GCC banks getting better with tech adoption

  • According to the rating agency S&P Global, financial and banking institutions in the GCC (Gulf Cooperation Council) are caught up with latest technologies in the retail banking as then pressure gets added up for better service delivery.
  • “S&P Global stated that with the advent and adoption of big data, Artificial Intelligence analytics, voice and facial recognition tools could help enable effective as well as the cost-efficient provision of customer (banking) services.”

With the mounting and changing technology landscape, banking operations have primarily been dented due to changing customer preferences than from the other regulatory pressures.

Mohamed Damak, S&P Global Ratings credit analyst, stated that the “Regulatory risk is on the lower side as policymakers are conscious of the extreme importance of local banking systems in the region and as well as keep them safe from potentially disruptive unregulated competition.”

Mr Damak as well stated that even if the overall customers’ preferences continue evolving, the risk involved in banking systems remains ideally lower for the next two years. “This is due to the fact that regulators continue to protect them (banks) and the share of current activity and risk associated with it is minimal.”

Few of the banking areas that are impacted in by technological change include money transfer, foreign currency exchange and payment services. The region’s young blood and as well as the fastest-growing population who are familiar with the newest technologies are the core driving force behind the success of the digital services in retail banking.

Around 40 percent of the overall GCC population is under age group of 30 or 30 plus, it provides in significant demand for digital financial operations, according to the Statistical Centre for the Cooperation Council for the Arab Countries of the Gulf.

S&P added that “All the Fintech (Financial technology) companies focus on lowering of the transfer fees and as well in the reduction of the transfer times, that can disrupt the financial transfer options of the banking institutions as well as exchange houses in and around the GCC.”

Based on the World Bank figures, during 2017, expats in the GCC region sent over $119.3 billion (Dh429bn) back to their home nations, with primarily India, Pakistan, Egypt and the Philippines the main destinations.

Rating agency S&P also stated that certain Banks like Dubai-based Mashreqbank, have prepared in for capturing this market by launching in Neobanks- 100 per cent digital banks – and that they think more would be followed.

In the GCC region, the online banking penetration remains predominantly significant as Saudi Arabia’s National Commercial Bank witnessed a 36.6 per cent of financial transactions executed online or through its mobile application by the end of last year.

“Reaching an online banking penetration has reached overall 92 percent in UAE banks and as well as 85 percent in Saudi Banks”, stated S&P and cited in by McKinsey figures, adding that the shifting of transactions online from branches is “high on the agenda” of some banks.”

Since December 2014, in the UAE, a number of bank branches have witnessed a declining trend as stated by S&P suggesting that the premier banking institutions have successfully managed in to get migrated to alternative channels.

The UAE Banks’ Federation’s 2018 annual report that was published the previous week witnessed that overall bank branches in the country falling the previous year by 31 to end at 823.

 Authorities and regulators across the GCC are as well as encouraging collaboration with FinTech companies, with most of them setting up ‘sandbox’ regimes allowing FinTechs to try out technologies within a flexible regulatory environment.

According to Bloomberg Intelligence, the UAE tops the list of countries with the highest number of FinTech start-ups in the region with 67, followed by Turkey at 44 and Jordan and Lebanon tying at 30.