant liquidity. There is a rapid rise in digital wallets and mobile payments seamlessly integrating with e-commerce.

SPEAKER_00 7:17

They are even utilizing blockchain technology now.

SPEAKER_01 7:20

Really? For what?

SPEAKER_00 7:21

To reduce the friction and the high costs of cross-border remittances. It makes it significantly cheaper to send money internationally.

SPEAKER_01 7:29

If we connect this to the bigger picture, I mean, government initiatives like the UAE's payment system strategy and Saudi Arabia's Vision 2030, they're not just technological upgrades for the sake of, you know, modernization. Aaron Powell Right.

SPEAKER_00 7:41

They are massive frameworks designed to deliberately accelerate the shift toward cashless economies.

SPEAKER_01 7:46

Now let me ask a practical question here. Because all these APIs, the cloud networks, the government frameworks, they sound great for the massive banks and the tech vendors, but does a quote unquote cashless economy framework actually eliminate bureaucracy for an everyday person?

SPEAKER_00 8:02

How do you mean?

SPEAKER_01 8:03

Like if you're a listener, if a small business owner is trying to get off the ground, does this invisible cloud infrastructure actually help them get a loan faster?

SPEAKER_00 8:12

It absolutely does. The source material addresses this directly through the growth of digital lending platforms.

SPEAKER_01 8:18

Okay.

SPEAKER_00 8:19

Because of these cloud networks and open APIs, banks no longer have to wait for physical paperwork to be processed through multiple slow departments.

SPEAKER_01 8:27

Right.

SPEAKER_00 8:28

They can instantly retrieve your financial data, analyze your cash flow, and leverage advanced data analytics to accelerate loan approvals. Digital lending platforms are enabling dramatically faster approvals and disbursements.

SPEAKER_01 8:41

And that specifically targets small and medium-sized enterprises and individual consumers, right?

SPEAKER_00 8:46

Yes. And it also integrates things like BuyNow Pay Later Services, BMPL, directly into the checkout process of a website or even a physical retail store.

SPEAKER_01 8:56

And crucially, it allows institutions to use alternative credit scoring to facilitate lending.

SPEAKER_00 9:01

That is a huge shift.

SPEAKER_01 9:02

Under the old system, if you didn't have a traditional rigid credit history, a human loan officer would pretty much automatically reject your application.

SPEAKER_00 9:12

Right, because they only had one metric to look at.

SPEAKER_01 9:14

Exactly. But now, because APIs can pull data from various aspects of your digital life, lenders can look at your consistent utility payments or your digital wallet habits or your real-time business cash flow to assess your credit worthiness.

SPEAKER_00 9:28

Aaron Powell But here's the thing: if you're pulling data from hundreds of different digital wallets, utility companies, and e-commerce platforms instantly, a human underwriter can't possibly read all that information, let alone make a complex decision in milliseconds.

SPEAKER_01 9:42

Oh, that's a good point. So who, or I guess what, is actually looking at all this new open banking data?

SPEAKER_00 9:48

Aaron Powell Well, the volume of information requires an entirely new brain for the core banking system. And that brain is artificial intelligence. Right. The interview refers to AI as a double-edged sword. It's revolutionizing core banking operations, but it's bringing some pretty profound structural challenges.

SPEAKER_01 10:05

Okay, let's focus on the revolution part first. Because the applications go way beyond just, you know, checking if you paid your utility bills on time.

SPEAKER_00 10:12

Oh, absolutely. AI-driven analytics are literally assessing creditworthiness by analyzing highly nuanced customer behavior and daily spending patterns. Which is wild. And beyond credit scoring, AI is completely transforming compliance and security. How so? Well, instead of relying on a human compliance officer to manually spot suspicious activity after the fact, financial institutions are deploying AI that monitors millions of transactions in real time. The text mentions the fight against trade-based money laundering or TBML.

SPEAKER_01 10:44

What is that exactly?

SPEAKER_00 10:45

It's where criminals manipulate international shipping invoices to hide the movement of illicit funds. Oh, wow. Yeah, it's very complex. But an AI can instantly cross-reference global shipping data, pricing anomalies, and transaction histories to spot a discrepancy that a human would frankly never catch.

SPEAKER_01 11:02

They are also implementing digital no no your customer solutions, right? To streamline how people open accounts.

SPEAKER_00 11:08

The EKYC platforms, yes.

SPEAKER_01 11:10

Yeah. Rather than going to a branch and handing a physical passport to a teller, you use your phone. And AI uses biometric verification through your smartphone camera. It actually maps the micro movements of your face to prove you are a live human being.

SPEAKER_00 11:24

And then it matches it against global databases in seconds.

SPEAKER_01 11:28

It's crazy.

SPEAKER_00 11:29

AI is also handling the internal bureaucracy. Robotic process automation takes over mundane data entry and compliance checks. That drastically reduces human error, cuts operational costs, and speeds up processing times.

