The new Hi Tech Emirates NBD Emirates Towers Branch
The new Hi Tech Emirates NBD Emirates Towers Branch. According to Bloomberg Intelligence Emirates NBD (ENBD) is ahead of its Gulf peers in terms of digital transformation. Image Credit: Antonin Kelian Kallouche/Gulf News archives

Dubai: Large UAE banks are building digital functionality to compete in a maturing market with rapidly evolving customer needs, according to a recent analysis by Bloomberg Intelligence.

Published to coincide with Innovation Month, the analysis states that innovation is key to gaining market share and building flexible, cost-effective activities, creating fintech-growth catalysts. High IT spending may spur a consolidation of smaller banks as larger peers revamp legacy systems, merge and emerge stronger.

According to the analysis Emirates NBD (ENBD) is ahead of its Gulf peers in terms of digital transformation. It was the first to move its core banking operations to an application program interface (API) based infrastructure, underpinned by a Dh1 billion ($272.3 million) investment budget.

ENBD’s application programming interface (API) Sandbox, launched in November 2018, provides a controlled environment where fintech companies can test solutions that can potentially be integrated into the bank’s core functions. Peers are likely to follow suit, or would be subject to policy action similar to Europe’s Payment Services Directive, which mandates open-banking access to third-party businesses, including fintech companies. This could pressure lenders to modernize legacy systems to keep up with ENBD.

Digitizing the back office and enabling API infrastructure enables a response to emerging needs via innovative offerings. Smaller banks are likely to struggle to compete with larger peers investing heavily, which should be a driver of consolidation.

In post-merger times, the analysis states that digital catch-up is key. Al Hilal Bank’s integration with ADCB gives it a full digital Islamic banking offering. With the addition of UNB ahead of schedule, ADCB is likely to focus on innovation and further efficiencies to be competitive and catch up with peers, following the completion of its last phase of integration.