In the UAE and many countries, online and mobile banking are finally coming into their own.
Some 15 per cent of UAE consumers said they used smartphones, tablets and computers for their daily banking transactions, a Bain & Company survey shows.
With mobile penetration and usage in the UAE among the highest in the world, there remains significant room for growth. In the same survey, 40 per cent of respondents said online and mobile banking would become their preferred way to bank. Both usage and preference are significantly higher for affluent consumers, as well as for those aged 35 and younger.
Indeed, Bain’s recent retail banking survey of about 2,500 people across the UAE highlights the relative importance of mobile, online and other direct channels.
A similar survey conducted last year included about 150,000 people in 14 countries across Europe, the Americas and Asia.
Bain’s surveys found that in the UAE, as in many countries, digital channels are delighting consumers. People love advanced features such as remote deposit capture, or alerts when homes that meet their buying criteria become available. They also value the convenience of mobile devices for straightforward tasks, such as checking account balances.
For retail bankers battling to retain customers and offer them more financial products, digital channels can be a powerful way of building loyalty – when those channels emphasise the right features and transactions, and dovetail tightly with phone centres and other ways that banks communicate with their their customers.
Banks should not assume that they can simply build mobile platforms and loyal customers will follow. Mobile banking usage increases with income, the survey finds, but wealthy customers are more demanding: They tend to seek premium service and tailored expert advice through personal banking relationships, not just convenience through digital channels. And because many of them conduct their banking and business affairs in several countries, they know what high-quality service looks like.
Why do affluent customers matter so much? In the UAE, moving affluent customers from being “detractors” or “passives” to “promoters” of a bank is worth roughly five to 10 times the economic value of turning mass-market customers into promoters, we estimate.
Affluent promoters own more bank products than affluent detractors, and they tend to recommend their banks to affluent friends and family members.
The two major themes of our survey findings – a surge in online and mobile banking and the tepid loyalty scores of affluent customers – point to a logical way forward. If UAE banks can take out costs in how they handle routine transactions, they will be able to serve mass-market segments more profitably and invest disproportionately in high-margin services for the rich.
Digital banking reduces branch visits, setting the stage for major branch redesign – thus serving the mass market more efficiently. Today, some 30 per cent of UAE customers still prefer to use bank branches for routine tasks; however, once customers turn to mobile banking, many of them will make fewer (if any) physical visits.
Bank branches will not disappear, but their role will shift to lighter, more innovative formats. A few examples in other countries show the range of possibilities. EasyCredit in Germany operates self-service terminals, where customers can fill out the first part of a credit application or pick up product packages to complete online at home. Citibank is piloting technology-intensive branches that rely on touch-screen walls, iPads and teleconference facilities at high-traffic locations in Hong Kong, Japan and Singapore. The point is to raise customer engagement with advisory services while providing faster self-service for routine transactions through internet kiosks.
Radical branch redesign, while daunting, can be done through test-and-learn experiments in trial markets. For instance, USAA Bank primarily serves its 9 million active and retired military members and their families through the mail, via phones, the internet and mobile channels, garnering customer loyalty and satisfaction in the process. But recently, USAA has opened physical service centres at locations where its members are concentrated, often near military bases. At these service centres, USAA staff show their members how to use their services and technologies, demonstrate how to complete routine transactions through various self-service channels, and help them with video-conferencing and other technologies for more complicated transactions.
Many customers will embrace such formats if the self-service channels are intuitive and convenient. The challenge is to integrate disparate channels into a seamless, holistic experience. Solid execution of the details will be critical. Does the bank pre-fill application forms with the customer data it already has? Do staff inform every customer about mobile applications? Does the core information-technology system provide a single overview of the customer?
Leading banks in other countries have already begun their network redesign. UAE banks should do so as well – before outside disruptors do. Waiting to act until the branches are drained of all routine transactions will be too late.
Tom De Waele and and Saeeda Jaffar are respectively a partner and a principal in the Dubai office of Bain & Company. They belong to the management consultancy’s Middle East financial services practice