Dis­rupt­ing per­sonal fi­nance

Amid tougher eco­nomic con­di­tions, tech­nol­ogy is bring­ing change to the Gulf’s per­sonal fi­nance mar­ket


Amid tougher eco­nomic con­di­tions, tech­nol­ogy is bring­ing change to the Gulf’s per­sonal fi­nance mar­ket

Con­di­tions in the Gulf ’s per­sonal fi­nance mar­ket are of­ten a good in­di­ca­tion of the gen­eral health of re­gional economies and 2016 was no dif­fer­ent.

Just as re­gional banks faced a liq­uid­ity crunch linked to low oil prices last year, con­sumers ex­pe­ri­enced in­creased dif­fi­culty gain­ing ac­cess to credit, par­tic­u­larly when it came to per­sonal loans.

Comparison site Com­pare­it4me re­ported that 1.68 per cent fewer peo­ple ap­plied for loans last year than in 2015, sug­gest­ing con­sumers did not feel se­cure enough to com­mit to longer loan agree­ments.

Mean­while, those that did faced in­creased hur­dles, with a 10.26 per cent rise in ap­pli­ca­tions in­di­cat­ing banks were less will­ing to give out credit.

“Cer­tainly the liq­uid­ity crunch caused by the low oil price has had its ef­fect on con­sumers look­ing for easy credit – which doesn’t re­ally ex­ist anymore. In 2016, users made an av­er­age of 2.97 ap­pli­ca­tions each for per­sonal loans, sug­gest­ing that banks were be­ing more strin­gent on who they were of­fer­ing per­sonal fi­nance to,” says Jon Richards, CEO, Com­pare­it4me.com.

Amid this more dif­fi­cult cli­mate, the ag­gre­ga­tor site and its ri­val Souqal­mal are an ex­am­ple of the chang­ing per­sonal fi­nance land­scape in the UAE and wider Gulf re­gion, with tech­nol­ogy play­ing a larger role than ever be­fore.

Where once ap­ply­ing for an ac­count in­volved ven­tur­ing to a bank’s near­est branch, and credit cards and loans were sold over the phone through of­ten un­wanted cold call­ing, tech­nol­ogy is putting the power back in the con­sumer’s hands in more ways than one.

Branches are chang­ing dra­mat­i­cally with tablets, video con­fer­enc­ing booths and mo­tion sen­si­tive screens re­plac­ing tra­di­tional coun­ters, of­fices and even staff in some cases. And the same is in­creas­ingly true of pro­cesses like pay­ing bills and de­posit­ing cheques, as on­line and mo­bile bank­ing be­comes the new norm and the likes of Emi­rates NBD and Com­mer­cial Bank of Dubai launch a new wave of on­line-only ac­counts targeting mil­len­ni­als.

“As tech­nol­ogy and so­cial me­dia evolve, the cus­tomers ex­pec­ta­tions of how they in­ter­act with their bank, what kind of ser­vices are avail­able and the in­for­ma­tion that is avail­able is also chang­ing,” says Mohsin Aikal, head of con­sumer fi­nance at Noor Bank.

“They don’t want to visit branches, they ex­pect to con­duct their bank­ing on their PC or mo­bile. And pro­cesses are con­stantly evolv­ing to cap­ture that feed­back and the ex­pec­ta­tions of cus­tomers.”


De­spite ad­vances in the way con­sumers con­duct bank­ing in the re­gion in re­cent years, Umair Hameed – a part­ner in KPMG’s man­age­ment con­sult­ing busi­ness – ar­gues there has been lit­tle in­no­va­tion when it comes to prod­ucts such as per­sonal loans, credit cards and mort­gages.

“The prod­ucts them­selves haven't evolved,” he says. “In the ab­sence of any in­no­va­tion it is re­ally the rates and fees that one could ar­gue are the dif­fer­en­tia­tors.”

As a re­sult, Hameed sug­gests that fi­nan­cial tech­nol­ogy firms like comparison sites – or ag­gre­ga­tors are the ones bring­ing true dis­rup­tion to the per­sonal fi­nance mar­ket and achiev­ing im­pres­sive growth fig­ures in the process.

KPMG es­ti­mates ag­gre­ga­tors in the UAE mar­ket are see­ing 60 to 80 per cent in­creases an­nu­ally in the num­ber of prod­ucts be­ing pur­chased through their plat­forms as users ap­pre­ci­ate the ad­di­tional trans­parency they bring with more than 75 banks and fi­nance com­pa­nies.

“Cer­tainly peo­ple in this re­gion are wak­ing up to the ben­e­fits of com­par­ing fi­nan­cial prod­ucts, but I think that has less to do with the cur­rent eco­nomic cli­mate and more to do with the fact that ev­ery­one wants to save money where they can,” says Richards.

“And peo­ple are be­gin­ning to re­alise that comparison sites re­ally do save them money.”

This growth is also dis­rupt­ing tra­di­tional push sales meth­ods in the re­gion’s per­sonal fi­nance mar­ket, with di­rect com­par­isons of prod­ucts like loans, car in­sur­ance, credit cards and more forc­ing com­pa­nies to com­pete more di­rectly on rates and ser­vices.

