By Amjad Baker
Albawaba.com - Amman
To avoid losing out to competitors, Arab banks are struggling to catch up with the technology of online banking, which is expected to become a regional norm within three to six years.
Imad Sawan, UBM executive for sales, told Albawaba.com that e-banking was not a kind of extra service the bank could extend to its clients any time it wanted to, but rather was a mandatory service required from every bank seeking survival.
A recent report by the Pyramid Research consultancy, a division of the Economist Intelligence Unit, showed that out of the Middle East's top 100 banking institutions, only 18 banks (with average asset value of $8.36 billion) offered online transaction services to their customers.
The rest were roughly split between those with informational websites (43 banks) and those with no web presence (39 banks).
According to the Jordan Times, online banking is still comparatively limited in the Arab World when compared to Europe or the US, yet a few pioneers have emerged, notably in Bahrain, Saudi Arabia, Kuwait, Jordan and the UAE.
As most Arab states prepare to enter the WTO, they face deregulation of the financial services sector and the prospect of competition with multinational banks.
Concern about loss of market share has encouraged Arab banks to consider offering online banking services.
Bankers in Amman said most of the Arab banks were technologically capable of offering e-banking services, but added that the telecommunications infrastructure in some countries remained deficient.
Other obstacles may play a major role in interrupting the spread of the e-banking technology in the Arab states, including the high cost of internet connections and the high telephone rates.
Internet penetration in the region is still relatively low, and as such may not encourage the investments required to develop e-banking.
A recent report by Forrester Research shows that 16 to 22-year-olds were four times more likely than adults to apply for financial products online. The Arab population is a predominantly young one and in the coming few years this younger generation will demand more from their banks and will also be more willing to change banks if their financial requirements are not met.
Internet penetration is also on the rise, creating higher demand for e-banking.
By March 2001, more than 3.54 million people in the Arab world were using the internet, and it is projected that by the end of the year, the region will have more than five million users. Moreover, as many as 25 million Arabs could go online within the next five years.
A wide number of services are offered through e-banking technology, such as account management, whic enables the client to pay his or her bills, personal loans, brokerage services, mutual funds, issuance of credit cards, etc.
All of these services are currently available in several Arab countries, including two local banks in Bahrain, three in Egypt, three in Jordan, three in Kuwait, four in Lebanon, one in Qatar, four in Saudi Arabia and five in the UAE.
Three GCC countries — Bahrain, Kuwait and the UAE — boast adoption rates equal to or higher than those in the US: 29 per cent in Kuwait, 21 per cent in the UAE, and 17 percent in Bahrain.
© 2001 Al Bawaba (www.albawaba.com)
