Digital banking trends: global and MENA contexts

Let's take a moment to reflect on the evolution and current state of digital banking, focusing on its profound impact on both the global and MENA banking sectors. The MENA region, which encompasses countries from the Middle East and North Africa, is remarkably diverse. It includes wealthy, technologically advanced nations like the UAE and Qatar, as well as developing economies such as Egypt and Morocco. This diversity creates a unique landscape where the trajectories of global fintech development are often reshaped by the interplay between emerging technologies and traditional cultural practices.

In such an environment, user demands evolve in distinctive ways, driven by the region's economic, social, and cultural nuances. These factors give rise to specific challenges and opportunities that differ from those in more uniform markets.

This is where Markswebb excels. Our expertise lies in digital banking services, and we have long been at the forefront of studying and understanding fintech practices, both globally and locally, conducting research such as Mobile Banking Rank, Mobile Web Banking Rank, Digital Corporate Banking Rank, Business Mobile Banking Rank.

Digital banking 4.0: a new era

The current phase of digital banking (2015-present), referred to as Digital Banking 4.0, is characterized by the profound influence of fintech, shifting customer behaviors, and the advent of new technological formations. These developments have significantly impacted the dynamics between banks and their customers, as well as the regulatory landscape governing financial services.

Fintech has revolutionized the banking sector, introducing innovative solutions that have not only enhanced the efficiency of financial transactions but also expanded access to banking services for a broader population. This era has seen the rise of mobile-first banks, blockchain applications, and AI-driven customer service, all of which are reshaping traditional banking models. As customer expectations evolve towards more personalized, real-time, and seamless financial services, banks are compelled to innovate continuously or risk obsolescence.

We at Markswebb know exactly what is happening in fintech, especially in the digital banking sector. For many years now, we have been thoroughly exploring this landscape, packaging our findings in periodic research reports.

Global digital banking trends

Globally, the digital banking landscape is marked by a rapid increase in the use of digital payments and online banking. This trend is evident in both high-income economies and developing countries, where financial inclusion has been significantly enhanced through digital channels. The convenience, speed, and security of digital transactions have driven their widespread adoption, reducing the reliance on cash and physical banking infrastructure.

Countries with advanced technological infrastructure, such as those in Europe and North America, have nearly universal digital banking adoption. However, even in developing regions, digital banking is expanding rapidly, spurred by the proliferation of smartphones and improved internet access. This global shift towards digital banking is also accompanied by a corresponding decline in the number of traditional bank branches, as customers increasingly prefer the convenience of managing their finances online.

MENA digital banking trends

In the MENA region, digital banking trends closely mirror global patterns, with some regional specificities. There has been a noticeable rise in the number of digital banking customers and financial transactions conducted through digital channels, particularly mobile banking. This trend is driven by several factors, including increasing internet penetration, the widespread use of mobile devices, and the enhancement of digital payment infrastructures.

• Growth in the use of digital banking services: In most MENA countries, there has been a significant increase in the number of digital banking users and financial transactions conducted through digital channels, particularly mobile banking. For instance, the number of active digital banking customers in the region grew by approximately 25% between 2020 and 2023, largely driven by mobile banking. Specific data points, such as Egypt seeing over 20 million digital banking users by 2023, could be highlighted. This is driven by the increasing penetration of the internet and mobile devices, as well as improvements in digital payment infrastructure.
• Reduction in the number of bank branches: In several MENA countries, there is a decrease in the number of physical bank branches, as clients increasingly prefer to conduct transactions online, reducing the need to visit branches. In Saudi Arabia, the number of bank branches decreased by 8% between 2019 and 2023, mirroring the trend towards digital banking. This could be contrasted with Egypt, where the reduction was more modest due to the ongoing digital transformation process.
• Impact of the COVID-19 pandemic: The pandemic accelerated the digitalization of banking services in many MENA countries, as clients sought to minimize physical contact and preferred to conduct transactions online. For example, digital payments surged by more than 50% during the pandemic in countries like Saudi Arabia and Egypt, reflecting a shift from cash-based transactions to digital alternatives.
• Financial inclusion and innovation: In MENA countries, the active adoption of new financial technologies continues to stimulate the development of digital banking services and increase their accessibility to the population. In countries like Morocco, the introduction of mobile wallets has played a key role in improving financial inclusion, with around 30% of the adult population now having access to financial services through digital channels. By 2023, approximately 90% of financial transactions in the UAE were conducted digitally, highlighting the country’s leadership in digital banking adoption and inclusion.

