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Middle East Banking Trends and Landscape in the Middle East

The Digital Banking landscape is undergoing significant changes in the Middle East. The ongoing COVID-19 pandemic has accelerated the shift from physical to digital transactions. Customer behaviour and expectations continue to evolve not only because of the pandemic but equally due to the influence of non-banking digital solutions with customers. Consequently, banks are exploring modern, digital first solutions to meet the emerging demands of their customers.

Over the last few years, the number of digital consumers in the Middle East has been increasing. Excellent internet and smartphone penetration in the Gulf Cooperation Council (GCC) countries is driving the demand for digital banking. Governments and regulators are also keen on extending support to the digital banking initiatives in the region. Banks and regulators in the region are launching innovation labs and regulatory sandboxes to catalyse FinTech advancements.

We explore some of trends and shaping the banking landscape in Middle East:

As everywhere in the world, banking customers in the Middle East also expect ease and convenience. Essentially, it translates to the expectation that banking interactions should be no different from those with BigTechs such as Amazon, Facebook, Netflix, etc.

A true omnichannel experience is fast becoming a norm across industries. Customers, especially Millennials and Gen Z, require anytime, anywhere access. The availability of a wide range of banking services across all platforms, especially mobile, is becoming a critical expectation.

Banking customers in the Middle East exhibit an increasing preference for the availability of self-service options and access to services in real-time. Increasing adoption of Artificial Intelligence (AI) based technologies such as voice recognition, natural language processing and generation, etc., has opened new possibilities for seamless self-servicing options for customers that are fast becoming standard expectations from banks.

Customers expect a close alignment of banking products and services with their needs. A proactive approach from the banks to identify key customer needs and fulfil them is fast becoming the norm globally, including the Middle East.

The FinTech landscape is brimming with activity in the Middle East. Banks and FinTechs in the region are striving to offer innovative solutions and digital-first services to customers.

Major economies in the Middle East are fast becoming significant attractions for FinTech innovations. According to an estimate, over 450 FinTechs in the Middle East would raise over $2 billion in venture capital funding by 2022. Robust support for FinTechs in the region is increasing innovations in the digital banking space.

Incumbent banks in the Middle East are developing digital-only banks or collaborating with FinTechs to capture the emerging segment of tech-savvy users. Banks and Neo Banks/FinTechs in the Middle East are collaborating to offer value-added services to their customers.

  • Commercial Bank of Dubai partnered with a neobank, NOW Money, to extend user-friendly digital banking services to its customers.
  • UAE-based FinTech YAP collaborated with RAK Bank to offer digital-only banking services to its customers.
  • UAE-based Mashreq Bank launched Mashreq Neo, a digital-only bank, to target and capture the fast-growing market of digitally savvy banking customers.

Strong government support in the Middle East is one of the key drivers for the increasing adoption of digital banking across the region. Most of the countries have established long-term visions that further facilitates growth and innovation.

Banks in the Middle East are gearing for the advent of open banking. In KSA, the central bank released an open banking policy in January 2021 to support financial industry development.

  •  More than 80% of banks in the UAE are expected to enable open banking by the end of 2021
  • According to Saudi Central Bank, the country’s open banking framework is set to go live in 2022 New Banking License Regulators in the Middle East are more open to offering banking/non-banking financial institution license to FinTechs.
  • KSA based FinTech Geidea received a banking license, the first non-bank to do so
  • Three digital-only banks are set to enter UAE – Al Maryah Community Bank, ADQ, and Zand Bank
  • Saudi Central Bank licensed 16 FinTechs to offer payment, consumer micro-finance, and digital insurance brokerage services

Governments in the GCC countries such as Saudi Arabia, Kuwait, Qatar, and UAE offer strong regulatory support for digital innovations and facilitate FinTech innovation via labs and sandbox.

  •  KSA: Vision 2030 facilitates FinTech innovation by creating a favourable regulatory environment
  • Kuwait: Vision 2035 supports partnerships of Banks and FinTechs for client-centric digital innovation
  • Qatar: Vision 2030 launched National FinTech Strategy to establish Qatar as a regional FinTech hub
  • UAE: Vision 2030 focuses on building an efficient and effective globally integrated business environment

The digital banking landscape of the Middle East is transforming wherein the relevant stakeholders are consolidating their capabilities to offer innovative solutions. Incumbent banks in the Middle East should strengthen their digital banking capabilities by harnessing the power of new technologies. Strong government support and the influx of latest technologies and innovations continue to shape the digital banking landscape, giving banks the ability to offer innovative products and solutions to their customers via in-house innovations or active collaboration with new-age players.

#digitaltransformation #middleeast #bankinginnovation

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