Dubai: Digitalisation of banking services can be traced back to the advent of ATMs [Automated Teller Machines] and payment cards from the 1960s. As the internet emerged in 1980s, banks began offering internet-based services.
In the past two decades, the mobile phone revolution has unleashed new breed of financial technology providers disrupting the banking industry using mobile app based technologies.
The arrival of new banking solutions based on mobile apps and the potential of non-banking players such as financial technology companies (Fintecs) competing for financial services businesses made it imperative on traditional banks to quickly opt for digital transformation.
Digital transformation in UAE’s banking sector
The UAE has been keeping pace with global developments in digitalisation of banking. This started with the introduction of ATMs and later internet banking and mobile banking. Now, existing banks propose digital-only solutions; and lately non-bank entrants are joining the digital banking fray.
UAE banks began realising the challenges and opportunities of financial technology revolution that began sweeping across the industry in the second half of the previous decade prompting a number of banks to launch digital banking initiatives, ranging from separate digital-only banking platforms to strengthening of existing mobile banking platforms, rationalising branch based services, and refocusing staff on value-added services rather than repetitive and less-profitable branch operations.
The emergence of Fintech (financial technology) or new technology that seeks to improve and automate the delivery and use of financial services posed and existential threat to the brick and mortar model of banking as new generation technology companies began to deliver these services on secure digital platforms at lower costs.
We will continue to disrupt industry paradigms to offer customers lifestyle-based intuitive banking experiences and are well positioned to remain as the bank of choice for the younger generation in the region.
Leading UAE banks such as Emirates NBD, Mashreq and Commercial Bank of Dubai were the first among the few who committed large resources for digital transformation of their banking models and took the plunge to offer digital only banks in the UAE starting 2016.
Emirates NBD’s Liv., Mashreq’s Neo and CBD’s CBD.Now were all digital banking propositions focused on branchless delivery of banking services to their customers through mobile banking technology.
“Launched in 2017 in line with UAE’s strategic objectives of creating a smart innovation-driven economy, Liv. continues to be the fastest growing retail bank in the country, with over 500,000 customers now,” said Suvo Sarkar, Senior Executive Vice President & Group Head - Retail Banking & Wealth Management at Emirates NBD.
Liv. offers a wide range of millennial-friendly products and services to customers including transactional and goal based savings accounts, a customizable digital credit card, insurance, the Liv. Prime premium subscription program as well as the Liv. Young banking solution for kids, which have helped it gain strong customer advocacy and acceptance.
Most digital banks have very advanced security features. For example Liv, uses multi-factor authentication, biometrics and various cyber-security protocols that leverage Emirates NBD’s robust infrastructure, providing customers with a safe and secure banking platform.
Given the strong market acceptance and overwhelming customer response for Liv. in the UAE since its rollout, the digital only bank was also expanded to the Kingdom of Saudi Arabia (KSA), where it is scaling up its operations and has now close to a hundred thousand customers.
“We will continue to disrupt industry paradigms to offer customers lifestyle-based intuitive banking experiences and are well positioned to remain as the bank of choice for the younger generation in the region,” said Sarkar.
Mashreq has been one of the first banks in the region to opt for complete digitalization. Looking back, the bank has come a long way in digital transformation from the brick-and-mortar model to a predominantly digital model.
“Going digital is an existential choice for the banking sector. If we didn’t move in that direction we will be out of the game. Brick-and-mortar model is a thing of the past. Digital is the future,” Ahmed Abdelaal, Group CEO, Mashreq.
Abdelaal sees digital solutions are new norms as the new generation has no tolerance for paper-based documents or wet signatures. In addressing the new customer needs, he said it is imperative to build platforms that speaks their language and the future of banking is all about creating experiences rather than creating new products.
Going digital is an existential choice for the banking sector. If we didn’t move in that direction we will be out of the game. Brick-and-mortar model is a thing of the past. Digital is the future.
In the last 12-18 months the customer response to Neo, both in terms of digital acquisition and digital engagement, has been tremendous. The Neo customer base has grown by over 60 per cent in the last 12 months with 100 per cent of all Neo customers are acquired digitally, of this, 95 per cent are acquired via the Neo Mobile App. Customer response to new digital initiatives like “Face Biometric” based onboarding or “Neo Credit” have received tremendous response and 100 per cent of customer acquisition for Neo is done via “Face Biometric”
The huge cost benefits of digitalized services combined with wider and cheaper market access prompted most UAE banks to embrace digital transformation leading to rapid rationalization of their branch networks and redeployment of staff to other productive tasks. High internet penetration and high levels of digital literacy has helped the UAE banks to adopt digital transformation and many to launch digital banking offerings.
Dubai Islamic Bank (DIB) and Abu Dhabi Islamic Bank (ADIB), two leading Islamic financial institutions in the country too are racing in the direction of a digital future.
