Globally retail banks are facing intensified competition due to deregulation and the opening of international markets. However, retail banking is projected to prosper in the Middle East, according to a recent report from Boston Consulting Group.
"In recent years, the Middle East belonged to the highest growth regions in retail banking globally and we expect this to continue in future," said Reinhold Leichtfuss, leader of the European and Middle East retail banking practice for BCG and lead author of the report.
"However, an increasing number of foreign competitors entering the market will require differentiating business models to succeed in the long-term. In the Middle East, too, further consolidation in retail banking is only a matter of time."
By 2015, the share of global retail banking revenues generated collectively in the top five European countries and in the United States will have shrunk by an estimated five per cent, with a corresponding collective share increase in Asia-Pacific and the Middle East.
Vast numbers of unbanked consumers in emerging markets - what BCG calls the next billion - will develop banking relationships over the next generation, providing opportunities for retail players.
According to the report, retail banking will remain the dominant source of revenue for banks worldwide through 2015. In 2006, the retail banking business accounted for 1.22 trillion euros in revenues, or about 57 per cent of the global banking revenue pool of 2.15 trillion euros.
Still, margin pressure is here to stay. From 2001 to 2006, banks included in a recent BCG benchmarking survey showed average margin declines in their retail segments of about 21 per cent. In some markets, attacking players have already taken sizable share from incumbents that have been reluctant to fight proactively on the price front - a trend that will likely continue.
The report underlines that the trend towards more direct and online banking is highly significant. The penetration of both general Internet usage and of online banking channels has increased sharply in many markets and will continue to do so - a dynamic that will lead to a further decline in the importance of bank branches for some sales activities, although branches will remain critical for customer acquisition and advice-intensive products. ( Gulf )