What is Driving Saudi Arabia’s Mobile Banking and Commerce Movement?
The BFSI transformation is creating a symbiotic loop where industry is driving customers and vice versa – one that is creating an infrastructure for modern, mobile-first commerce – driven but not limited to payments.
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[Image source: Krishna Prasad/MITSMR Middle East]
Modern Banking, Financial Services, and Insurance (BFSI) players are using customer intent to drive new product offerings. An agile tech infrastructure helps maintain lean teams, quick development cycles, and an evidence-based mindset to test and grow at speed and scale.
There is a lot riding on BFSI to drive change. In the Kingdom of Saudi Arabia, specifically, a confluence of trends is moving neo players to innovate. Propelled by the government’s Vision 2030 initiative, customer expectations for easy access, speed, efficiency and enhanced security coupled with business requirements like cost-effectiveness – new-age players are moving at a pace unknown to most traditional institutions. The digital finance ecosystem is the key to diversifying the Kingdom’s economy.
The Saudi Central Bank (SAMA) has spearheaded the launch of the Saudi Payments Network (MADA), significantly enhancing the country’s digital payment ecosystem. Over the past three years, this initiative has driven a remarkable 75% increase in digital transactions, fueling substantial growth across payment systems, lending platforms, insurance, and investment services.
Banking without physical branches
While traditional banks face challenges in modernizing their legacy IT systems and processes, their neo counterparts offer a stark contrast with quicker product development cycles.
According to Amro Abbas, Executive Advisor to Chief Executive Officer & CMO at Vision Bank, “The banking consumers’ behavior has been constrained with the limits of the banking industry. Over the years, the world has witnessed exponential growth due to smart use of technology in every sector, from retail to manufacturing and services. This has been driven by the collaboration of cross industries with technology that bridged the gap and provided us with terms such as fintech, edutech, and medtech among others; and with the smart use of data, it unleashed a whole new market and business segments.” Vision Bank is a Saudi digital bank regulated by the Saudi Central Bank (SAMA) looking to reimagine banking in the region.
According to a report by KPMG, neo-banks hold a market share of 20% in Saudi Arabia’s digital banking sector, while online banks have a 30% market share. Banking-as-a-Service is expected to reach a market valuation of $7 trillion by 2030, growing at a rate of 26% year-on-year. Non-banking players like STC Pay and Mobily Pay that offer seamless wallet experiences are also proving to be formidable competition to traditional banks.
One of the main drivers of this change has been what younger bankable consumers expect. Abbas says younger audiences show a higher trust in technology than previous generations due to more prudent security measures and stronger systems that respond and adapt to their needs. In addition, their financial needs are different. “They take less loans, they are more likely to spend on experiences than material things, their ability to save and invest is compromised, and their ability to make money with the gig economy and trends like part time jobs during seasons has increased. All this changes the game for the BFSI player to enable services that meet these needs and puts a responsibility on us to provide financial literacy to the younger audiences while revisiting their legacy profit-making models,” he says.
Turning from a capital-driven to service-driven approach has made institutions reallocate investment of resources in different parts of the business, such as customer care, innovation, and data. With the right data strategy, these players will have a considerable advantage in the industry.
Insurance takes a lifestyle approach
While marketers frequently parrot the need to increase customer lifetime value, few are able to crack what that really entails. For example, traditional insurers often focus their efforts on acquiring customers when they are at the point of needing insurance, offering them products to keep them satisfied, and ensuring renewal. “While this approach isn’t wrong, it overlooks the broader potential,” says Mohamed Auf, Director of Digital Experience Excellence at Tawuniya, a Saudi Joint Stock Company established in Riyadh by royal decree in 1986. “Insurers should consider expanding their offerings to encompass both the stages before and after the purchase of insurance and positively engage with the customers throughout their larger journey,” he says.
Take motor insurance as an example: rather than relying solely on selling insurance products, insurers should explore opportunities to disrupt related markets, such as the sale and leasing of vehicles. This not only establishes a relationship with the customer earlier in their journey but also positions the insurer as a trusted partner during the consideration phase. Customers are more likely to engage with a familiar brand when making significant decisions.
Moreover, the journey doesn’t end with the purchase of insurance. Insurers could extend their offerings into post-purchase services, such as vehicle maintenance. This would transform the revenue model from a one-time payment to continuous engagement, significantly enhancing customer lifetime value.
“Empowering insurers’ platforms with additional digital services, in collaboration with key market players, can help insurers engage a broader segment of customers, both in the short and long term. This approach allows insurers to not only expand their offerings beyond the traditional scope or reach customers earlier in their journey but also to innovate new revenue streams that previously didn’t exist, delivering a unique and disruptive value proposition, says Auf. The success of these partnerships depends on their relevance.
The convenience of digital payment options and cross-functional partnerships between finance and non-finance players is supporting the shift toward mobile commerce. Improved transaction speed is only part of the win; the main aim is increased customer satisfaction. While the lines between payments and retail blur, data remains the common thread binding commerce to customer intent.
Hassan El-Tahan, Vice President of Growth, Gathern, a vacation rental platform licensed by the Ministry of Tourism, says, “We place a premium on transactional data to track past booking behaviors, customer feedback to gauge happiness levels, and predictive analytics to forecast future actions based on previous behavior. Combined with lifecycle stage data, this provides a comprehensive view of customer intent, enabling us to craft personalized experiences that boost retention, conversion rates, and lifetime value.”
However, embracing new strategies gives way to modern business pain points. The BFSI industry in Saudi Arabia is at the precipice of transformation, a good time to anticipate future challenges. Players, new or old, who can identify and act on the challenges, as seen in global markets, will find new opportunities to convert customers to loyal advocates.
After all, the modern Saudi customer is discerning. Going digital alone doesn’t guarantee a more valuable relationship with customers. The success of digital transformation investments in enterprises traverses a multidimensional framework that spans financial, customer, process, workforce, and purpose parameters, according to Deloitte’s Measuring Value from Digital Transformation Research.
On the business side, this means using technologies to drive significant cost savings for the bank, along with seamless data integration across departments, more agile and efficient operations, and a quicker, less expensive regulatory and compliance process.
But how does it translate for the customer?
Customers not only expect ease in transacting, gaining insights on spends, automated alerts, increased security, but also an amalgamation of their financial activities with lifestyle. This could mean something as simple as identifying a redundant subscription payment, or predictive insights on making wiser investment choices. While modern BFSI products are embracing new technologies to create smarter and more empathetic products, marketers in the industry have the opportunity to improve client service and customer experience.
The experts quoted in this story will participate in the Customer Centricity Summit, scheduled to take place in Riyadh on November 13, 2024.
