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ANALYSIS

Tech disruption in retail banking in GCC

DUBAI, September 8, 2019

As in other markets, the main risk of technological disruption for retail banks in the GCC is changes in customer preference, said S&P Global Ratings in a new report.

"This is the conclusion we drew from our four-factor analysis of a banking system's technology, regulation, industry, and preferences (TRIP), which we are incorporating in our ratings on banks in the region,” said Mohamed Damak, S&P Global Ratings credit analyst, commenting on the report titled "Tech Disruption In Retail Banking: GCC Banks Are Catching Up As Clients Become More Demanding" published on RatingsDirect.

“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," he added.

“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. We expect some GCC bank business lines to remain protected from fintech in the medium term. These lines 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 concluded. – TradeArabia News Service




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