News Column

Opportunity knocks as confidence returns

August 6, 2014

The return of confidence in the UAE economy and rising business sentiment is being reflected in a recovery for banking. The country's real estate sector, notably in Dubai and, to a lesser extent, in Abu Dhabi recovered strongly in 2013. "Given UAE banks' sizeable exposures to the real-estate and construction sectors, their performance is highly correlated to the fortunes of the property market," said RAM Ratings, adding that, "Recent regulatory developments, such as pre- emptive measures to curb property speculation, the imposition of large exposure limits and the setting up of a credit bureau, are steps in the right direction."

While questions remain to be resolved on the restructured debts in their lending portfolios, UAE banks have benefited from cost efficiency, decent net interest margins and greater focus on fee-income generation.


However, the key challenges for the future may lie not with the coming round of debt restructuring but with addressing rising customer expectations. Around the world, according to the EY Global Consumer Banking Survey 2014: Winning through customer experience, confidence in the banking industry is on the rise.

The report noted 33 per cent of customers gaining confidence in the past 12 months and only 19 per cent losing confidence, compared with a 40 per cent decline in the previous survey. "While much of the improvement may simply be a restoration of the confidence lost in the wake of the global financial crisis, this improved sentiment can only help financial institutions as they work to solidify and expand relationships with their customers.

"There is significant business opportunity associated with customers who are true 'advocates', those who are very likely to recommend their primary financial services provider (PFSP). Specifically, 44 per cent of advocates opened new accounts or services at their PFSP in the past 12 months..."


With a majority (85 per cent) defining their PFSP as a bank, EY described this 'as an opportune time for banks to increase advocacy and expand their customer relationships'. The report says that customer experience drives not only trust, advocacy and referrals but also the amount of business customers place with their PFSP.

Financial institutions looking to boost their share of customer wallet and broaden their range of product take-up should, said EY, be focusing on three key areas:

??making banking simple and clear through transparency of fees, simplicity of offers and communication and delivery of an omni-channel experience;

??helping customers make the right financial decisions in a complex environment through more and better advice and through greater use of data and digital channels to offer customer empowerment; and

??working with customers when problems arise, becoming their advocate through improved problem resolution capabilities.

Separately, in a report sponsored by Temenos, entitled Future factors: How regulation, client expectations and technology are transforming retail banking, the Economist Intelligence Unit warned that retail banks risk losing out to non-financial competitors if they fail to adapt to new customer service digital strategies. Increasing competition is a factor that all banks must be aware of but it should perhaps be a cause for concern that the EIU analysis found that while attracting new customers is the priority for digital investment (31 per cent), retaining customers is the lowest priority (eight per cent), just lower than gaining customer insights (11 per cent). The does not seem to be a recipe for long-term success!


"If you fail to look after your customers, it's not long until your business will fail. Retail companies know this better than most and could take advantage if retail banks falter. It is clear banking has fallen behind in the digital age, but now it needs to catch up," said Monica Woodley, the EIU report's editor.

More optimistically, EY said, "After mastering the basics of day-to-day banking, banks have a tremendous opportunity to differentiate by helping customers achieve their financial goals. Thus far, many of the opportunities to realise benefits from improving the experience have related to simplifying it, which often equates more to reducing pain points than to adding incremental value. Also, the introduction of technology and self-service channels into the customer experience delivered a level of convenience that customers quickly integrated into their daily lives. Constant access to banking and the security procedures enabling banking to be conducted in a safe manner now represent seemingly universal requirements and minimum expectations for which customers generally are not willing to pay more."

In other words, the bottom line is this: the seductive siren call of technological development for its own sake must not be allowed to drown the service requirement that should underpin any successful financial product set, whether targeting the retail or corporate client.


In January this year Forrester Research published Financial Service Brands Fail To Earn TRUE Consumer Trust (Technographics® TRUE Brand Compass: Financial Services), Forrester said, "Financial services brands have long suffered from lack of consumer trust, but the 2008 financial collapse undermined the brand relationship. Difficult as the road is, financial services brands must strive to secure brand trust to build their brand." EY comments that one of the key drivers of earning back customer trust is through superior personalised products offerings. High-quality products that meet customer needs are a key driver of trust in financial services.

Recent regulatory developments, such as pre-emptive measures to curb property speculation, the imposition of large exposure limits and the setting up of a credit bureau, are steps in the right direction

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Source: Banker Middle East

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