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Is PFM the next big thing in the Middle-East?

02 December 2014  |  3545 views  |  0

In the Middle-East, consumers have typically been most comfortable performing banking activities via traditional face-to-face interactions, and digital banking is consequently not as well-established as it is in developed Western markets. However, the trend is changing: consumers – especially the younger, tech-savvy generation - in the region are no longer afraid of conducting their regular banking activities online, and digital banking is becoming increasingly popular. To cope with this change in consumer behaviour, banks in the Middle-East are striving to provide competitive online and mobile banking offerings. But many banks in the region face challenges in improving their existing digital banking solution, and find it difficult to differentiate themselves with their online and mobile banking offerings.  Can Personal Financial Management (PFM) tools, which help customers manage their finances and budgets, be the answer to improving digital banking solutions in the Middle-East?

The potential for digital banking in the Middle-East is huge: internet and smartphone penetration in most countries in the region is high, and mobile banking usage in Middle-East and Africa is expected to quadruple by 2017. Many banks in the region are still offering first generation online and mobile banking solutions focused on transactions - which were satisfactory for most customers until recent years - and are now looking for new ways to improve their digital banking services.

 

How can PFM help?

PFM can be an excellent tool for improving digital banking: it can help banks to differentiate their brand, create a new, valuable service for their customers, and engage effectively with a younger customer segment. A well-designed and intuitive digital banking solution incorporating PFM can improve customer experience, which translates into lower attrition rates. Improving customer experience is very important for banks in the region due to low service levels in traditional channels: in the UAE, for example, only 10 percent of the UAE’s expatriate customers say they are satisfied with the service levels in traditional channels. The key reason for this is a lack of skilled personnel in the branches. On the other hand, banks can take full control of the user experience on the digital banking channel and increase customer satisfaction by giving customers greater control over their financial activities.

PFM can also help banks to turn digital banking into a revenue generating channel. Consumers in the region are not reluctant to buy products and services online anymore: according to A.T. Kearney, e-commerce volume in GCC is expected to reach $15 billion by 2015, catching up to e-commerce levels in Europe. Such a trend can be utilized by banks in the region.  To make sales through digital banking channels, banks need to deliver personalized and targeted product offers to their customers.  PFM can be very helpful in providing valuable customer insight – spending habits, preferences, financial goals etc. - that can be utilized together with data mining and campaign management tools to deliver highly personalized and targeted marketing and sales campaigns.

PFM can also be part of the mobile wallet and mobile payment initiatives launched across the Middle-East, such as the UAE mobile wallet initiative or JoMoPay in Jordan. PFM tools can offer additional value to mobile wallets users - such as receiving advice or warning related to their budget and spending before making a purchase – which could help in the increase of mobile wallet adoption.

 

How to drive a successful PFM implementation?

In order to drive a successful PFM implementation, banks in the Middle-East must learn from their peers around the world. A key factor for a successful implementation is that PFM solutions offered by vendors should be tailored to the local market and customer needs. Banks have to define which customer segments they want to address with PFM, understand the needs and habits of these segments, and shape the PFM functionality accordingly. For example, budgeting or retirement planning might not be relevant for a high income individual in the UAE. However, a PFM tool helping achieve a financial wish or goal – such as buying a new car or a new house - might capture his or her interest. Banks have to enable customers to personalize PFM and enable them to use parts of the application that are the most relevant to them.

 

Conclusion

Many banks in the Middle-East are aware that online and mobile channels offer vast opportunities in the region, and innovative banks can gain great benefits by developing their digital banking channel strategies. PFM can be an important part of the digital channels strategy for any bank in the Middle-East catering to the retail customer segment, and banks adopting PFM and incorporating it into their online and mobile banking solution can see significant benefits in customer acquisition, retention and online sales.

 

TagsMobile & onlineInnovation

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