It is no secret that the pandemic has changed a lot in consumers’ behavior in the GCC countries, where governments enforced lockdowns and assisted the residents in shifting to tech-based shopping and services.
Banks were also part of that transition; many clients who initially hesitated to make purchases or transactions online have become increasingly reliant on digital infrastructures.
This good momentum brought on by the fully integrated experience will continue to drive profit and innovation for some time.
Digital benefits
In an interview with TRENDS, Redmond Ramsdale, Senior Director and Head of Middle East Bank Ratings and Islamic Banking at Fitch Ratings, mentioned four main benefits for banks in optimizing digitalization, as follows:
- It helps banks protect their customer bases.
- It improves customer satisfaction.
- It draws up business volumes.
- It attracts new customers, particularly the youth.
Regarding GCC banks, Ramsdale revealed that the most significant concern remains that smaller banks might be left behind if they don’t invest appropriately in digitalization, as they might be short of funding.
GCC residents crave technology
Backbase Software firm’s latest report, in cooperation with YouGov, delivered insights from more than 2,016 banking customers in Saudi Arabia and the UAE.
The report titled “Digital Banking Appetite in the GCC: a look at digital banking trends and shifting consumer habits in the region”; stated that 65 percent of the respondents are “very likely” to opt for digital services instead of visiting their bank’s physical branch post-pandemic. In comparison, less than 5 percent of the respondents answered “Not at all” regarding digital services.
At the same time, 30 percent of the respondents use their banks’ digital services once a day or more. While 29 percent use it 2 to 6 days per week, 17 percent once a week, 15 percent once a month or less, and only 8 percent don’t have a bank account.
Still weak!
Today, the substitution of bank lending with finance companies and fintech solutions is becoming increasingly popular in the GCC. Still, 33 percent of respondents perceive their bank’s online offerings as weak.
About 82% of respondents claimed that better customer experience – and the presence of self-service banking that is fully accessible online – would make them decide to shift to a different bank.
Technology has become a must!
Banks and other financial organizations that don’t adopt this technology risk losing consumers to rivals that do.
Forty-four percent of the survey’s respondents also revealed that the low cost of services would make them decide to switch to a different bank. In contrast, 41 percent answered “self-service banking fully accessible online and has a better customer experience.”
As the pandemic recedes, banks have the opportunity to provide enhanced customer engagement online, which will pave the way for physical branches to deliver more complex, high-value activities.
Because of the importance of keeping up with digital financial developments, creating services that are more responsive to customer needs, and expanding access to financial services, many GCC governments are actively encouraging banks to transition to digital banking and develop e-services.
At look at the future
Most expectations show that GCC banks will rise again in 2022 and witness large revenue margins in 2023.
From his side, Ramsdale predicted that GCC banks would increase interest rates in the upcoming months. At the same time, he considers there’s still a long way for GCC banks to build the needed reputation and trust with their clients. Yet, the recent governmental regulations show significant support for digitalization in finance and business, which might assist smaller banks in investing.