When the Commercial Bank of Dubai (CBD) was created by an Emiri decree in 1969, the UAE was not yet an independent nation and Dubai was still very much a small Gulf port at the very beginning of its meteoric rise to become one of the world’s foremost global hubs.
But, as Dubai and the UAE modernised, CBD grew alongside them, and today, under the leadership of its current CEO, Dr Bernd van Linder, the bank – now with dozens of branches across the country – is working hard to keep pace in an industry that is transforming in ways, and at speeds, that few would have thought possible when the bank was born five decades ago.
Speaking to Arabian Business at CBD’s Deira headquarters, the tall, tech-savvy Dutchman says that, in many ways, technology is transforming the very nature of the banking industry, and in the process is departing from established industry practices.
“I think the branch model has changed already, substantially. If I look at myself, or you look at yourself, when was the last time you went to a branch?” he asks. “It’s probably a long time ago, because there is a lot that you can do without having to go to a physical outlet.”
The way Dr van Linder sees things, in the very near future, banks will serve as “sales, service and support centres”, rather than a venue to perform the functions that most people still associate with branches.
“You will go to a branch if you need something specific. If you want to talk about a mortgage, you will probably, for some time to come, still want to talk to an expert at a branch,” he notes.
“For things that are more day-to-day banking, such as getting a new credit card or increasing the amount of a personal loan, all of that will be done through electronic channels. It [the branch model] will continue to evolve.”
That isn’t to say, however, that branches will disappear. Instead, Dr van Linder says he, and by extension CBD, view them as one prong of an “omni-channel” strategy, alongside digital and mobile applications.
“Clients will do the vast majority of their business online, and of that, a vast majority will be done on mobile. We truly believe that mobile first is the way to go for banks,” he says. “Branches have to change, and will continue to change, but they will remain a very important part of our strategy and how we service our clients.”
Given Dr van Linder’s thoughts on the digital-first future of the banking industry, it may seem natural to assume that banks such as CBD will consolidate branches, or eliminate some entirely, along with many of their staff. However, according to Dr van Linder, this isn’t necessarily the case. Instead, he believes that branches will be forced to “evolve” their service model to better match the needs of their customers.
“It’s a given that branches will be different, but we still want to bring branches to the places where our clients are. You will see more branches in malls, with longer opening hours, to really make sure that our clients can come to the branch if they wish to do so.”
If in the future branches are indeed closed, Dr van Linder says it will be a transformation that is completely driven by CBD’s customers. “The simple fact is that around 60 percent of our clients use online banking, and approximately 40 percent use mobile banking. In the years to come, those numbers will go up substantially. If you look at markets in the West, the focus is on having the best electronic offerings and reducing the branch network,” he says.
“I think that’s a trend that is fully driven by customer demand. If customers don’t need to come to a branch anymore, banks will require fewer branches.”
In the case of CBD’s own efforts to improve mobile functionality, Dr van Linder says that it is a “must”, driven by the region’s overwhelmingly young, constantly connected population. “The more functionality we offer with mobile, the more people who will want to use our mobile app. It’s as simple as that,” he says. “This is especially true for our new customers. The digital world is their whole reality, so that’s where we need to be as well.”
Over the course of the next three to five years, Dr van Linder predicts that mobile usage will “easily” double, and may perhaps evolve more rapidly than that. “These things have a habit of going much faster than you think at any point in time,” he says.
Among bank CEOs, Dr van Linder is unique in that he is an expert on artificial intelligence, holding a PhD in AI from the University of Utrecht in the Netherlands. And while to the public, AI may still seem like a futuristic concept torn from the script of a science fiction film, Dr van Linder says that the future is closer than most think.
“It’s here now. Perhaps not necessarily strong AI, where artificial intelligence equals or exceeds human intelligence, but if you look at machine learning and robotic process automation, it’s happening today. It’s happening today at many banks, internationally and locally, and we’re doing it as well,” he says, noting that in CBD’s case the bank is already looking at automating the “vast majority” of processes.
As evidence that AI and automation are here to stay, Dr van Linder notes that the technology is already in use in various “know your customer” and fraud detection applications, as well as in scanning – and understanding – legal documents and in semi-intelligent chat bots that interact with customers.
“I only see it growing. To me, every process of a bank is a candidate to be fully digitised. When I say digitised, I mean straight through, zero-touch, with no human interaction, in real-time,” he adds.
The success of AI, according to Dr van Linder, can be gauged as much by customer satisfaction as by a bank’s financial bottom line. “[AI and automation] will result in a much more efficient bank, but more importantly, it will vastly improve customer service. For a customer, having a guaranteed, error-free process with a very rapid turnaround time is the basic definition of customer service,” he notes.
“Ultimately, for a bank, the moment you automate your processes and your infrastructure becomes more efficient, in principle your cost base should decrease, but the key benefit is for the customer.”
Notably, despite the widespread speculation on the future of blockchain in the banking industry, Dr van Linder says that the technology is unlikely to play a significant role in cross-border remittances for a long time. In his view, at the moment cryptocurrencies are the only “real-world” application of the technology in existence.
“By real world, I mean an application that has surpassed the pilot stage. All the other [use cases] that I’ve been able to find are still pilots, whether it be cross-border remittances, KYC (know your customer) or legal contracts,” he says. “Almost every bank in the world is running a pilot using blockchain for those uses.”
At present, Dr van Linder says that he doesn’t believe blockchain is a viable alternative to existing cross-border transfer systems, such as Society for Worldwide Interbank Financial Telecommunications [SWIFT] transfers. “I personally don’t think it will play a big role in remittances for some time to come. As of today, it’s not sufficiently scaleable, and not sufficiently fast,” he says. “We have an infrastructure with SWIFT that is working very well already in real-time, so blockchain will take time, if ever.”
However, Dr van Linder readily admits that he does see the potential value of blockchain in other areas. “The concept is interesting, and I do see some great usage. The main application will be in areas where there is shared documentation, whether it is in Know Your Customer applications or trade finance where there is a lot of documentation going back and forth,” he notes. “There, the distributed ledger that guarantees the security of these documents will be very important.”
CBD, according to Dr van Linder, is currently running pilots on the use of blockchain in cases of shared documentation and remittances, even if he says the purpose of the pilots, at least in the cases of remittances, are largely for the bank to familiarise itself with the underlying technology and infrastructure.
Dr van Linder says he is “optimistic” about the UAE’s economy, largely based on the fact that oil prices have stabilised to an “acceptable” level, a significant amount of investment related to Expo 2020, and, importantly, an International Monetary Fund (IMF) forecast that the country’s economy will grow 3.4 percent in 2018, after a projected 1.3 percent growth for 2017.
“On the whole, we are operating in a positive economic environment. The drivers are very positive,” he says. “Banks will grow at five to seven percent on the back of that. Our forecast is that we will be able to outgrow the market yet again, probably for the fourth of fifth year in a row. That’s something we definitely aspire to.”
Importantly, Dr van Linder notes that despite the investments that CBD has made in technology such as AI, ultimately, its success and expansion will depend on its long legacy and the perhaps more traditional service elements and customer focus.
“We’ve been around for 50 years. We’re a bank that is known to be a relationship bank. We’ve stood by our clients through multiple economic cycles, and we’ve always been there,” he notes.
“We want to understand our clients, stand by our clients, and compete on the basis of customer service. We’ll invest in people and processes. We’ve done that throughout our history, and will continue to do so.” aFor all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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