embracing and levaraging change

8/3/2019 Embracing and Levaraging Change

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Banking in the Gulf CooperationCouncil in 2015Embracing and Leveraging Change


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About the Research 03

Executive Summary 04

Introduction 05

Detailed Findings 09

Initiatives for Success in an 15Altered Banking Landscape

Conclusion 21

About the Authors 22Collaborating with Accenture 23

Contents

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About the Research

3

The Accenture study of the banking

industry in the Gulf Cooperation

Council (GCC) finds that regulatory

changes, higher customer expectationsand a tight labor market will mold the

industry by 2015.

The Accenture 2011 study of the

banking industry in the GCC is based

on the results of a primary survey

conducted across all the six GCC

countriesBahrain, Qatar, Oman,

Kuwait, Saudi Arabia and the United

Arab Emirates. The survey respondents

comprised 47 C-suite and senior

bank executives. The survey was alsoextended to three major regulatory

authorities in the region.

The survey covered several key

dimensions influencing the banking

business and captured the opinions

and viewpoints of the key decision

makers in leading banks to gain

insights into factors driving change in

the industry. The survey was conductedwith the objective of gaining a deeper

understanding of the challenges and

gauging how banks are preparing to

overcome these challenges and position

for change.

The survey, combined with Accentures

banking industry insight and local

market knowledge reveal several key

trends most likely to shape the GCC

banking industry by 2015. This point of

view discusses these trends and thenpresents a series of initiatives aimed at

helping banks navigate the challenges

and obstacles to emerge as high

performers by 2015.

Regions

Count Percent

UAE 19 41

Qatar 8 17

Bahrain 8 17

Saudi Arabia 6 13

Oman 3 6

Kuwait 3 6

Group Revenues

Count Percent

>US$10 bn 3 6

US$5 bnUS$10 bn

0 0

US$3 bnUS$5 bn

2 4

US$1 bn

US$3 bn

12 26

US$500mnUS$1 bn

4 9


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4

Banks in the Gulf CooperationCouncil (GCC) expect to face a wholenew layer of business imperatives

as fundamental economic anddemographic changes unfold intheir countries.

A gradual shift away from traditionalgovernment-driven, large oil-basedenterprises to industries such astelecommunications, finance andtourism is creating new avenuesfor economic growth. As theseindustries grow, banks will beaddressing a more diverse customerbase including long-neglected

segments such as small and mediumenterprises (SME). Target audiencesfor banks will increasingly includeyouth as well as womenas bothare growing segments on account ofhigher education and employmentlevels within these demographics.Mobile technologies and the growingnumber of Internet users areopening up new distribution formats,complementing conventional ways toreach the customer.

In a region with traditionally lowcustomer penetration, banks willcompete to acquire and retaincustomers, underscoring the need tostay differentiated. And, as systemicrisk from the global economy remains,it is even more important to ensure astrong competitive position.

To gain deeper insights into how banksare preparing to address the demandsof a transforming and fast-growing

market, Accenture conducted asurvey of 47 banks across the sixGCC countries.

Executive SummaryThe survey revealed that a majorityof the banks, in anticipation of thechanging customer profile, are indeed

considering a shift to a more customercentric and service-oriented operatingmodel. Some of the key surveyfindings are:

Focus on retail and SME segments

Strengthening distribution

Analytics for customer insights

Regulatory compliance challenges

Widening skills shortage

Banks in the GCC, in general, areaware of the key areas that need

to be addressed while chalking outtheir growth strategies for the nextfew years. However, it is importantthat they reassess their business andoperating models to build and sustainprofitability, and deliver operationalexcellence. Accentures deepunderstanding of the global bankingindustry and our analysis of the GCCbanking sector shows that banks canachieve high performance by initiatingfive key steps to overcome challenges

and seize new opportunities:Align the operating model withstrategic business goals.

Build customer analytics withpredictive analytics capabilities.

Strengthen distribution channels andcreate new ones based on the Internetand mobile technologies.

Seize the growth opportunities inthe evolving regulatory scenario.

Architect talent strategies aimed at

managing and retaining talent.

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The flexibility to respond quicklyto customer needs is as critical tobanks as it is to other industries

such as retail, consumer goods andtelecommunications. Accenturesexperience and research has shownthat customer centricity underpinscompetitive differentiation.

In the Gulf Cooperation Council (GCC),where a general change in customerneeds and behavior can be recognized,banks too are turning their focus toeven more customer-centric businessmodels to position themselves in anincreasingly competitive market.

