Consumers and lenders on board as the UAE’s digital banking evolution comes of age

Dubai at the forefront of innovative technologies as Banks Federation develops open platform

All over the world, the banking sector is operating in an era of great technological flux, one in which the adage “innovate or die” morphs into a stark message staring the industry in its face.

As technology plays an ever-increasing role in the evolution of the banking industry, digital banking uptake continues to rise in the UAE and across the region. McKinsey’s latest research reveals that at least 80 per cent of urban consumers in the UAE now prefer to do a portion of their banking through digital channels. Digitisation in the banking sector is bringing about substantial and tangible benefits in customer service, product development and in other areas.

Within the digital banking landscape, the action is increasingly shifting towards mobile platforms. A study conducted by KPMG last year underlines the growing consumer reliance on mobile solutions to fulfil their banking needs, with Saudi Arabia and the UAE leading the way with a mobile banking adoption rate of 60 per cent and 52 per cent, respectively. Gemalto, the global digital security company, estimates that mobile banking users in the Middle East and Africa will exceed 80 million this year.

Banks in the UAE are responding to this shift in consumer preference by stepping up their investment in digital innovation, focusing especially on improving their mobile banking security and user experience. The result has been that consumers in the UAE today benefit from access to the latest in banking technology – whether it is biometrics, augmented reality or contactless payments.

Today, we see that banks are increasingly using advanced analytics to improve their risk assessment and drive revenue. Analytics provide significant opportunities for banks by helping to generate powerful insights that facilitate better, more informed decision-making. Through business-wide use of data and analytics, banks are able to better understand their customers and develop service offerings tailored to their needs.

The concept of “open banking” – which refers to a connected ecosystem of financial services that allows banks to securely and rapidly enhance their digital offerings – is also gaining ground in the UAE. As this ecosystem evolves further, it will bring greater financial transparency for account holders while enhancing security and consumer protection. The UAE Banks Federation has been leading initiatives in developing an open banking platform that will connect the member banks with governmental department ecosystems such as the Emirates Identity Authority.

Perhaps the most disruptive of all emerging technologies is blockchain, which, with its capacity to record anything of value and ensure an unrivalled degree of transaction security, is changing not just the banking and financial industry, but the world as we know it.

Not surprisingly, Dubai is leading the blockchain charge. The emirate has outlined its plan to become the first blockchain-powered government in the world by 2020 as part of a move to make government services more efficient and enable thousands of business opportunities in the private sector. This ambitious vision involves implementing blockchain technology in a range of sectors including banking, real estate, health care, transportation, urban planning, energy, digital commerce and tourism. And in line with this initiative, the UAE Banks Federation has established a digital committee with the core objective of utilising blockchain technology to align the financial institutions with the government vision.

Dubai’s leadership in digital innovation received further validation recently when MasterCard released its Digital Evolution Index 2017, which placed Dubai among the world’s “standout digital economies” along with Singapore, the UK, New Zealand, Estonia, Hong Kong and Japan.

With the UAE set for the roll-out of the Emirates Digital Wallet, the pace and extent of digitisation in the country is poised to accelerate further.

This year, we have already seen considerable investment in virtual UAE banking services. With technologies such as Robotics Process Automation predicted to replace as many as three-quarters of back and middle office jobs in the banking industry in the next 15 years, it appears clear that – both in the region and around the world – digital is the new battleground for financial services growth.