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19 March 2019

How GCC banks can prepare for digital disruption

By Jorge Camarate, partner with Strategy&, part of the PwC network.


The banking sectors in the six GCC countries must prepare for inevitable digital disruption. The region’s financial services industry region differs by country, with some markets saturated, different reporting standards, and a wide variety of products and offerings.

While digital banks and offerings are not widespread, experience from other markets demonstrate that eventually they will have an impact. Rather than waiting, GCC banks can prepare for the future and shape it. The most significant feature of GCC financial services is that cash remains dominant in personal transactions.

In Saudi Arabia, cash use in 2016 was equivalent to 38 per cent of GDP, compared to 24 per cent in Turkey. There is, however, progress towards reducing the prevalence of cash. A MasterCard survey of 33 countries and their move towards cashless payments had the UAE in 28th place and Saudi Arabia at 31st.

Despite the importance of cash, GCC banks are moving gradually toward digital transformation. Already, there has been substantial growth in electronic commerce. GCC consumers are enthusiastic technology adopters, with high levels of smartphone penetration, while fast and reliable data connections are more widespread.

GCC consumers are interested in digital finance. According to a 2016 survey by Payfort, 53 per cent of Saudi consumers expressed an interest in mobile wallets and mobile payments. In line with consumer interest, a few banks, such as Emirates NBD, are offering digital products. There has been rapid growth in the financial technology sector, known as fintech, which offers digital solutions for finance. GCC fintech companies raised around $100 million from 2010 to 2017.

Already, some telecom operators are offering digital finance products. Saudi Telecom Company (STC) has launched STC Pay, a mobile wallet that allows users to transfer money to each other and to banks. Leading technology companies—Google, Apple, Facebook, and Amazon—are exploring GCC digital payments, with Facebook having already established a financial services team in Dubai since the end of 2017.

As they confront these changes, GCC banks can learn from other countries with more experience. They should examine how digital banks have operated and their leading practises. Successful digital finance providers have tended to have a clear segmentation approach and value proposition, they have concentrated on value-added services and customer engagement rather than the nature of the product.

These digital banks also started with minimum viable products, which are favoured by digital natives, and then they tested them to learn about product development—an approach used by Revolut Bank in the United Kingdom. Finally, they focused on customer data and used creative marketing, such as through social media and by fostering online communities.

For example Monzo, a UK bank, reached one million transactions within a year of launching without investing in traditional marketing. Instead, Monzo developed unrivalled customer insights to market its services and to differentiate itself in the market. This should lead GCC banks to ask three questions about how to address this impending threat. First, what is their vision?

This is the most important question as it influences the next two questions about the scope of digitisation and how they will develop its digital capabilities. Banks can become entirely digital, which means end-to-end digitisation in a separate organisation.

Alternatively, they can retain the full range of face-to-face contacts with its clients by connecting with them through new channels and digitising the back office. Or, they can become a digital-human interaction hybrid. Second, what is the scope of digitisation?

Digital banks or banks that stress human interactions have different digitisation needs. However, digital-human interaction hybrid banks would connect with customers through new digital channels and digitise their front offices. Third, based on the vision and the scope, banks should determine their digital capabilities.

To pursue innovation, banks could change from within, although the corporate culture of most banks does not support innovation, nor are banks attractive places for digitally-skilled individuals. Alternatively, banks could create an autonomous organisation to pursue digitisation, or buy digital banks.

Such separate digital subsidiaries would service those customers who care about their digital user experience and who do not need to speak to staff face-to-face. The difficulty would be getting banks culturally to accept this new organisation and their culture of innovation.

Or, banks could take a mixed approach, starting separate teams and infrastructure in their main organisation to deal with digitisation, or they could form alliances with fintech companies. GCC banks that act quickly and boldly will come to the market with a robust value proposition that will attract the unmet demand for digital banking. These first movers are likely to reap the largest rewards. 





CPI Financial was established in Dubai in 1999 to meet the needs of an ever-expanding financial community, offering a comprehensive portfolio of market-leading products and services tailor-made for the banking and financial services sectors.

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