Deloitte study finds Turkey leads MENA laggards in digital banking maturity

A comprehensive market study conducted by Big Four firm Deloitte has found that Turkey leads the Middle East when it comes to digital banking maturity, while most other states in the region are considered digital latecomers.

Deloitte’s extensive Digital Banking Maturity project for the EMEA has evaluated 248 financial institutions across 38 countries in Europe, the Middle East and Africa to determine the maturity of each nation’s digital banking landscape, assessing internet and mobile banking channels against consumer expectations and 826 functionalities.

To determine the maturity of each nation’s digital banking sector, the comprehensive Deloitte study first identified the 826 functional benchmarks for overall weighting, grouped across areas such as information gathering, account opening, customer onboarding, relationship expanding, and, with 396 separate functions measured, day-to-day banking. To perform the objective analysis, a squad of 136 mystery shoppers was then deployed across the study regions to open banking accounts.

The assessment exercise was further augmented by a customer survey with 8,000 bank clients in the 38 countries of the study, seeking to determine local customer needs and preferences in order to map digital banking functionality against consumer expectations in each market. The subjective feedback was then reinforced through an evaluation of mobile user experience (UX) according to a standardised assessment tool; the User Experience Questionnaire (UEQ) framework.

The analysis subsequently grouped the countries of the study into four categories according to overall market maturity; digital champions, smart followers, adopters, and latecomers. For the Middle East, the highest market achiever and the only regional state to be considered a champion was Turkey, while Qatar was the closest follower with a ranking in the ‘smart follower’ bracket.

Meanwhile, Jordan, Lebanon, Kuwait, Israel, Saudi Arabia and the UAE are all lumped in the latecomer category, with some lagging due to little local market pressure – which, according to the Deloitte analysis, is revealed as the key driver for digital banking maturity.

Here, digital banking development can be driven by two distinct market pressures; expectation from customers as to the level of services which should be available, and pressure from competitors which have leveraged digital channels as a competitive market distinction. As to the latter, the countries lagging behind due to lesser market expectations will be increasingly subject to competition from both foreign digital challengers and the burgeoning fintech domain. 

On the flip-side, while the use of digital banking is highly correlated with internet access, the study found that internet penetration alone doesn’t equate to the maturity of digital banking services, with digital laggard the UAE for example having internet usage rates already beyond 90 percent of the population according to 2016 World Bank data.

Of the vast number of functionalities assessed, 695 of them related to the digitalisation of traditional banking products – bricks and mortar into internet and mobile, or old world banking into new channels – while 110 functions related to what is termed ‘open banking’, a platform-based business approach where data, processes, and business functionalities are made available within a larger ecosystem of users, and just 21 of the functions rated fell within the ‘beyond banking’ class – platforms with an integrated suite of diverse services and providers.

It is in these areas of open and beyond banking, Deloitte declares, where the digital champions of the future will be decided – with, in addition to digitalisation, the current digital leaders having already achieved strong position in this respect. And with the cross-border market threat from the EU’s Revised Payment Service Directive (PSD2), which allows third-party financial management of accounts, the Big Four firm concludes that now is the time for the digital latecomers of the Middle East to move out of their comfort zones or risk being left behind.