Financial institutions aren’t doing enough to meet the needs of millennials in the UAE despite their growing spending power, says a new report by payments technology firm Visa.
Millennials, as a large and increasingly affluent group, are the fastest growing segment within the region, and in the UAE and Saudi Arabia, tend to be higher spenders than their global peers, the report said. In terms of their respective affluence, it is estimated that millennials in the UAE will generate $40,000 in average annual gross income by 2019.
Additionally, the group is driving the surge in e-commerce spending in the GCC, which increased by 25 per cent in 2015, according to the study, which interviewed more than 1,000 millennials (18-34 years old) and non-millennials (34+ years old) across Saudi Arabia and the UAE.
While more than 50 per cent of millennials in the UAE and Saudi Arabia prefer to bank digitally, they are frustrated by the user experience. Key service gaps in the UAE are the inability to monitor card transactions, payment alerts and a lack of personalisation.
Millennials in Saudi Arabia are unhappy with personalisation options, as well as the overall user experience and a lack of real-time updates, the report said.
“To adapt to the changing preferences of millennials, banks, issuers and merchants should adopt a consumer-centric business model focused on personalised services,” says Kriti Makker, of Visa Performance Solutions, who undertook the study on behalf of Visa.
She added that financial institutions should develop engaging digital communities around the brand, work on seamless integration of the customer experience across various touch points, and accurately target communication with customers.
“Significant potential exists to fill the gap between what new-generation consumers want and what they receive,” she says. “Those in the digital payments and banking industries need to increase their value propositions and create a seamless and integrated experience in order to satisfy the end consumer. A customer-centric and multi-channel approach is the only way forward to address an evolving tech-savvy market.”
Millennials will continue to drive the trend towards increased card usage over the medium-term, and Visa predicts that by 2018 credit cards will account for 65 per cent of non-cash retail payment volumes by all UAE residents, while in Saudi Arabia debit cards will account for more than 70 per cent.
The decision to choose one payment proposition over another is heavily influenced by the rewards and benefits associated with specific products, with millennials in Saudi Arabia particularly valuing travel-related benefits, while travel benefits, discounts and cashback are motivating factors in the UAE.
Despite this, the study identified a significant satisfaction gap between what millennials expect from their payment cards versus what they currently get. In particular, UAE millennials are dissatisfied with their travel miles and cashback offerings, while millennials in Saudi Arabia want more travel miles in addition to better voucher options.
“With millennials in the UAE and Saudi Arabia having spending power two and five times that of their Middle East peers, there is significant potential for banks, issuers and merchants with the right business models,” says Makker.
“Visa’s research shows millennials in these countries to be highly sophisticated consumers who have embedded technology into their lives, which has important commercial implications for areas like the development of loyalty programmes and the targeting of advertisements.”