Emerging relatively unscathed fromthe recent global financial crisis,GCC banks are today consideringoperational changes in response to abanking landscape, which is expectedto be altered by the dynamics ofeconomic diversification and by thenew technologies that are alreadyoverturning conventional waysto reach the consumer. However,systemic risk from the global economyremains, and therefore, it is evenmore important to ensure a strongcompetitive position.

Over the past 10 years, the economiesof GCC countries have been growingfast: the growth was on par withother emerging markets, withaverage growth rates exceeding5-6 percent, and much faster thanadvanced economies (Figure 1). By2014, the GDP of GCC countries willbe twice the figure in 20011, while

advanced economies will grow by justa fourth. The high growth rates areexpected to be, in part, sustained bythe government stimuli to diversifythe industrial base and reduce theregions heavy dependence on oiland gas revenues. In 2010, oil andgas extraction alone constituted 54

Introductionpercent of the GDP in Kuwait, 47percent in Qatar, 45 percent in theKingdom of Saudi Arabia (KSA) and 39

percent in the United Arab Emirates(UAE). If the oil-related industries andthe public sector is taken into account,this share can go up to an average of70 percent2.

Given the volatility in oil prices,the GCC countries see economicdiversification as the way forwardto creating sustainable growth. Thefocus is now on fast developmentof alternative industries, such astourism and financial services,

creation of a stronger push forfull vertical integration of the oilindustry, and development of moreoil processing industries. Additionally,the GCC governments are stimulatinginfrastructure and housing investments,particularly in KSA.

Simultaneously, demographic changesare redefining the regions economies.The GCC population is relativelyvery young. In KSA and Oman, forexample, more than half of the

population is below 25 years; in mostWestern European countries, theproportion of youth is 30 percent orlower3. Most of the GCC countriesare relatively smallfour have lessthan 4 million residents. The biggestis KSA with about 25 million4.

5

1. IHS Global Insight, May 2011

2. IHS Global Insight, May 2011

3. Business Monitor International, Arab Social Media Report, January 2011

4. Official data of central banks and statistics authorities


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As expected, the banking industry is

also gearing up for change againstthis dynamic backdrop of a regionaccelerating toward high growth.

So, what are the priorities of bankingchief executives and how are theyaligning their businesses to a growthagenda? To understand how banksare preparing for the requirements ofa changing, fast growing economy,Accenture conducted a survey of 47banks across the six GCC countries.

The survey reveals that banks in theGCC anticipate a more competitivemarket, stricter regulations and aburgeoning skills shortage by 2015.In response, banks are consideringa shift to a more customer-andservice-oriented operating model.

Much of this sharpened customerorientation is based on theexpectation that the customerbase will widen and deepento better cover youth, womenand SMEssegments that havetraditionally received little attention.These segments are expected tobe significant contributors to the

economy. Additionally, as banks

continue to strengthen their retailbanking franchises within the region,there will be greater competitionfor the same pool of customers,resulting in successful banks placingmuch greater emphasis on buildingdeep customer relationships andpenetrating new customer segments.

Many GCC banks are considering orare already investing in initiativesto get closer to the customer. Thehigh Internet and social media

penetration is helping banks reachout to tech-savvy customers withsmartphone and iPad applications,and through Facebook.

Many also recognize that a well-defined customer-centric approachwill require them to embed analyticsin their operating models to gaincustomer insights. Customer analyticsis expected to inform almost all oftheir choices.

Successful banks will positionthemselves to manage two othermajor change factorsa stricterregulatory environment and an

intensified struggle to get the

right talent. Like their globalcounterparts banks in the GCC tooare anticipating their central banksto enforce requirements focusingon maintaining stricter liquidityratios and create capital adequacynorms in line with the Basel CapitalAccord. However, since the GCCbanks are fairly well capitalized,their concerns will be centered onliquidity management and meetingreporting requirements laid out bycentral banks. Additionally, moretransparent corporate governanceand risk management requirementsare expected to influence theoperating models.

The talent challenge too is developingalong the same lines as in the otherparts of the world where industriesface a widening skill gap among theworkforce. However, in the GCC,there is an additional dimension of alabor pool restricted by the ization

policies that mandate a quota oflocal talent to be hired in all nationaland international organizations.In KSA, for instance, the minimum

Figure 1. Future and past growth

Real GDP growth percentage, comparison with selected countries1

1. GCC countries compared with other Middle East countries and most important emerging, natural resources-based markets

Source: IHS Global Insight, May 2011


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Sauditization level is 49 percent for

banks with 500 employees or more.

The Accenture survey shows that themajority of the respondents are stillto implement initiatives to preparethem to meet the changes expectedin the regulatory environment, theworkforce and the customer base,which are set to shape banking in theGCC by 2015.

