Banks aiming to retain their customers must court the Middle East's young, technologically adept population with innovative payment methods or suffer dwindling profits, a top banker has warned.
Speaking at the Middle East Retail Banking Forum in Dubai, Sanjoy Sen, the regional head of consumer banking at Citibank, said banks should heed the growth of new card payment methods such as Visa payWave and mobile phone payment applications such as Square and Zong.
"The battlefield for payments is expanding, and we need to watch this space," Mr Sen said. "The day and age of just physical infrastructure is going away."
He said regulatory changes, such as the UAE Central Bank's recent circulars limiting the size and fees of personal loans and banning unsolicited telemarketing, would drive banks towards new means of attracting customers.
But Mr Sen said simply adding new internet applications and payment methods to a bank's services would not alone suffice. Services would also need to improve.
"It's very important that we have a customer-centric approach and not a product-centric approach," he said. Banks should look towards "embedding" themselves in cities by collaborating with eGovernment initiatives and other processes.
As bank customers can be fickle and not especially loyal to one institution, developing payments based in technology would be an important means of keeping their business, according to Salmaan Jaffery, the head of advisory services for the Middle East and North Africa retail banking sector at Ernst & Young.
Banks that invested in these technologies would be well placed to target young customers in the Gulf, where half of the population is under 45, Mr Jaffery added.
"They're very savvy with online usage, as well as mobile banking," Mr Jaffery said. "It's a very important thing. [The services] are all new, peer-to-peer or wireless, online-based and very cool or innovative."
He said that while innovation had been driven by international banks, local competitors were starting to catch up.
"There's definitely a gap, because a lot of it is capital-intensive," Mr Jaffery said. "And a lot of it is happening in the West and cascading downwards … But some of the bigger, more well-funded banks here are doing it."