Beyond convenience: Why banks strive to go cashless

Mashreq, which is celebrating its 50th anniversary next year, is one of the most active banks in the UAE and for the last two decades has focused on innovation as its competitive differentiator.

 The retail banking sector is in an interesting place right now as products and services are embracing complex technological advancements, which at the same time, make it more convenient and simpler for customers to bank, according to a senior banker.
Subroto Som, head of Retail Banking Group at Mashreq, told Khaleej Times what the current trends in retail banking are and what the future holds for his bank.
“The velocity of digitisation in banking is accelerating to keep pace with customer demands for convenient access to financial solutions. And while digitisation of products and services is complex, it actually has the benefit of ultimately making banking simpler, convenient and enjoyable for the customer,” Som said.

Mashreq, which is celebrating its 50th anniversary next year, is one of the most active banks in the UAE. The bank sees technology as a key area of innovation and is making huge investments in digitisation to differentiate itself.
While Mashreq has introduced innovations such as integrating its mobile banking app — Snapp — with Apple’s Siri for voice-powered payments, Som agreed there was still some way to go before the UAE becomes a truly ‘cashless’ society.
A cashless society
He says that while currently 75 per cent of the bank’s customers use Snapp and 87 per cent of retail transactions are currently taking place through digital channels such as online, mobile, ATM and Cash Deposit Machines, more than 70 per cent banking transactions in the UAE as a whole are still through cash.
“We are far from being a totally cashless society as we have many tourists and visitors coming in, hence it is not part of the existing local banking community. However, in time I do believe that e-wallet and mobile banking will replace cash with digital money.
“There are two factors that will drive this. One is the convenience and simplicity for the customer, and the other is the high cost of handling cash.
“Between three per cent and four per cent of the value goes into managing the cash and when a bank can migrate customers to digital channels, you save on these cash handling costs as well as providing incredible convenience to the customer,” he explained.
Dubai’s banking landscape
One aspect that most bankers agree on is that with about 3.5 million bankable customers and about 50 banks in operations, Dubai is definitely an overbanked community. Som explained that while this is a current challenge, consolidations and mergers are already beginning to change the banking landscape.
“It is important that customers have a range of choices in banks, but with Dubai’s overbanked position, there is less innovation and product development among the smaller players. Consolidation brings economies of scale and scope that allow the combined assets of those banks to bring greater value and innovation to their customer base,” he said.
Bad debts are a concern for anyone — whether an individual or a business and Som praised the government for the introduction of initiatives like the new bankruptcy law, and the introduction of a federal credit bureau.
He mentioned that the introduction of the Al Etihad Credit Bureau is a great asset to the industry and while currently it is a new service for individuals to use and get used to, over time the bureau will actually bring two big benefits.
“It will allow banks to lend more responsibly and more knowledgeably; and it will reduce the cost of lending to good customers while increasing the cost of lending to bad customers,” he said.
Banking industry outlook
After a challenging 2016, the outlook for the banking industry in the country looks better for next year, according to Som. The third quarter was better than the second quarter and fourth quarter is expected to be better than the third quarter. He mentioned that the bank as a whole responded to the challenges it faced during 2016, ensuring that it made changes to products and customer criteria to weather the market conditions.
Talking about the bank’s priorities and focus areas going forward, he replied that the primary focus is to grow the bank’s customer base through a number of areas. In addition the banks wants to build wealth business, continue to build innovations and its digitisation strategy.
“We have strong programmes for each of these,” he informed. Wealth business is also one of the big focus areas for the bank. “We have seen good year on year growth of around 30 per cent till the third quarter of this year. We are still a small player in it but our market share is increasing,” he said.
Mashreq is also one of the top three card acquirers. Merchant acquiring business in the market is growing at seven-eight per cent despite less tourists arrivals in the UAE, but acquiring is good business for Mashreq as the bank’s business is growing by up to 14 per cent.
— business@khaleejtimes.com