“They [ag­gre­ga­tors] in­tro­duce a layer of trans­parency and this keeps all the banks on their toes,” says Aikal.

“You need to be con­scious of what the com­pe­ti­tion is do­ing and what’s out there in the mar­ket. Ob­vi­ously you did that even be­fore these ag­gre­ga­tors but I think it adds an ad­di­tional layer of ur­gency or con­scious­ness that you’ve got to make sure you do the best you can be­cause this is what’s out there.”


Among the side ef­fects of the rise of ag­gre­ga­tors has been the pit­ting of Is­lamic providers against their con­ven­tional coun­ter­parts in ways not seen be­fore.

Aikal sug­gests the num­ber of cus­tomers opt­ing for Is­lamic prod­ucts is on the rise and grow­ing faster than the mar­ket, par­tic­u­larly given the of­ten more favourable terms when it comes to late pay­ments.

But he be­lieves one key hur­dle Shari­a­com­pli­ant in­sti­tu­tions face is a lack of con­sumer aware­ness in terms of how Is­lamic prod­ucts work in comparison to their con­ven­tional coun­ter­parts.

A re­cent cam­paign, dubbed #Ibankislamic saw seven Sharia in­sti­tu­tions and the reg­u­la­tor in the UAE get to­gether to pro­mote aware­ness through so­cial me­dia, fi­nan­cial work­shops and in­for­ma­tion ses­sions in schools.

“We need more and more of that so more and more peo­ple be­come aware of how it all works,” he says.

“At the end of the day we all op­er­ate in the same mar­ket whether con­ven­tional or on­line and we com­pete for the same cus­tomer base.”

Data from Com­pare­it4me sug­gests some level of suc­cess. The com­pany re­ported a 6.85 per cent in­crease in the num­ber of peo­ple ap­ply­ing for Is­lamic per­sonal loans last year compared to 2015.

How­ever, an 8.57 per cent dip in con­sumers ap­ply­ing for Is­lamic credit cards sug­gests more fo­cus will be needed on this area in the year ahead.


As tech­nol­ogy con­tin­ues to dis­rupt the Gulf ’s per­sonal fi­nance mar­ket, Richards sug­gests there are still a num­ber of gaps wait­ing to be filled.

“The first that springs to mind is mi­cro-fi­nance, of­fer­ing things like pay­day loans on short-term agree­ments. An­other is good fi­nance for SMEs – banks in the re­gion pur­port to of­fer this but the re­al­ity is very few lenders will of­fer fund­ing for an SME.”

He also ar­gues a wider is­sue is the sys­tem of de­ter­min­ing credit-wor­thi­ness.

“We’d need credit checks to get a lot more so­phis­ti­cated if we were to bring mi­cro-fi­nance and good SME fund­ing to the re­gion,” he says.

At the same time the Gulf also has some way to go in its adop­tion of comparison sites, which have ex­isted in other parts of the world since the turn of the cen­tury.

“In Europe, for ex­am­ple, over half of in­sur­ance poli­cies are bought through a comparison site, whereas that num­ber is min­i­mal here. Once more in­sur­ers are ready to get on­line with comparison sites there’ll be more choice for con­sumers and health­ier com­pe­ti­tion,” Richards adds.

But as adop­tion in­creases, Hameed be­lieves the pressure will be on banks to change their ap­proach, with some smaller in­sti­tu­tions pos­si­bly opt­ing to con­duct their sales through ag­gre­ga­tors en­tirely rather than hir­ing their own staff.

“Re­tail fi­nan­cial in­sti­tu­tions need to re­alise that – with a com­modi­tised and stan­dard­ised prod­uct of­fer­ing, and in­creased dis­rup­tion to the tra­di­tional com­pet­i­tive model – as ag­gre­ga­tors in­creas­ingly be­come the in­ter­me­di­ary be­tween them and the end cus­tomer, they are one step fur­ther away from hav­ing a di­rect in­ter­face with the cus­tomer. And one step closer to be­com­ing in­vis­i­ble to the cus­tomer,” he says.

So does this mean the end of cold call­ing by banks ea­ger to sign you up for a credit card or loan?

Those hop­ing for an end to the prac­tice may be dis­ap­pointed but ag­gre­ga­tors and other tech­nol­ogy ad­vances may at least mean banks are more in­tel­li­gent in the way they go about it.

By util­is­ing data and an­a­lyt­ics to study cus­tomer trans­ac­tion data Hameed sug­gests lenders could soon be call­ing cus­tomers to of­fer them some­thing more tai­lored to their needs, such as an ed­u­ca­tion prod­uct after pay­ing their child’s school fees, rather than an un­wanted dis­trac­tion.

“How many times has some­body called you at the right point of time of­fer­ing you some­thing you need? Banks aren't do­ing that,” he says.

“By putting it in con­text they can of­fer you some­thing that is more rel­e­vant.”


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