Dubai: Retail banks in the Middle East need to seriously up their game in the digital space if they want to stay in business and remain profitable.
With its high internet and mobile penetration rates, the region is among the markets in the world that are well equipped to move away from the traditional face-to-face transaction.
Nearly eight in 10 people (73 per cent) in the UAE use smartphones and almost the same number (75 per cent) have access to the internet. Every bank customer is active on social media, and many prefer to bank remotely, through the internet, mobile phone or other non-physical channels.
While a number of initiatives have recently been introduced to cash in on the market’s digital readiness, the region is still lagging behind its peers in the shift from the traditional paper-based space. The global average for mobile banking usage, for example, is around 30 to 35 per cent, compared to 15 to 20 per cent in the Middle East.
“The root cause for this is that the overall banking offering is still not as advanced as it is in more mature markets. And this is because retail banks in the region are just starting to [enhance] their capabilities to really engage customers on their digital channels,” Dirk Vater, partner at Bain & Company, told Gulf News.
This doesn’t mean banks don’t have the eagerness or budgets to finance innovative, next-generation strategies.
“The appetite exists, but the banks have not moved enough, we believe,” added Julien Faye, partner at Bain & Company Middle East.
One of the areas the banks need to work on is the ability to seamlessly interact with customers across various channels. “For example, you do something online or on the phone today, but then the next day the branch people would not know about it. So the big topic now for the banks is creating omni-channel experiences,” said Faye.
“From the customer perspective, it’s very convenient for me to jump on the channel I want to jump into, whether it’s over the phone, in the branch or internet. But my primary requirement is that each channel knows what I’ve done before, so that I don’t have to get in on my data again [every time I switch to a new channel],” added Vater.
Bain & Company has recently conducted a study involving 190,000 customers worldwide. Among the 2,000 respondents in the Gulf Cooperation Council countries, 60 per cent prefer that banks contact them through SMS, email or website. When asked about their future preferred ways of transacting with their bank, about 50 per cent chose call centre, online banking, smartphone and tablet.
While more like the idea of virtual banking, they still consider the presence of a traditional branch as equally important. The scenario in the region is different compared to other markets, where the physical bank branch is becoming obsolete. In Europe, nearly half of bank branches are forecast to close shop in less than a decade as more consumers embrace digital banking.
“An additional complexity for the local banks here is that the physical network is still very important to customers in this market, where people like to have physical contact with their service provider, but at the same time, if you don’t go digital, you’re going to lose some clients,” added Faye.
Bain’s study found that 75 per cent of high-value customers now use social media. All of them prefer to get alerts for banking promotions and offers through Facebook, Twitter and other related platforms, while 67 per cent would prefer live customer service via the internet.
About a third (32 per cent) also use social media to talk about products, influencing the purchasing decisions of the people in their network. Nearly 80 per cent admitted that they have purchased a product after a friend mentioned it online.
“This is important because banks are not used to dealing with these informal communication channels and the decision now is made even before the client calls a bank or comes to a branch,” said Faye.
Vater recommended, among other things, that banks should therefore undergo a “digical” transformation, where they improve their physical and digital services to further engage customers.
