Revenue of UAE banks to soar to $25bn by 2030 on pivot to digitisation

Transformation playing a key role in boosting operations and customer adoption, says Abdulaziz Al Ghurair

Abdulaziz Al Ghurair, chairman of the UAE Banks Federation, speaks at Abu Dhabi Finance Week. Khushnum Bhandari / The National

The revenue of UAE banks is expected to surge by 52 per cent to about $25 billion by 2030, with digital transformation playing a key role in boosting operations and customer services, the chairman of the institutions' professional representative body said.

The Emirates' “robust” banking sector will remain healthy and stable in the long term, and the effect of financial technology is evident in the changing trends over the past years, Abdulaziz Al Ghurair, chairman of the UAE Banks Federation, said in a keynote at the inaugural Abu Dhabi Finance Week on Tuesday.

The share of cash in payments declined to 20 per cent in 2021 from 69 per cent, while the number of digital accounts jumped. They comprised 51 per cent of all bank accounts in 2021 from 7 per cent in 2018, Mr Al Ghurair said, quoting figures from the Central Bank of the UAE.

Among the UAE's largest and leading banks, about 95 per cent of banking transactions are now done digitally, with mobile banking comprising “well over” 90 per cent of activity, he said.

The UAE is already the “undisputed” top financial hub in the Middle East and one of the top seven globally, he said, and the industry has invested heavily in technology to boost customer bases and bottom line to keep in step with an economy undergoing a rapid digital transformation.

“Changing customer needs have triggered a significant digital transformation across banks. This has resulted in a significant upgrade across ... banks' end-to-end and digital channels to deliver superior customer experience,” Mr Al Ghurair said.

“As a result of all these changes, we have seen digital adaptation increase ... this positive momentum and investments in technology [means UAE banks are] well positioned for the future.”

The UAE has long championed the critical role digital transformation plays in its economy and society as the country positions itself as a global hub for innovation.

The banking and financial sector is poised to be one of the main benefactors of this shift, given the critical role it plays in the economy and the opportunities it brings to entrepreneurship.

GCC banks have been projected to recover almost to pre-pandemic levels in 2022 starting in 2023, S&P Global Ratings said in its latest report last week.

FinTech, meanwhile, remained the highest funded sector across emerging venture markets — which includes the Middle East — in the first half of 2022, more than tripling to almost $1.68bn in the first half of 2022 from a year ago, start-up data platform Magnitt said in a recent study.

Banks in the UAE have also gone beyond their boundaries to create a more inclusive FinTech environment. As a result, funding for FinTech companies leapt more than threefold to $310 million in 2021 from $92m in 2017, Mr Al Ghurair said.

“Strong digital and financial capabilities will give banks opportunities to expand their model,” he said.

Digital trends are set to continue and grow further in the financial sector, and this means more customer data that needs to be processed and protected.

Banks are addressing this by ramping up their talent pool, hiring designers, engineers and data scientists, Mr Al Ghurair said.

“Managing and using data effectively will become a competitive advantage for banks,” he said.

The changing landscape will require the financial system and its players to constantly adapt, requiring “continued adjustment of their operating models”.

“Digitisation is now mainstream across all products and segments ... it will continue to be on the rise, and data will be essential for banks to raise their capabilities,” Mr Al Ghurair said.

As a consequence, the number of physical bank branches have declined, down about a third to 581 in 2022 from 823 in 2018.

However, this is a necessary step, as “we need to fundamentally restructure our operating model and reducing our branch network is only the first step”, Mr Al Ghurair said.

Mr Al Ghurair credited the UAE financial system's strength to the efforts of the Abu Dhabi Global Market and the Dubai International Financial Centres, which regulate the industry in their respective emirates and who have a positive effect throughout the country.

Combined, there are more than 7,100 businesses that have licences and about 44,000 employees at the two hubs, with more than 22,000 working in the banking sector alone.

“Collaboration with various stakeholders in the ecosystem will unlock greater value for the industry and unleash innovative solutions for UAE customers,” Mr Al Ghurair said.