I am pleased to deliver this speech on the UAE financial sector.
Part I: State of the UAE banking sector
Our banking sector today is solid and robust. Banks are well-capitalized and profitable– a prerequisite to having a healthy and stable financial sector in the long run.
We have come a long way – let’s look at some facts:
• Over the past 20 years, the assets of the UAE banking sector have grown by a factor of 12X, from USD 75 billion in 2000 to over USD 900 billion in 2022.
• The share of assets to our nominal GDP has risen from around 70% in 2000 to 250%+ in 2022 which is in line with leading global markets
• The UAE has emerged as the undisputed financial center for the region and among the Top 7 globally.
Part II: UAE banks’ transformation
Changing customer needs has triggered a significant digital transformation of the local banks. Banks have invested over USD 1bn in the last 5 years This has resulted in a significant upgrade across multiple dimensions
• Technology:
Banks have modernized their technology stack towards microservices, APIs and cloud
• Digital:
Banks have digitized key customer journeys end-to-end and enhanced their digital channels to deliver superior customer experience
• Digital banks:
2 pure digital-only banks have launched operations and 3 incumbent banks have launched their own digital banks as well
• Talent:
Banks have recruited new age talent including designers, engineers, data scientists, etc.
• Agile:
Banks have implemented ‘tech-like’ agile operating models with much faster delivery cycles and greater team empowerment As a result, we have seen digital adoption increase
• +95% of all transactions for leading banks are digital nowadays. These figures are among the top quartile levels globally.
• Mobile banking penetration for the large leading banks is well over 90%.
• Digital sales have also increased significantly, for example 50%+ of all new accounts opened were done digitally.
The role of the physical branch is diminishing.
Over the past 5 years, over 200 branches have been shut (representing a 30% drop).
One large bank has closed over 80% of its physical footprint.
Part III: Enablers of the financial ecosystem
Our financial centers – namely DIFC and ADGM – have played a significant role in developing our financial sector and putting it on the global map. Today, DIFC and ADGM combined are home to more than 7000 businesses. These businesses employ more than 44,000 people. On top, we have over 20,000 banking employees in mainland UAE.
Fintechs have emerged across all segments and products. The UAE is the undisputed hub for fintech in the MEA region with cumulative investments of more than USD 1 bn over the past few years.
Regulation has come a long way as well. Our local regulators are at the forefront leading innovation in contrast to a few years back, where innovation was bank driven. For example, last month, the CBUAE completed the world’s most extensive pilot of central bank digital currencies transactions (CBDCs).
Part IV: Looking ahead The banking industry is expected to grow at double digit rates which would faster than the overall economy. The expectation is that banking revenues (after risk) will reach USD 25 bn+ by 2030 which is 50% increase from today. Given the positive momentum and the recent investments in technology, digital and talent, I believe banks in UAE are very well positioned.
Let me put forward a perspective for the future:
• The digitization of financial services will accelerate:
Digitization is now mainstream across all products and segments. Banks' technology budgets and capabilities will inevitably have to continue to rise to keep up.
• Managing and using data effectively will become a competitive advantage; in the world of data, it will be essential for banks to raise their capabilities in analytics
• Digitization will require continued adjustment of the operating models: we cannot continue to add costs. Competition from Fintechs and others will make this impossible.
We need to fundamentally restructure our operating models Reducing our branch network is only the first step.
• Banks will expand their role in the customer life: strong digital and analytical capabilities gives the opportunity for banks to expand their role in tapping non-banking revenue pools.
We already have some examples of embedded finance, transaction banking solutions, home ecosystem orchestration.
• The structure of our sector will change
The number of players is unlikely to decline despite wave of consolidation. The attractiveness of the sector is likely to attract new entrants including international players and non-banks.
We will see a greater range of business models where players will focus on specific segments, products, or channels
Competition with Fintech will move increasingly to collaboration: Collaborations between the various stakeholders in the ecosystem – Banks, Fintechs and Bigtechs – which will unlock great value to the industry and unleash innovative solutions to UAE customers 9 and businesses
Part V: Closing summary
In summary, the UAE is well positioned to further strengthen its position as the region and global primary financial center and to be a bridge between East and West. I remain incredibly optimistic about the future.
