Digital Banks
Image Credit: Gulf News

Dubai: Is it possible now to open a bank account — in just four minutes flat? And that, too, without leaving your home? Quick answer: Yes. This greatly simplified process will be the “new normal”.

Picture this in your mind: a bank you never have to visit, queues you never have to wait in, and paperwork that’s no longer necessary. The world has changed, and people know it. This trend is accelerating.

Given the speed and convenience of social media, people now expect that same experience with their banks — to transact in ways akin to a WhatsApp chat.

“The movement to, and now emphasis on, digital banking was already happening prior to the pandemic,” said Abdul Rahman Jaroudi, a UAE banker, told Gulf News. “But once the world entered the reality of extended periods of social distancing, stay-at-home orders and all that goes with them, digital banking was no longer a nicety. It’s a necessity”, said Jaroudi, Head Digital Transformation and Innovation, at Dubai-based Aafaq Islamic Finance (AIF), established in 2006 with a heavy push for digital.

The movement to, and now emphasis on, digital banking was already happening prior to the pandemic. But once the world entered the reality of extended periods of social distancing, stay-at-home orders and all that goes with them, digital banking was no longer a nicety. It’s a necessity.

- Abdul Rahman Jaroudi, Head Digital Transformation and Innovation, at Dubai-based Aafaq Islamic Finance (AIF)

Bank employees, too, know this fully well. Junie, 42, is one of them. After the banking back ops executive recovered from COVID in January, he returned to work with his team — all working from home — a gig he’s been doing since March 2020.

“We ourselves are bank customers,” said Junie. “Going to a branch or even an ATM machine for a simple transaction is a challenge these days. Why go there, when you can bank on your smartphone?”

Q: What is digital-only banking?

It is banking simplified, from your smartphone. No paperwork. It’s integrating digital technology into all areas of the money chain. More importantly, it also means an overhaul of the culture and behaviour in managing value — how it’s stored, shared and regulated.

In general, it’s changing the industry’s ways, from the sign up process to branch operations. In short, it’s challenging the Medici model of banking — the idea that a bank is a place where you go. Today, banks live in the “cloud”. Amid the global “fintech” scramble, it’s only bound to increase in velocity.

Q: How are banks adapting?

Experts say “fintech” is doing to banks what YouTube has done for TV. Faced with disruption, the industry must take the new reality in earnest.

Result: the banking tech stack is getting overhauled— $297 billion in bank IT budgets are earmarked this 2021, a 14% jump from 2018, according to Celent. Teams are getting restructured, with everyone now centred around “customer experience” — keeping clients happy. But in banking, “happy” is a big word, a moving target to constantly chase.

And the pandemic has only accelerated this trend. "We expect this phenomenon to stay," said Sacha Holderegger, Strategist, CIO European Equities at UBS Global Wealth Management.

Client needs have certainty changed. Many clients want to bank anywhere, anytime on whatever device and this in a seamless and cost-efficient way. Digital banks have a technology advantage here which results in lower cost of serving clients.

- Sacha Holderegger, Strategist, CIO European Equities at UBS Global Wealth Management

"Client needs have certainly changed," Holderegger told Gulf News. "Many clients want to bank anywhere, anytime on whatever device and this in a seamless and cost-efficient way. Digital banks have a technology advantage here which results in lower cost of serving cients."

Digital Banks
Image Credit: Gulf News

Q: What’s the digital banking experience like?

From experience, it starts with a simple-and-easy sign up. The user interface, with much bolder easy-to-read instructions on the smartphone walks you through the process — and in as few steps as possible, like:

  1. Download the app.
  2. Submit your details and ID scan (or picture).
  3. Take a snap of yourself, submit and you’re good to go.

Q: How soon can I use my digital bank facility?

After a quick sign-up, you get an SMS stating your debit card is on the way. At this point, the account remains pending. But only for a day, or less. The new account kicks or as soon as you get your card (usually next-day delivery, that’s how your identity gets verified, via ID and fingerprint scans using a device brought by the delivery guy).

And since it’s app-driven, you can use the account soon after the at-your-door sign-up. So now, instead of spending hours at a branch where a bank staff or manager sits down to establish a “relationship” with you (a process that may take hours), a face-to-face trip to the branch has been completely “truncated”.

