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Gulf’s neobanks must hone the user experience

Digital banking in the region must learn from European pioneers and innovate further

The Gulf's neobanks could learn a lot from the West's online banking experience
The Gulf's neobanks have a huge opportunity if they tailor their offerings to digitally savvy consumers

In recent years digital banking has swept across the Middle East. 

As in many parts of the world, this has been driven by an increasingly urgent need to enhance efficiency, improve customer experience and respond to demand for more online and mobile banking services. 

Yet in many ways the transition is just beginning. Data from Statista shows the global number of neobank, or so-called challenger bank, customers was around 188 million in 2022, up from 19 million in 2017 – and is likely to increase beyond 350 million by 2026.

Growth is led by China, Japan and Brazil and has yet to hit the Gulf. 

While Middle Eastern banks followed the Western lead in the 2000s and moved to digital banking, the adoption of embedded payments and financial services fuelled by neobanks such as Monzo, Bunq and Chime remains sparse in the Middle East.

And the next frontier for fintechs in the Gulf is to hone the user experience. 

In the UAE, the proportion of adults with neobank accounts rose to 19 percent in 2022, an increase from 17 percent in 2021. This transition has largely been limited to the foundational features of digital banking, with the innovative services used by the digitally savvy in Europe, Asia and North America still waiting for mass adoption. 

As a result, there is a huge opportunity for further innovation in the digital banking space across the Gulf. This is great news for regional challenger banks, which can learn from the successes of European fintech pioneers and expand the accessibility of financial services.

European fintechs won over consumers by offering advanced financial services such as real-time spending notifications, low-fee international transactions, and user-friendly interfaces catering to the modern consumer’s expectations of banking. 

For challenger banks in the Gulf, this is an unprecedented chance to differentiate themselves. By offering a broader spectrum of services, they can serve the unmet needs of a digitally savvy customer base.

This could include offering personalised financial management, investment platforms, cryptocurrency services, or advanced lending and saving products – all accessible through a seamless digital interface.

A crucial enabler of neobank’s success in Europe and the US was innovation in payments. The cutting edge of payments technology brings more transparency and lower fees to consumers during both regional and international transactions, increasing user confidence in digital banking. 

Virtual cards are also transforming the customer experience, enabling consumers to begin spending as soon as they sign up. Payment functionality is a fundamental part of any bank, and optimising digital payments is a critical method for challenger banks to win over consumers.

Financial inclusion

There are several reasons why this innovation is important – the first of which is that it enhances financial inclusion. 

Traditional banking systems often inadvertently exclude certain segments of the population, such as those in remote areas or with lower incomes, due to physical and financial barriers. 

Digital banking, with its lower operational costs and broader reach, can break such barriers. By providing accessible banking services to excluded groups, digital banking platforms can empower individuals and communities. 

Zand is a frontrunner in this regard. Licensed by the UAE’s central bank in 2022, Zand has stripped down outdated processes, enabling users to budget their spending in certain categories while providing interest on all deposits, a first in the region.

Another advantage of digital innovation is lower fees. Digital banks, without the extensive physical infrastructure and overheads of traditional banks, can operate more cost-effectively. 

This efficiency enables them to offer better rates to their customers. Wio Bank is taking a lead in the UAE in this area, providing free SWIFT transfers with low fees for consumers, whilst also providing the highest interest rate for savings accounts in the region (at the time of writing).

Consumer choice

Lastly, digital banking simply brings many more choices for consumers and businesses. Unlike traditional banks, which often offer a one-size-fits-all approach to banking products and services, digital platforms can provide more customisable options. 

When it comes to the Middle East, the fastest route to adoption is shaping up to be a specific type of collaboration. It tends to involve international fintech experts and infrastructure leaders forming partnerships with an emerging generation of local entrepreneurs, and together, they hone the user experience for the market segment. 

Such an approach means that specific regional and industry-by-industry insights can be used to create a user experience that is globally informed and locally relevant. 

This is instrumental in appealing to a broader demographic who might otherwise be hesitant to move away from traditional banking methods. By integrating technology and customer-centric design, challenger banks have the potential to offer a more engaging, efficient and personalised banking experience. 

The Gulf’s banking sector is on the cusp of a major transformation. The successful integration of innovative digital banking services could redefine the consumer’s banking experience and also play a pivotal role in driving economic growth in the region.

By focusing on user experience and customer-centric solutions, challenger banks have the opportunity to break the traditional banking mould and introduce a new era of banking that is accessible, affordable, and appealing to a broader user base.

Nauman Hassan is regional director for Mena at Paymentology

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