GCC banks reduce number of branches amid digital transformation: Report

Digital transformation has enabled GCC banks to reduce the number of their branches by 328 branches over three years, according to the global consultancy firm Roland Berger.

In a statement to Emirates News Agency (WAM), Saumitra Sehgal, Head of Financial Services in the Middle East at Roland Berger, said that the number of bank branches in the Gulf countries decreased from 4,067 branches at the end of 2019 to 3,739 branches at the end of 2022.

Sehgal said that the revenue of the UAE bank branches is the highest in the region at $18.6mn per branch for retail services.

He pointed out that the banks operating in the UAE were able to achieve the highest number of branches that were merged and reduced with the support of digital transformation from 2019 to the end of 2022. The number of branches in the UAE decreased by 157 branches, Saudi Arabia 82 branches, Bahrain 57 branches, Qatar 20 branches, and Kuwait 20 branches, while Omani banks increased their network by 8 branches.

Sehgal continued, "The UAE has been one of the leading countries in reducing the number of bank branches by relying on technology and digital transformation over the past three or four years, and there is still a possibility of reducing branches by 10% to 15% within two years."

He said that banks in the Gulf countries have been reducing their branches by up to 10% on average over the past few years due to the rising trend of digital customer interaction. The purpose of bank branches has shifted towards more complex matters like obtaining mortgages, as simple transactions have become easier to complete digitally.

He said that digital transformation in the banking sector of Gulf Cooperation Council (GCC) countries is essential for both banks and customers. Customers favour digital banking, while banks view it as a way to enhance customer service and profitability by reducing operational costs.

Sehgal then looks at the number of bank branches per 100,000 people in the GCC countries. This number ranges from 7 to 12 branches. He predicted that the number of branches will continue to decrease and that this decrease will vary from country to country depending on what has been achieved in previous years.

He also pointed out that the cost of bank branches in the GCC is high, with annual costs reaching around $14.8bn. He argued that by merging branches, reducing their number, and accelerating the adoption of digitization, GCC banks can save more than $3bn per year in branch costs.

Sehgal discussed the possibility of further consolidating branches in the Gulf region, reducing the total number by 623 branches in the coming years. This includes an additional 80 branches in the UAE, which is one of the leading countries in digital and technological transformation in the banking sector. The UAE has already made significant progress in this area in recent years.

He talked about the size of the branch network in the Gulf Cooperation Council countries, measured by the number of branches per 100,000 people. In this context, the share of every 100,000 people in the UAE was about 7.2 bank branches, while it was, for example, 12.8 branches in Kuwait.

The Emirati bank branch network topped the productivity or revenue in the retail sector, as the revenue per retail branch reached around $18.6mn after a 27% increase compared to its levels at the end of 2019.