Emerging Trends in Retail Banking in Saudi Arabia

EPAM’s most recent Consumer Banking Report consists of proprietary research derived from surveying 9,000 banking customers across nine different countries. While the global results weave a rich tapestry that provide actionable insights into the attitudes and expectations of banking customers, the regional results from each individual country surveyed tell a unique tale all their own.

Take, for example, Saudi Arabia, where we heard from 1,000 banking customers. Respondents here reported rates of happiness and trust in their banks that well exceeded the global average. However, customers also identified as being more willing to switch banks than any other country we surveyed. On the surface, these two data points appeared quite contradictory. So, to understand the story behind the numbers, we caught up with Mohammad Shehab, EPAM’s Senior Manager, Architecture and Technology Consulting in UAE, focusing on financial services in the GCC region.

Across the board, we saw Saudi banks representing the highest rates of consumer trust and loyalty. 93% of customers reported being happy with their primary bank and 84% of respondents trust banks in general. What's driving these high rates of trust and satisfaction and what lessons are there that could be applied to the banking industry elsewhere?

MS: If you look at Saudi Arabia specifically, it's a consumer driven market and banks are quite highly regulated. There is a high emphasis on scrutiny, KYC and regulations. In our culture, face-to-face interactions are crucial; we value personal meetings over digital or AI interactions. This also holds true when it comes to making any major financial decision. Whether it's a consumer loan, a mortgage or a deposit product, we want to meet with a representative from the bank and engage in a much more personalized experience.

So, of the 93% of the Saudi Arabian respondents who identified as being happy with their banks, 46% state their happiness is driven by good customer service. Are there specific actions that banks here are taking that help drive this satisfaction?

MS: We've certainly seen banks here compete on delivering customer satisfaction. I’d argue a large part of this can be attributed to the culture of the region. Saudi Arabia is transforming into a tourist and a business hub, and it's welcoming in a large population of expats at around 40%. Banks, too, are competing to welcome these customers. And again, back to regulation, the finance industry is closely supervised by the government, which I think does help drive consumer trust in the banking sector. Just as an example, the UAE was recently removed from the FATF grey list, showing just how diligent the government is working to establish a robust and secure financial sector in this region.

Something that really stood out in the data was, despite these high rates of satisfaction, 40% of customers advised that they would be open to switching banks in the next 12 months. So, on one hand the region has the highest rate of satisfaction and, on the other, customers expressed the highest rate of willingness to switch banks. Can you shed some light on this discrepancy?

MS: I think there are a few contributing factors here. As I mentioned, financial services here are heavily regulated. When you add in the large expat population, simple processes like obtaining a loan can quickly become complicated given the need for KYC protocols, salary transfers and so on. This gets further complicated by the legacy systems that many banks in the region are built upon. This means if I want to get a loan from my specific bank, I must go to the branch. I cannot just open an online portal, fill in a couple of fields and click submit. Rather, I need to fill in papers and sign documentation. 

From a customer standpoint, there’s no incentive for me to have all my products and services in one location as none of these legacy systems are communicating with one another to make that a seamless experience. Instead, I’ll likely have my checking at one institution, investment management at another, and so on, based on what’s convenient and who is offering the best incentives, which is also why you see so much disintermediation in the region.

Let’s talk about technology for a moment. 74% of respondents in the region identified receiving access to a digital AI assistant to help manage their finances as being an important offering from their bank in the next three years. This was an outlier in the data, where the global average was only 51%. Why might customers in the region be more receptive to leveraging AI to manage their finances?

MS: It’s really a fascinating dichotomy. On the one hand, there has been a huge, huge adoption of AI and GenAI, especially within FinTech and private companies. But banks are still catching up.

In order to really leverage these technologies, you have to have the right infrastructure — whether it's data, agile cloud systems, customer 360 and so on. Unfortunately, a lot of the legacy systems banks in the region just aren’t there yet when it comes to bringing all these different components together. So, customers may have had a lot of great experiences with AI in other facets of their day-to-day life, but the banks just aren’t tooled to deliver on that front quite yet, which, in turn, leads to the strong customer appetite we see in the report data.

It's a really interesting picture of the region that’s starting to emerge. On one hand, there are a number of great metrics banks can point to like customer trust and happiness. On the other hand, there are a lot of improvements banks could make to their core systems that would really help them capture a larger share of wallet and build a lasting competitive advantage. To wrap, what advantages can banks in the region leverage as they look toward large-scale digital transformation?

MS: For starters, many of the banks here are quite old and the people have been using them for quite some time. There’s a lot of positive brand recognition for banks here to work with. If you're a local or expat living in the Middle East, then you’re likely familiar with these banks, as they have a large footprint within the region.

As a result of this recognition, these banks also have a large customer base — in the order of millions. So, from a from a revenue perspective, they are quite large and they have the resources to build and transform. At the same time, the government is incentivizing that transformation with the Central Bank issuing regulations for open banking and the FinTech ecosystem to meet many of the generational demands we saw in this research.

That said, I think the real X-factor here is going to be talent. To drive these large-scale digital transformations — whether we’re talking about cloud, data, AI, etc. — having the right talent on hand is going to be critical.

At the end of the day, the banks that are serious about digital transformation and, in turn, serious about growing to meet the evolving needs of customers in the region, need to be working on a digital transformation roadmap now to actively building a pipeline of associated talent.

To frame it another way, banks here in the region need to become proactive about digital transformation rather than reacting to their competitors.