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Across the UAE, the banking and wider financial services sector is changing faster than most individual incumbent banks, with consumer forces disrupting their roles, structures, and competitive environment. As financial and lifestyle services continue converging and financial products become even more embedded within customer propositions, enriching existing banking offerings with lifestyle services will enable local institutions to build deeper, wider end-user relationships while consolidating their relevance status. Arthur D. Little (ADL), the leading management consultancy firm with the longest-standing presence in the Middle East region, expounds this viewpoint in their latest report entitled Beyond Banking: Is there an opportunity for banks to go beyond banking in the UAE? Based on a recent survey Arthur D. Little conducted in collaboration with M2P Solutions, a leading application programming interface (API) infrastructure company, the report explains why the national banking sector is likely to drive newer ways of banking in due course and details the necessity for adopting multiple partnership-based strategies in the evolving ecosystem. 

Beyond banking outlook in the UAE

In line with an analysis of 2,000 UAE retail bank customers, the report substantiates the view that the retail banking market is coming under mounting pressure, with 45% of traditional banks’ clients ready to switch to competitors within the next six months. Low rates, regulatory changes, and various new players entering the financial services landscape – including Fintech companies, retailers, and telecommunications providers – are behind this trend. As such, banks have begun taking proactive steps to go beyond traditional banking, expanding into growth territories away from financial services. These efforts have subsequently resonated with customer bases: 61% of clients are now ready to turn to their primary bank for a beyond banking proposition, as are 70% of customers aged 25-44.

Pierre Mariani, Partner, Financial Services Practice, Arthur D. Little Middle East, said: “Evolving customer demand accelerated digital transformation and entry of new players are disrupting the traditional business models of UAE banks. These trends will continue to reshape the financial sector in the years to come, and banks that fail to embrace the change and make the necessary adjustments to serve their clients beyond existing services will inevitably fall behind.Therefore, a holistic approach is required by banks striving to retain customers, capitalize on future opportunities, and truly go beyond banking as they know it.”

As per the report, the appetite for beyond banking propositions is increasing among banks and customers alike, with the share of positive outlook customers set to increase from 61% to as high as 68% because of complementary services opportunities across entertainment, education, retail, and food. However, there are several considerations for the wider UAE banking community before such avenues can be pursued successfully.

Key considerations for UAE banks

Having examined the beyond banking landscape, the report provides a comprehensive overview of the most pressing considerations pertaining to banks’ beyond banking efforts. Firstly, banks need quickly redesign their respective diversification strategies. To remain relevant in the future, they must understand and track dynamically changing markets to avoid building on outdated perspectives. Secondly, they should build on a vision, deciding whether to lead their own ecosystems or participate in an existing one. Moreover, the other topmost considerations concern SME banking and customer-centricity. Beyond retail client franchises, SME banking is identified as a new growth territory to explore, while banks can adopt customer-first approaches and ultimately enjoy beyond banking success by closing existing data, digital maturity, and talent capability divides. 

“Making full use of beyond banking avenues and presenting customers with newfound value through diverse, attractive offerings hinges on a forward-facing approach from the outset of such projects,” added VaanathiMohanakrishnan, Business Head, M2P Solutions. “If banks do heed this recommendation and pursue such an approach, their efforts to elevate the appeal of current offerings while pairing them with various lifestyle services will certainly accelerate progression on the beyond banking route.”

Beyond Banking: Is there an opportunity for banks to go beyond banking in the UAE? also provides insights and information regarding the drivers of changing banking customer demands, the importance of data sharing and customer trust, and why UAE banks require bold investments and partnerships.