Q: What are examples of UAE digital banks?

Some of UAE's mega-banks already have gone live with their digital banking spinoffs. For example, EmiratesNBD has launched Liv., its digital-only bank in 2017. These are the leading banking apps in the UAE. Liv., though operated and managed by Emirates NBD, is a mobile-only bank. It is also dubbed as the “fastest-growing bank” in the UAE, acquiring more customers monthly than any other bank.

In 2018, Asian Banker named it as the Best Digital Bank in the Middle East. Competition is intense. Digital banks offer customers “richer” experiences, via increased banking privileges and exclusive lifestyle treats.

Some digital bank sweeteners:

  • Full access to the banking platform
  • Instant digital account opening
  • Money transfers based on social media
  • Customisable goal-based savings accounts and games
  • Better interest rates on balances
  • Bill splitting
  • Curated and personalised content
  • Zero account maintenance fees
  • Free international transfers
  • Waiver of bank charges on international debit card spends
  • Priority customer support

Some also offer other perks: two-for-one cinema tickets, cashback on spends, free deliveries, free music subscription, double loyalty points, etc.

Q: Does the UAE have a strictly digital-only bank?

Yes. On Tuesday (April 13, 202), the UAE Central Bank granted the first licence for Al Maryah Community Bank, thus becoming the country’s first licensed digital-only bank. The new entity targets “gaps” — underserved individuals and small businesses as an all-digital bank, according to Tarek Ahmed Al Masoud, Chairman of Al Maryah Community Bank.

Q: Are there other applicants to form a digital-only bank in the country?

Yes. On Monday (April 12, 2021) Mohammed Alabbar said he’s chairing Zand, a new all-digital bank is awaiting “final regulatory approvals”. Another digital-only bank is expected to be launched by Abu Dhabi's ADQ, with initial capitalisation of Dh2 billion. It was reported in October 2020, that in the latter’s case, First Abu Dhabi Bank (FAB), the UAE’s largest bank, will transfer the licence it holds for FGB (First Gulf Bank) to ADQ, the Abu-Dhabi based investment holding company for Kizad free zone, AD Ports and other basiness entities. This licence will be used to create a digital-only bank headquartered in Abu Dhabi.


of consumers plan will make less use of bank branches — or stop using them altogether — post pandemic, according to Boston Consulting Group’s report “COVID-19 Set to Radically Accelerate Digital Transformation in the Retail Banking Industry"

Q: How are other countries doing it?

Various countries have embraced digital-only banks. For example, China gave WeBank a private bank licence in 2014. In the UK, Starling Bank received its banking licence in 2016. Elsewhere in Asia, digital banking licences had been issued in Hong Kong, Malaysia, and Taiwan. In 2018, Financial IT ranked the top 50 digital banks. In 2020, the Monetary Authority of Singapore (MAS) reportedly received 21 digital banking applications.

Trends in digital banking
Digital banking adoption continues to become even more popular in 2021, according to Gaurav Singh, CEO
and founder of chatbot company Key trends:

• Personalisation: Beyond customer account balances, consumers increasingly want access to information about their finances to make more well-read decisions about their money and economic goals.

• Real-time Payments: With social distancing and concerns about COVID-19 on everyone’s mind, contactless payment forms grew more popular this year. We consider that this trend is here to stay even after the approval of a COVID-19 vaccine.

• Automation:This enables banks to achieve operational agility and capture substantial cost efficiencies; it also helps them deliver the digital experiences that customers increasingly demand.

In the US and Europe, traditional banks have taken forays into digital-only set. At the same time, new entrants have sprung up — from phone companies partnering with retailers and ride-share companies, to gaming companies joining forces with supermarkets. Such solutions have greatly improved the life of people, but has caused disruption in the money trail.

Digital Banks
Image Credit: Gulf News

Q: How many people are using digital payments?

Recent years have witnessed a surge in the number of people handling digital payments, with the figure growing from 2.7 billion in 2017 to over 4.6 billion in 2020. In the next four years, the number of users in the digital payment segment is set to touch 6.4 billion.

For example, Gcash (owned by the telco Globe), recorded 1 trillion pesos ($20 billion) worth of transactions in the Philippines in 2020 — most of which addressed “unmet” demand, such as goods or taxi payments. People also use it to donate money. It runs on a crypto platform operated by the Ant Group, controlled by Alibaba’s Jack Ma.

