National Bank of Kuwait CDO Tariq Al Osaimi takes a look at the history books, and explains why the GCC’s exploding youth population demands a rethinking of the relationship between branches and technology in the region. 
“I know what I’m talking about. I have thirty years in this industry.” A character in a well-renowned Dilbert cartoon stakes his claim to understand the latest tech on the market. “How does that help you understand technology that is six-months-old in a youth-oriented culture?” His colleague gingerly replies. I couldn’t find a better way to describe the current state of retail banking in the Middle East.
Over 70 years ago, banks in this region began their operations with one branch per bank as there was no means of sharing account information between two or more locations in a timely manner. In those days, the ledger that has the client account balance was kept in the bank, and the client had no access to it unless they visited the bank in person or had an excellent memory.
The first attempt to improve customer service in banking came in the 17th Century, with the invention of the passbook. This empowered clients with a record of their account balances and transactions.
From the 17th Century to the late 1950s, passbooks were the only customer service that banks offered to empower their customers with data. In the late 1960s, mainframe computing was the most powerful technology on the market. Banks used the mainframe to digitalise the accounts ledger, and make it accessible by multiple members of staff and across multiple locations. That made it possible for one bank to equate to multiple branches. Customers were able to visit their nearest branch for their banking needs.
By the late 1960s, vending machines were the flavour of the month. John Shepherd-Barron invented a vending machine that could dispense cash, and in 1967, Barclays launch the first cash vending machine in London. Customers simply used a piece of hardened paper with magnetic ink detailing the amount they wanted to withdraw. It wasn’t until the late 1970s when cash vending machines were connected to the mainframe, and banks found a way to verify the identity of the customer by using PIN numbers and plastic cards. Vending machines were renamed to Automated Teller Machines (ATMs).
After digitalising the ledger, banks found a way to verify the identity of customers in a digital domain. Banks started to find more ways to better serve their customers. In the 1980s, after phone companies digitised phone systems by replacing rotary phones with touchtone phones, banks adapted the call centre to service their customers over the phone 24/7.
In the 1990s, the World Wide Web boomed. Connecting computers around the globe prompted banks to invent online banking, and by the 2000s, the boom of smartphones has ushered in mobile banking.
All of those technologies exist in a map of service where the branch is central to the customer, where layers are built after it to serve customers at their convenience.
That is changing, however.
This was the status quo, until the GCC’s youth population began to explode. In some countries in this region, young people account for as much as 70 percent of the population.
Whether we call them youths, millennials, or digital natives, in certain respects, their lives are very different from previous generations’. Their banking needs are so different, and they expect their bank to be more than just a custodian of their money. Asking them to visit a bank branch to start their banking journey is verging on being a foreign concept. As their lives exist mainly in the digital world, they have a diminishing need for the physical world.
So, how do they live? When it comes to entertainment, they have at their disposal every movie on record, which can be viewed whenever and wherever they want. In some cases, they value their digital friends more than their physical friends; in restaurants and malls across this region, young people are occupied by their smartphone.
For their shopping needs, they go online, where they have access to every brand, whose products can be dropped to their door steps in under a week.
The list goes on. If they are hungry, instead of rustling something up in the kitchen, they open a food delivery app and can order any cuisine delivered to their door in 30 minutes.
The way they live and interact is so different from any generation before them. They – and their smart devices – are central, where all their needs are catered for in the virtual world, with fewer needs in the physical world.
Banks have recognised the needs of the digital native, and are shifting from delivering ‘customer service’ to being ‘customer-centric’. A customer-centric approach can be achieved by having the customer at the centre of their operations, and then making the most of what is closest to the customer – mobile banking. If that doesn’t serve the customer, they can the contact a call centre.
Some banks have invested in virtual call centres and branches, which are located in malls and high traffic locations. They redesign the branches to make them look and feel like coffee shops and lounges, and have tasked them with being advisory organs.
As banks across the GCC started to implement the customer-centric model, they found themselves chained to branches, as they didn’t have the technology or the means to verify the identity of the digital native customer. Digital natives cannot comprehend why they have to go to the branch to fulfill their banking needs, when they should be able to get anything they want in their virtual domain.
However, there is light at the end of the tunnel. Each country in the GCC relies on national identity cards. In each card there is a chip that has all the person’s information in a digital format. What’s more, there is a digital signature in the chip that can be used to verify the identity of the card holder in the digital domain. All of the GCC governments have passed laws to govern the use of the digital signature, where they gave the digital signature the same weight as written signature in the eyes of the law.
So now, banks have the last piece of the jigsaw to build a full digital bank for the digital native, where digital natives can have their banking needs satisfied as easily as shopping online, or ordering food.
