A brave new world of retail banking

As digital disruption gathers pace, the future of branch banking is at stake

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Conventional retail banking in branches will soon be a thing of the past. While there are no mass closures of branches yet, the transformation is slowly taking place worldwide. 
 
In Japan, Bank of Tokyo-Mitsubishi, one of the country’s mega banks, this year deployed multilingual robot tellers at its downtown Tokyo branches, a first step in automation. In the US, banks are setting up big drive-in branches with multifunctional automatic teller machines. In Africa, where most of the unbanked would have to spend a fortune to even get to the nearest bank branch, mobile banking applications are a huge success. In Europe, a large bank such as UniCredit  is trying to sell its loss-making retail units without substitution, cutting more than 18,000 jobs in the process. 
 
“Bank tellers will be the telegraph operators of the 21st century when we look back in 100 years — the most impacted job,” says Brett King, an Australian technology futurist and co-founder and CEO of Moven, a mobile banking start-up, in his blog. 
 
“The banking industry will experience more disruption in the next ten years than in the previous 300 years”.
So, how will banking look like in 2025? King believes there will be no more branches. “Banking is no longer somewhere you go but something you do,” he says.
 
Broken down for the UAE, this is probably hard to believe because banking in the Arab culture has always been a process involving personal contact, but most banks are increasingly digitalising their services and trying to develop new online and mobile tools. 
 
The Central Bank of the UAE is also designing a new regulatory framework that aims at fostering the development of digital payments.  Change is coming, but slowly. Mashreq, one of the more innovative banks, as early as two years ago launched its smart banking initiative to provide the E Cube branch concept that boasts features such as interactive screens, simulation tables for financial products and kiosks for video conferencing with customer consultants. The new branches were opened earlier this year.
 
Industry estimates show that banking and other financial service providers such as securities companies in Mena spent about $12.8 billion (Dh47.01 billion) on IT products and services in 2014, compared to a revenue of nearly $12.5 billion in the previous year. Other trends indicate that banks in the Gulf are investing in new software to transform their legacy systems to keep up with the rapid pace of the modern technologically driven market.
 
For example, Emirates NBD lately introduced services such as a Bluetooth-enabled mobile banking app, after earlier launching a money transfer service that enables an account holder at the bank to transfer money to another customer using mobile numbers instead of account details.
 
“These initiatives set new benchmarks for the industry by combining digital and physical to offer a truly distinct and seamless customer experience,” says Pedro Cardoso, Head of Multichannel and Customer Relationship Management at the bank. 
 
For King, bridging between physical and digital banking is just part of the transformation. “The biggest banks in the world in 2025 will be technology companies. Banks that grew by physical bank presence will have a real problem,” he says. “People will just don’t need branches any more. In 2020, more people will be banking on their mobile phones than have ever banked before, and that’s just five years away.”
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