By Gillian Sarah Duncan | Special to Reach by Gulf News
Corporate banks across the world are facing tough competition due to declining revenues, rising regulatory costs and increased capital requirements. The UAE is no different. With more than 40 banks operating in the market, these financial institutions – which service companies, as opposed to individuals – must find new ways to differentiate themselves. So how can they stand out? And what will the winning bank of the future look like?
Corporate banks have traditionally been slower than their retail counterparts to adopt new technologies and processes. That is now changing as more corporate banks realise they must adapt in order to cater to their clients’ requirements.
“Banking has evolved a lot in the past two decades in this region,” says Vivek Uberoi, Senior Vice-President, Corporate & Investment Banking Group at Mashreq (pictured right). “Post-crisis we have a new era of banking and customer demands. Some banks have come a long way. Others are in the process. There are no quick answers, but there are a few inevitables.”
Specialisation is the future
Specialisation is one of the inevitables. He says corporate banks can no longer offer a bit of everything. They must now specialise in order to offer customers more value. “Corporate clients nowadays are increasingly sophisticated and require customised offerings.”
Mashreq pioneered this approach long ago by having the Contracting finance and Real Estate divisions. “The banking industry has acknowledged Mashreq’s expertise in these areas,” says Uberoi. “In 2015, we embarked upon a drive towards a specialist approach, making our relationship managers experts in their line of businesses. It’s been a success and Mashreq has been the first in the region.”
Mashreq's specialised contracting finance team enabled some of Dubai's well-known landmarks
Specialisation helps relationship managers gain a better understanding of a customer’s business and banking requirements to offer bespoke solutions, says Uberoi. These RM’s have industry knowledge and better understanding of the changing trends in the market. This also helps in effective risk assessment for the bank, he adds. “That is what is going to give Mashreq the edge. Going forward, our relationship managers will be advisers rather than just account managers. And this will distinguish the more successful banks from the others.”
As technology evolves, customers’ expectations about how they interact with the bank are changing. To meet demands, digitisation is another critically important area for corporate banks, say experts.
The effects of digitisation are far-reaching, affecting everything from how a bank interacts with its customers, to the way it processes things in the back end, and how it complies with the regulator, says Dr Saeeda Jaffar, Managing Director at Alvarez & Marsal in Dubai.
Digitisation is another critically important area for corporate banks
Banks that digitise efficiently and quickly will probably be the ones that will be able to outperform and get a much larger part of the pie, she says. “Others that don’t move as fast as they could have and should have will probably be left behind.”
Mashreq, which is celebrating its 50th anniversary this year, is one of the most active lenders in the UAE. It sees technology as a key area of innovation and is making huge investments in the field to differentiate itself.
“The new model emerging for the industry is being lean and mobile,” says Uberoi. “Our aim is to be a connected bank — integral to customers’ everyday lives and be the key financial services provider in their digital ecosystems.”
There is a dark side to digitisation. A new set of competitors have emerged as technology allows financial technology companies (fintechs) to tap into the most lucrative part of the value chain in corporate banking — origination and sales.
The services corporate banks offer are now becoming faster; thanks to new and streamlined processes. Transactions that used to take days and weeks are now completed in a matter of hours, says Dr Jaffar.
It is only going to improve going forward. Uberoi adds, “It’s going to be cheaper and it’s going to be far more convenient.”
One of the most essential ingredients to understanding customer needs and behavior is data. “Investment in data mining can open up new revenue streams for banks, helping them measure risk better, identify sales or cost-saving opportunities — and build new services,” says Uberoi.
Despite the challenges, the future for corporate banking looks good. Non-oil activity, including government spending on infrastructure in the UAE, and robust trade and financial services, is expected to support growth. The construction of major projects in Dubai in preparation for the 2020 World Expo is likely to contribute further.
Construction activity for Expo is expected to offer opportunities for corporate banks
“The UAE economy is expected to grow by 3.4 per cent in 2018 and 3.5 per cent thereafter, providing plenty of room for corporate banking business to grow,” adds Uberoi.
Speed of execution
In conclusion, it is agility that will help the business survive and thrive in turbulent times, says Uberoi.
“In the new world, size is not the only factor to determine the winner – speed and agility can make even a smaller player win the race,” he adds.