Banks run risk of missing digital wave in UAE!

We live in a world that is fast changing, especially with individual behaviour impacted significantly by the three vectors of change — digitalisation, mobilisation and the cloud.

This is manifest by everything around us becoming connected to the web, computers morphing into wearable devices, mobile health and diagnosis online, 3D printing, instant delivery cycles, mobile payment, digital currencies, electric cars and e-learning. All this empower the individual and the enterprise with freedom to control their day, their destiny.

But perhaps an even more profound change is playing out before us in the global payments space, once the preserve of the banks we have grown to depend on. Payment as we know it is witnessing challenge with non bank entities beginning to own significant chunks of the value chain, with mobile wallets and internet based giants taking an aggressive share via the delivery of a clear promise that is punctuated with simplicity, security and convenience for the end consumer.

The global payments business represents a mammoth $1.4 trillion (Dh5.14 trillion) in annual revenue growing at an annual clip of 18 per cent and representing almost 30 per cent of any major bank’s revenue pool. Banks are under siege today with giant internet companies, established telecom companies and global handset manufacturers all aiming to grab a share if not control this lucrative opportunity. Ownership of the customer that delivers the golden goose is up for grabs. Loyalties are fleeting and the early adapter no longer is the 25-year-old yuppie.

The need for convenience, control and a cheaper solution is universal and cuts across all age groups, genders and nationalities.

Take Apple Inc, the company we admire and love for example. Did you know that the second biggest business relates to iTunes, which boasts today of almost a billion customers with complete payment records submitted and generating the company almost $5 billion in revenues per quarter. If this business were to stand alone, it would probably have as high a capitalisation in the top 10 bank range. Apple could well become the dominant payment processor and services provider globally given that it has developed the appropriate eco system and has a truly engaged customer base. Bankers are both excited and worried about how iTouch and iBeacon from Apple is changing the customer experience. With lower switching costs and an integrated eco system, this company has a distinct advantage.

What one must appreciate in parallel is the fact that the revolution in payments today is being fuelled with a new development — one that is less than 2 years old, namely the smart phone. Almost 700 million new smart phones will enter the market this year globally and will add to the 1.5 billion already in circulation — growing at 2.5 times the rate of growth of PCs and tablets combined. This computer in your hand changes the game completely.

Here in the UAE the situation gets even more alarming for banks with the almost every individual owning one. We know that the rate of internet and social media usage — and soon e-commerce — in the UAE has a top five ranking worldwide. The revolution is here and recent surveys conducted suggest that the digital-savvy consumer (generation Y) is increasingly dissatisfied with the digital and mobile service delivered by the bank!

There are many reasons why we believe the most rapid change in customer behaviour with regards to payments and general banking will play out faster in the UAE. Key factors include a growing and quality target market, 220 per cent mobile phone penetration, 4G infrastructure and wifi increasingly available, huge government sponsorship — Smart City, smart payment gateway, smart wallet, smart bureau etc, plus 2.5 million plastic owners and 60,000 points of sale growing 15 per cent annually!

Banks stand to lose almost 40 per cent of their revenues in the next three to five years if they do not embrace change and move to a true “mobile first” strategy. It is imperative that such strategy be grounded on the three pillars of providing customers with a wow experience, trust/transparency and ubiquity in use case.

Mashreq is a bank where we live the future and embrace change. Experienced leadership and the decades of fine-tuning an execution DNA like none other have allowed us to bring to the consumer in the UAE a myriad of digital experiences that keep up with the times. To name a few we have launched the unique E cube experience at our top 12 branches where customers can “gammify” their banking experience — paperless, open loop and with connectivity to their mobile devices. We have launched the unique ‘Tap and Go’ functionality that allows a customers cell phone to replace the plastic card with no signature no paper and with added security protocols built in to the engagement.

We have launched a true innovation in remote GPS and wifi-enabled card acceptance capability termed Pay Port. Our loyalty programme Salaam is the only programme that awards customers for overall bank engagement and allows the customer to enjoy reward redemption at point of sale, within the check-out flow.

A novel idea in creating a closed loop property and SME market within the customer base of Mashreq, enabling quality buy and sell trades of a digital platform, will be launched later this month. In the near future Mashreq will launch a whole new experience on the marketing front.

Why do we invest so much time and energy in the digital enterprise? The answer is in two apt phrases: “Wow the experience and own the relationship” and “own the payment and own the customer”!

— The writer is the executive vice-president & head of the Retail Banking Group at Mashreq.