The survey covered several keydimensions influencing the banking

business and captured the viewpointsof the key decision makers in leadingbanks to gain insights into factorsdriving change in the industry. Thesurvey respondents comprised mostlyC-suite bank executives and headsof strategy and retail operations. Thesurvey was also extended to threemajor regulatory authorities inthe region.

Looking ahead, the survey resultsdescribe how the banking landscapeis likely to evolve in the GCC by 2015.

Changing customer structure: Amajority of the respondents (85percent) say they will continue to

invest in retail banking within the

region. As GCC economies maintainsteady growth, the customer profileis expected to include a growingnumber of youth and women.Banks will also build capabilitiesto respond to the needs of theburgeoning private and the small andmedium businessesa segment thatbanks currently struggle to serve.An overwhelming majority of therespondents (91 percent) say theirbanks are investing to strengthenSME banking operations.

Strengthening distribution: Banksrecognize that developing bankingchannels, both traditional andemerging, will not only be pivotal forpenetrating new market segments, butalso for enhancing their market share.Close to 80 percent of the bankshave either planned or have ongoinginvestments in distribution channels.

Major challenges perceived in stricter

regulations and a tight labor market:A tighter regulatory environmentwith new capital and liquidityrequirements proposed by the BaselCapital Accordwill be a challenge,

but can offer opportunity by raising

the profile of banks in the GCC.

Banks also expect the current strugglefor the right talent to intensify. Amajority of the respondents (89percent) say that attracting andretaining talent will be critical toenhancing shareholder value. Bankswill remain challenged with aworkforce that is a blend of educatedbut inexperienced young localsand highly experienced expatriateswith a penchant for short-tenure

assignments. If banks are to addressnew and emerging customer segmentswith the right products, they will needskilled professionals who understandthese markets and develop appropriateproducts. These skills will be in shortsupply as banks scale up their retailand SME banking operations.

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Detailed Findings

The customer-centricity imperativestems from the expectations of bankchief executive officers (CEOs) whosee an organic route to growth by2015 in retail banking, primarilydriven by customer penetrationand customer acquisition (Figure2). A stronger customer focus alsoenhances cross-selling, up-selling, andcustomer acquisition and retention.

Part of the customer focus is basedon the understanding that just aswith many consumer goods andservices industries, the retail bankingsector too will face an increasinglyfickle and demanding customer.More than 70 percent of the surveyrespondents say that customer

loyalty is waning.

The battle to engage and acquirecustomers is expected to intensify

around three main areas: need for

continuously updated information,use of new technologies such asmobile devices, and better qualityof customer service. A majority ofthe survey respondents (76 percent)say that a critical challenge willbe to manage customer serviceexpectations. However, more than 80percent acknowledge that the biggestchallenge will center on managingthe information expectations of tech-savvy customers. While 66 percentof the respondents feel that thecustomers expectation for innovativeproducts will be a key challenge inthe near future, 75 percent considerthe development of such products apriority area by 2015.

Most of the respondents indicated apreference to invest within their owncountries in retail (85 percent) andSME banking (91 percent)(Figure 3). This is not surprising,given the governments focus on

economic diversification. At present,access to financial services for SMEsis constrained in the GCC countriesas compared with other emerging

markets, with SMEs accounting for

only 2 percent of the total loans atthe regional level compared with27 percent in the Organisationfor Economic Co-operation andDevelopment (OECD) countries. Thisinsignificant share of SME lendingreflects the historical structure ofoil-based and government-driveneconomies, dominated by very largeenterprises. This has also resulted inmore standardized service offeringswith lower focus on payments andcomplementary products such asinsurance, mezzanine and leasing.Banks are, therefore, consideringbuilding capabilities to service thisgrowing business segment.

Banks are also likely to increase theirattention around other potentialgrowth segmentsyouth and women.The GCCs heavy reliance on anexpatriate workforce is expectedto reduce as the GCC governmentshave been encouraging population

growth. As a result, the UAE andKSA, for example, have more than 75percent and 61 percent, respectively,below the age of 30. This is in sharp

Source: GCC 2015 Banking Survey

Figure 2. How important are the following growth drivers for your bank tosustain organic growth in the next five years?

SME, tech-savvy youth and

women customers are likelyto define customer

expectations for innovative

products and services.


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contrast to the global average of 52

percent5. Additionally, a renewed focuson stimulating employment amongthe youth presents banks with anopportunity to address this growingcustomer segment.

