MidEast banks face profits crunch amid lag on digital services

New survey says more than 50% of customers in UAE, Saudi Arabia are willing to switch to get more online services
MidEast banks face profits crunch amid lag on digital services
By Staff writer
Fri 26 Feb 2016 01:10 AM

The Middle East's banking sector risks seeing profits slump over the next five years if it continues to lag behind on digital offerings, according to a new report.

The Boston Consulting Group’s (BCG) survey of corporate-banking customers worldwide revealed that the region's banks have been slow to put in motion the deep, transformative digitisation that other international players have started to embrace.

The responses revealed that banks in the Middle East fall significantly behind their global counterparts when it comes to the range and depth of their digital offerings in corporate banking.

BCG surveyed 660 companies in 13 developed and emerging markets and 23 industries. A total of 1,112 respondents from 14 countries – including the UAE, Saudi Arabia, France, Germany, Poland, the UK, and the US – were surveyed.

BCG’s data also demonstrated that by 2021, digital laggards could see profits plummet by as much as 15-30 percent relative to fast-moving competitors.

While a few banks in the Middle East offer basic services, such as invoicing, payment approval and cash management, no bank in the region – that was surveyed by BCG – currently provides online customer service chat capabilities or online business intelligence and analytics tools – services that have become widely prevalent in other markets.

Overall, the study also found that, when it comes to communicating with their bank, customers in the UAE and Saudi Arabia still mostly rely on traditional media.

"BCG’s data shows that over half of customers in the Middle East are willing to switch and move to a banking partner capable of offering high-value, digitally-enabled services, with over 80 percent willing to pay for access to the services offered.

In terms of expectations, the survey results indicate that banking customers in the Middle East place critical importance on factors such as ease of use and convenience. 62 percent of respondents in the UAE and Saudi Arabia believe that online banking should be as easy to navigate as Amazon.com, the online retail giant.

“Already, globally, a handful of banks and nontraditional players with advanced digital platforms are gaining share with real-time, low-cost cross-border payments, preapproved credit, and superior foreign-exchange rates,” said Markus Massi, managing director at BCG Middle East and a co-author of the report. “In the process, they are generating 3-6 percent more in annual cross-selling revenues than their peers.”

That reinvestment potential combined with the momentum and experience gained by being early movers will make it significantly more difficult for slow-moving peers – such as Middle East banks – to acquire the talent and resources to catch up, he said.

To close that gap, corporate-bank management in the region needs to coalesce quickly around a clear digital strategy and move decisively to build critical skills and capabilities, he added.

Alessandro Scortecci, another co-author, said data suggests that over a five-year period, these strategies can enhance revenues by 15-40 percent and improve cost-income ratios by 7-15 percent for Middle East banks.

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