The retail banking sector in UAE is expected to have a revenue growth calculated at a Compound Annual Growth Rate (CAGR) of 6.4 percent between 2021 and 2026. As per a report by the Boston Consulting Group (BCG), GCC countries like UAE, Saudi Arabia, Bahrain, Qatar, and Kuwait are expected to see a CAGR growth of 8.8 percent during the same period. In the coming years till 2026, the retail banking sector will be gaining revenue from mortgages, deposits, and payments.
During the Covid crisis, customers’ trust in their banks grew
The report titled Global Retail Banking 2022: Sense and Sustainability make some interesting observations about the priorities listed by retail banks worldwide. Almost a quarter of the retail banks is putting Environmental, Social, and Governmental (ESG) factors as their main focus for digital transformation.
Around thirty-eight percent of them said that they look at ESG as a major criterion for selecting and prioritizing digital transformation strategies.
Abdulaziz Al Ghurair, Chairman of the UAE Bank Federation is predicting a well-rounded and consistent growth for the UAE banking sector in the coming years and it would grow faster than the macroeconomic rate with bank revenues.
It will be reaching around $25 billion by the year 2030 and this would lead to a fifty percent increase from the existing revenue generation. The UAE banks are having well-maintained capital and all the banks are creating profits in a consistent manner.
These factors make the footing strong for maintaining a steady rate of growth in the long term.
The report by BCG also states that customers prefer the privacy features of UAE banks more than any other service. They are ready to disclose more information about themselves if they feel that a particular service of the bank is really useful for them. Sustainability is an important factor that is shaping up industries and fostering new channels of growth.
In today’s world, it is a kind of necessity that drives the relationship with customers rather than an optional program. The ESG-centered approach has been adopted by banks as a method of establishing strong bonds with customers.
Apart from banks working towards achieving a sustainable relationship with customers, they can also play a major role in creating a sustainable development model as part of the larger agenda of UAE. The ESG-focused model will help in achieving this and it can raise the economy to a new level of progress.
The UAE Green Agenda 2015-30 lays down a long-term plan for achieving sustainable development in all aspects of its economy. Retail banks should also go along with this vision by looking to invest in markets where there are unique opportunities to create offerings. They should be able to build efficient business models to make use of the market potential.
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After the Covid-19 pandemic, the retail banking sector had gone through some major transformations. The competition has also increased among the different companies as a bank should consider multiple factors like regulatory pressures, technological disruptions, customer behavior, etc.
This transformation has indeed become a blessing in disguise for customers as banks are now focusing on customer satisfaction as their primary objective. The digital space is also becoming a new testing ground for banks as they are grappling with new digital technologies that would make the customer experience more smoother and efficient.
The innovative aspects of the metaverse are also being tested by many retail banks to enhance user experience and intelligent banking systems. The concept of Neo banks is also gaining prominence as the need for a physical space for banking is becoming redundant.
But these new shifts in the banking sector also come with major challenges. The threat of hackers, the unpredictability of AI tech, employee competence with regard to digital platforms, digital literacy for users, etc are all issues that need to be addressed moving forward.