Why getting digital banking right could prove vital in the Gulf

Like many regions across the globe, the Gulf is currently going through a period of change in the banking industry, which is presenting challenges for local institutions but also creating opportunity.

With tech evolution shaping customer expectations, regulatory changes creating new compliance demands and industry competition increasing all the time, banks need to get their strategy planning and execution right in order to succeed. This is particularly true in the digital space, which is likely to be a key area of competitive differentiation in the years to come.

Standing out in a crowded marketplace

One of the defining characteristics of the Gulf region’s financial services industry is that it is overbanked, with a disproportionately high number of competing providers for the available customer base. What this means is that any bank hoping to succeed in the region must have not only a strong brand, but a clear plan to distinguish itself by achieving high standards in customer experience.

The United Arab Emirates (UAE) is one key market where this trend of overbanking is particularly notable. A Dubai-based banker told the Financial Times: “The region is overbanked – the population is small and [banks’] ability to grow is constrained by small sizes.”

Speaking to the Khaleej Times, Stuart Scoular, partner with PwC in the Middle East, said: “If you look at [the] UAE population, it is a certain conclusion that the industry is suffering from overbanking.”

As brands seek to build up and maintain a loyal customer base in this congested region, one goal that could prove to be more significant than any other (at least as far as customer experience is concerned) is getting digital banking right.

Digital demands

Consumer demands for the levels of speed, convenience and user-friendliness that digital banking can offer have never been higher. In the Gulf region, banks are competing to offer a next-generation digital experience to millennials and the even younger ‘Gen Z’ – groups that take digital services for granted.

A McKinsey report published in November 2016 showed that at least 80 percent of internet users in the UAE and Saudi Arabia prefer to do at least some of their banking digitally, turning to branches and telephone banking when they have specific or more complex requirements.

The management consulting firm was fairly conclusive about the importance of financial services providers – from established banks to emerging fintechs – meeting their customers’ digital demands.

“Incumbents who can keep pace with consumers’ changing preferences – and the new entrants poised to serve those customers in new ways and at a lower cost – are likely to gain lasting competitive advantages,” it said in the report. “Laggards will fail to deliver engaging digital experiences, will lose market share and become irrelevant within three to five years.”

As the banking industry in the Gulf continues to evolve during the coming years, customer experiences in the digital space will be defined by various factors. Banks’ willingness to invest in offering new digital tools (chatbots and voice technology, for example), seamless connections across digital and physical channels, and a smooth, reliable digital user experience will be particularly significant.

Face-to-face engagement between providers and consumers will not become irrelevant in the Gulf, with branches continuing to play a key role in how banks build and maintain relationships with their customers. But with deployment of new technologies proving just as significant in the physical space as it is in mobile and online channels, there’s no overstating just how important it is for banks in this region to get their digital strategy right.

 

Image: mdgomes via iStock

Written by Jack Dougal

Jack Dougal

Jack Dougal is Banking.com's resident news reporter. He writes regular blogs covering the latest stories and key developments in the global financial services industry.

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