Dubai: As digitisation of banking and financial services sector gathers momentum across the world, in the Middle East and North Africa (Mena) region, the UAE banks have taken the lead in adopting digital solutions according to a recent study by Al Masah Capital.

Bankers and analysts say digital initiatives will be the most important factor in remaining competitive in a market that is fast embracing technology.

“The UAE banking sector has joined the global trend of technology transformation, digitisation and innovation that is sweeping financial services sectors around the world. Customers in the UAE are fast adopting digital banking services. In many cases customers are demanding more digital solutions that brings major cost savings to banks and convenience to customers,” said Abdul Aziz Al Ghurair, CEO of Mashreq Bank and Chairman of the UAE Banks Federation.

A number of banks have already announced digital banking initiatives, ranging from separate digital-only banking platforms to strengthening of existing mobile banking services, rationalising branch networks, and refocusing staff on value-added services rather than repetitive and less-profitable operations.

Emirates NBD (ENBD), one of the leading banks in the region has committed Dh1 billion for digital transformation. Banks such as Mashreq and Commercial Bank of Dubai (CBD) too have been early adopters of digital transformation. Most investments involve adoption of digital and mobile technologies, launch of digital only banks and making existing digital service delivery channels more useful and customer friendly.

Analysts say pressure is mounting on regional banking and financial institutions to accelerate the adoption and digitisation of processes as the demand for cutting-edge online banking from millennial consumers continue to rise.

In order to remain competitive, swift response to the evolving consumer needs is paramount as more and more customers are now expecting their respective banks to be at the forefront of effective and efficient technological transformations.

“Unprecedented disruption is steadily engulfing the regional banking and financial services space with the private sector, governments, and individuals realigning their inward and outward operations in line with the day-to-day needs of the customer,” said Shailesh Dash, chief executive officer of Al Masah Capital.

UAE’s leads

The UAE has arguably the most advanced digital technology infrastructure within the GCC. UAE’s government has been keen to develop all required digital infrastructure through substantial spending and attracting private investments. This has strategically positioned the country on the path to becoming one of the most digitally advanced countries in the world.

Most of the leading banks in the country have witnessing an upward tick in cost to income ratios despite significant reduction achieved in operating costs during the last two years. Analysts attribute the uptick in costs to investments in digitisation.

Over the past few years, UAE has witnessed a significant digital transformation and is gradually progressing towards becoming one of the most digitally advanced countries in the world. The government is majorly focusing to develop all required digital infrastructure through substantial spending and attracting private investments. UAE offers promising opportunities for digital banking which can be gauged by availability of digital infrastructure and customer’s willingness to switch to digital space.

According to We Are Social 2018 report, the UAE is ranked among the top nations in terms of internet users, social media users, mobile subscriptions, digital optimism and penetration of mobile banking. The recent data substantiates the country’s potential for digital banking services and is expected to become a top market for digital banking service providers.

Banks in the UAE are responding to the digital shift in consumer preference by stepping up their investment in digital innovation, focusing especially on improving their mobile banking security and user experience. Resultantly, consumers in the UAE have started benefiting from access to the latest in banking technology, ranging from mobile apps to augmented reality, and contactless payments. UAE banks are also increasingly using advanced analytics to improve their risk assessment and drive revenue, while the concept of ‘open banking’, which refers to a connected ecosystem of financial services that allows banks to securely and rapidly enhance their digital offerings, is also gaining ground in the UAE.

The UAE is also fast emerging as the start-up hub for the regional financial sector, while Dubai and Abu Dhabi are the most favoured destination for Fintech firms owing to the availability of an advanced technological infrastructure. There are over 80 Fintech firms in the region, of which 30 per cent are based in the UAE.