Thursday 16, February 2017 by Nabilah Annuar

Revolutionising retail banking

Charles Habak, Principal, Financial Services at Booz Allen Hamilton discusses the state of retail banking in the region.

Describe the development of retail banking in MENA.

The two major factors driving changes in the market are the need to decrease operating costs and to increase access to deposits in light of the tightened liquidity and higher cost of funds across the region. There is also a renewed focus on the customer journey, and tailoring to customer needs in a more customised and intimate fashion.

What have banks accomplished in 2016 and what should the market expect from them this year?

The year 2016 moved the topic of digital channels under the close watch of CEOs and the board. In many cases there is a particular focus on the bank’s mobile app. Leading banks have shown significant progress in adding mobile app features and improving their underlying processes, with personalisation starting to slowly creep in.

Additional trends include—Empowering frontline staff with business tools. Banks are investing in financial planning and advice tools/CRM to enable and empower front-office staff to provide customers with personalised, relevant recommendations to free up their time for value added services and further back-office automation.

Retail banks are also looking at opportunities to automate their back offices, primarily on customer onboarding, loan processing and payments processing. The trend is moving from offshoring to automation. Proactive risk management and regulatory requirements are also on the agenda.

Given the pressure of implementing regulatory requirements, GCC banks have proactively started looking at early warnings systems for financial crime through investment in customer due diligence and transaction monitoring systems—data theft is a big challenge for retail banks in GCC. Banks are investing in new technologies to preempt data theft.

What are the issues surrounding the retail banking sector?

Retail banking products still tend to focus largely on affluent segments, and a lot of effort has been spent on providing competitive products, particularly when it comes to high-tiered credit card offerings, same-day loans and housing loan products.

Compelling and differentiated products have been lacking, with many banks electing to limit spend on innovation and rather follow first movers.

Significant opportunities remain when it comes to personalisation, customer journeys and cross-sell, among others, particularly in mass, youth, and female segments.

What should a bank’s main focus and strategy be in gaining market share in retail banking? 

The focus should shift away from market share and evolve to what we call quality share. In other words, doubling down on capturing customers that, at a portfolio level, boast strong deposits at lower risk levels, which is an area that remains largely under-developed.

Digital has still only scratched the surface.  Banks have focused on adding more features and improving processes, but almost no one has created a new business model with completely restructured value propositions that can truly impact market share and brand.

Tremendous opportunities also exist in areas such as predictive analytics, machine learning, robo-advisory and support, to name a few, which have been completely disregarded to-date.

What is your outlook on this area for 2017?

The outlook will continue to be focused on cost containment and greater competition for quality customers. Security will emerge a key priority for CEOs and Boards of Directors. New initiatives will be limited, other than regulatory requirements.

Several banks will double or triple down their efforts on digital banking, and those that will lead such endeavours come from very clear and targeted business initiatives which will reap tremendous dividends three to five years from now. Those that will focus largely on technology for technology’s sake will slightly enhance their brand but will be largely disappointed in the results.

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