The main risk for technological disruption in banks based in the Arabian Gulf is customers changing their preferences, according to a report released by S&P Global Ratings on Sunday.
S&P Global Ratings Credit Analyst Mohamed Damak said that the conclusion of the report was drawn from an analysis of a banking system’s technology, regulation, industry, and preferences.
“Regulatory risk is low because policymakers are conscious of the extreme importance of local banking systems in the region, and the need to keep them safe from potentially disruptive unregulated competition. Technology and industry structure present a moderate risk of disruption,” said Damak.
GCC economies are still in the process of adopting significant technological advances, including big data and artificial intelligence analytics. Consumer-facing technology, such as voice and facial recognition technology, may also drive more efficient customer services. S&P expects some GCC business lines to be more protected from technological disruption than others in the medium term. Services which focus more on human value, such as corporate lending, will be more resilient.
“Therefore, even if customers' preferences continue to evolve, we think that risks to these banking systems remain contained, at least in the next two years,” said Damak. “This is because regulators continue to protect them and the share of current activity at risk is small.”