SPEAKER_01 11:43

And on the customer-facing side, you have natural language processing powering chatbots that can actually parse complex queries and provide useful assistance around the clock.

SPEAKER_00 11:52

Plus roboadvisors using predictive analytics to optimize personal investments.

SPEAKER_01 11:56

Okay, so what does this all mean?

SPEAKER_00 11:58

Well.

SPEAKER_01 11:58

Because honestly, hearing that AI is mapping my face, reading my daily spending patterns, and analyzing my behavioral data just to decide if I'm a trustworthy participant in the economy, it feels incredibly invasive. I get that. Are we essentially handing over our financial future to an opaque algorithmic black box?

SPEAKER_00 12:16

It's a very valid concern. And Cholita is very explicit about this risk in the interview.

SPEAKER_01 12:20

Okay, good.

SPEAKER_00 12:21

He warns that the adoption of AI brings major challenges, and he specifically calls out concerns over data privacy and algorithmic biases.

SPEAKER_01 12:29

Because an AI is only as objective as the data it is trained on?

SPEAKER_00 12:34

Precisely. If an AI is trained on historical banking data that contains human biases regarding who is typically deemed a safe borrower, the algorithm will simply replicate and scale those biased lending decisions at lightning speed.

SPEAKER_01 12:47

You also face the immense technical challenge of securely integrating these advanced AI models with the older legacy systems. You don't want to create vulnerabilities.

SPEAKER_00 12:56

Plus, there is a severe lack of skilled technical talent available globally to actually manage and audit these AI systems properly.

SPEAKER_01 13:03

But despite those hurdles, the source maintains that when AI is paired with strict global compliance standards and deliberate ethical oversight, it becomes the primary engine for the financial inclusion we discussed earlier.

SPEAKER_00 13:15

Yes. By analyzing a wider alternative spectrum of behavioral data, a well-governed AI can identify responsible individuals who simply lack a traditional credit footprint.

SPEAKER_01 13:27

Right. It finds the invisible, qualified borrowers that the old manual system just completely ignored.

SPEAKER_00 13:34

Exactly. So this data revolution isn't just changing the internal mechanics of how a bank operates. According to the interview, it is completely changing what a bank actually is.

SPEAKER_01 13:43

Because of all this shared data, the borders between entirely different industries are starting to blur.

SPEAKER_00 13:48

And the most prominent example discussed in the text is bank assurance.

SPEAKER_01 13:52

Bank assurance. That's the integration of banking and insurance into a single unified offering.

SPEAKER_00 13:56

Right. And historically, banking and insurance have had very different core focuses.

SPEAKER_01 14:00

Yeah. Banks prioritize real-time transactions, liquidity, and credit scoring. Insurers are entirely focused on risk management, underwriting, and analyzing long-term behavioral data to predict future liabilities.

SPEAKER_00 14:11

But because of the unified digital platforms and predictive analytics we've been discussing, those two worlds are merging. A bank has a massive database of your real-time financial habits.

SPEAKER_01 14:23

And an insurer has the complex models to assess risk.

SPEAKER_00 14:26

Right. So bank assurance brings them together into integrated products.

SPEAKER_01 14:31

So the banks gain entirely new revenue streams by selling insurance products directly through their banking apps.

SPEAKER_00 14:37

And the insurers dramatically expand their market reach by tapping into the bank's massive captive customer base. And again, the fintechs provide the APIs to make the data flow seamlessly between the two.

SPEAKER_01 14:50

So the consumer ends up with a completely frictionless experience. You can access a wide range of services, like getting a mortgage and instantly securing the required home insurance through a single banking channel you already use.

SPEAKER_00 15:02

It significantly reduces the barriers to entry for populations that might never proactively seek out an insurance broker on their own.

SPEAKER_01 15:09

But this merging of systems isn't just about cross-selling products and maximizing corporate profit, is it?

SPEAKER_00 15:15

No, it's not. The interview dives deeply into how these exact same technologies are being adapted to strictly enforce specific ethical and religious frameworks.

SPEAKER_01 15:25

And they specifically talk about the massive global growth of Islamic banking.

SPEAKER_00 15:29

Right. Islamic banking is evolving rapidly alongside this digital transformation.

SPEAKER_01 15:34

Which is fascinating.

SPEAKER_00 15:35

The fundamental architecture of Islamic finance is built on ethical banking principles. It requires transparency, fairness, and the strict avoidance of interest, financial speculation, and investments in unethical activities.

SPEAKER_01 15:48

So how do you digitize a philosophical and religious framework into a banking app?

SPEAKER_00 15:54

Well, by partnering with FinTechs to develop modern Sharia compliant financial software. Islamic banks are leveraging the exact same AI, blockchain, and automation tools we've been talking about, but configuring them to automate compliance with Islamic financial principles.

SPEAKER_01 16:07

Oh, I see.

SPEAKER_00 16:08

So instead of traditional interest-bearing loans, the software facilitates profit sharing based products. This ensures that individuals who are excluded from the conventional banking system due to their religious beliefs still have access to modern digital financial tools.

