88% Of Saudi Customers Willing To Open Digital-Only Accounts And 79% Would Share Their Data To Improve Banking Experiences

Competition in the Kingdom of Saudi Arabia’s (KSA) banking sector is intensifying as customer demands and expectations continue to increase, according to new research by Boston Consulting Group (BCG). The findings from BCG’s “2021 Consumer Sentiment Study in Banking”, in which over 2,000 respondents in Saudi Arabia were surveyed, ascertain a further understanding of the evolving retail banking segment. The research found that 52% would have no problem switching to a new bank and 63% of customers actively look for new offers.

“With digital capabilities introducing consumers to new possibilities, the Saudi banking sector is witnessing more and more people proactively engage in multiple banking relationships. Demands and expectations are evolving, and we see that it is easier to switch banks with the simplicity of digital onboarding,” explained Mustafa Bosca, Managing Director and Partner, BCG. “This trend is substantiated by our latest research, which confirms almost two-thirds of respondents now search for alternative offers and over half would have no problems switching to another bank. Together, these highlights the increasing level of competition across the national retail banking landscape, with many changing banks within the past year alone.”

The research shows that only one in two Saudi banking consumers has been with their bank for more than five years, which is primarily attributed to people looking for improved banking experiences. Of the 49%  of respondents who have changed banks within the last five years, increased interest rates, products not fitting personal needs, and poor customer service were cited as the top reasons behind their decision to change banks. On the other hand,a strong brand reputation, superb digital experience, and excellent customer service are the main reasons why customers have recommended their banks to friends and family.

“Respondents have cited several prominent reasons behind their decision to change whom they bank with and these include previous institutions offering limited products for individual needs, poor customer service, increased rates, charges, and minimum balance. Therefore, retail banking players losing customers due to such factors should reevaluate and ultimately improve the services they provide,” said Bhavya Kumar, Managing Director and Partner, BCG. “There are many components that the modern consumer finds appealing, with strong brand status and excellent digital service and experience among those setting new standards in the industry.”

As per the research findings, current accounts and credit cards have also witnessed an uptake in acquisitions over the past year, although all other banking products, including personal loans and fixed deposits, remain behind 2020 levels.This stems from current accounts and credit cards already offering digitalized journeys, thus presenting customers with ease and simplicity when acquiring them online during the pandemic when branches were temporarily closed. With that said, the survey does show an increased appetite for innovative savings products across the retail market and this is a factor supported by national priorities.

BCG’s study has also substantiated the rise of digital as a key channel for banks, with 88% of customers now willing to open a digital-only bank account – which would place additional pressure on traditional banking players. Digital channels’ expectations are increasing, and most customers expect to do all transactions on their smartphones. The most important and appealing features of digital-only banks are instantaneous account opening, loans, and payments, although interest in innovative savings and investing continues to gain traction.

“Digital transformation acceleration has unquestionably set a new benchmark for retail banking incumbents. Customers seek convenience and personalized experiences through digital, and the majority will pursue alternatives should they encounter more attractive propositions,” added Martin Blechta, Project Leader, BCG. “Considerable willingness among respondents to open digital-only accounts reaffirms this. Moreover, the widespread appetite for digital banking services in the Saudi market is a trend almost certain to continue expanding. With these considerations in mind, the onus is on every bank to continue accelerating digital transformation and reimagine the customer journey.”

In addition, there is also an increasing willingness to share data online and explore new digital assets and cryptocurrencies. These aspirations were further emphasized as 44% of respondents confirmed that they had already invested – or at the very least were planning to invest in cryptocurrencies. Furthermore, the imminent introduction of open banking was also highlighted. Of the Saudi respondents, 79% are now willing to share their data in exchange for improved banking experiences – higher than the 66% of European customers who made this revelation.

“Open banking is something that appeals to a majority of today’s customers nationwide. As such, many are prepared to share their data to avail open banking benefits, and the arrival of emerging asset classes and widescale open banking is certain to transpire sooner rather than later,” concluded Blechta. “With this reality looming, banks can position themselves to remain competitive and accommodate consumer demands and expectations through numerous actions in the near-term future, such as embedding new asset classes within investment portfolios and building new and innovative open banking use cases.”

Key Implications for KSA Banks and Areas of Focus in the Next 12 Months

Based on the findings of this year’s survey, five key areas of focus are vital for banks in the coming year:

1. Continue to accelerate digital transformation and reimagine customer journey to serve increasingly demanding customer needs
2. Launch innovative savings and digital lending propositions to capitalize on increased demand and optimized go-to-market
3. Personalize marketing around customer’s financial lifestyle such as spending habits and favorite brands using analytics
4. Embed new asset classes to leverage the increasing customer demand
5. Build external APIs and account integrations to build new innovative use cases allowed by open banking