Mashreqbank applies for Saudi banking license
Dubai-based lender sees future of retail banking as digital-only
Mashreqbank has applied for a banking license in Saudi Arabia and is seeking to enter the Omani market, Ahmed Abdelaal, CEO of Mashreqbank, told Bloomberg News.
The Dubai-based lender no longer sees its main competitors as other bricks-and-mortar lenders and sees the future of retail banking as digital-only, he said in an interview.
Traditional bank branches will no longer exist “very soon,” Abdelaal told Bloomberg. The Dubai-based lender currently operates just 10 branches in the UAE, having closed 24 in the past two years, he said.
“There’s a complete shift in our strategy to focus on digital channels,” which now account for the majority of new business at the lender, Abdelaal said. “We still have some clients who rely on brick and mortar but our numbers show these are diminishing by the minute.”
“Our real competitors are the providers of client experience ... the owners of data, the owners of information,” he said.
The Saudi Cabinet gave its nod to the Kingdom’s finance minister to issue licenses for the country’s first digital banks, STC Bank and Saudi Digital Bank, the Saudi Press Agency (SPA) reported in June.
STC Bank will be created from the conversion of STC Pay into a digital lender with a paid-up capital of SR2.5 billion ($670 million), having received an investment of SR750 million from Western Union for a 15 percent stake.
Saudi Digital Bank will have paid-up capital of SR1.5 billion and
will include Al Moammar Information Systems Co. (MIS) and other investors.
Digital banks licensed in Saudi Arabia will help improve the quality and user experience for customers in the Kingdom, supporting innovation and reducing costs, Yazeed Alsheikh, director for general of banking control at Saudi Central Bank (SAMA), said at the time.
This will directly contribute to stimulating competition with local banks and financial technology companies, he said.
The e-commerce payment sector is surging in Saudi Arabia. Statistics from SAMA show that the number of transactions in the first quarter of 2021 rose 95 percent year-on-year, while the total number of point-of-sale terminals in the Kingdom rose 68 percent in the same period.
SAMA in January also issued its policy on open banking. Once regulations are introduced, this will enable bank customers to securely manage their accounts, share their data with third parties, access bespoke financial products and services from the same platform, and experience smoother daily banking activities.