Retail Banking Innovation in the Post-COVID Era

By Shivangi - 18 Apr 2022 Last Updated: 05 Jul 2022
Retail Banking Innovation in the Post-COVID Era

COVID-19 has unquestionably changed the game in a variety of industries, including banking. It has influenced consumer requirements and behaviour, paving the way for new commercial prospects and models.

The retail banking landscape has seen significant transformation as the industry responds to the effects of Covid-19 and looks to the future. Changing client behaviour, economic headwinds, increased competition, regulatory pressure, and technological upheaval are all concerns that banks must contend with.

However, while change provides obstacles, it also brings opportunities. Banks that can differentiate themselves by putting the customer experience at the centre of everything they do and connecting it throughout the organisation can gain a major competitive advantage. While most banks acted quickly to support consumers in the aftermath of the crisis, the key question is whether they will be able to capitalise on the momentum and accelerate their broader digital transformation ambitions in order to remain competitive in the future.

 A simple lift and shift method does not always make sense for digital transformation to be successful. Instead, banks must radically reinvent their processes and models, as well as drive a cultural shift away from legacy banking and toward digital banking. During a crisis, it might be extremely difficult to innovate and fulfil changing client expectations. Progressive executives and an innovative culture, on the other hand, are critical success criteria for banks in the digital age. It is critical to make a commitment to establishing a fully digital business rather than simply checking boxes.

Ways by which UAE Bank can speed up their Digital Journey

Be Part of the Ecosystem

The majority of UAE banks are already undergoing digital transformation. Customer data is being used by some of the largest banks to provide customised marketing and services. They developed banking apps using machine learning technology to analyze data. Banks are increasingly adapting services and incentives based on client behaviour data. This means that all banks will be part of a larger ecosystem of partners as they push arrangements with restaurants, merchants, and beauty salons.

Within this environment, banks should be able to provide products. A bank, for example, may use customer data to integrate an automotive or educational journey. When a student is researching college education alternatives online, a bank should be able to provide a rapid perspective of educational finance options. Application programming interfaces (APIs), for example, can help to alleviate this problem. But, more significantly, banks and their partners must imagine the proper route and create a business case for it.

Since many venues were forced to close due to the worldwide health crisis, UAE consumers are spending less money in all industries. However, other consumer segments have risen, such as online grocery shopping, staycations, and home entertainment. With new client journeys, banks must modify their digital transformation objectives.

Improve the journey

Customer expectations are evolving, and old ways of functioning aren't going to cut it. Since many services are not available digitally, the global health crisis has harmed banks' ability to serve consumers. While many UAE banks were already trying to finish their digital transformation plans before the epidemic, the shift to digital is now speeding up, making digital the preferred option for consumers. During COVID-19, Mashreq Neo, the UAE's first full-service digital bank, had a 50 percent increase in customer acquisition. Banks must adapt to the rise of digital banking, and one way to do so is to improve digital transformations.

To do so, banks must focus on and adopt what Publicis Sapient refers to as Jump, a major component of its Evolve, Jump, Attack transformation portfolio. Jump entails creating a new shell into which the current company may be migrated. Established banks are being pushed to be more disruptive than they have been in the past. Large-scale technological and engineering advancements have not always yielded the desired results. In addition, established businesses are fighting with new financial technology companies. This emerging competition, which is both nimble and adaptable, can better address client need.

Change the mindset

Engineering and cloud transformation are about putting technology to work to solve problems now and in the future. UAE banks may get a jump start on determining their cloud strategy by adopting an engineering mindset. Many banks in the United Arab Emirates are working on cloud migration plans. As the foundation for its AED 1 billion digital transformation effort, Emirates NBD has established a multi-platform cloud approach. The debut of AWS Outpost in the UAE was welcomed by First Abu Dhabi Bank (FAB), which wants to utilise it. Others, including Mashreq Bank, are migrating to Azure.