Variability across MENA countries

However, it is important to note that the degree of digitalization and adoption of digital banking services varies significantly across MENA countries. This variability is influenced by several factors:

1.Internet and mobile penetration:

• High penetration (80-100%): UAE, Qatar, Bahrain, Turkey.
• Medium penetration (50-80%): Saudi Arabia, Egypt, Morocco.
• Low penetration (30-50%): Yemen, Libya, Sudan.

The UAE has one of the highest internet penetration rates in the region, with over 99% of the population having access to the internet. The UAE's commitment to maintaining its position as a global leader in digital innovation is evident in its ambitious national strategies, which prioritize the development of cutting-edge financial (and beyond) technologies and infrastructure. This proactive approach not only ensures the UAE remains at the forefront of digital banking, but also sets a benchmark for other nations in the region. Markswebb is currently conducting an in-depth analysis of this sector and will soon release the findings, offering valuable insights into the UAE's digital banking landscape in Mobile Banking Review UAE 2024.

2.Digital payments usage:

• High Usage (70-90%): UAE, Saudi Arabia, Kuwait, Turkey.
• Medium Usage (40-70%): Egypt, Jordan, Lebanon.
• Low Usage (10-40%): Algeria, Iraq, Syria.

3.Mobile banking development:

• Widely Used (50-80% of the population): UAE, Saudi Arabia, Qatar, Turkey.
• Moderately Used (20-50% of the population): Egypt, Morocco, Tunisia.
• Sparsely Used (less than 20% of the population): Yemen, Libya, Iraq.

4.Digital transformation in banking:

• High transformation: UAE, Qatar, Turkey, Saudi Arabia (integration of FinTech, reduction of branches).
• Moderate transformation: Egypt, Morocco, Jordan (development of digital services, retention of physical branches).
• Low transformation: Yemen, Libya, Syria (limited digital services, reliance on traditional branches).

5.Regulatory support and innovation:

• Strong support: UAE, Saudi Arabia, Turkey, Bahrain (support for startups, financial inclusion initiatives). The Central Bank of the UAE has been particularly active in supporting FinTech innovations, introducing regulatory sandboxes that allow new digital financial products to be tested in a controlled environment.
• Moderate support: Egypt, Morocco, Jordan (developing regulatory frameworks).
• Limited support: Yemen, Libya, Syria (unstable conditions, limited resources).

6.Financial inclusion levels:

• High financial inclusion: UAE, Saudi Arabia, Turkey, Bahrain (broad access to banking services).
• Moderate financial inclusion: Egypt, Morocco, Tunisia.
• Low financial inclusion: Yemen, Libya, Sudan (significant portions of the population are unbanked).

Future of digital banking in MENA: Markswebb vision

The future of digital banking in the MENA region resembles a fertile field, meticulously sown and ready for a period of rapid and vigorous growth. With ongoing technological advancements, digital banking is set to expand and evolve, bringing unprecedented convenience and accessibility to consumers across the region. However, just as a field requires careful tending to yield the best harvest, this burgeoning digital landscape demands strategic oversight and regulation.

As digital banking flourishes, it becomes increasingly important to address the potential pitfalls such as security vulnerabilities, UX gaps, and the challenges of maintaining customer trust in a rapidly changing environment. The region stands at the threshold of significant transformation, and the tools to manage and guide this growth are more critical than ever.

Markswebb is poised to offer its expertise in this evolving landscape, providing tailored solutions to ensure that the digital banking sector in MENA not only grows but thrives. By implementing effective strategies and tools, Markswebb can help cultivate a secure, efficient, and customer-focused digital banking environment, ensuring that the seeds sown today yield a prosperous future for the region.