Gulf gears toward banking on the go

With its mobile phone penetration rate posting an annual growth of over 100 per cent, the Gulf Cooperation Council (GCC) region automatically becomes an attractive market for mobile banking, industry sources told Alrroya.com.

As of May, the UAE’s mobile phone penetration rate has been recorded at a whopping 193 per cent, according to the country’s Telecommunications Regulatory Authority. Multiple-SIM ownership and a growing competition from telco operators has also seen mobile phone usage jumping into triple-digit figures in Bahrain, Oman, Saudi Arabia and Qatar, their respective telecom watchdogs have reported.

“Nearly every financial institution is already using some kind of internet banking system for their clients and the market is absolutely mature in this regard. However, requirements are changing,” says Lars-Dominic Droste, head of Mobility Solutions Unit at Sybase Products Middle East.

He explained that as people get more mobile, the demand for easily accessible solutions also gathers pace.

This trend has also been observed by Zakraf Shafee, Vice-President-Software Projects of Interblocks Limited.

“Financial corporations are seeing the need for mobile banking solutions because their customers are becoming increasingly tech-savvy and they, as banking service providers, need to satisfy that requirement,” Shafee said.

Young demographics fuel rise in internet usage

A United Nations survey released in March revealed that the population in the six Gulf states has reached 38.5 million as of the end of 2008. This figure was 4.77 per cent or 1.7 million more than the estimated population recorded in end-2006.

The UN also specified that majority of the region’s 38.5 mln population are composed of people aged between 24 and 65 years. This age group, which usually exhibit high disposable income, has been tagged as the major driver in the region’s high internet and mobile phone usage.

According to InternetWorldStats.com the entire Middle East, including GCC states, has a total internet penetration rate of 23.7 per cent. Out of this, UAE recorded the highest domestic rate hike of 59.6 per cent, followed by Qatar (52.3 per cent), Bahrain (34.3 per cent), Kuwait (33.4 per cent), Saudi Arabia (25.1 per cent) and Oman (13.7 per cent).

However the GCC and Middle East’s internet market rate is dwarfed by figures posted in other regions such as North America (73.9 per cent), Oceania/Australia (60.1 per cent) and Europe (50.1 per cent).

Droste said the region’s low internet penetration can actually be seen as beneficial to the mobile banking industry.

“Not everyone is using a PC with internet connection, while really everyone [has] a mobile phone, which in return can be perfectly used for mobile payment services,” he said.

Other transactions, such as balance inquiry, fund transfers and even overseas remittance can be done via a mobile device.

“Overseas remittance is very popular among blue-collar workers and since they are all holding mobile phones, those payments can be executed in a very fast and convenient way without lining up at the local exchange house,” Droste said.

Mobile banking challenges

Convenience is the biggest selling point of mobile banking service, as emphasised by the industry sources. However, a nagging concern among consumers over security risks has been slowing down further mobile banking developments.

“It has not really taken off yet,” admits Shafee, “but this region has a lot of potential that’s why we’re trying to aggressively promote our products (mobile banking solutions) to the banking industry here.”

He also assured that technology solutions providers are always on their toes to ensure that security concerns are taken care of.

“We go by the industry standards. We use HTTPS (Hypertext Transfer Protocol Secure), which is a secure tunnel that allows a client’s mobile applications to communicate directly to the bank servers,” Shafee said.

Sybase’s Droste is confident that the regional market will soon embrace mobile technology.

“Obviously there is still resistance since the technology is quite new and users are hesitant because of the security. But [this is a common reaction with] all new technologies. Security is always a major concern for all our products and we are addressing every issue individually,” he said.

He added that security risks are present in almost every transaction undertaken nowadays.

“In the end, there is a security risk in everything we are using: ATM cards, credit cards, and the likes. But having PINs, one-time passwords or tokens leverage the risk to a certain extent. There is always a mechanism to actually get around an actual security risk,” Droste said.