Banks that direct themselves in serving communities first with a customer-centric approach are the best-positioned to succeed; according to a new KPMG report.
The multinational network emphasised the necessity for a ‘purpose-led’ approach to banking in its recently released ‘Banking perspectives: Saudi Arabia 2022’ publication.
The report, which is now in its third edition, analyses the evolving landscape in the Kingdom of Saudi Arabia’s (KSA) financial services sector, encompassing the developing environmental, social and governance (ESG) considerations and customer-centric perspectives that are underpinning boardroom discussions.
The publication covers current themes in the banking industry that the firm’s financial services team has observed segmented into four streams; people-centred banking, governance and compliance, transformational technologies, and enabling excellence – providing perspectives to address current challenges and opportunities.
In an official statement, the network’s head of financial services Ovais Shahab stated that “we see a major sea change to how banks operate in value-based banking. Those more grounded in communities, serving the real economy and leveraging a customer-centric approach are best positioned to succeed in this changing landscape,” while recognising the transformational impact of disruptive technologies from both within the financial services sector and beyond.
Encouraging money management
One of the main objectives of the Kingdom’s Financial Sector Development Programme (FSDP) is to advocate financial planning by driving the adoption of savings products, strengthening the savings ecosystem and delivering financial literacy.
Commercial banks have created new savings products as a response to some of the ambitious targets set by the FSDP which were to increase the total amount held in savings products and increase the variety of savings products.
“Partnerships with communities and local businesses to create sustainable savings programs and development projects, is the future of social banking in Saudi Arabia,” Shahab stated.
According to the publication, banks will need to source ways to support beneficiaries and the community beyond the usual provision of loans.
For example, banks need to understand their beneficiaries, their needs and business opportunities, and partner with them through sustainable funding models. Such purpose-led businesses will be increasingly in demand as organisations gravitate towards sustainable growth.
The publication has further analysed the KSA’s banking sector’s results for Q1 2022, which indicated positive industry performance, highlighting a year-on-year (YoY) increase in net profit by 22.83 per cent.
Total assets of the banking industry have also increased by 3.75 per cent as compared to 31 December 2021.
December 2021’s marked profit increase of 40.15 per cent represented the banking industry’s rise from the ashes of the pandemic, in tandem with a decline in expected credit loss (ECL) charge of 11.47 per cent YoY in Q1 2022.
Meanwhile, total customer deposits reported modest growth of 3.90 per cent since 31 December 2021, evidencing that the liquidity has not been a challenge to date.
SAMA driving change
“SAMA has been a proponent of change and development in the financial sector, in line with the objectives of FSDP, by taking new players in the financial sector under its wing and embracing a positive attitude towards new technology to usher banking into the future,” commented Khalil Al Sedais, office managing partner – Riyadh at KPMG in Saudi Arabia.
Banks are responding to this shift and to the requirements of the government to achieve greater economic development, while considering the threats and opportunities permeating an evolving technological and risk environment.
With the imminent launch of the SAMA open banking framework, with now three open banking fintech permitted into its sandbox, yet another step in the evolution of the banking industry is set. This will increase demand for cloud solutions as a key enabler for both open and digital banking.
“The outlook for the banking sector looks promising, owing to product innovation and conscious efforts on deploying digital solutions for improving efficiencies. Moreover, the entry of the new digital banks that are gearing up for innovative and customer-centric products will bring more liquidity to the banking system and enhance economic activity,” Shahab concluded.