Women in the GCC countries are animportant customer segment thatis only expected to grow further. Inrecent times, women are making amark in higher education with theiruniversity enrollment rates surpassingthat of men. At 36 percent, their

university enrollment is 16 percentagepoints higher than that of men. Thefemale employment rate has grownconsiderably in the past 10 yearsfrom30.1 percent in 2001 to 37 percent6. Aswomen in the GCC countries aspire forgreater independence and professionalachievement, their purchasing power isexpected to rise.

The survey respondents also expecttheir Islamic banking practice to expand

over the years in their countries. Thisline of business has been growing

Banks to continue investingin the current distributionchannels and increase focuson mobility.

Defining and targeting new customersalso involves creating the rightinfrastructure. The GCC bankingsector, which traditionally focusedon corporate lending, is now lookingat the deployment of new generationautomated teller machines (ATMs),contact centers and Internet-based banking to address emergingopportunities. Initiatives by banks toincrease shareholder value by 2015will be mostly around distributionchannels, as 81 percent of the

respondents see rising synergiesbetween distribution channels and

rapidlyglobal Islamic finance recorded

a double digit growth rate over thelast three years, despite the financialcrisis. In that period, the total share ofGCC countries grew to over 40 percentof global total. KSA is the largestIslamic finance market within the GCCfollowed by Emirates and Kuwait7.

core platforms to be the key to

increase shareholder value.

Given the emerging growthopportunities and the increasingtechnology adoption by potentialcustomers, GCC banks can afford toleapfrog the traditional branch modeland offer new and innovative optionsin terms of banking channels. Banks,however, still see a scope for growththrough branch expansion.

As the GCC has a higher commercial

banking assets to GDP ratio (116percent) compared with otheremerging markets in Europe,the density of bank branches iscorrespondingly lower (Figure 4). Thereare only 17 branches per 100,000adults compared to about 75 branchesper 100,000 adults in the eurozone.Given this low branch density, itis not surprising that 76 percentof the respondents are planning orare already making investments to

enhance their distribution channelsincluding branch and ATM networks.

Figure 3. In which lines of business are you planning to invest by 2015 both locally and internationally?


10

5. Business Monitor International, Arab Social Media report, January 2011

6. World Bank, World Development Indicators, September 2011

7. Accenture Research analysis based on different sources


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The Accenture survey also reveals that

although a majority of the banks areconsidering expanding their distributionnetworks significantly over the nextfive years, only half of them believethat increasing traditional channelsis a key growth driver. Now, thereis a clear focus on new distributionchannels that leverage Internet andmobile technologies46 percent thinkthat it was critical to expand newdistribution channels to sustain organicgrowth, while 76 percent are creatingand expanding specific services byleveraging mobile capabilities to meetevolving customer needs.

Mobile banking usage is at an earlystage, but most of the large playersoffer some services focused onaccount management and alerts.When examining if mobile technologyis likely to sustain growth, 79 percentof the respondents believe thatmobile banking is the most criticaland important technology enabler

to sustain growth, while 76 percentconsider mobile payments as acritical factor.

A little more than half of the GCC

banks surveyed are planning orcontinuing with their ongoinginvestments in social collaboration to

get closer to customers.

Customer analytics withpredictive analytics willbe the major technologyenabler for growth.Business intelligence (BI) tops the listas the most critical and importanttechnology with banks looking to

leverage BI capabilities for customeranalytics, risk analytics and marketingeffectiveness. The survey showsthat 61 percent of the respondentsare either planning or are alreadyinvesting in customer analyticswith predictive analytics. Internettechnologies are the next in priority,followed by mobile technologies andcloud computing. Online bankinghas an important role in the GCCcountries as a complementary channelto small product-centric stores.Indeed, online banking in the Middle

East is rapidly evolving; as of 2010 itseems more developed (~7 percent ofthe population) than in many other

emerging markets, such as Russia

(4 percent of total population) andcomparable to other emerging tech-savvy countries like Turkey8. With thedeepening Internet penetration andthe increasing number of tech-savvyyouth that banks are planning totarget, the demand for online bankingis set to grow considerably.

Bankers perceive the evolvingregulatory environment as amajor external challenge togrowth by 2015.

Banks in the GCC fared better thantheir counterparts in the West duringthe recent global financial crisis.However, the consequent tighteningof the global regulatory environmentis likely to influence their businessconsiderably. Nearly 80 percent ofthe banks in the region perceive theevolving regulatory framework tobecome a major external challengeby 2015.

Central banks are expected to placegreater emphasis on corporategovernance and transparency to protectthe banking industry and its clients.

