Technology has been playing a significant role in the banking industry globally for quite a long time. The adoption of digital tools and platforms is transforming the way banks are operating, dealing with customers, and other functionalities on a day-to-day basis. Technology is acting as a key enabler for the banking sector in the UAE as well. As per the latest report by Gulf News, financial analysts are forecasting that 2021 will be a less volatile year for the UAE banks. The UAE banks have very strong capital buffers and liquidity with consolidated state support during any sort of crisis or events of structural risks. Besides, as compared to the last year, the UAE banks will see less volatile operating environments thanks to the consistent technology disruptions that is making an inroad to the core of the system. As per Delloite’s Middle East Financial Services Practice, eight disruptive technologies will have a massive impact on the banking industry in 2021 and beyond!
Let’s analyze these 8 technologies and how they can be a big impact on the UAE banking industry –
Banks leverage the power of Cloud service technology to penetrate newer business opportunities and accessing new delivery channels. Banks can reduce the huge data storage costs by saving abundant on CAPEX and OPEX without compromising with customer data security aspects.i.e. protecting customer data in the process. There are three types of Cloud services that banks can procure – Infrastructure as a service (IaaS), Software as a service (SaaS), and Platform as aservice (PaaS). Banks can benefit from Cloud services in the following ways –
- High-level data security.Restraints of data manipulation via security and audit restrictions.
- On-demand provision of required services,i.e, scaling, and agility.
- Banks will pay only for what they use.Shifting to IT-based Clouds prevents them from unwanted and upfront infrastructure investments.
Overall, banks will see the impact of this technology on their overall business growth, risk & regulatory affairs, improved operations, and huge cost reduction.
2. Artificial Intelligence(AI)
Data is playing, will play,a central role in the banking sector.AI helps banks in the decision-making process, enhances customer experiences, and overall operational efficiency.AI’s real-time sensing power and ability to spot anomalies empowers banks to detect frauds and discrepancies in financial transactions, or just any kind of transactions with customers and other stakeholders. Using ML capabilities AI -applicationslike automated frauds detection systems, read and identify peculiar behavior patterns of customers indicating any fraudulent intention and activity. AI-powered advanced financial management tools provide recommendations to customers that are ‘human-error-free’ and personalized ones.NLP AI Chatbots serve customers as a constant virtual assistant helping in real-time banking transactions. Banks will also leverage the technology increasing productivity in back offices like compliance reporting, communication-related to onboarding new customers, and various other documentation processes.
3. Big Data Analytics
Big Data Analytics is helping banks in extracting valuable insights from massive databases and analyzes data in a specified manner. Eventually, this works like a big boost in the decision-making process making it more efficient and succinct. Thus, Big Data Analytics is going to rule the UAE banks benefitting the following ways-
- Increased level of customer-retention provision.
- Greatly optimizing risk management things.
- Providing real-time insights into the stock market.
- Along with RPA, AI tools, ML, Big Data is indeed catapulting the industry to a seamless level.
4. Internet-of-Things (IoT)
The IoT connects physical devices like computers or mobile, and sensors over the internet, and helps banks with useful and insightful data-driven functions. The UAE banking system especially retail banking will go for larger investments in the IoT field for utilizing internal infrastructures and consumer-facing capabilities. Moreover, the very deep data insights will help the industry to increase operational efficiency, prevent fraudulent activities, and reduce the big chunks of non-performing assets(NPA). The easier verification process, loan tracking process, improved customer and employee efficiency, customer-retention are other few advantages that the banking industry in the UAE can leverage out of the IoT capabilities.
Intelligence automation is the underlying description of Robotic Process Automation (RPA) technology. The banks can leverage their capabilities to increase efficiency, remove human-errors, and repetition of work. Few remarkable advantages in adopting RPA to the banking system are –
- Diminished error-rates guaranteeing accuracy.
- Huge cost-reduction.
- Inbuilt-robots are faster than humans, no doubt. SO, increased level of operational efficiency.
- Enhancement in several aspects of compliance.
Banks can benefit from quantum mechanics to solve problems that are otherwise not possible on regular computers.The bank-sector can expect four major usages under this technology –
- Dynamic portfolio making and optimizing of one
- Handling of complex financial data through enhanced financial modeling features.
- Strong data security through sound encryption-creation.
- Capitalizing ML capabilities by scanning an unimaginable amount of data in milliseconds and providing feedback.
7. BlockChain & DLT
Blockchain and its related Distributed Ledger technology are usually helpful in tracking the massive circulation of Bitcoin Cryptocurrency. The technology is going to disrupt the banking sector in the following ways –
- There is a time-sensitivity factor in Blockchain technology. Real-time settling of recorded transactions is a big utility that ensures enhanced customer experience in all.
- Authentication through Smart Contracts.
- Manual processing will be reduced due to automated audit facilities.
- Data consistency and transparency are guaranteed
8. APIs and Open Banking
Open banking means banks working together as technology partners. The banking sector can participate in either of the four ways –
- As a full-service provider.
- As Utility.
- As Supplier.
- As a Marketplace.
By creating, opening their APIs, introducing FinTech solutions by connecting other APIs in the market, enhanced service provision can be assured. This is embracing the open banking API economy that brings about a transformation in the current offerings and attracting customers as a whole.
According to the Bank of America Merrill Lynch (BoAML), 2020 has impacted the UAE banks due to the global pandemic recession and other geopolitical tensions. Despite this, the analysts also predict that certain reforms like 100 percent foreign ownership of businesses, stronger loan growth, and lowering of provisioning costs will boost the UAE banking sector in 2021. On top of all, the eight disruptive technologies will be the driving force behind all transformative changes in the UAE banking industry.
Interested to know how digital technology can transform your core banking? Contact us today!