Arab banks begin to modernize
More and more Arab banks accept that they must embrace the internet or risk losing share in their home markets to more technology-savvy international players. National banks see the internet as a means to realize their regional ambitions. Change is under way across the region, perhaps most notably in Bahrain, traditionally the key offshore banking centre in the Gulf. Now Islamic banking and investment banking operations are growing up and offshore banking is becoming less prominent. The country’s leading offshore and local banks are rethinking their strategies and hope to become regional players.
Internet banking is gradually gaining momentum in the Middle East after a slow, tentative start when neither financial institutions nor customers appeared to have much enthusiasm for the concept.
Bankers are now divided between a minority who are pressing ahead as rapidly as possible and a rather larger number who are reluctantly acquiescing in an investment that they privately consider will neither generate immediate profit nor be popular with customers in the short term.
Internet banking has only scratched the surface of the potential market. The service, which has been taken up by little more than a quarter of a million customers, is available from only 18 banks in eight countries. These are Saudi Arabia, Bahrain, Qatar, Kuwait, the UAE, Jordan, Lebanon and Egypt.
However, several banks are planning internet strategies and are expected to be offering the service by the year-end. The financial conditions are right for making this investment. Higher oil prices are expected to stimulate Gulf economies, providing banks with the revenue needed to make the financial commitment to upgrade information technology.
There are also grounds for believing that there is genuine demand. Bankers point out that although comparatively few people in the Arab world are linked to the internet, a relatively high proportion of those who have logged on do use internet banking.