Figure 4. Branch density

1. Latin America (LATAM): 6 countries, North Africa: 3 countries; CEE: 9 countries; ASEAN: 4 countries; Eurozone: 18 countries

Sources: Accenture research on BMI and World Bank data

Banking Assets/GDP

% 2010

2010 average total assets per country, USD

Branches

per 100,000

adults

#2010

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8. Accenture Research estimates based on Eurostat and local sources


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Figure 5. What are the key priorities for your bank to address upcoming challenges sucessfully and the top performersin your industry by 2015?

Figure 6. What are the key challenges that your bank will face in the next five years to sustain organic growth

(i.e., attract, retain and develop customers)?




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To better understand how banks are

positioning themselves and their riskdepartments to address regulatorychallenges, we asked banks whattheir main priorities were with regardto their risk management capability.The survey reveals that banks planto align the risk strategy with theiroverall business strategy as theyexpect an increased focus on liquidityrisk management on account of theBasel Capital Accord requirements.Banks will be compelled to improve

risk reporting, implement risk-basedpricing, and develop effective riskmeasurement and modeling. Morethan 70 percent of the respondentssay that risk management will notbe an isolated departments prioritybut the bank leadership will focuson developing an organization-wideculture of risk awareness.

Banks see the skills shortagedeepening and affectingcapability development andinnovation.

With heightening competition anddemanding customers, banks needthe right skills to innovate and design

The Saudi Arabian Monetary Authority

(SAMA), for example, has played aparticularly proactive role in regulatingand protecting the Saudi market fromthe current global economic turmoiland is expected to take the lead inregulatory reform across the GCC. Byfostering a close working relationshipwith the local banking industry, SAMAhas been able to create an open dialogwithin the industry.

In 200809, the GCC governmentsinjected liquidity and capital into

the banking industry, but are likelyto implement regulation that willreduce the risk of similar needs in thefuture. Banks are of the view thatcapital and liquidity requirements willinfluence the banking industry themost by 2015. About 72 percent ofthe survey respondents believe thatcapital requirements will impact thebanking industry and 70 percent feelthat liquidity requirements will have anequally big impact. But, several banks

that we interviewed responded positivelyto the prospect of increased regulationand welcomed any regulation aimed atenhancing the profile of the financialservices industry.

new products and to effectively

manage their operations. The bankingindustry in the GCC is facing asituation familiar in other industriesshortage of skills. In the GCC, policyrequirements on mandatory localhiring and a floating expatriatepopulation present unique challengesfor banks. Talent managementstrategies are, therefore, likely togain a lot of importance for bankskeen on increasing their shareholdervalue by 2015.

The need for specialized skills willbe especially great when catering tosegments such as SME and corporatebanking that require professionalswith a thorough understanding oftheir segments along with otherspecialized financial skills.

The talent issue is even more relevantif we consider that the competitionfor highly skilled talent affects allindustries in the GCC. Moreover, an

active alignment with the governmentpolicy on increasing local talentcontribution is an important externalfactor in the workforce plans of both

international and national companies.


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Initiatives for Success in an

Altered Banking Landscape

Given these findings, what shouldbanks in the GCC do to develop amore customer-centric approach andposition themselves for a greatermarket share? The survey results,combined with our banking industryinsight and deep local marketunderstanding, suggest that banksin the GCC could undertake fiverecommended initiatives to create thecustomer centricity needed to meetgrowth and profitability objectives:

Align the operating model withstrategic business goals.

Build customer analytics withpredictive analytics capabilities.

Strengthen distribution channelsand create new ones based on theInternet and mobile technologies.

Seize the growth opportunities inthe evolving regulatory scenario.

Architect talent strategies aimed

at managing and retaining talent.

Getting the operatingmodel right

The right operating model can makethe difference between just survivingand outperforming competitors inthe current climate. An operatingmodel defines how a companyexecutes its business strategy acrossthe value chain and consists of bothgovernance and structural decisions.Fundamentally, an operating modelstrategy is about optimizing thevolume and distribution of peopleacross a companys portfolioof initiatives.

Accenture's High PerformanceBusiness research demonstratesthat organizations that align theiroperating models with their businessstrategies outperform those that donot. By asking the right questions,banks can design an optimal operating

model and execute a business strategythat will enable them to achieve a

competitive structure, attract new

customers and revenue, and reach

their financial objectives. Answers to

these critical questions, along with

a clear understanding of the best

business model to follow, allow banks

to stake out a clear vision of how to

shape their future organization.

Operating model schematic

(Figure 7):

1. Client management and marketing

I s there a single customer view based

on a unified group-wide marketingstrategy or are customer segments

managed independently?

Are there different brands and service

positioning per customer segment?

