Mideast banks play catch up in digi­ti­sa­tion game

The Pak Banker - - COMPANIES/BOSS -

The Middle East's bank­ing sec­tor has been slow to adopt deep, trans­for­ma­tive digi­ti­sa­tion that other in­ter­na­tional play­ers have started to em­brace, ac­cord­ing to re­cent sur­vey of cor­po­rate bank­ing cus­tomers world­wide by the Bos­ton Con­sult­ing Group (BCG).

Glob­ally, a grow­ing num­ber of cor­po­rate banks are ex­pand­ing their dig­i­tal of­fer­ings well be­yond a ba­sic web pres­ence, ac­cord­ing to the BCG. The study shows that over the next five years, cor­po­rate banks that re­main dig­i­tally lag­gard could see prof­its drop by as much as 15-30 per cent rel­a­tive to their dig­i­tally fast-mov­ing com­peti­tors.

As part of the study, BCG sur­veyed 660 com­pa­nies in 13 de­vel­oped and emerg­ing mar­kets and 23 in­dus­tries. A to­tal of 1,112 re­spon­dents from 14 coun­tries - in­clud­ing the UAE, Saudi Ara­bia, France, Ger­many, Poland, the UK and the US - were sur­veyed.

The re­sponses re­vealed that banks in the Middle East fall sig­nif­i­cantly be­hind their global coun­ter­parts.

"Al­ready, glob­ally, a hand­ful of banks and non-tra­di­tional play­ers with ad­vanced dig­i­tal plat­forms are gain­ing share with real-time, low-cost cross-bor­der pay­ments, pre-ap­proved credit and su­pe­rior for­eign ex­change rates.

In the process, they are gen­er­at­ing 3-6 per cent more in an­nual cross-sell­ing rev­enues than their peers." said Markus Massi, a part­ner and man­ag­ing di­rec­tor at BCG Middle East.

The mo­men­tum and ex­pe­ri­ence gained by be­ing early movers will make it sig­nif­i­cantly more dif­fi­cult for slow-mov­ing peers - such as Middle East banks - to ac­quire the tal­ent and re­sources to catch up. To close that gap, cor­po­rate bank man­age­ment needs to co­a­lesce quickly around a clear dig­i­tal strat­egy and move de­ci­sively to build crit­i­cal skills and ca­pa­bil­i­ties.

"Three dig­i­tal value propo­si­tions show par­tic­u­lar prom­ise: seam­less on­line bank­ing, en­hanced dig­i­tal ad­vice and real-time de­ci­sion-mak­ing sup­port. Our mod­els sug­gest that over a five-year pe­riod, th­ese strate­gies can en­hance rev­enues by 15-40 per cent and im­prove cost-in­come ra­tios by 7-15 per­cent­age points for Middle East banks," said Alessan­dro Scortecci, pro­ject man­ager and co-au­thor of the re­port said

While a few banks in the Middle East of­fer ba­sic ser­vices, such as in­voic­ing, pay­ment ap­proval and cash man­age­ment, no bank in the re­gion - that was sur­veyed by BCG - cur­rently pro­vides on­line cus­tomer ser­vice chat ca­pa­bil­i­ties or on­line busi­ness in­tel­li­gence and an­a­lyt­ics tools - ser­vices that have be­come widely preva­lent in other mar­kets. The sur­vey re­sults showed that there is a higher pen­e­tra­tion of non-bank­ing ser­vices in the Middle East, com­pared with other re­gions.

The study high­lighted that, glob­ally, only 34 per cent of com­pa­nies are us­ing non-bank­ing ser­vices (such as Ama­zon, Rip­ple, etc.) - in the Middle East, how­ever, that fig­ure stands at 56 per cent.

Over­all, the study also found that, when it comes to com­mu­ni­cat­ing with their bank, cus­tomers in the UAE and Saudi Ara­bia still mostly rely on tra­di­tional me­dia. "BCG's anal­y­sis re­vealed that one third of re­spon­dents in the UAE and Saudi Ara­bia (33 per cent) last in­ter­acted with their Re­la­tion­ship Man­ager (RM) for ad­vice via email, 30 per cent did it over the phone, and 26 per cent did it in per­son.

Am­bas­sador of Re­pub­lic of Korea Song Jong-hwan speak­ing dur­ing his visit to ICCI Head Of­fice.

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