Rethinking customer engagement: How banks can thrive in a digital-first world

By Hetarth Patel, VP – Growth Markets (MEA, Americas, APAC), WebEngage

The banking sector in the MENA region finds itself at a critical crossroads. On one hand, the macroeconomic environment is conducive to growth – favorable policies, rising consumer spending post-COVID, and a surge in demand for housing and auto loans. On the other hand, foundational banking metrics like the growth of Current Account Saving Accounts (CASA) tell a sobering story. This is more than just a balance sheet concern; it signals a deeper issue of customer engagement and trust.

Customers are increasingly holding cash or turning to alternative investment vehicles like fintech products. This shift raises an important question for banking leaders: how can banks retain relevance in a landscape where digital-first competitors are capturing customer mindshare and, more importantly, their funds?

The challenge is not limited to deposits. Consumer banking, despite the growth in financing, remains sluggish with segment growth hovering around 5-6%. This is a stark contrast to the growing appetite for personal loans, driven by lifestyle demands and a recovering economy. What’s missing is a cohesive strategy that marries digital transformation with deep customer engagement.

Digital transformation demands more

For years, digital transformation in banking has been synonymous with offering online services – primarily web-based portals for transactions and utility bill payments. While this was revolutionary in its time, the digital age demands more. The shift from internet to mobile banking is underway, evidenced by a 13% annual growth in mobile transactions. However, this shift is not translating into increased app adoption. A mere 10% of a bank’s customer base engaging with its app is a missed opportunity, one that speaks volumes about the current digital experience banks are offering.

Banking apps often suffer from uninspired interfaces, a lack of engaging content, and generic offers that fail to resonate with individual customers. For instance, consider a customer who spends significantly on travel. Instead of offering generic dining discounts, targeted travel-related offers could create a more relevant and engaging user experience. Similarly, nudges like reminders to pay credit card bills before incurring late fees, or velocity-based insights to offer small loans when account balances are low, reflect the potential for meaningful, personalized interactions.

Retention and engagement technologies have the power to transform this narrative. These tools are not about superficial engagement but about building meaningful relationships with customers at every touchpoint. Personalized reminders for upcoming festivals paired with relevant financial products, like promoting lower interest rates on loans during Ramadan, demonstrate how nuanced customer insights can drive engagement and loyalty.

A well-executed retention strategy can boost app subscriptions to nearly 10% annually, expand the digital user base by 20-30%, and even reverse the negative trends in internet banking usage. More critically, it can revitalize CASA, driving upto 5-8% increase in current account deposits – a lifeline for banks aiming to enhance their lending capabilities.

Customer journey mapping is key

The transformation mustn’t stop there. The absence of robust customer journey mapping in many banks today represents another missed opportunity. Understanding how customers interact with banking services, identifying friction points, and proactively addressing them can redefine the customer experience.

For example, consider the journey of a customer opening a secondary account with a bank. The account setup might be efficient, but without ongoing engagement – such as personalized updates on spending trends or tailored financial advice – the relationship risks going dormant. Post-onboarding interaction and targeted engagement are weak – and in some case, missing – links today.

The insurance arm of banking is equally ripe for disruption. Persistency ratios, particularly in auto insurance, hinge on timely and relevant engagement. Connecting with customers well before their Mulkiya renewal ensures brand recall and increases the likelihood of policy renewal with the same provider. Also, real-time service enhancements, like reducing wait times at hospitals or pharmacies through proactive system responses, can significantly improve the customer experience.

This principle applies across other insurance verticals as well – health, life, and critical illness. For expatriates, trust often resides with brands from their home countries. Local insurers have a dual challenge: building trust and educating potential customers. Here too, retention technology plays a pivotal role – analyzing churn patterns and enhancing real-time service delivery can drastically improve renewal rates and customer satisfaction.

Competing with fintechs through agility

In this race towards digital excellence, the aspiration for many traditional banks is clear: to compete with, and even outperform, fintechs. Brands like Halan and ValU are showing encouraging signs in the MENA region and have become benchmarks or sorts because of their retention strategies. However, calling oneself a neobank or launching a fintech arm is not enough. True fintech agility requires organizational transformation – embracing data-driven decision-making, fostering a culture of rapid iteration, and prioritizing customer-centric innovations.

The future of banking is one where customer relationships are not transactional but relational. Banks that invest in retention and engagement technologies will find themselves at the forefront of this evolution.