Saudi Arabia’s retail banking industry is ready to take on the digital future according to Ali Alomran, the deputy general manager for Technology Services at Arab National Bank. "A digital bank should be able to reach everyone and everything in the market" he declared at a roundtable conference in Riyadh in September. The conference, hosted by Infosys and Retail Banker International, focused on how Saudi Arabian banks face continued disruption as the world becomes more digital, reports Alexander Atkins
In his key note speech, Alomran highlighted three aspects of banking that would have to evolve for Saudi banks to achieve digitisation: "The three aspects I am concerned about here are reach, products and analytics. If we are able to provide a dynamic in our situation where the three aspects are automated, automated reach with minimum human participation, automated product fulfilment in terms of processing, and supporting analytics, that is what I view as a digital bank."
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By GlobalDataHowever, he admitted there are significant challenges along the journey to digitisation. "The bank office today in Saudi Arabia is still late in the digitising place," proclaimed Alomran. "Our key products or processes are still human based." Going further, he emphasised that there are key limitations, due to the current market, as to how far Saudi banks could take digitisation, including the outsourcing environment of financial services in Saudi Arabia. "There is a limit to the efficiency gains that we can introduce to an organisation without pushing more community services outside an organisation. I can’t see Saudi banks achieving the efficiency limits that are claimed by certain digital banks where, for example, a million customers are served by 300 employees."
A further concern Alomran underlined was the need for more Arabic language research and development, in three areas in particular: sentiment analysis, voice recognition systems and Optical Character Recognition, stressing that much more research was needed in all three.
Alomran was also keen to assert that Saudi banking needs to focus on making back offices more efficient and less on making channels more efficient because the channel inefficiency is linked to back office inefficiency. "We should convert from channels to improving reach and we should introduce more analytics as the analytics of banking in Saudi Arabia is way behind other sectors in the country."
The incentives for digitisation, however, are large Alomran stated. One incentive he listed was banking inclusion and being able to reach the large market separate from the traditional client base, stressing the importance of new means of finding them. "This segment of the market is another incentive for digitalisation, because it requires us to sell simple products for masses. Those customers who have limited device capabilities, limited access to data plants, limited access to bank with and limited education, we will reach them in a similar way to reaching the next billion customers of Facebook."
The conference also featured a theme address from Sriranga Sampathkumar, AVP and head of Middle East at Infosys Finacle, who showcased how to make sure the bank branch network was running efficiently and how to use this infrastructure with digitalisation. Sampathkumar explained the driving forces behind banking evolution in today’s market, focusing on mobility, big data, the cloud, bloc chain, social networks and the Internet of Things. He further emphasised the future importance of the bitcoin and the bloc chain as traditional banking disruptors: "Many banks want to take on bitcoin, many don’t want to, and there are serious pros and cons in terms of digital security, but if you see the way bloc chain is growing today, you can see the market for bitcoin is growing."
He further explained that due to these forces, the customer has evolved as well: they are informed and they know what they want and if they cannot get it from a specific bank, they will move to another. With customers demanding more, he told the conference, banks will have to offer more versatile products, especially with the growing competition from non-banking competitors. Furthermore, with the pace of business in the world getting faster, this new customer wants their banking on the move, at any time and in any place, something Saudi banks would have to adapt to.
The panel discussion, featuring key figures in the region’s banking industry, examined the big questions facing digitisation in the Saudi market including pricing differentiation and its relevance in the Saudi market. "I think it will be practised because certain transactions online are cheaper than branch equivalent and branch transactions" answered Ali.
Almohanad Alzooaabe, a partner at Bank Al Jazeera, agreed with Ali’s opinion: "I think we have to think about the different generation rules. If we see young kids these days, they are adapting to technology much faster than us and by the time they are our age, everything will be digital. It means that we have an advantage if we can teach them how to use financial products with this digital technology and save money, in order to prevent them from weaknesses in the future."
A further issue that arose from the discussion was the future of omnichannel in banking. Douglas Blakey, moderating the debate, brought up the evolving idea that the customer should be given the opportunity to personalise their banking experience depending on different uses of technology at different places and at different times of the day.
Sampathkumar responded by talking about the need for a strong business model that can manage the various channels. "Omnichannel is obviously in the process of becoming more like a commodity. One person may want something exclusive as mobile banking, and another customer may come and say I want a very exclusive ATM. But if you have a business model that sits in the heart of the bank, then you can keep on adding these channels, ATM, mobile, branch, because the business model remains constant."
Alzooaabe talked about channel integration as the future of omnichannel. "A key would be integrating these channels so that if you start a process in a certain channel and this is disconnected for any reason you can go and carry on with some other channel." Sampathkumar responded by explaining that the business model he was talking about has the capability to integrate various channels. "Every mobile channel will have certain features which are common and very similar to mobile banking with an ATM, these connectors are application programme interfaces (APIs) and the business model exposes those APIs so you no longer need to be dragged through all these channels for one single item."
As to the question of the future of Saudi banks and the future of banking in the region, the speakers sounded positive and proposed how they thought banking was going to change. Alzooaabe believed that payment methods would be one of the major changes, especially with the rise of online banking. "I think the main difference in five years for Saudi banking will definitely be in payment methods. Maybe online banking will be the only future for the course of banking."
However, the repercussions of the possibility of a future of only online banking became apparent when the issue of branch and ATM networks was raised, with the possibility that the larger banks would lose the advantage of having large ATM and branch networks if customers could do banking in other ways, and how this would affect the future of branches and ATMs.
But Sampathkumar was adamant. "The branches will not go and ATMs will not go. Banks like investing in branches because they are efficient." Alomran shared this sentiment when he too declared in his keynote speech that branches would continue to live on. "Branches may not continue to be as iconic as they are today. They will stay because we have ethical and legal obligations to interact with customers directly through people." He continued on what purpose the branch of the future could serve: "Surviving branches might end up being community branches fulfilling the community’s needs and they could operate as card centres."
He went further with this talking about the need for banks to centralise complexity and distribute simplicity, by having branches do less and therefore avoid distributing controls, procedures, policies and technology. "If we centralise as much complexity as possible, than we are keeping a line on all of those centrally, which will give us the pricing advantage too."
The future of branches is an issue that is being talked about, not only in Saudi Arabia but globally, as seen in London recently when financial representatives met for the RBR Branch Transformation Conference which focussed on what the future of bank branches could entail.
The conference helped to highlight what challenges Saudi banks face when tackling digitisation and that they will need to adapt rapidly. But the future is positive and the conference also helped to show that Saudi banks are aware that the market is changing and that they are more than ready to change with it.
