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UAE banks see bricks-and-mortar branches surviving despite global pessimism

UAE banks see bricks-and-mortar branches surviving despite global pessimism

Bricks-and-mortar banking branches are likely to survive in the UAE despite 65 percent of global banking executives believing that branch-based banking will be “dead” within five years. A global report written by the Economist Intelligence Unit (EIU) and published by banking software company Temenos was based on a survey of 305 senior global banking executives.

Bricks-and-mortar banking branches are likely to survive in the UAE despite 65 percent of global banking executives believing that branch-based banking will be “dead” within five years.

A global report written by the Economist Intelligence Unit (EIU) and published by banking software company Temenos was based on a survey of 305 senior global banking executives.

But banks in the UAE say a combination of bricks-and-mortar and digital solutions is a more realistic forecast.

As well as appearing to sound the death knell for branch-based banking, the research also showed that 65 percent of bankers saw technologies as the biggest driver of change for the next four years – up from 42 percent three years ago.

Kanika Hope, chief strategy officer, Temenos, said: “Open banking and increased competition from big tech and new entrants are causing banks to rethink their business models.”

Kanika Hope, chief strategy officer at Temenos.

According to the research, 81 percent think unlocking value from AI will be the differentiator between winning and losing banks.

Philip King, group head of Retail Banking at ADIB, was more positive about the future of branches, but conceded that the digital acceleration brought on by the global coronavirus pandemic, meant that change is a must.

He told Arabian Business: “The Covid-19 pandemic has resulted in a fundamental shift in consumer preferences towards digital and remote banking experiences. With that being said, we at ADIB believe there is a future for a hybrid style of banking which combines the efficiency of automation and digital banking with the human interaction of a bank manager in a branch.

“The role of the branch will be to supplement and work seamlessly with digital solutions, and we are already managing this through our branches. Physical branches will continue to play a critical role in building trust and credibility, providing financial advisory services, and assisting in the transition to digital channels.

“Therefore, it is important to extend digitisation to the overall client experience, including the branches and all the processes that are shared among channels.”

Philip King, group head of Retail Banking at Abu Dhabi Islamic Bank (ADIB).

According to research from Roland Berger, it is estimated that the proportion of customers unlikely to use bank branches will reach 60-70 percent in the next decade.

It also showed that, in the past 10 years, 67,000 branches were consolidated in mature markets (West Europe, East Europe, North America), while 139,000 branches opened in emerging markets (Asia Pacific, Middle East & Africa, South America).

Matt Colebrook, HSBC’s regional head of Wealth and Personal Banking for Europe, the Middle East, North Africa & Turkey, told Arabian Business that digitising is a “key pillar” of the company’s global strategy, but stressed that bricks-and-mortar would remain.

He said: “The digital ecosystem is already real for us and our customers, with 92.7 percent of global retail banking transactions at HSBC done digitally in 2020, supported by a physical branch presence that itself has evolved to become more digitally-oriented in response to shifting customer needs and that will likely evolve further in the years ahead.”

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