GCC banks adopt new technologies to meet customer needs: S&P

Retail banks in the Gulf Cooperation Council (GCC) are catching up with the latest technologies to cater to the growing needs of customers, S&P Global Ratings said in a recent report.

“The digitalization of GCC economies is still a work in progress. The adoption of big data, artificial intelligence (AI) analytics, as well as voice and facial recognitions tools, could enable a more effective and cost efficient provision of customer services,” it noted.

“Regulatory risk is low because policymakers are conscious of the extreme importance of local banking systems in the region, and the need to keep them safe from potentially disruptive unregulated competition. Technology and industry structure present a moderate risk of disruption," said S&P Global Ratings credit analyst Mohamed Damak.

However, the rating agency expects some GCC bank business lines to remain protected from fintech in the medium term which include corporate lending, where human added-value remains significant in the region.

"Therefore, even if customers' preferences continue to evolve, we think that risks to these banking systems remain contained, at least in the next two years. This is because regulators continue to protect them and the share of current activity at risk is small," Damak added.

According to the report, demand for fintech is expanding thanks to large expatriate and youth populations.

“We believe demand for fintech solutions is present and expanding, driven primarily by the lower costs for service provision and speed of execution,” the rating agency said.

Fintech firms are also benefiting from the region's high smartphone penetration and 4G coverage, and top-notch physical infrastructure, it added.

Meanwhile, demand is also coming from the region's youth, who are more familiar with new technologies.

According to the Statistical Centre for the Cooperation Council for the Arab Countries of the Gulf, about 40 percent of the GCC population is under 30 years old, which creates significant demand for digital financial operations.