New
technologies are transforming finance to such a profound and unprecedented
degree that the bank of 2030 could be barely recognisable from that of today.
From big data and artificial intelligence analytics to voice and facial
recognition systems, much of the technology is already under development and
all that is waiting the apps that can bring it all together and the willingness
of consumers to give it a try.
In
the latter respect, the global lockdown imposed to hold back the COVID-19
pandemic has pushed the world to move much more quickly towards a cashless
society than it might otherwise have done and as a consequence could make many
more customers comfortable with the new ways of banking made possible by
the new technologies.
By
2030, it might be perfectly normal to shop or dine and pay for it all
automatically through facial recognition apps or wearable devices such as interactive
glasses. The beginnings of this are evident today through the growing use of
voice-recognition devices such as Amazon Echo or Google Home. Tapping
point-of-sale devices with cards or smartphones will become a cumbersome thing
of the past.
The
physical, high street bank will exist as an invisible digital enabler allowing
their customers to easily use such apps while providing them with a wide range
of tailor-made services that would allow them to track their spending and
finances in real time.
Customers
would be given the digital tools to better manage every aspect of their
finances, or at the other end of the spectrum be able to sit back and know that
the bank’s algorithms will take care of everything for them.
Consumer
comfort with data use essential to digital take-up
Possibly
the most significant development in digital banking is the use of data. It is through data that banks will be able to
anticipate and respond to customers’ individual needs. The bank of 2030 may
even be able to provide up-to-the-minute financial advice and budgeting for
their customers who want it such as what they can afford to spend on such
big-ticket items as a house, a car or a holiday. They may be able to guide
customers to the products and services that best suit their needs and spending
ability, or by analysing customer behaviour to be able to develop targeted
offerings and promotions for services such as shopping and dining.
Part
of the challenge for banks is to instill trust in their customers that personal
data are being used safely. However, non-banking corporate giants such as
Google and Amazon use massive quantities of personal data and people are happy
to use them because of the services they provide and because they are assured
of the data’s security. There is no reason why banks should be any different,
and once customers see for themselves how financial technology can help them
they will be more than happy to use it. If the Blockchain financial technology
currently being developed can progress from its current revolutionary stage to
the mainstream over the next 10 years, its decentralization of data storage
would make transactions still more secure and attract still more customers to
digital banking channels.
Digital
banking adoption surges in Middle East amid COVID pandemic
There
are signs that in the Middle East, where financial inclusion has been much
lower than in the West or much of Asia, there has been a rapid increase in
levels of digital adoption so far this year amid the coronavirus pandemic. Abu Dhabi Islamic Bank reported that in the first half of
2020, there was a fundamental change in consumer behavior as nearly 60% of its
retail customers used its digital channels for a wide range of banking
activities, such as applying for cards and financing or paying bills. Also, during this period, 99% of the bank’s retail
financial transactions were conducted digitally. This may be just the tipping
point the industry needed for digital banking to become widely accepted in the
Middle East.
Because
of this, banks are investing to enhance their digital banking proposition,
whether by developing the digital banking channels that offer convenient,
seamless and uninterrupted banking services themselves or partnering with new
digital ‘challenger’ banks to offer the best possible services.
Technological
developments such as 5G and cloud services will also assist banks in enhancing
their digital offerings. The technologies being developed will not only make
customers feel more secure while putting their needs first, banks will benefit
from the enhancement of risk analytics. These can determine a client’s credit
quality by analysing their spending and bill payment patterns, for example.
Data analytics and artificial intelligence can also enhance banks’ business
through more targeted marketing initiatives.
There
is enormous potential in the Middle East for digital banking to expand, with
around 300 million currently under the age of 24. The UAE is one of the world’s
largest financial technology markets, with a world-leading mobile penetration
of 173%, while 65% of the population are active users of the Internet.[i] The country aims to be completely
cashless by 2021, and the mobile wallet market there is expected to amount to
$2.3 billion by 2022 as more residents adopt digital payments.[ii] By 2030, the banking landscape in the
Middle East will look very different to today.