Driving Forces in the Banking Industry of the United Arab Emirates

Driving forces are the major underlying causes of change in industry and competitive conditions. The banking industry in the United Arab Emirates is growing and attracting a large number of local and international players. A driving force in the banking industry market is a growing buyer preference from nationals and expats looking for quality and speed in the banking technological services. According to Table 1 in the case, there is an obvious increase in the number of internet users in the past 20 years.

The growth percentage of users has been decreasing in the same period of Lime.Internet usage has reached a stage of no growth from 2011 to 2013 according to Figure 1, Online Banking Adoption in a result of Internet usage is less among older generation and it is because of the education and household income.  Mobile phones and Internet in both consumers and business has reflects in a positive results and led banks to create solutions to add value to customers.

Also mobile phones and tablets have improved communication and expanded the economy activities for financial institutions.

Network readiness measures a country’s capability to leverage information and communication technologies (ICT) to improve competitiveness and well-being. The ranking of UAE has shown the improvements and how much the government is considering development is imponant for the country. According to Table 2 Networked Readiness Index, UAE rank has increased in political and regulatory environment from 31 in 2012 to 24 in 2014. UAE have also shown a magnificent increase in the government usage rank, from 32 in 2012 to 2 in 2014 Today‘s IT technology increased the productivity in the banking system, In a result of the pace of technology and the improved services that banks provide today for the customers; the number of branches has been declining and banks start to see the strategy of franchising is a loss for them instead they invest more in modern technology.

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The top three types of transactions important for the customer are checking balance, transaction funds, and withdrawing cash. People used to go to the bank branches to make this transaction, but now it is easier to check your saving account balance on your mobile phone or transfer funds on the bank’s online website or you can drop by any nearest ATM and withdraw cash, As the United Arab Emirates is a developing country, the government supports the banking industry to raise the standards of living in the country, underdeveloped industrial base, and to raise the GDP per capita; Because of the government support, the economy of the UAE will grow First Gulf Bank is the only bank in the United Arab Emirates that gives national citizens a housing loan with out interests. Compared to the UAE in 2000, more banks has been opened most of them new national banks and the rest are international banks opening a branches here.

The more branches are available in everywhere and more banks opened that will result in a decreas of the growth of demand and it will bring an increase in rivalry and increased efforts by some firms, To be attractive for customers is a main goal for banks by providing attractive products and services. Technology has influenced the banking industry in all aspects to improve the mobility and productivity It has a significant impact on the products are offered from this industry and it change the process innovation and has been an attraction for new customers. Product innovation has been a key driving forces in the banking industry such as mobile phones and tablets applications, online transactions and online accounts. The competition has force the banks to decrease and lower the interest rates on loans and mortgages to attract more customers. The world economy since 2009 has led banks to tighten and restrict their lending.

Head-to-head rivalry tends to be intense The competition between banks is not only regional, the competition shifts to be international as the banks missions to be globalized and to open branches in important and major cities. For example National Bank of Abu Dhabi is planning to franchise in major cities such as London, Hong Kong, and Mumbai not only to provide the retail banking services but also focusing on providing wholesale services for companies The competition in the banking industry still growing as the economy of UAE is suitable for international banks to franchise and provide services to the customers. National Bank of Abu Dhabi, First Gulf Bank, Abu Dhabi Commercial Bank, and Al Hilal bank are examples of the regional competitors. Each national bank strategy is to improve and develop new services and new Internet technologies to attract more customers.

As the bank provides the customers with best services in the market, customers will be loyal for this bank, Competitors in the banking industry are weakly differentiated. Substitute products There are very weak substitute products and not competitive with the products and services that been provided by the banks People may save some cash at home incase of emergencies and for daily expenditure, this way cannot be compared to what the bank provide. As the bank provide safe accounts for customers to save their money and provide easy ways for the customer to use his money and spend it or save it m In these days using a credit or a debit card from the bank to pay for your groceries, bills, and daily needs became a habit. People are no more caring large amount of cash in their pockets to cover their daily expenditure; that is a reason for the big number of banks’ customers today.

Using a bank card is more safer and it helps to record monthly transactions if you want to revise them and save money for the following month or to reduce expenses. Banks provide qualified services to customers in order to compete others and be better for customers. It is important for a bank to require identification of his customers. Vast amount of purchases by consumers are important for the bank. The cost of a customer to switch a bank is high. It is a weak threat of losing customers easily. w The large number of national and international banks available in the banking industry in the United Arab Emirates made it harder for new banks to open up. To opena new bank in the market needs a large capital and connections, which it is not available for normal people or medium companies, There are many high barriers for new entries to the banking industry, In this time existing banks are struggling to earn good profit since the global financial crisis. The threat of national banks is low. Those factors determine the threat of new entries to the banking industry as a weak threat.

Suppliers Suppliers in the banking industry considered as a moderate threat in my view The central bank in United Arab Emirates are regulating and supporting the banking industry. Regulations have been set highly from central bank after the recession to prevent banks from going bankruptcy An example of the regulations was setting a limit for loans that being lent to the banks’ customers. The significant shifts of technology in all departments have an advantage impact on the banking industry productivity. There are several big companies that provide any bank with a system, this technical system helps to record and calculate every transaction and every service. The technical systems that are required for banks to work are very expensive and in a high cost, some of them reach 25 million dirhams per year.

The switching cost of this system is highNeLApp is an American company provides banks with data management solutions; their product basically is secured file storage for banks. In the other hand, there are small companies that provided banks with software and IT services to increase the productivity and to save extra money by reduce the unneeded expenses. An example of this software is a solution to decrease the amount of printed papers during working days; this kind of software works the same way as we have in our university. The advantage of this software it will reduce the paper that been used which it means it will reduce the printing cost for the bank. The Witching casts of these small companies are low the banking industry employees are qualified and trained to be in these positions.