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Middle East: Digital winners vs the banking dinosaurs 17 January 2017

Fahim uz Zaman speaks to retail banking leaders in the Middle East to find out how technology, changing customer preferences and the economic environment are impacting the region’s retail banking landscape.

Banks operating across the Middle East are having to relook at how they operate. “There are a number of macro trends that are impacting us at the moment,” says Suvrat Saigal, managing director and head of global retail at NBAD. “The falling price of oil is having a big effect on our economy, and this is filtering down to the job market and consumer attitudes to spending. Confidence levels are lower than they have been, and this influences borrowing and investment patterns.”

Interest rates are likely to change too. “For a while now, we have lived in a world with virtually zero interest rates,” says Saigal. “We expect a rise in interest rates over the coming months – to what extent we’re unsure of yet. In return, retail banks, particularly in this region, are likely to shift their focus to deposits – something they have largely ignored over the last seven years because it didn’t make them enough money.”

While Saigal expects the industry to refocus on deposit growth, the number of deposits being made isn’t necessarily going to grow so success is going to come down to market share. “The competition for those deposits will be fierce,” he says. “This is why banks are going to have to look to differentiate themselves, and this ultimately comes down to product innovation.

“You have to stand out,” Saigal explains. “In my opinion, there are two key areas where you can do this: change the way you distribute your products and services – in particular this is about providing a seamless digital and physical experience – and make it as simple and convenient for customers to engage with your business.”

Digitisation is forcing banks to relook at their delivery models for products and services. “The evolution of mobile and digital technologies has meant banks have had to rethink their policies and the way they deliver products and services to meet new customer demands,” says Suvo Sarkar, group head of retail and wealth management at Emirates NBD.

Growing digitisation and the proliferation of mobile devices means that customers expect more. “Customers expect to be able to pick the products or services they want and to find all the information they need immediately, wherever they are,” explains Sarkar. “The combination of self-service and customisation is transforming the way retail customers want to bank, so when they want help they expect to get it immediately, at any time of the day or night.”

According to Mudassar Aqil, CEO at FINCA Microfinance Bank Pakistan, the cumulative consumer experience of the digital solutions retail banking players bring to the market will determine success or failure. “The winning solution will amalgamate a digital solution’s ease of use and seamless customer experience,” he says.

An optimum delivery model relevant to the customers in the region is something which combines the global trend of digitisation with local customer behaviour and preferences.  Explaining this Suresh Bajpai, head of the consumer banking group at the National Bank of Kuwait said: “The global trend is all about digitisation, putting the bank in the customer’s hands and offering instant access to products and services that are relevant to their lifestyle. The regional trend in GCC is that malls are becoming social destinations for both locals and nationals. Now the challenge facing the consumer banking industry is to bring together those two trends to deliver a customer experience that is easy to use and relevant to customer in GCC.”

Talking about changing role of existing physical channels and new digital channels in the region, Philip King, head of retail banking for UAE at Abu Dhabi Islamic Bank says: “I don’t think the branch is going to disappear anytime soon as I think it has an advisory role to play. I think transactional banking will shift from more to the digital channels and that’s a good thing as it will mean people can enjoy the branch experience without having to queue.”

King believes that the digital offering will be used by digitally active customers for transactions they feel comfortable with such as quick transactions, balance checks, payments and top-ups. “But when they want personal advice, those people want to come to the relationship manager,” he explains.

Discussing the emergence of digital players and digital models in the region and across the globe, Martin Leong, AGM, retail and consumer banking at the Commercial Bank of Qatar says that digital banking could be seen as the cannibalisation of traditional banking. “But digital isn’t a threat, it’s an opportunity for us to disrupt our own industry before other organisations come and do it for us.”

“Digital transformation cannot simply take the form of digitising a process. A lot of work is needed initially to look at every single process and every customer journey to see what is lacking. After that, you need to identify how much of it can be digitised,” Sarkar added.

A co-creative approach is the only way to truly deliver the experience customers want. “We can’t change the world alone, and in the world of banking we need to work with our partners, whether they are merchants, IT vendors or from other industries, to co-create innovations that work for the customers,” Sarkar said.

Other major attributes of successful players will be their flexibility and ability to adapt quickly to the changed environment.  “I think that the ability to react with speed and flexibility are going to be important differentiators in this industry in the future. Those banks that are able to adapt and keep up with their customer needs are going to be the ones that will ultimately thrive in this uncertain world,” Saigal concludes.

Efma Retail Banking Summit in the Middle East, on 31 January in Dubai, is THE place to meet for top banking experts in the region. Are you among them? Book your place now!

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