Q: What are the top digital-only banks?

In China, WeBank (Tencent) and MYBank (Alibaba) are the Top 2 two digital banks. In the US, there’a Moven Bank, Simple Bank, GoBank, MoneyLion, BankMobile and Chime. They also known as “neobanks”. In terms of digital banks with the best (free) fees, there’s Ally Bank, Charles Schwab, Capital One, USAA and TD Bank.

Q: Where is the digital-only banking industry going?

It’s only set to grow. Its biggest draw is simplicity. Benefits include:

  1. Easy sign-up
  2. Quick balance check features through mobile platforms
  3. Photo-bill payments, snap a pic and the app pays your bill from your account.
  4. Access accounts exclusively through app, reset pins, order cards, etc.
  5. Easy expense management, through different hashtags like #expenses, #utilities and other spendings.
  6. Real-time data analytics

But to pull that simplicity, an inordinate amount of complexity runs behind-the-scenes. And competition is intense. UBS' Holderegger said: "Issues some of these 'neobanks' may have is to build up scale, client loyalty and high-adding value services. This was seen last year when leading neobanks witnessed a significant drop in the number of new app downloads in the wake of the COVID-19 pandemic.

"Also, most large traditional banks are significantly investing in their digital capabilities through own solutions, third-party solutions or joint ventures with technology leaders. It's a very competitive field."

• Statista data show that a lion’s share digital payment users are in China. The number of those using online payments has soared from 840 million to 1.3 billion in the mainland over the last three years — or about 30% of all users in the world.

• The US reached 305.7 million users in the digital payments segment in 2020, four times less than leading China. Statista 2020 FinTech Survey shows this number will rise to 353 million by 2024.

• Among Europeans, the use of digital payments is forecast to grow by 24% in the next few years, reaching 721.7 million by 2024.


users of digital payments in the US in 2020

Leading US digital banks

Top digital banks in the UAE
Image Credit: Gulf News

Q: What are the biggest challenges for digital-only banks?

While digital-only banks offer numerous benefits, there are potential pitfalls. Verloop's Singh says there are three basic challenges for the sector: security, customer satisfaction and scale.

• Security: Securing digital-only bank is of utmost concern, with risks from hackers, fraudsters and rogue actors faced by both bankers and clients.

Moreover, there’s also the challenge of curbing malpractices and adhering to regulatory requirements. Financial fraud accounts for the biggest chunk of Internet crime.

• Customer satisfaction: This is a concern. Digital-banking’s biggest attraction is no physical locations. Without a physical location, there is nowhere for the customer to turn to for help — other than the apps, a phone call. For many, that’s one downside. Making connections with clients so that is a top priority.

• Scaling: A key challenge for digital banking is scalability, say experts. Alibaba’s Jack Ma once said that to manage 10,000 online sign-ups, he only needs to computer servers (not branches).

Q: While lots of things have changed, what remained the same for banking?

Trust It never changes. So the entity with the most reliable, trustworthy digital service takes the pole position in terms of standing, quickly overtaking established or traditional brands. “It means that users already get the overall impression of a financial brand directly from the interaction with its digital service. If the experience of the digital solution isn't satisfactory, the user’s trust is affected,” said Jaroudi of Aafaq Islamic Finance (AIF), which is pushing its own digital platform.

• A key area digital-only banks focus on is real-time data analytics. If harnessed well, this offers a mountain of benefits. For one, it allows banking apps to warn users when purchases or spending habits are outside their budget. For two, customers can be notified them when geo-targeted discount deals, for example, are available.

• Millennials are driven to digital-only banks due to convenience and such added layers of customer experience, along with the faster velocity of transactions and cheaper fees, which make them want to stay.

• For existing banks, the new-age of digital-only banks are more agile. As virtually 100% cloud-based business, they leverage the expertise of remote workers, powered by leading edge digital networks, instead of stand-alone or quick-to-become obsolete on-premise technology.

Q: Will switching banks become the “new normal”, too?

