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CBUAE encourages banks to embrace digital transformation

International credit rating agency Standard & Poor’s (S&P) has praised the continued development of the UAE’s banking services sector.

The coexistence of traditional banks and neobanks has become more likely, with each serving specific customer segments and offering unique advantages, the company said.

In its recent report titled “The future of banking”, S&P predicted increasing reliance on neobanks, which operate online without physical branches, and digital services offered by traditional banks in the UAE. This shift is due to the population’s apparent preference for digital banking, backed by the country’s strong digital infrastructure, he added.

S&P believes that while neobanks will not replace traditional banks, they will provide additional value to customers in the UAE, while Central Bank of the UAE (CBUAE) will continue to maintain the stability of the traditional banking system and encourage banks to advance their digital transformation efforts.

The number of banking customers in the UAE is high and continues to increase, especially as the target customer base has a clear inclination towards digital banking services, S&P added, noting that according to research data from Global web index (GWI), smartphone penetration in the UAE reached 96.2 percent in 2022, one of the highest rates globally, surpassing the average rate of 95 percent in Europe.

The report also shows that neobanks have not only expanded in the UAE in recent years, but have also spread globally.

S&P said that according to statesman, The number of Neobank customers worldwide reached about 188 million in 2022, up from about 19 million in 2017, adding that this number will likely exceed 350 million in 2026, accompanied by an increase in the number of virtual banks to more than 500 in 2022.

S&P also stated that independent neobanks, such as Zand, Wio and Al Maryah Community Bank, have emerged in the UAE in recent years, while traditional banks have launched digital services, such as “liv” and “E20” by Emirates NBD, and “Masreq Neo” by Mashreq Bank.

The agency explained that according to the Discoverer On its website, the number of Emirati adults with accounts at neobanks increased to 19 percent in 2022, compared to 17 percent in 2021, and it expects adoption of banks offering digital-only services to increase by 35 to 10 percent. 40 percent by 2027. in line with the world average.

News source: Emirates News Agency

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