2. Distribution channels and

front office

Can customers access products

through several channels and expect

consistent service or are there

different sets of channels for differentclient segments?

Are channels segmented by

product line, brand, client segment or

geographical region?

3. Back-office factoriesAre all products produced by the

banks own factories or does the bankproduce third-party products?

Are factories split per clientsegment, brand or region?

4. Group functionsWhat governance model is used to

steer the bank? What is the level ofautonomy of marketing, distributionchannels and product factories? Who

takes precedence?

Which functions are organized acrossregions, operating companies andfactories, and which ones are devolved?

Our experience with clients hasshown that leading global banksare focusing on transforming theiroperating models. Their transformationefforts center on processes aroundHR transformation, risk management,strategic cost reduction, business

innovation and extended valuechain development (such as

mobility services).

Figure 7: Bank operating model schematic

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Client management and

marketing

Distribution channels andfront office

Back-office factories

Group functions


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Customers, in general, have becomemore demanding, better informed

and less loyal to certain brands. Thisis true in practically every service-oriented industryretail, bankingand telecommunications. To keeppace with customer expectations, topretailers across the globe have focusedon marketing, customer segmentationand continuous monitoring of thecustomer. By leveraging thesesuccessful models for their ownbusiness, banks can differentiate theirproducts and services for consumers.

A recent study based on a surveycommissioned by Accenture andUniCredit, and conducted by Efma,reveals that major European banksare implementing or planning toimplement proven retail strategies ofcompanies such as Best Buy, GiorgioArmani and Prenatal. For example,Best Buy had implemented a customersegmentation initiative for appropriatemarketing and offers. Giorgio Armanideveloped in-store and online branding

programs targeting Generation Ycustomers with popular icons, socialnetworking and entertainment.

The study also shows that internationalbanks are considering retail strategiesfollowed by Amazon.com for its point-

of-sale product recommendations,which present packages frequentlybought together based on store-wide buying patterns and othercorrelations; or those such asApples iTunes Genius tool, whichrecommends new content based onindividual users purchasing histories

and entertainment libraries, enabledby analytics capability.

As shifts in customer segments,priorities and behaviors reshape thebanking landscape in the GCC, gaininga firm grasp of what customers wantand then knowing how to addressdemand profitably will be a criticalcompetitive differentiator. Hence,banks will need to use customeranalytics to mine customer data for

actionable insights that can be used toachieve positive business outcomes.

Deployed effectively, advancedcustomer analytics can help companiescreate customer loyalty and improvethe overall customer experience whileimproving the return on marketinginvestment and generate newrevenue streams. To make the most ofanalytics, at the primary level, banks inthe GCC will have to establish a stronginformation management foundation

by improving business processes andinsights to achieve a single source oftruth for all their information. And, asa first step in this direction, banks willneed to consider improving the qualityof their databases.

Importance of customer

analyticslearning from

the experience of the

retail industry.

Successful banks will move beyondbreaking down the data silos withinthe bank and consider erasing thesilos between the bank and otherproduct and service providers to comecloser to the customers' needs andexpectations. For example, a strongrelationship with telecommunication

service providers could help the bankcreate an innovative mobiledelivery channel.

Moving forward, banks should improvebusiness intelligence capabilities thattranslate into improving businessperformance with appropriate,actionable and timely data andinformation. Insights gained fromcustomer analytics, for example, canbe used to shape unique products for

nontraditional segments such as theyouth and women, as well as the smalland medium businesses.

Initiatives into re-examiningcustomer segmentation techniquesare also a priority. Many bankscontinue to divide their customerbase into groups based on simpledemographics, such as age orincome, or into categories based onhow profitable they are. These areimportant, but banks need

to supplement this data withoften-neglected behavioral andneeds-based attributes, such astime spent online or brand loyalty,to create a truly multidimensionalcustomer segmentation (Figure 8).

Figure 8. Multidimensional customer segmentation

Source: "New faces, places and spaces: Customer-centric principles for acquiring

customers in today's multi-polar world", Accenture 2009


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Strengthening andenhancing distributionchannels

A robust branch network anddistribution channels are a criticalpart of creating the right customerexperience. The right branch model willneed to consider the geographic areaand customer profile. For this, banksneed to define strategic guidelines andevaluate different branch model optionsas well as strategic branch positioning.An effective distribution strategycan only be created on the right kindof customer profiling based on theinsights drawn from customer analyticscombined with market analysis.

Our experience shows that reshaping

branch networks to reflect a goodmix of multichannel services andofferings is effective in building theright level of customer experience.In a multichannel environment,however, it is important for banks tocreate a common experience acrosschannels. By delivering a seamless,personalized customer experience

across all channels, banks can achievecompetitive differentiation.

