Demand for skilled banking staff is outstripping supply in the Gulf region at a time when the Western banking industry is drastically cutting its workforce, according to an Accenture survey of 47 executives at major banks in the Gulf Cooperation Council (GCC).
Meanwhile, the region's banks are in a race to adapt to more demanding customers and are increasingly targeting the largely untapped youth, women and small- and medium-sized business markets.
According to the survey, a shortage of skills is the biggest challenge facing the GCC banking industry, aside from new regulation- especially as more global banks enter the market. A skills shortage was cited by 58 percent of all executives surveyed and 69 percent of those from the largest banks. In fact, nearly two-thirds (64 percent) of respondents agreed that the biggest impact of more global banks operating in the region will be the increased competition for skills and talent over the next few years. A majority (89 percent) of respondents said that attracting and retaining talent will be the most important strategy their banks will use to increase shareholder value.
"As European and American banks undergo large domestic workforce reductions, financial institutions in the Gulf region are struggling with a shortage of skills to support the growing demand for banking services," said Amr Elsaadani, managing director of Accenture's banking practice in the Middle East. "Our research suggests this demand is also becoming more complex, as customer expectations rise and regional competition heats up. This will fuel the battle for talent in the region, as banks look for the skills required to develop more innovative products and to manage and grow their businesses."
According to the survey, banks are implementing a range of initiatives to address skill shortages and retain talent, including:
• Coaching and mentoring (53 percent)
• Revamping compensation through higher salaries and bonuses (51 percent)
• Increasing transparency in career paths (47 percent)
Rising Service Expectations, Diminishing Loyalty
According to the survey, customers in the Gulf region are becoming more demanding and less loyal to their institutions. Improving customer service was cited by executives as the single most critical challenge to attract and retain customers through 2015: 46 percent of executives cited it as "critical" and 30 percent cited it as important. Meeting increasing demand from customers for online and mobile services was cited as a top challenge by 79 percent of respondents. And, 71 percent of executives said declining customer loyalty would be a major challenge through 2015.
The survey suggests that GCC banks must plan to respond aggressively to customer demands in order to stay competitive. This is borne out by the following findings:
• 93 percent of executives see "robust customer management" as the top driver of profits and growth through 2015. This was ranked higher than better risk management, pricing, and cost reduction.
• 87 percent believe "improving customer centricity" will be the most important strategy their banks can use to address market challenges and outperform the industry. This was ranked ahead of product innovation, productivity improvement, risk management, product distribution, diversification of businesses, new operating models and cost reduction.
Small- and Medium-Sized Businesses, Youth and Women to Fuel Growth and Investments
"The increasing customer orientation of these banks reflects an expectation that the pool of customers in the GCC is getting wider and deeper -- especially with regard to youth, women and small and medium enterprises (SMEs), which have traditionally received little attention," added Elsaadani. "To capture these markets, banks will need to ramp up both their retail and commercial banking capabilities."
More than half the population in the GCC is below the age of 30, and the female employment rate has grown considerably over the past 10 years - from 30 percent in 2000 to 37 percent in 20091. While small business is burgeoning, SMEs account for only two percent of the total loans in the region, compared with 27 percent in countries that are members of the Organization for Economic Co-operation and Development (OECD)2.
The survey revealed that an overwhelming majority of respondents (91 percent) are investing in SME banking operations and a majority (85 percent) will continue to invest in retail banking in their domestic markets. The survey shows that nearly 80 percent of GCC banks have either planned to invest or are
• Adding to their distribution networks with branches and ATMs (78 percent)
• Integrating channels for more seamless customer experiences (74 percent)
• Improving customer segmentation and better tailoring services (74 percent)
• Creating and expanding mobile banking and payments capabilities (67 percent)
1 Source: Accenture Research estimates based on The World Bank, World Development Indicators, September 2011.
2 Source: World Bank - "The Status of Bank Lending to SMEs in the Middle East and North Africa Region - March 2011"