Julien Faye and Philippe De Backer, authors of the report and members of the firm’s Financial Services practice, noted that for every 17,000 people in Saudi Arabia, there is only one bank branch. To put that in perspective, there are roughly 2,000 people per branch in most European countries.
With such an underdeveloped banking sector, the challenge of attracting new customers – many of whom have never used a bank before – is central to bankers in the region.
Some banks are adopting a nimble approach to expansion, opening small “stores” and kiosks in malls and other high-traffic locations. These outlets have a fraction of the footprint of a traditional, full-service branch, which can cost five times as much to build and operate. Their open floor plans, customer-friendly sales and service agents, and interactive product displays are well-suited to attracting customers who are new to personal banking.
This “light-retail” model emphasizes product sales and new-customer acquisition over routine transaction processing, which is increasingly carried out through low-cost electronic channels like ATMs and the Internet.
By using technology to centralize back-office activities, GCC banks can leapfrog the conventional branch model and quickly position themselves to attract the many first-time bank users. In the UAE, light retail also allows banks to expand their networks despite regulatory restrictions on the number of branches that can be established.
For smaller players, light-retail outlets can also be an affordable way to gain market share and expand geographic reach.