Mobile banking will be particularlyuseful in improving customerpenetration and customer engagement.As urbanization rates are more than80 percent, mobile banking could

encompass innovative servicesdelivered over mobile devices. Globally,smartphones and tablets such as iPadsare already driving innovative ways tomaximize the customers' accessibilityto the bank. Take the case of Citibank,which has devised iPad applicationsallowing customers to search for specialdiscounts on nonfinancial products.Similarly, Commonwealth Banks iPhoneapplications allow customers to accesssales data on real estate.

Or, take the case of La Caixa, in Spain,which has designed a smartphoneapplication to provide location-baseddiscounts. Targeted primarily at theyouth, the application, which is alsoavailable for the iPhone, allows usersto consult relevant commercial offersdepending on where they are. Usinga geo-location technology, the bank

can send users tailored commercialoffers via SMS, while also providing amap to get to the store. The offers arespecifically conceived for the targetand propose discounts on a variety ofareas such as music, concerts, movies,sports, bank products and education.The free application also allows people

to access their bank account, maketransfers, buy tickets online, andlocate ATMs and branches.

Indeed, mobile banking and paymentsare hot technologies currently, even inthe GCC. However, banks in the GCCwill need to prepare for the next phasein mobile technologies. To becomehigh performers, banks will have tomove up the maturity curve (Figure9), along a progression from relaying

information to customers, throughenabling transactions, interactingwith customers around their financialneeds, being part of life stylemanagement, and engaging in largelynonfinancial activities. Closer tiesbetween banks and telecommunicationservice providers could deliver newchannels quicker.

Figure 9. Mobile banking sophistication

Source: TowerGroup, Accenture


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Mastering regulatorycompliance

With banks in the region already beingadequately capitalized, the impact of

Basel Capital Accord will be felt morein terms of liquidity risk managementthan on capital requirements. Bankswill need to take a proactive stance inunderstanding these new requirementsand their implications for their currentproduct and service offerings andmanagement of liquidity. Banks that

differentiate themselves will be ableto identify and act on the opportunityto align risk management with thebusiness strategy and look for growthdrivers. Such an approach couldenable efficiency and performanceimprovements, increase transparencyto the customer base, and provide risk-

based analytics-driven insights.

To position themselves to prepare forregulatory changes, banks should focuson allowing space for the finance andrisk department at the strategy table.The risk department will need to moveaway from its traditional support/service provider role toward being atrue business partner (Figure 10). Inthis capacity, they can drive real valueand support in taking advantage of

regulatory change.

Technology will play a pivotal rolein creating the desired customerexperience. Communicating withcustomers across multiple channelsvia handheld devices and the self-service kiosks already available insome bank branches, for example,will improve both customer experience

and efficiency of bank distributionnetworks. Indeed, banks will take aleaf out of the experience of retailersin designing and marketing theirproducts and services. And, as in thecase of retailers, the ability of banksto apply technology innovations inbusinessin channels, products andprocesseswill be a key component inbuilding customer loyalty.

GCC banks recognize the criticality of

IT in business operations. Banks in KSAand Qatar, for instance, have beensteadily increasing their IT spendsover the last years and are expectedto demonstrate double-digit growthin the mid-term. Increased auditingand compliance requirements, bothnationally and internationally, requirebanks to spend on IT systems.

However, as IT departments of banksin GCC countries tend to be smalland characterized by heterogeneousarchitectures, they may well need tointegrate the architectures and silosfor greater business efficiency. Moreimportantly, as our experience withclients has shown, business outcomes

can be achieved better in organizationswhere the IT departments role isthat of a strategic business partner.Being a true business partner means,using innovative technologies asa differentiating factor to createcompetitive advantage.

Figure 10. Transitioning to a business partner

Source: Accenture


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Accentures experience has shownthat it is possible to design talentstrategies aimed at achieving customersatisfaction goals as well as employeeengagement and retention objectives(Figure 11). A talent-poweredorganization is one that sees workforcetalent as the engine for sustained,competitive advantageand excels at

attracting, developing, engaging andretaining its best people.

Organizations everywhere aregrappling with the challenge ofattracting, engaging and retainingtalent. In our experience, todayspressure for skills can be won byproper planning and with creativetalent management strategies.Companies with clearly defined three-to five-year workforce plans thatquantifies volumes per critical roles,

identifies the market supply potentialin the region and globally, and

Design the right talent

strategies to attract and

retain talent.

measures the time to proficiency per

critical role, among many other suchparameters, are on the way to winningthe war.