We target a wider spectrum of digitally savvy customers who we call a ‘connected generation'. Our target audience consist of all those who are in the millennial age and millennial mindset, making our digital offering one of the most inclusive and simple digital banking offering.
DIB’s recently launched digital only platform Rabbit targets all digitally savvy customers such as digital ‘migrants’ born between 1960–1994, digital ‘natives’ (born between 1995-2010) and those born in the digital age (2010 and later).
“We target a wider spectrum of digitally savvy customers who we call a ‘connected generation'. Our target audience consist of all those who are in the millennial age and millennial mindset, making our digital offering one of the most inclusive and simple digital banking offering,” said Dr. Adnan Chilwan, Group CEO at Dubai Islamic Bank.
Rabbit will initially offer some of the more basic banking services ranging from account opening, fund transfers and payment solutions with the scope for adding credit and debit card services in the near future. The app is open to all UAE residents.
“Our objective is to simplify banking services through this app by making it customer-friendly, agile and transparent,” said Dr. Chilwan.
ADIB has been making big strides in digital transformation during the past few years both in retail and corporate banking. In terms of retail services, digital money transfers and customer profile updates have witnessed an 88 per cent and 40 per cent rise, while cash withdrawals and cheque deposits through branches have declined 8 per cent and 6 per cent with more than 95 per cent of these services taking place online, marking a growing usage in digital payments.
Digital adoption in corporate banking has also realised a major surge, with Wholesale Banking Group’s daily transaction clocking a high of 21,000 in June 2021, representing a 95 per cent increase over the same period last year.
Realising the great potential of digital only offerings, ADIB in last August launched Amwali the world’s first Islamic digital bank targeted at youth in the age group of 8 to 18.
“ADIB has been building up its youth banking segment over the last decade. We now have over 100,000 customers under the age of 24 banking with us and our goal is to expand youth access to personalised and safe financial products and services as well as to empower them to establish a disciplined culture with regards to managing their finances,” said Philip King, global head of Retail Banking, at ADIB.
Digital banking adoption in the UAE: Acceptance gaining traction
Digitalisation of banking services have seen rapid surge in customer acceptance across the UAE. Bankers say while the younger generation customers were quick to accept digital offerings and digital only platforms, the older generation though skeptical in the beginning are now fast adapting.
I am an ADCB banking customer. I was perhaps amongst the first to adopt the digital banking service that ADCB had launched many years ago. Ever since, I have only had to visit the bank only once when I was changing the nature of my bank account.
“My digital banking experience in Dubai has been a mixed bag. On one hand, there are platforms like Liv by ENBD that eliminate the need to visit a bank entirely while on the other hand there are portals like the Bank of Baroda online banking platform that really need major updating,” said Deep Ruparelia, Dubai-based entrepreneur.
“To be very honest, I have not had a lot of offline banking experience here in the UAE except in Bank of Baroda where I hold my company account. My personal banking has been online from day one. This has been really convenient except for one circumstance where everyone was locked out of their Liv accounts for a day or two. I was holding all of my savings in the account and couldn't access it. They don't have a contact number where you can talk to someone and ENBD branch will not answer any questions about Liv. A human conversation would have been very reassuring in that particular moment,” he said.
"I am an ADCB banking customer. I was perhaps amongst the first to adopt the digital banking service that ADCB had launched many years ago. Ever since, I have only had to visit the bank only once when I was changing the nature of my bank account. Everything else, inclduding, my day to day banking, money or wire transfer, issuing DD's etc. has been done using their application. The user experience is simply excellent and getting support whenever necessary has always been prompt," said Akash Pal, CEO, Eulify LLC, HR and Channel Engagement Platform.
In my experience as a digital banking user, it is now easier than ever to open a bank account or get real-time assistance from my bank with the click of a button. It's not just about having access to help 24 hours a day, but also about having an ease of access to a wide range of products, personalized services, and most importantly security of data that is provided.
Simple processes involved in account opening, easy access to the account and ease of doing secure transactions in privacy are some of the key features that are making digital banking popular among UAE’s bank customers.
“In my experience as a digital banking user, it is now easier than ever to open a bank account or get real-time assistance from my bank with the click of a button. It's not just about having access to help 24 hours a day, but also about having an ease of access to a wide range of products, personalized services, and most importantly security of data that is provided. All these services have made banking so simple and convenient that there is no longer any need to travel to the bank to complete tedious paperwork or wait in long queues,” said Sanjana Krishnamani, Dubai-based expat.
From my experience with digital banks, they have low to no fees, better interest rates, have better budgeting features, and are generally easier to use. On the other hand, they have no physical branches, fewer financial products, and often fewer ATMs and customer service that isn’t as developed as their traditional brick-and-mortar counterparts.
