At the heart of any healthy economy lies a strong banking sector, enabling individuals, families and companies to finance their ambitions and realise the opportunities presented to them. From loans and payments to acquisitions and flotations, access to the complete suite of banking services is a growing expectation for customers of all types across all countries.

All of that certainly holds true in Saudi Arabia, where a growing economy (see Fig. 1) is creating especially strong demand for retail financial services. This demand is not just being felt in the major cities, but throughout the kingdom, and technology is playing an increasingly important role in providing the new channels that are enabling customers to manage their finances in ways most convenient to them. This is an area of strategic importance for Saudi Hollandi Bank (SHB). We are the longest-established provider of financial products and services to citizens and leading companies in the kingdom, and we are increasingly applying technology to enhance our service offerings for all of our clients.

Government support
The sustainable growth we are seeing in retail banking has been prompted by two catalysts: an active government programme of investment in the kingdom, and a banking sector that is willing to engage and support individuals and families across the country. From health and education to infrastructure and food, the government has provided investment and subsidies that have brought about the emergence of a new middle class consumer, helping to drive the economy and stoke demand for banking services.

Specifically, the government is placing a greater emphasis on increasing home ownership among Saudi nationals, which currently stands at around 30 percent, and is encouraging the involvement of local banks in reaching this objective. In 2011, it launched the construction of 500,000 new homes as part of an overall spending package estimated at 19 percent of Saudi GDP, and this is already having a positive impact on home ownership. However, in Saudi Arabia today, mortgages comprise only around two percent of GDP, so the kingdom has introduced a new mortgage law to ensure a more effective and transparent system.

With a population of 29 million (a huge proportion of which – some 70 percent – is under 30 years old) expected to grow at a rate of 2.5 percent annually, it is clear that the demand for banking services will continue to broaden. Increasingly, people across the kingdom are turning to banks not just to access cash, but for advice on how to finance their future plans, be it in the form of a new home or car, or simply to enable access to their funds day-to-day, wherever they are.

We already know that traditional customer service and strong relationships have an important place in meeting customer expectations. But with customers who are increasingly technologically sophisticated and used to ‘anytime-anywhere’ service, every bank needs to evolve its service model. Customers expect, and banks have to provide, convenient and effective service across a wide range of channels (including the internet and mobile apps), accessible anywhere.

Digital transformation
Nowhere is that more immediately obvious than in the impact and usage of social media. Already more than eight million people are on Facebook in Saudi Arabia, and five million on Twitter, so there is a real opportunity to build insights on customers and to make improvements in service that can be felt quickly. Today, customer enquiries and complaints generated on these channels must be dealt with immediately; responsiveness at this level is key to building a great customer service reputation, which in turn attracts new customers to your brand.

Beyond the obvious visibility of social media, technology is also enabling the growth of mobile banking and customers are embracing the use of their smartphones and tablets to handle transactions. The demand for applications that are both useful and easy to navigate is growing fast. Smart phone penetration in Saudi Arabia is already close to 75 percent and the potential to broaden the usage of this channel and to place it at the heart of customer relationships in retail banking is huge. When SHB launched a mobile banking app, over a quarter of our existing internet banking users registered almost immediately, without any direct marketing efforts.

Digital transformations like this give banks an opportunity to provide customers with ever more convenient services, and can also play a major role in building customer loyalty. Many new loyalty programmes in retail banking are now built around approaches that allow product managers to more deeply understand customer behaviour and needs. Technology is allowing the analysis of data that in turn helps to formulate offers and rewards that strengthen bonds and enhance customer experience at the same time. SHB has realised the potential in this digital transformation and has evolved its loyalty programme proposition to its customers accordingly.

Evolution and tradition
But we should not forget that in Saudi Arabia, some critically important banking transactions are still carried out in branches, including the initiation of relationships and account openings. While there is a need to continue to provide branch accessibility, the cost of doing so for the simplest routine transactions, such as withdrawing cash or making small deposits, is increasingly seen as prohibitive.

In line with global trends, banks in the Kingdom of Saudi Arabia are actively moving their cost structures towards a combination of self-service electronic channels for everyday transactions with more specialist advisory services at repurposed physical branches. Globally, some two-thirds of branch interactions consist of the routine, with only one third being about advice or new sales. Longer-term, banks will need to move their cost structures towards a combination of self-service digital channels for everyday transactions, with more specialist advisory services at repurposed branch buildings. Providing a true omni-channel experience across low-touch digital channels and high-value add branches is the future of retail banking in the kingdom and across the world.

To be truly successful in the retail market, banks need to focus their resources on segments where they can combine a natural set of strengths with an understanding of that particular segment. And, of course, combine that with an understanding of market dynamics. For example, in SHB’s case, the knowledge that there is a relatively low home ownership rate in Saudi Arabia, and that the government is working to increase this, has led the bank to focus much of its efforts on home finance. It has also innovated an approach that combines government support for loans with the bank’s own funding to help first-time buyers.

Similarly, knowing that SMEs are a generator of economic value for the kingdom and are among the main generators of jobs in every economy, SHB has invested in understanding and serving this segment. In all of this, and against a backdrop of growing demand for retail financial services, the prerequisites of excellence in service, customer access to the right products and services, and efficient delivery channels, are as ever the keys to future success.