Are UAE banking customers ready for robo-advisors and Gen AI support services?

We are already in 2024 - and just a year from the quarter-way mark of this century. A slowing global economy along with a divergent economic landscape is challenging the banking industry’s ability to generate income and manage costs.

Bank customers are becoming more demanding, technology is evolving exponentially, and fintechs are disrupting the historical status quo of the industry. What then can we expect to be the trends for banking in 2024, especially in our region?

Here are, in my view, the top few trends.

Frictionless service

We are seeing a return to good old-fashioned service. Rapid digitisation has made banking increasingly faceless and impersonal. It is time for banks to forge deeper customer relationships and instil a greater sense of financial empowerment.

Personalization will be key to demonstrating lifetime value. This is where generative AI, open data and advanced analytics will play a key part. The battle will be won by banks - and neo-banks - that can provide frictionless processes and curate tailored experiences using customer data.

As my friend Brett King says, either banks remove friction, or someone else will.

Instant credit

Banks will use decision management tools to provide instant credit to customers. Today, 3 out of 4 personal loans granted by Emirates NBD are processed instantly through a computer-driven algorithm without any human intervention.

My belief is that competitive pressures will push most banks in the region to move to instant loans and cards that are increasingly fulfilled online or through a mobile app. A related trend is what is called ‘embedded finance’ where non-financial companies offer integrated payment solutions to their consumers.

So, an Ikea or Tesla will offer you financing seamlessly when you buy that sofa or dream car. In this scenario, consumers may fulfil all their financial services needs with the retailer they favour, without the need to be loyal to their bank.

Self-service investing

There is an accelerating move from a ‘relationship manager’ driven model to a robo-advisory model in managing the wealth of mass affluent customers. Over a trillion dollars of wealth in the US is already managed by robots, and this is expected to double by 2027.

While few banks in the region have launched such a service, the advantages of robo-advisory are many - impartial and unbiased advice, lower fees and 24x7 service which a RM cannot provide.

Adoption will scale up with the use of data, AI and gamification. This is especially relevant in a decade that will see the biggest inter-generational wealth transfer in the history of humanity. Robo-advisors like Wealthfront in the US, Nutmeg in UK and Sarwa in UAE are driving more and more customers to self-service investing.

Open banking

This year will see the emergence of an ‘open banking’ framework in the region in the lines of what we have seen in UK and Europe. Open banking is simply the sharing of data via APIs between banks and third-party service providers, notably fintechs, who can pitch products to customers.

While there are lingering concerns on data privacy, the advantages for consumers are many. Everyday banking becomes easier, financial services become more accessible and consumers get better value for money.

Embedded finance and open banking ecosystems will define the future of personal financial services : witness the rise of super-apps like WeChat in China, Paytm in India and Careem in UAE.

Going cashless, going green

We are rapidly moving to a cashless society. The instant payments platform ‘Aani’ from UAE Central Bank will soon go fully functional giving consumers the ability to transfer money using just phone numbers, and enable businesses to accept payments using QR codes.

A UAE domestic card scheme, independent of Visa and Mastercard, is expected to be launched this year. Digital wallets are fast replacing plastic cards, and crypto-currency wallets are not far behind.

Customers are willing to pay more for ESG-linked products, and banks will use green finance as a key differentiator. Wio, the neo-bank, has just launched a carbon calculator for its customers to measure the impact of their transactions.

In summary, this will be a very exciting year.

Banking is today facing a future marked by fundamental restructuring. Banks that successfully manage this transition will become bigger and more profitable while leading to a value creation opportunity, according to a recent McKinsey study, of up to $20 trillion globally.

Truly, a happy new year for banking.