Today, globally, a growing number of corporate banks are expanding their digital offerings well beyond a basic Web presence. The Middle East's banking sector, however, has been slow to put in motion the deep, transformative digitization that other international players have started to embrace, Boston Consulting Group's (BCG) recent survey of corporate-banking customers worldwide revealed. In an effort to help corporate banks understand how digital is reshaping customer expectations – and as part of its new report titled "Digital in Corporate Banking Reaches the Tipping Point", BCG surveyed 660 companies in 13 developed and emerging markets and 23 industries. A total of 1,112 respondents from 14 countries – including the United Arab Emirates (UAE), Saudi Arabia*, France, Germany, Poland, the UK, and the US – were surveyed. The responses revealed that banks in the Middle East fall significantly behind their global counterparts when it comes to the range and depth of their digital offerings in corporate banking. What's more alarming, BCG's data demonstrates that by 2021, digital laggards could see profits plummet by as much as 15% to 30% relative to fast-moving competitors. "Already, globally, a handful of banks and nontraditional players with advanced digital platforms are gaining share with real-time, low-cost cross-border payments, preapproved credit, and superior foreign-exchange rates," said Markus Massi, a Partner & Managing Director at BCG Middle East and a coauthor of the report. "In the process, they are generating 3% to 6% more in annual cross-selling revenues than their peers." That reinvestment potential combined with the momentum and experience gained by being early movers will make it significantly more difficult for slow-moving peers – such as Middle East banks – to acquire the talent and resources to catch up. To close that gap, corporate-bank management needs to coalesce quickly around a clear digital strategy and move decisively to build critical skills and capabilities. Alessandro Scortecci, Project Manager and co-author added, "Three digital value propositions show particular promise: seamless online banking, enhanced digital advice, and real-time decision-making support. Our models suggest that over a five-year period, these strategies can enhance revenues by 15% to 40% and improve cost-income ratios by 7 to 15 percentage points for Middle East banks. But each strategy requires a certain level of upfront investment." While a few banks in the Middle East offer basic services, such as invoicing, payment approval and cash management, no bank in the region – that was surveyed by BCG – currently provides online customer service chat capabilities or online business intelligence and analytics tools – services that have become widely prevalent in other markets. Interestingly, based on the survey results, there is a higher penetration of non-banking services in the Middle East, compared with other regions. The study highlighted that, globally, only 34% of companies are using non-banking services (e.g. Amazon, Ripple, etc.) – in the Middle East, however, that figure stands at 56%. Overall, the study also found that when it comes to communicating with their bank, customers in the UAE and Saudi Arabia still mostly rely on traditional media. Scortecci gives details "BCG's analysis revealed that one third of respondents in the UAE and Saudi Arabia (33%) last interacted with their Relationship Manager (RM) for advice via email, 30% did it over the phone, and 26% did it in person. In addition, 30% of respondents had an in-person meeting with their RM just to complete a form." "BCG's data shows that over half of customers in the Middle East are willing to switch and move to a banking partner capable of offering high-value, digitally-enabled services", Massi explained. More importantly, over 80% are willing to pay for access to the services offered. The ability to meet those needs would give digitally-enabled banks in the Middle East a rare opportunity to markedly change their growth trajectory. These responses prove that business customers in the Middle East are not only eager to engage digitally with their corporate-banking partners but also that most expect at least a baseline level of digital service. "The truth is, to achieve even the most basic level of digitization, Middle East banks must lay out a clear vision predicated on their current level of digital maturity," said Mohammed Turra, Senior Principal and Digital Expert. "It also requires a sustained commitment to redesigning systems and processes: simply adapting technologies to today's banking environment will not work." In terms of expectations, the survey results indicate that banking customers in the Middle East place critical importance on factors such as ease of use and convenience. In line with this, according to the analysis, 62% of respondents in the UAE and Saudi Arabia believe that online banking should be as easy to maneuver and navigate as Amazon.com, the online retail giant. Likewise, 64% don't think that a bank should ever ask them to complete the same form twice. A total of 59% agree that they should be able to get a new product or service after two to three clicks or make foreign exchange transactions entirely online. A staggering 70% of respondents in the UAE and Saudi Arabia also claim that banks should have a single online log-in page for all active services. Similarly, 70% say that they should get better pricing options once their bank starts operating mostly electronically. Lastly, 71% expressed that they should have the option to review bank statements and transactions online. Based on this, it is clear that digital is driving expectations. The question is: will banks in the Middle East be able to meet those demands? First global movers have already demonstrated that digital offerings can sharply improve the quality of client service, introduce new revenue streams, and create greater cross-selling opportunities. Only time will tell if banks in the Middle East will be able to follow suit and reap those benefits.
