UAE banks, under pressure from retail client competition and the growth in digital currency alternatives such as Bitcoin, are moving quickly to upgrade payment technologies.
The country’s 50-plus banks are spending money on technology like never before. And the dividends of those investments will start to materialise in the next couple of years, bankers at a cards and payments conference in Dubai said this week. That will translate into more efficiency and cheaper transaction costs for consumers, they say.
"In the next three to five years, you are going to see a significant [technology] rollout among the banks that operate in the region with back office operations moving to the cloud," said Farhad Irani, the head of retail banking at Mashreq bank. "It's a fast-growing market, very high-tech market, very amenable to innovation. Banking and payments have a very exciting opportunity in that context in being able to wow consumers with solutions."
The push to digitise banking in the UAE came after the global financial crisis in 2008. Many lenders began to focus on consumer operations as big corporate clients struggled to pay old loans and could not take out new ones. The fierce competition has been a boon for consumers, who can now do most of their banking on smartphones.
The UAE, with a population of 9.2 million, has the highest usage of smartphones in the world with penetration rates at about 75 per cent, according to a recent Google study. And even though cash has been traditionally prized over cards in this part of the world, many traders and consumers are increasingly being won over by the ease of cards and digital payments.
In a region where personal relations are highly prized, banks have often prided themselves on the size of their branch networks and managers who are available to chat over a cup of tea. But increasingly, consumers have shown a preference to get their banking needs done remotely through the internet to avoid traffic, parking and queues.
And the banks themselves would much prefer that simple activities, such as changing an address or requesting a bank statement, be done online to free up staff to sell more products.
"Cash has been the traditional mode of payment in UAE due to its safe and secure environment but as the economy grows, the cost of cash to society is also increasing," said Kaizar Patla, the head of consumer assets at Abu Dhabi Commercial Bank. "To that effect, the Government of the UAE is investing heavily in adoption and implementation of electronic payments through the e-government initiative. This will further boost the economy and enhance financial inclusion."
Mashreq’s Mr Farhadi said the federal government’s support of efficient digital solutions has aided banks in their goal to make transactions hassle-free. He cited recent innovations such as direct debit to replace cheques, a unified payment gateway for debit, credit, ATM and e-commerce transactions, and a nationwide credit bureau as initiatives that will make banking cheaper and easier for consumers. Credit card signatures are also being phased out this year in favor of Pins, and regulations for digital signatures are being considered.
While digital currencies such as Bitcoin have not yet gone mainstream and have had legal setbacks, banks are trying to learn from them.
“Trust is very important when it comes to money,” said Mr Patla. “The traditional mode of payment by card offers works and is reliable and safer. There are also many systems around it to protect the consumer. Therefore, while banks can learn a lot from new digital currencies, it might take some time for new digital currencies to become viable solutions on their own.”
mkassem@thenational.ae
Follow us on Twitter @Ind_Insights