S&P praises ongoing development of UAE’s banking sector

International credit rating agency Standard & Poor’s (S&P) praised the ongoing development of the UAE’s banking services sector. The coexistence of traditional and Neobanks has become more likely, with each catering to specific customer segments and offering unique advantages, the company said.

In its recent report titled “Future of Banking”, S&P predicted an 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, supported by the country’s solid digital infrastructure, it added.

S&P believes that while Neobanks will not replace traditional banks, they will provide additional value to customers in the UAE, while the 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 bank 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 GlobalWebIndex (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 they have also spread globally.

S&P said that according to Statista, the number of Neobank customers worldwide reached some 188 million in 2022, up from some 19 million in 2017, adding this number will likely exceed 350 million by 2026, accompanied by a rise in the number of virtual banks to over 500 in 2022.

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

The agency explained that according to the Finder website, the number of Emirati adults with accounts in Neobanks increased to 19 percent in 2022, compared to 17 percent in 2021, and it expects the adoption of banks that offer digital-only services to rise to some 35 percent to 40 percent by 2027, in line with the global average.

Meanwhile, Dubai International Chamber, one of the three chambers operating under the umbrella of Dubai Chambers, has successfully attracted six companies from across the globe to set up their businesses in Dubai.

The signing of six Memoranda of Understanding (MoUs) during the Dubai Business Forum underlines the chamber’s commitment to achieving its strategic priorities by attracting global companies and investments to the emirate.

Agreements were signed with five multinational companies including China’s Shenzhen Meiniao Technology; India’s Temla Consumer Products, Sensedynamic Fashion, and Metal Power; and Indonesia’s House of Indonesia. In addition, one MoU was inked with Dynamox, an SME from Brazil.

Valued at over US$ 300 million, Shenzen Meiniao Technology is a Chinese technology company dedicated to comprehensive solutions for automotive and home entertainment software and hardware. Through five years of intensive development, the company has created a range of automotive entertainment software and hardware solutions at various price points for ordinary and intelligent connected cars. It also boasts research, development, and production capabilities for smart karaoke software and hardware.

Timla Consumer Products is a dynamic and vibrant Indian snack brand that caters to a health-conscious market. The company has established a branch in the UAE under the name Timla Trading. With projected annual recurring revenue of US$ 14 million for 2023-2024, the company aims to establish strategic partnerships that will leverage local expertise while bringing its unique offerings to the UAE.

Sensedynamic Fashions is a direct-to-consumer youth fashion e-commerce company that aims to democratise fashion. Valued at US$ 20 million, the company operates on an innovative, on-demand technology, and works with zero inventory and zero warehousing as a zero-wastage brand.

Metal Power is an Indian manufacturing company that provides a comprehensive range of products, accessories, and services for optical emission spectrometers. Valued at US$ 12 million, the company has more than 35 years of experience in spectrometry, directly and indirectly supplying and servicing its customer base in over 50 countries across six continents.

WAM