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MEA Retail Banks are the strongest believers in a Cashless Society

Middle East and Africa (MEA) retail banks believe delaying digitalization poses genuine threats to their business models

6 in 10 banking executives in the Middle East and Africa (MEA) think cash will dip below 5% of retail transactions in the next five years, compared to 48% globally. The global Coronavirus pandemic is likely to reinforce this trend; MEA retail banks believe delaying digitalization poses genuine threats to their business models; Changing customer demands are cited as the highest-impact trend in the near term (35% by 2020), with new technologies predicted to be the most impactful development in the medium term (43% by 2025); Building a mobile-first greenfield bank is ranked as the top innovation strategy by 37% of MEA banking executives.

Banks in the Middle East and Africa (MEA) are the strongest believers in a cashless society, according to a global retail banking survey released by Temenos (SIX: TEMN), the banking software company. The in-depth survey conducted in 2019 by the Economist Intelligence Unit (EIU) on behalf of Temenos reveals that 6 in 10 Middle East and African banking executives think cash will dip below 5% of retail transactions in the next five years, compared to a global average of 48% who think the same. The lockdown measures imposed by governments worldwide in light of the evolving Coronavirus pandemic are also expected to increase the need for and use of digital banking and payment solutions globally.

The EIU report entitled “A Whole New World: How technology is driving the evolution of intelligent banking in the Middle East and Africa” indicates that MEA retail banks are highly conscious of the threats financial exclusion and delaying digitalization pose to their business models. Respondents acknowledge consumer demands for accessible, hyper-personalized digital banking experiences, ranking changing customer demands as the highest-impact trend by 2020 (35%). A plurality of MEA banking executives – 43% of respondents – identify new technologies, including AI, as the most impactful trend on their sector by 2025.

In order to capitalize on these trends, MEA retail banks recognize the need to sharpen digital marketing skills to bring excluded customers into the banking sphere. As such, mastering digital marketing and engagement is considered the top strategic priority for retail banks in the near term (35% by 2020), and in the medium term (35% by 2025). Notably, higher numbers of MEA respondents believe digital marketing is also the most valuable use for new technologies (23% versus 13% globally). These findings indicate that MEA retail banks believe investing in digital technologies to target and attract the un- and underbanked is crucial.

The survey reveals that the Middle East, in particular, is poised to encourage digital financial inclusion, with young populations and smartphone use predicted to hit 74% by 2025. Governments across the entire MEA region are increasingly embracing digital agendas to encourage financial inclusion and accelerate digital banking and a cashless economy. The affordability of smartphones is a key driver in the new development of building mobile-only and mobile-first greenfield banks, the top innovation strategy chosen by 37% of MEA-based respondents alongside investing in fintech start-ups (37%). Nearly one in three respondents (29%) is innovating by building a greenfield fintech firm, also a top five pick among global respondents (25%).

Jean-Paul Mergeai, Managing Director – Middle-East & Africa, Temenos, commented: Even in the most uncertain times, the power and opportunities of digital banking remain the same. This retail banking report outlines the opportunity for MEA banks who adopt modern technology to accelerate financial inclusion and digital banking, to support economic and social development. At Temenos, we believe in investing in technology and innovation and have the privilege of helping banks and their customers to prosper by using this technology every day. We continue to relentlessly invest 20% of our revenues into R&D, the highest in the industry, and provide to banks the winning combination of the most advanced cloud and AI technology with the richest, broadest banking functionality.”

Katya Kocourek, Managing Editor – Financial Services, The Economist Intelligence Unit, said: “The significant impact of the ongoing Coronavirus pandemic is likely to accelerate the cultural and institutional shift towards digital banking that is already taking place in the MEA region.” •

About the survey
In 2019, The Economist Intelligence Unit surveyed 405 global banking executives about the challenges retail banks expect to face between 2020 and 2025, and the strategies they are deploying in response. The survey data consist of 51% C-Suite level respondents and 10% Board Members. The Middle East and Africa report is based on 65 respondents from the region and was supplemented with in-depth interviews with senior executives from leading banks in the region. •