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Is the closing bell sounding for banking as we know it? Many would have us believe that digitisation, and even artificial intelligence, will soon eradicate humans from our personal financial world. Bankers could become the new “Luddites”, raging against the machine.
But just as the coal and steam age did not remove everyone from manufacturing, it is unlikely that – for something as emotive as our money – we will turn exclusively to machines and robots. In the UAE, bank customers clearly subscribe to this view – not only are online and mobile bank services increasing, but so too are the number of bank branches.
The whole concept of how banking services are delivered is being revolutionised. According to Citibank, investment in financial technology has increased from US$1.8 billion globally in 2010 to $15bn last year. This not only supports the increasingly efficient delivery of services and more robust platforms, but it also enables banks to offer a much wider range of products, advice and follow-up using new technologies and big-data analytics.
Here in the UAE, we have had a rapid adoption of digital technology in smartphones, in government services and many other areas. People see online or mobile banking as a more effective way of managing their day-to-day finances. For example, at Abu Dhabi Islamic Bank, access of our services through the internet increased by 25 per cent during just one quarter last year. Transactions through our banking app increased by 71 per cent over the year. This is not surprising, given the way the UAE population is embracing new technology. But it is impressive and it supports the notion that digital banking is being embraced universally.
However, those numbers tell only part of the story. A recent customer survey by ADIB showed that 97 per cent of respondents still want to pop into their local branch and speak to a person – rather than, for example, to Apple’s Siri or an Interactive Voice Response system.
They do this because they want a relationship manager – not for a hard sell of financial products – but for advice on matters of personal finance, for help in understanding confusing or complicated options, or for sorting out a problem. For this reason, we have seen only a small decrease – about 6 per cent – in visits to branches despite the huge response to our online and mobile banking.
So how will the UAE bank of the (very near) future look?
I believe two trends will emerge. One is a blend of digital and human – through mobiles, online and in branches. The other is an increase in the ways that people are able to store, spend and transfer money.
About 70 per cent of bank investment in digitalisation globally is around payments. As banks come under increasing competitive pressure from “fintechs” (new non-bank players in the financial sector such as PayPal, Google and Apple) this investment can only increase. At the same time, the fintechs and other players who want to play in the payments space need to ensure they provide the same level of protection to customers around transactions as a bank does. This point was recently made by John Williams, the president of the Federal Reserve Bank of San Francisco, when he said: “As a matter of principle, if it walks like a duck and quacks like a duck, it should be regulated like a duck”.
Branches will continue to exist, but without the queues of the past. Very soon, customers will be able to check through their banking app to see waiting times for service at a branch, plan their visit and to book an appointment. There will be much less bureaucracy and documentation. In short, customers can look forward to more convenience and more options in how to interact with a bank, which will improve their overall experience of going there.
Filling in many forms and providing copies of documentation when opening an account or applying for financial products or services will be a thing of the past. It might be reduced to as little as putting an Emirates ID card into a machine for verification, which could include credit history.
Bankers would then be able to concentrate on providing more valuable services – such as advising on the most appropriate products for a customer and explaining properly how they work, what the risks are, and what the options are. They will give useful advice on managing personal finances, including budgeting, managing expenditure and the best ways to save for school fees and retirement. Branches will be much more of an advisory centre than a transaction processing centre.
The other trend, as mentioned earlier, is how technology will let people move money without necessarily having bank accounts. A group of banks, including ADIB, has been working with the UAE Banks Federation over the past two years to introduce a way for people to use their smartphones for buying, transferring and storing money. The mWallet, a mobile wallet, will be the world’s first such system to be introduced at a national level, with most of the major banks involved as stakeholders. It will make a major contribution to the UAE’s smart government strategy as well as enabling many presently unbanked or financially excluded people to access essential services.
Then there is the big one – the eventual demise of physical money. The fact that even central bankers around the world are beginning to talk about this not only as a possibility but as a probability means it will happen at some point.
Banking is ripe for change. Greater digitisation will continue to transform our lives for the better – and will give us the choice to manage our money, whatever form it takes, how we like. But if the UAE is anything to go by, this change will not replace branches but will allow banks to give a much more personal service to customers.
Tirad Al Mahmoud is the chief executive of Abu Dhabi Islamic Bank.
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