Lower costs of operating an account and better return on deposits are attracting a lot of new customers to digital banks.
“From my experience with digital banks, they have low to no fees, better interest rates, have better budgeting features, and are generally easier to use. On the other hand, they have no physical branches, fewer financial products, and often fewer ATMs and customer service that isn’t as developed as their traditional brick-and-mortar counterparts. However, I personally prefer digital banks simply because of convenience,” said Ebin Wilson, a lead financial analyst at a global tech firm.
While sheer convenience of accessing all services online, customers say it saves a lot of time. “Digital banking is a life saver for me. For a few years now I have been doing every bank transaction digitally, to the point where it’s even a pain for when I need hard cash. From paying retailers, bills and even peer-to-peer (P2P) service transfer, I prefer doing them online," said Varun Joshi, a Dubai-based PR professional.
“Efficiency in banking transactions is perhaps more important to me than anything else – and digital banks have ensured that for me. I remember the queues, the time wasted standing in line and the inconvenient opening times of a traditional bank, making it effectively impossible for people who worked full-time to actually go there anyway, unless they take time off work. Digital banks have solved this dilemma for me to a considerable extent,” said Shanu Thomas, a corporate lawyer at a research and advisory firm.
I remember the queues, the time wasted standing in line and the inconvenient opening times of a traditional bank, making it effectively impossible for people who worked full-time to actually go there anyway, unless they take time off work. Digital banks have solved this dilemma for me to a considerable extent.
What is digital banking?
Digital banking is the digitization of every level, from front- to back-end, of banking. This means that digital banks rely on artificial intelligence to automate back-end operations such as administrative tasks and data processing—which in turn alleviates pressure put on employees to complete day-to-day tasks.
Not only do digital banks allow users to make account deposits and transfers remotely; but they also provide them with the opportunity to more easily apply for loans and access personalised money management services including overseas transfers and investments in various asset classes such as stocks, gold, mutual funds and even crypto assets.
Digital banking involves the digitization of all traditional banking products, processes and activities to serve customers through online channels such as obtaining bank statements, cash withdrawals, funds transfers, checking/savings account management, opening deposit accounts, loan management, bill payments, cheques management and transaction records monitoring.
With digital banking, all bank branch services are available 24/7 on mobile phones, computers and compatible smart devices. Digital banking software makes all traditional services easier to access, understand and manage.
What are the differences of online banking, digital banking and mobile banking?
Although these terms often used as interchangeable, there are fundamental differences.
Largely refers to transactional functions offered by traditional banks to their on their core banking system through internet. Capability is limited to some of the basic banking functions such as account access, management, fund transfers and access to some limited banking services such as online application for loan and investment products.
Digital banking systems are much more flexible and allow banks to add and expand features much faster than traditional systems using the latest banking technologies including distributed ledger (blochain) technology to automate a number of functions ranging from customer and multiple counterparty verifications.
Digital banking relies on high-level process automation, web-based services and APIs [Application Programming Interface] which is a software intermediary that allows two applications to talk to each other. These new technologies provide banks and their customers with high levels of cost efficiency, security and flexibility. In digital banking, the customer journey is fully digital, automated and are supported by real time data and analytics.
Although digital banking is delivered on mobile phones and other mobile devices like the digital banking propositions, it is not one and the same as digital banking.
Mobile banking can be defined as a service provided by an existing bank to its customers enabling them to perform transactions via their mobile devices, without the need to visit a bank branch.
Although delivered through mobile devices, the scope of digital banking is much wider as these employ real time data
Digital banking has revolutionized the speed of banking services using the latest in information technology and communications married to blockchain technology. The entire customer journey in these two types of banking are totally different
▶ Account opening
In the traditional model customer has to visit a branch, fill forms, hand over physical documents to complete the KYC [know your customer] requirements. Once the documentation is completed it needs to be approved by the bank in compliance with the banking rules.
In digital banking all the onboarding process such as filling the applications and uploading the documents required for KYC verification and compliance checks are can be done online. Accounts can be opened almost instantly. The ‘Customer Journey’ from opening an account to operating it in digital banking is completely digital.
In traditional banking most banking transactions required the customer to visit bank branches and take the assistance of a staff to process transactions ranging from cash withdrawals, deposits, third-party payments, change of personal data such address and phone number.
In digital banking all these can be done using smart phones, computers, digital kiosks and ATM machines.
▶ Customer support
While the online customer is committed to digital support, the traditional customer uses the bank offices to interact with the bank. The main advantage of online banking is its availability 24/7, making the traditional customer more limited in time and space
▶ Ease of access
Digital banking has enable customers to use multiple devices to access banking services. While in the digital format customers can, for example, request a loan from a computer or tablet, the traditional customer will have to do so in the office.
