UAE sees region’s highest bank branch revenues
Digital transformation enabled banks to reduce number of branches
Bank branches in the
UAE are witnessing the highest revenues in the region, amounting to
$18.6 million per branch, according to a top executive at Roland Berger.
This was driven by the nation’s digital transformation which enabled banks in the Gulf Cooperation Council region to reduce the number of banking branches by 328 within three years, Saumitra Sehgal, the global consulting firm’s senior partner, told Emirates News Agency, also known as WAM. Sehgal pointed out that the number of bank branches across GCC nations decreased from 4,067 at the end of 2019 to 3,739 by December 2022.
He further noted that banks in the UAE saw the highest number of outlets merged and reduced with the support of digital transformation between 2019 and 2022. This was demonstrated by a decrease of 157 branches during that time period.
In April 2022, the UAE Cabinet approved a new Digital Economy Strategy, which included more than 30 initiatives and programs targeting six sectors and five new areas of growth.
The move aimed to increase the digital economy’s share in the country’s gross domestic product to 19.4 percent over a decade. It was introduced to strengthen the nation’s role as a central hub for the digital economy, both within the region and globally.
Saudi Arabia also witnessed a reduction of its bank branch numbers, with a decrease of 82 facilities.
On the other hand, Bahrain registered 57 closures, while Qatar and Kuwait both saw a decrease of 20 branches.
Seghal said: “The UAE was one of the leading countries in reducing the number of banking branches by relying on technology and digital transformation over the past three or four years, and there is still the possibility of reducing branches by between 10 percent and 15 percent within two years.”
The executive explained that the conventional purpose of bank branches has shifted at the present time.
While customers used to frequent them to conduct transactions such as withdrawing money and depositing checks, this has now been made easier and simpler through digitization.
Thus, the branches are now mostly reserved for more complex matters such as obtaining a real estate loan.
He added that digital transformation is a requirement and need for both sides of the equation, as customers prefer digitization and banks find this an opportunity to serve their customers at the lowest cost. Seghal explained: “If you look at the banks of the GCC countries, and the number of bank branches per 100,000 people as a measure to know the number of bank branches in each country, the number ranges between seven and 12 branches, and therefore the reduction in the number of branches will continue and will vary between countries according to what has been accomplished.”