A majority of banks in the Middle East and Africa (MEA) view that cash will dip below 5% of retail transactions in the region over the next five years against 48% globally, a survey undertaken by Temenos, a banking software entity, found.
"The global coronavirus pandemic is likely to reinforce this trend," said the survey done on behalf of the Economist Intelligence Unit (EIU).
As many as six of the 10 bank executives in the region view this trend to emerge in the next five years as lenders in the MEA are the strongest believers in a cashless society.
The lockdown measures imposed by sovereigns worldwide in light of the evolving pandemic are also expected to increase the need for and use of digital banking and payment solutions globally.
Highlighting that a big digital switch need not mean the end of face-to-face banking; it said respondents in MEA are the least likely to believe that customers will forgo human contact (42% against a 51% global average) even if digital services are free or low-cost.
Respondents acknowledge consumer demands for accessible, hyper-personalised digital banking experiences, ranking changing customer demands as the highest-impact trend by 2020 (35%).
A plurality of MEA banking executives – 43% of respondents – identify new technologies, including artificial intelligence (AI), as the most impactful trend on their sector by 2025.
Notably, higher numbers of MEA respondents believe digital marketing is the most valuable use for new technologies (23% versus 13% globally). These findings indicate that MEA retail banks believe investing in digital technologies to target and attract the un- and under-banked is crucial.
The survey reveals that the Middle East, in particular, is poised to encourage digital financial inclusion, with young populations and smartphone use predicted to hit 74% by 2025.
The governments across the region are increasingly embracing digital agendas to encourage financial inclusion and accelerate digital banking and a cashless economy.
The affordability of smartphones is a key driver in the new development of building mobile-only and mobile-first Greenfield banks, the top innovation strategy chosen by 37% of MEA-based respondents alongside investing in fintech start-ups (37%).
Nearly one in three respondents (29%) is innovating by building a greenfield fintech firm, also a top five pick among global respondents (25%).
"Even in the most uncertain times, the power and opportunities of digital banking remain the same. This retail banking report outlines the opportunity for MEA banks that adopt modern technology to accelerate financial inclusion and digital banking, to support economic and social development," Jean-Paul Mergeai, managing director (MEA), Temenos, said.