Tracking the account
In traditional banking clients consult the balance, the history or the transfers through the cashiers of their cards, while in digital banking they can consult their data at any time with just a couple of clicks, as well as having the possibility of Download the operations.
Digital banking offers higher level of transparency and less fine print when it comes to carrying out procedures. The fact of contracting services through the Internet, requires that the conditions and contracts are on the web or mobile application and, at the same time, are more clear and concise than a traditional bank office, so that the user does not have the need to use an office or call a phone number.
▶ Service delivery
The digital banking does not have schedules, that is to say, 24 hours 7 days a week, since all the procedures are carried out through Internet, there is no schedule to do them.
Digital banking is highly cost effective for banks and customers. Banks gain significantly on staff costs and branch operations.
Customers benefit from fewer commissions and transaction charges. Digital bank is a good option for those users who seek to save maintenance or administration fees.
Attention to users 24 hours a day. Although they do not have face-to-face attention as in physical offices, most digital banks have customer service numbers or emails so that users can contact the bank whenever they need it.
Advantages and drawbacks of digital banking
Traditional banks invest a lot of time and resources in checking and accounting. By eliminating redundant back-office processes, digital banking software significantly reduces operating costs. Digital banking systems remove a lot of work from banks by automating the processes associated with daily transactions. Digitization reduces the number of steps and people involved in transactions, reducing the risk of costly financial errors.
Integrated KYC [know your customer] and AML [anti money-laundering] protocols enable digital banks and customers to open accounts within minutes from any internet-enabled device. ID Verification systems and risk assessments enable banks to serve customers quickly and easily, allowing people who are not bank customers to access financial services.
A major advantage of digital banking is that it is available 24/7. This means that customers can carry out any transaction from anywhere and access a wide range of services.
Digital banking software enables sophisticated personalization strategies powered by artificial intelligence (AI) and machine learning (ML). Banks can offer customers relevant financial options, interactive tools, and educational resources at the right time. Automated budgeting, spending analytics, savings reminders, and many other tools help inform and engage customers.
Digital banks already have many features that established banks simply cannot offer, such as buying cryptocurrencies and gold or investing in stock markets directly in the banking app. Digital banking customers can instantly change their security settings, transaction limits, and even specify whether or not they want to enable NFC or magnetic stripe payments.
With both desktop and mobile access to your bank accounts available, digital banking means you’re not beholden to bank hours to manage your finances.
With online banks driving fees down, consumers have choices beyond their local brick-and-mortar financial institutions. It’s easy to compare rates and fee structures to find the best bank for your needs.
Banks for masses
Upstart online banks can easily reach large unbanked and underbanked communities that rely heavily on mobile phones but may not have access to physical bank branches.
Digital banking, while highly convenient and easy to access, isn’t without its challenges.
If you rely solely on an online bank, you could be challenged to access your accounts should your bank experience an online or mobile app outage and there’s no branch for you to visit instead.
For those who aren’t tech-savvy, online banking and mobile banking apps might be a bit much to digest.
There’s always the chance that personal data can be compromised in digital transaction. However, online banks do integrate a number of security features to reduce such risks.
A blockchain is a distributed database that is shared among computer networks. As a database, a blockchain stores information electronically in digital format. The goal of blockchain is to allow digital information to be recorded and distributed among authorized counterparties. First proposed as a research project in 1991, the blockchain has widespread application in banking financial services, trade and crypto currencies.
▶ What Is Financial Technology or Fintech?
Financial technology (Fintech) is used to describe new technology that seeks to improve and automate the delivery and use of financial services. At its core, fintech is utilized to help companies, business owners and consumers better manage their financial operations, processes, and lives by utilizing specialized software and algorithms that are used on computers and, increasingly, smartphones. Fintech, the word, is a combination of ‘financial technology’.
KYC (know your customer) is the practice carried out by banks and companies to verify the identity of their clients in compliance with legal requirements and current laws and regulations. The extensive use of new technologies and the internet makes it necessary to define standards that help fight online fraud.
▶ What are anti money laundering (AML) protocols?
AML protocols are the guidelines banks and financial institutions need to comply with in order to prevent money laundering through banking channels.
▶ Artificial intelligence (AI)
AI is the ability of a computer or computer-controlled robot to perform tasks commonly associated with intelligent beings.
▶ Machine learning (ML)
Machine learning (ML) is a type of artificial intelligence (AI) that allows software applications to become more accurate at predicting outcomes without being explicitly programmed to do so. Machine learning algorithms use historical data as input to predict new output values.
Near Field Communication (NFC) technology allows users to make secure transactions, exchange digital content, and connect electronic devices with a touch. NFC transmissions are short range (from a touch to a few centimeters) and require the devices to be in close proximity. NFC is the technology in contactless cards, and the most common use of NFC technology in your smartphone is making easy payments. NFC can also be used to quickly connect with wireless devices and transfer data with Android Beam.