UAE Bank Branches Rake in Top Revenues in the Region
In a groundbreaking revelation, UAE bank branches are pulling in the highest revenues in the region, hitting an impressive $18.6 million per branch. This milestone was disclosed by Saumitra Sehgal, the head of financial services in the Middle East for global consulting firm Roland Berger.
Digital Transformation Drives Branch Consolidation
The surge in revenue can be attributed to the UAE’s digital transformation journey, which has empowered banks in the Gulf Cooperation Council (GCC) region to slash the number of banking branches by a staggering 328 within a span of three years. Sehgal, speaking to Emirates News Agency (WAM), highlighted that the total number of bank branches across GCC nations plummeted from 4,067 in 2019 to 3,739 by the end of 2022.
During the same period, banks in the UAE led the pack in branch consolidation, merging and reducing a total of 157 outlets with the aid of digital transformation initiatives.
UAE Cabinet’s Digital Economy Strategy
In April 2022, the UAE Cabinet greenlit a comprehensive Digital Economy Strategy encompassing over 30 initiatives and programs targeting six key sectors and five emerging areas of growth. The strategy aims to elevate the digital economy’s contribution to the country’s GDP to 19.4 percent over the next decade, solidifying the UAE’s position as a pivotal digital economy hub regionally and globally.
Branch Reductions Across GCC Nations
Despite the UAE’s remarkable strides, other GCC nations also witnessed a decline in bank branch numbers. Saudi Arabia saw a reduction of 82 branches, while Bahrain closed 57 facilities. Qatar and Kuwait both recorded a decrease of 20 branches each.
The Shift in Bank Branch Functionality
Sehgal emphasized that the traditional role of bank branches has evolved significantly. Where once customers frequented branches for basic transactions like cash withdrawals and check deposits, these tasks have now been streamlined through digitization. Branches now primarily cater to more complex services such as real estate loan applications.
According to Sehgal, digital transformation is imperative for both customers and banks, with customers preferring the convenience of digital services and banks seizing the opportunity to serve their clientele at minimal costs.
Continued Branch Reductions on the Horizon
Looking ahead, Sehgal forecasted further reductions in bank branches across GCC nations, with potential decreases ranging between 10 percent and 15 percent over the next two years. The ongoing trend of branch consolidation is expected to persist, varying across countries based on their individual progress in digital transformation.