Talent management strategiesthat extend beyond rewards andremuneration and are based onother factors such as learning anddevelopment opportunities, creatingan innovative and attractive workenvironment, and clear successionplanning among others can enhance abanks competitiveness.

Additionally, GCC banks may needto consider empowering their HRdepartment to be able to drive animpact on overall company businessperformance and align companygovernance with country governmentstrategy and indicators (i.e., GDPor Sauditization/Emiratization/Kuwaitization). This alignment withcorporate strategy will be mosteffective if HR directors are equipped

with rigorous, fact-based reportingmetrics and predictive and prescriptiveanalytic intelligence.

Banks will need to invest in creating

a performance culture as commonvalues that bind the organizationfrom the branches through the backoffice and headquarters and internallyestablish value-based inclusion anddiversity capability.

Figure 11. HR and talent management framework

Source: Accenture


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ConclusionBanks in the GCC are looking at

adopting a customer-centric approachrather than a product-centricmodel to meet the challenges of anevolving banking landscape. Customermanagement based on analytics-driveninsights, integrated risk management,strategic cost management andinnovative products enabled bynew technologies will be the newpriorities for banks on the road to highperformance. Although most banks inthe GCC perceive a major challengein stricter regulatory requirementsexpected by 2015, Accenturesexperience suggests immense potentialfor serving the customer better throughtransparency, efficiency and improvedrisk management.

This guiding principle of customercentricity is in line with our globalresearch, which shows that banksacross the globe have or are movingaway from leverage-based modelsand aggressive cost cutting. Banks

everywhere are positioning themselvesfor changeputting in place flexibleoperating models that respond tocustomer needs, market changes,product innovations and channels mix.

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So, what will a winning bank in the

GCC look like in 2015? Most likely sucha bank will have a diversified customerbase, revenue streams and products. Itwill have a customer-centric operatingmodel, an organizational culture ofanalytics and a multichannel experiencefor its customers.


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About the AuthorsAmr El Saadani, managing director-Financial Services, Accenture in theMiddle East, has worked for andconsulted with large and diversefinancial institutions for more than24 years. His experience includescore business transformation,merger integration and back-officeconsolidation. Amr can be reached [email protected].

Oliver Reppel, senior manager-FinancialServices, Accenture in the Middle East,has worked for and consulted withbanks and insurance companies formore than 10 years. His experienceincludes corporate strategy definition,operating model design and value-basedmanagement. Oliver can be reached [email protected].

Michael Gibson, consultant-FinancialServices, Accenture in the Middle East,has worked for and consulted withbanks for more than six years. Hisexperience includes operating modeldesign, strategy and governancedesign as well as risk management.Michael can be reached [email protected].

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Collaborating with AccentureTo succeed today, banks need arenewed focus on imperatives such asthe customer, new operating modelsand effective divestitures/mergers andacquisitions. Accenture has assistedmany banks in defining their newbusiness strategy and operational

journey to achieve high performancein a continuously changing world.

Accenture's deep banking knowledge,wide-ranging transformationexperience, skills of more than 15,000professionals and a global deliverynetwork have supported our clients ontheir journey to high performance.

We help our clients in developingand executing strategies to target,acquire and retain customers moreeffectively; expand product and serviceofferings; manage risk; comply withnew regulatory initiatives; support

integration related to mergers and

acquisitions; and leverage newtechnologies and distribution channels.

Accenture has implemented morethan 200 core banking transformationprograms across multiple typesof operating models, geographiesand software solutions. Sincetransformation programs affectthe way people work, Accenture

also provides change and culturalintegration management.

Every one of our top 25 clients haveworked with Accenture for 10 years ormore, and 18 of them have worked withus for 15 or more consecutive years.

Our solutions have been used by:* 88 percent of the top 50 banksworldwide

* 93 percent of financial servicesinstitutions ranked in the Fortune

Global 100

*80 percent of the top 20 moneymanagers worldwide

For more information, please visitwww.accenture.com/banking.

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Copyright 2011 Accenture

All rights reserved.

Accenture, its logo, and

High Performance Delivered

are trademarks of Accenture.

About AccentureAccenture is a global management

consulting, technology services and

outsourcing company, with approximately

236,000 people serving clients in

more than 120 countries. Combining

unparalleled experience, comprehensive

capabilities across all industries andbusiness functions, and extensive research

on the worlds most successful companies,

Accenture collaborates with clients to help

them become high-performance businesses

and governments. The company generated

net revenues of US$25.5 billion for the

fiscal year ended Aug. 31, 2011. Its home

page is www.accenture.com.

You can access this content on:

http://www.accenture.com/gccbanking

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