SME banks & technology: the five new dimensions

The Middle East has always stood out as a confluence of cultures, and the services rendered by its banks epitomise the profile of its audience. While traditional banking is still in vogue for the conventional customer, CIOs continue to invest in technology driven innovations that are in line with international directions, and the new age customer. More than 50% of the population in the UAE for instance, is less than 30 years old, reflecting the typical profile of the customer demographic, and highlighting demands that need to be urgently addressed

Even while the larger economic impact driven by the drop in the oil prices and the resultant implications that banks need to deal with are debated in every boardroom, there are many technology initiatives they continue to engage with; a few stand out as being more common, and in most situations demonstrate a paradigm shift. We explore five of these initiatives, seen to be critical and pervasive across most Middle East banks.

1. Digitalisation of branches:

The number of branches per person in the UAE is almost one third of that in the US. That being said, this is still much higher than many other developing markets, and with the increased consciousness to drive the customer experience through alternative channels, there is a need to determine the right locations for the branches so as to justify their existence, and also differentiate themselves through innovation.

It is interesting to see the innovations that are being brought about in the branch model. Moving away from the traditional branches and neighbourhood models that serve local communities, banks are seen to be be increasingly investing in self-service kiosks and customer service centres, which are highly digitalised, and offer an Apple Store-type environment. A case in point is the automated branches launched by Mashreq Bank. In addition to offering all cash transaction facilities, customers can pay utility bills, open an account, apply for a card or loan or cheque book, remit money and also speak with an RM for investments. The e-cube branches, the other model launched by this bank, targets the new age customer with a digital experience making it completely paperless, allowing customers to review products on large screens, view investment options on simulated screens and download application forms and products on their smartphones.

2. Mobility

Mobile transaction penetration levels in the Middle East are growing at 40-50%, reflecting the demographics of the age groups and income levels. Almost every bank seeking to be perceived as keeping pace with this trend will offer its retail customers typical services pertaining to enquiries on accounts, financial transactions and key services including account opening, customer services, location enquiries and product promotions. The more advanced ones are now seeking to promote cutting edge services – online transactions using mobile banking, contactless/NFC payments enabled through the mobile, personal finance management and remote deposit capture. A case in point is the new service launched by EmiratesNBD, one of the largest players in the Middle East, whereby its customers can scan cheques and have them deposited directly, without having to physically drop them at a branch or an ATM. Banks are also looking to build on the concept of virtual RMs; a live meeting experience with the Relationship Manager through a video call from a registered mobile, using interactive technology.

‘Banks are at an inflexion point of needing to modernise core tech assets’

3. Channel convergence

The advent of new digital channels, much beyond what was envisaged when the core engines were invested in, has necessitated banks to increasingly look for channel integrations as a fulcrum to their technology architecture and offer unified customer experience across channels. The need is not only to provide for integrating a plethora of digital channels including corporate and retail internet banking, mobile banking, payment systems, e-trading platforms and digital banking, but also to take into account what would be the next generation integration requirements to let the central core engine seamlessly connect with emerging customer touchpoints. It is natural, then, to see a high degree of investments being made on channel convergence and in middleware technology. Any procrastination, CIOs and CTOs increasingly admit, will only result in a spaghetti of connectors and even more sleepless nights, given the 24/7 banking model that customers increasingly expect.

4. Data, Big Data and analytics

Never before have we seen such a need for consolidation of multiple data sources, and the unending appetite for storing, warehousing and processing of data to be more pronounced. The average population per bank for UAE is at 191k, Qatar at 127k, Bahrain at 24k and Kuwait 165k. Compare this with India at 8.7 million people per bank and Malaysia at 760k – it is evident that the Middle East banks do need to compete to grab their share of the retail pie, and the opportunity of harnessing the power of analytics is seen to be critical. No wonder, then, that we are seeing a significant portion of IT investments being made with suppliers and service providers in the area of data and information management and analytics. From aggregation of data, to its cleaning and enrichment, to having the right platform for storing and warehousing, banks are continuously seeking to invest for the future. The new age terminologies of business intelligence, predictive analytics, customer life cycle management, risk analytics and analytics driven campaigns are increasingly commonplace in the corridors of Middle East retail banks.

5. Modernising the IT infrastructure

A natural corollary to all of the above is new age application architecture. Last year alone there were over 27 new sales in the area of back office system, as compared to 21 the previous year in the Middle East. This is also a reflection of banks recognising that they are at an inflexion point of needing to modernise core technology assets – and this includes not just the core banking platform, but also the aligned infrastructure and services around it. This is not limited to investments, but also in service transformations and improving the process and compliance framework, and adherence to international standards of ITIL, CoBIT, CMMi, ISO etc. There is also a general positive correlation to an economic slowdown and an inward focus to upgrade infrastructure – leveraging an opportunity to get some housekeeping done, whilst preparing for the next wave of growth.

Indeed, the above can only be a subset of what banks are looking to do, and not necessarily exhaustive. Yet it would be a fair bet to say every bank in the Middle East has identified some if not all of these as part of its portfolio of initiatives for 2016. For those who ignore them all, they do so at their own peril! It will, of course, be interesting to see which ones succeed in getting them all right – the proof of the pudding, at the end of the day, will be in their customers consuming it!

Author | v. Ramkumar

For a further conversation on this subject of Cedar View or how we may be able to help please email V. Ramkumar, Senior Partner, Cedar at

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Thomas Cook
GoldMan Sachs

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