People constantly look for solutions to ease their lives and provide positive emotions. Going forward, industry officials say “experiential banking” can only grow from here. “One of the reasons why the tech giants have the support of so many customers is their ability to provide value and form an emotional connection. This could become a blind spot that financial companies aren't aware of,” AIF’s Jaroudi.

“Open banking, makes switching easier than ever before, as the number of user-centered alternatives rises in the market. In the digital age, customers are harder to impress and are less forgiving. Only one case of bad product experience is enough to damage the way a brand is viewed in the eyes of the customers — and switch to another one.”

• “Cloud banking” (no physical presence means less cost) is the new name of the game, which benefits both banker and clients.

• As a result, banks may now charge lower fees, and make more money per client. There’s a downside to this, for both clients and banks: Services are limited to simple banking like checking/debit and savings accounts.

Q: What do digital banks and blockchain have in common?

A crypto-powered global economy seems inevitable. Blockchain, the technological wizardry behind cryptocurrencies, is now the main engine of the biggest digital finance brands. Digital-only banks are, by definition, “crypto-natives”, listing the tokens that underlie the block-chains. Most of the leading digital banks are partnering with block-chain technology like Ripple, Ethereum, Bitcoin, and other “alt-coins”.

Stock Blockchain
Blockchain Image Credit: Shutterstock

Q: Is digital banking the “new normal”?

Yes. And it's here to stay. Keeping customers happy has been and will always be, the name of the game. With digital, the source of happy hormones serotonin has moved to the cloud, instead of buildings. This is easier said than done, though.

One study shows 77% of bank customers feel that their bank's performance falls short on their expectations. Today, most banks are left with no other choice — adapt, or turn into a Dodo.

“The new normal of banking,” states a Financial Brand report, “is quickly moving from branch-heavy, product-centric organisations with legacy technologies and cultures — to consumer-centric organisations, with more personalised solutions…”

Q: Is it here to stay, or it’s Just a fad?

Digital Banking is definitely the way forward. Branch banking has historically performed a central role in acquiring fresh customers and nurturing solid relationships with existing customers. But COVID-19, with the social-distancing measures required to keep populations safe, has caused a sharp decline in branch traffic, a design that may linger for several months—or even years.

According to a new report by; 50% of consumers in the Middle East, India and South-East Asia are interacting with banks through mobile apps since the Covid-19 outbreak, compared to 32% in 2018. Technologies such as artificial intelligence and machine learning help banks and other financial institutions automate services quickly and address customer queries more efficiently during the pandemic.

Q: What are the upsides/downsides?

Definitely, there are pros and cons when technology evolves. Singh points to a number of upsides: to save stress and time where the customer can conduct banking operations without going to the physical bank, where one can stay at home, saving their time and effort. One downside: fraud. Reducing dependency on paper forms, as all transactions done electronically, while reducing administrative cost, need a robust in-house and regulatory oversight in order to keep customer's trust.

"The digital age has opened more possibilities for development and growth than ever before," said Singh. "The banks are challenged to adopt a fresh mindset, business strategy and innovative technologies to take their services to the next level. Success in handling these challenges relies on customer trust and loyalty."

The concept of banking is thought to have begun in ancient Assyria and Babylonia with merchants offering loans of grain as collateral — within a barter system.

In the history of banking, a number of banking dynasties — notably, the Medicis, the Fuggers, the Welsers, the Berenbergs, and the Rothschilds — have played a central role over many centuries. The oldest existing retail bank is Banca Monte dei Paschi di Siena (founded in 1472), while the oldest existing merchant bank is Berenberg Bank (founded in 1590).

Q: What is the future of digital-only?

Digital banks, especially digital-only, must blaze their own path to stay relevant and grow. As competition intensifies, the technology behind it presents increasing complexity.

“We are already used to desktop, mobile and wearable (Apple Watch) products. But these are nothing compared to what the future holds,” says Jaroudi. “Conversational services, IoT (Internet of Things), VR / AR services (virtual and augmented reality, e.g. Oculus), robots and neuro services are expected to become a part of our daily routines in the near future.” In the digital banking space, each entity will no bout jostle for their place.

Q: What happens to me as a consumer?

As a kid, I remember spending almost an ENTIRE DAY with my mom at a bank. That’s one day — for one bank transaction at a Philippine bank branch in my province some years ago. Today, people, won’t put up with that, knowing they have better options.