Determining the steps of a bank's cloud strategy is a critical part for all banks. Do they choose for a single cloud platform or a hybrid approach? Do they go with a software-as-a-service (SaaS) solution or do they wait for regulatory approval to migrate to the cloud? Regulatory permissions, particularly in regards to data residency and security issues, are critical, as is securing the funding required for banks to simplify their architecture and applications in order to shift them to the cloud.

Each decision point is guided by the Publicis Sapient cloud proposition. It can assist clients in deciding on a multi-cloud framework, determining which workloads should be moved to which cloud, and ensuring that the client has a cloud exit option. The proposal also lays out a regulatory approval process that satisfies the Central Bank and allows banks to use the cloud.

Innovative Banking Trends

Digital Payment/Instant Payment

From 2020 to 2025, the Middle East and North Africa (MENA) digital payments industry is estimated to grow at a CAGR of 6.5 percent. Factors such as a sharp increase in e-commerce sales, ubiquitous internet connectivity, and high smartphone penetration are driving this trend. Demand has also been spurred by the expanding number of digital wallet fintech companies, as well as the growing acceptance of digital wallets among retailers. Consumer preferences are shifting as a result of demographic shifts and global developments. Expectations are being raised as a result of regulatory developments such as the push for open banking and the migration to ISO 20022.

ACI Worldwide, a supplier of real-time electronic payment solutions for banks, recently established a strategic worldwide agreement with Vocalink to enable swift bank adoption of real-time payments through ACI's UP Real-Time Payments solution in Saudi Arabia. The UAE's first all-in-one digital wallet was created by First Abu Dhabi Bank (FAB). The Enterprise Payment Hub was established by Emirates NBD and provides complete scalability for the speedy introduction of new and existing payment innovations across all Emirates NBD markets and organisations. The UAE Central Bank has also implemented the UAEPASS initiative for all banking transactions.

Digital only Banks

With a rush of announcements in the Middle East region recently, there has been a growth in digital banks and payment institutions. Advanced AI and analytics can use the data created by digital banking to detect consumer preferences and push relevant offers. When banking is integrated, analytics can help with payment forecasts and loan decisions.

The Saudi Central Bank (SAMA) has recently approved International Digital Solutions Co and Azm Fintech Co as part of its effort to strengthen the country's financial technology sector. In addition, ADQ, which owns some of the UAE's most valuable assets, including Abu Dhabi Airport, has announced plans to establish a digital bank heritage licence with First Abu Dhabi Bank (FAB). Bank ABC introduced "ila Bank," a digital, mobile-only bank in Bahrain, in December 2019. Banque Misr in Egypt has declared that it will create a digital-only bank in the third quarter of 2021.

Cloud Adoption

The most important question for banks when it comes to cloud adoption is not 'why,' but 'how.' In general, a step-by-step approach that begins with migrating non-critical environments to the cloud, then uses cloud approaches to optimise infrastructure investments and performance, and then migrates the production environment to the cloud, works effectively. Countries such as the United Arab Emirates (UAE) and Bahrain have already embraced cloud computing, while the Kingdom of Saudi Arabia (KSA), Egypt, and Oman are all exploring cloud banking options.

Open Banking

Open banking is also gaining traction. The Bahrain Open Banking Framework was established by the Central Bank of Bahrain ("CBB") in October 2020, with KSA following suit in January 2021. Jordan's Bank al Etihad is nearing completion of its open-banking developer portal, which will have over 400 APIs. Banks are re-designing their technology needs around open banking to take advantage of the region's burgeoning fintech and partner ecosystem, as well as to satisfy the changing needs of their customer base outside of banking.

Conclusion

The United Arab Emirates has lofty goals to become a global leader in technological innovation. The majority of the region currently has 4G connectivity. Unsurprisingly, the banking industry is following suit and embracing digital innovations by incorporating them into everyday financial services.

In retail banking, technology is guiding how clients choose to interact with their institutions. Customers can now access their bank accounts through a variety of devices, including PCs, tablets, smartphones, and even social media. For banks to retain consumers in the future, a combination of digitalisation and retail products forms an omni-channel banking strategy.

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By Shivangi

18-Apr, 2022

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