SPEAKER_01 16:24

This concept becomes incredibly interesting when you apply it to the insurance side of things, the bank assurance model we just talked about.

SPEAKER_00 16:30

Yeah, what's fascinating here is the structural model of Takaful.

SPEAKER_01 16:34

Takaful.

SPEAKER_00 16:35

Yes. Takaful is the cooperative insurance model offered within Islamic banking.

SPEAKER_01 16:40

Okay.

SPEAKER_00 16:40

So in conventional Western insurance, the underlying mechanism is the transfer of risk. You pay a premium to a corporation to transfer your risk to them.

SPEAKER_01 16:49

Right. If something goes wrong, they pay out.

SPEAKER_00 16:52

And if nothing goes wrong, the corporation keeps your premium as profit.

SPEAKER_01 16:55

Makes sense.

SPEAKER_00 16:56

But Takafool operates on a fundamentally different mechanism. It's risk sharing.

SPEAKER_01 17:02

Wait, risk sharing. So instead of placing a bet against a giant corporation, the participants pool their resources to guarantee each other against loss.

SPEAKER_00 17:10

Exactly. And the technology manages the complex pooling and distribution of those resources seamlessly in the background. The risk is shared among the community rather than transferred to a centralized profit-seeking entity.

SPEAKER_01 17:23

That is so cool. It uses cutting-edge fintech infrastructure to reinforce a philosophy of mutual benefit and social responsibility.

SPEAKER_00 17:31

And this highlights why the perspective of a company like BML Isti is so valuable in this text. I mean, they have been operating for over half a century with a multicultural team bridging the East and the West.

SPEAKER_01 17:44

Right. They intimately understand the complex legacy architecture of conventional global banks.

SPEAKER_00 17:49

But they also understand the strict parameters of Islamic banking. They are using their software to help financial institutions navigate these diverse frameworks, balancing the need for technological profitability with social responsibility and ethical compliance.

SPEAKER_01 18:04

Because fostering that long-term trust is really the only way these institutions survive the massive digital transition they are currently undergoing.

SPEAKER_00 18:11

Without trust, the whole system falls apart.

SPEAKER_01 18:13

It really brings the whole deep dive full circle.

SPEAKER_00 18:15

It does.

SPEAKER_01 18:15

I mean, the next time you open the banking app on your phone, the one that feels incredibly fast, intuitive, and simple, take a moment to think about the staggering complexity operating just beneath the screen.

SPEAKER_00 18:26

It's mind-boggling.

SPEAKER_01 18:28

When you tap your digital wallet at a coffee shop or get instantly approved for a small business loan, or see a personalized auto insurance offer seamlessly integrated next to your checking account balance, remember the massive global machinery making it possible.

SPEAKER_00 18:43

Yeah, you are witnessing the merging of rigid, centuries-old banking infrastructure with hyper-agile fintech code.

SPEAKER_01 18:51

Connected by standardized digital shipping containers.

SPEAKER_00 18:54

And orchestrated in real time by artificial intelligence. We have moved from a world of isolated localized financial institutions to an interconnected, data-driven global ecosystem.

SPEAKER_01 19:05

But here's where it gets really interesting.

SPEAKER_00 19:07

Oh, yes. So the source mentions that banks are increasingly utilizing alternative behavioral data to score your credit worthiness. Right. Simultaneously, insurers rely heavily on behavioral data to build their risk models and determine your premiums.

SPEAKER_01 19:20

So they're both watching what you do.

SPEAKER_00 19:22

Exactly. Now consider the trajectory of bank insurance, where your bank and your insurer are seamlessly integrated onto a single platform, fully powered by predictive AI that is forecasting your life choices.

SPEAKER_01 19:34

Okay.

SPEAKER_00 19:35

This raises a critical question about the future of this infrastructure. Where is the boundary drawn?

SPEAKER_01 19:41

Oh wow. Because if the systems are perfectly integrated, will there soon be a day when a completely legal, seemingly harmless, behavioral choice like using your digital wallet to buy a little too much fast food?

SPEAKER_00 19:54

Or purchasing equipment for a dangerous hobby online.

SPEAKER_01 19:57

Right. Will that automatically trigger an algorithmic increase in your life insurance premium?

SPEAKER_00 20:02

Or instantly flag you as a higher risk for a mortgage application.

SPEAKER_01 20:05

And all of it happening in milliseconds, processed by an AI before a human being ever even looks at your file.

SPEAKER_00 20:11

It's the ultimate double-edged sword of data synergy. When the Agile Tech Company and the massive traditional bank are perfectly synced and sharing all your data, who is actually steering the course of your financial life?

SPEAKER_01 20:22

That is definitely something to mull over the next time you use that frictionless tap-to-pay feature. Keep questioning the systems around you, and remember that even the most seamless technology has a massive, complex architecture beneath it. Thank you so much for taking this deep dive with us. We'll catch you next time. And until then, keep an eye on that clunky turn sleek little bank in your pocket.