Covid-19 hastens UAE customer shift away from bank branches

About nine in 10 survey respondents say they are more likely to transact digitally than visit a physical outlet

Most UAE consumers polled by FinTech company Backbase said they prefer digital self-service banking solutions delivered with the same convenience as their e-commerce, entertainment and transport solutShow more

The Covid-19 pandemic has hastened a consumer shift towards digital banking services in the UAE, according to a new survey.

Eighty-nine per cent of respondents said they are now more likely to opt for digital banking services rather than visit a physical bank branch, the survey by YouGov for FinTech provider Backbase said. It polled 1,005 people.

“As the pandemic recedes, banks have the opportunity to provide enhanced customer engagement online, which will pave the way for physical branches to only deliver more complex, high-value activities,” said Matthijs Eijpe, regional vice president of sales for Europe, the Middle East and Africa at Backbase.

“To make sure that they can capitalise on changing customer behaviour, banks will need to break free from siloed technology architecture and bring engagement to the forefront of their digital operations.”

The rise of FinTech companies, an increasingly smartphone-savvy consumer base and a sharp increase in digital services have forced banks worldwide to increasingly invest in digitisation and reduce the number of branches.

The Covid-19 pandemic, which led to movement restrictions and social distancing around the world, further hastened the pivot to digital services across industries.

Half of the consumers in the Middle East, India and South-East Asia are interacting with banks through mobile apps since the Covid-19 outbreak, compared with 32 per cent in 2018, according to a report in April by Verloop.io, a customer support automation company in Bengaluru.

Technology such as artificial intelligence and machine learning is helping banks and other financial institutions to automate services quickly and address customer queries more efficiently during the pandemic, Verloop.io said.

A Boston Consulting Group survey that interviewed more than 2,000 respondents in the UAE last year found that 87 per cent of respondents would be willing to open an account with a digital-only bank.

The Backbase research found that 72 per cent of respondents in the UAE use digital banking services at least once a week, and 24 per cent use these services once a day or more.

Those polled said they prefer digital self-service banking solutions delivered with the same convenience as their e-commerce, entertainment and transport solutions.

The sudden increase in customer adoption has dramatically advanced the digital transformation of many banks in the region. Many financial institutions now realise that online banking services are critical to increase customer retention and grow revenue streams, Backbase said.

The digitisation of services for banks, which would usually take two years, is being completed within two weeks as a result of the pandemic, JP Morgan Chase chief executive Jamie Dimon said last year at Sibos, an annual conference for the global financial services industry.

“Consumer expectations from digital banking have shifted from just day-to-day banking services and transactions to also include more complex interactions, such as remote account openings or subscriptions to new products or services, such as getting a loan or subscribing to insurance,” according to Backbase.

However, 31 per cent of UAE respondents defined their own bank's performance as "weak" in terms of offering seamless access to online banking services, the survey found.

Some banks in the UAE have released stand-alone applications to add new functions and services to their online banking offerings, creating fragmented systems that do not deliver a good experience to customers, according to Backbase.

About 44 per cent of those polled in the UAE cited poor customer relations as a key factor behind their decision to switch to a different bank, the survey revealed.