HOW THE GULF CAN LEAD IN DIGITAL BANKING WITHIN THE NEXT TWO YEARS
Managing director of financial services for MENA at Accenture, explains why GCC countries can leapfrog their way to the top of the digital banking tree
The ‘fourth industrial revolution’ and its reach is said to have much more impact than any other industrial leap that has ever changed the world in the past.
Emerging economies have the most to gain from industrial digitisation, where the potential to leapfrog pipeline societal advancements and get on par with other developed economies, is a faster reality.
While there is much excitement surrounding this opportunity, there is also a realisation that all organisations may face digital disruption while others are already experiencing what we call a ‘digital culture shock’.
The key drivers of digital change and innovation are the evolving technological capabilities available in the market, pressured macro and micro economic situations and customers who are demanding change and security. ‘Be digital’ and ‘go digital’ are terms that we are hearing more and more in relation to the banking sector. These terms go hand-in-hand: ‘Be digital’ referring to the need to remain in the market and on top of current technology, and ‘go digital’ referring to the process of how new and innovative technologies are integrated and implemented.
The key tenet of digital banking is that it provides financial services in real-time. This is the concept of GAFAA banking (Google, Apple, Facebook, Amazon, Alibaba) through which the process of transactions become seamless and invisible. The more we express our feelings and ideas on social media, the more the GAFAA system can accurately predict what people will decide and buy.
A closer look at the regional landscape
Banks in the region need to take a proactive approach to collaborating with financial technology (FinTech) firms during the early stages rather than scrambling afterwards to catch up. This can assist banks in enriching their offering for a specific target customer group, leverage alternative channels to offer core banking products and adopt innovative solutions to increase efficiency.
The Middle East, and in particularly the UAE and Saudi Arabia, have all the advantages and drivers to be successful in the digital age.
Firstly, both countries can leverage the supporting governance structure, the appetite to invest, the need for economic diversification and the need to improve efficiency. Also, due to the nature of the banking sector in the Middle East, banks can innovate in both classic and Islamic banking functions alike to create powerful new digital Islamic banking products.
Secondly, the Middle East – again most notably the UAE and Saudi Arabia – has a young, dynamic, highly educated and fast growing population. This section of the population is extremely eager to utilise new digital technologies and is very active on current digital and social platforms. There is a clear trend in the decreased usage of traditional payment methods, such as cash and cheque, and growing adoption of eWallet usage across the retail sector.
Thirdly, the region has an interesting combination of population segments, each bringing their own needs. Each population segment is active and engaged in digital, providing an opportunity for growth and innovation, and for a strong pivot to more digital technologies.
And lastly, the new Framework for Stored Values and Electronic Payment
Systems of the UAE will open the market to FinTechs and innovation. It is expected that banks will use different models for different customer segments, online banking channels for the older generation, older millennials using bank based apps, and younger generations using chat type apps. The future of banking must carefully navigate the needs of each segment and incorporate digital accordingly. These factors will play a key part in defining and developing the bank of the future.
The near future
This drive towards constant innovation and digitalisation of the banking process does not signal the end of brick and mortar institutions.
One example where the region is already accelerating its innovation intention is in blockchain. It is already in full play in Dubai where a public services blockchain migration plan until 2020 is already defined. However, there are still many opportunities for its additional usage in areas where Saudi Arabia and the UAE can be the pioneers and frontrunners, such as land registry and housing purchases, various types of loans, trade finance and other trade transactional activities.
With the pace of change and innovation racing ahead, and new variables coming into play, along with the need for constant innovation and improvement, banks in the Middle East need to stay in the market and at the same time develop as players without disruption to customers at the front-end.
Accenture has developed a two speed banking transformational road map of ‘ be digital’ and ‘go digital’, which incorporates the different components of the bank of the future and creates a reliable template for long-term transitioning, with room for manoeuvre when new opportunities and challenges arise each day.
In the next two years, the Middle East will leapfrog into the digital age by adapting the best digital technologies from around the world and implementing them successfully and constructively in the local market. For banks to be best placed to meet the needs of the changing market, they need to be innovative and ready for change, they must act in the moment and look to the future.