Despite rapid developments in the ease and security of electronic banking services worldwide, Saudi banks are still limited in terms of variety and quantity, according to a recent report by Al-Eqtisadiah newspaper.
The dearth in the quantity of local banks has raised many concerns regarding the quality of services provided to customers, as competition between banks will stimulate this sector to provide better and more attractive programs to customers. Currently, the Kingdom has only 11 banks, with more branches opening across the country, but not enough new banks entering the market.
Abdul Rahman Sultan, an economic expert, advised the Saudi Arabian Monetary Agency (SAMA) to exercise greater flexibility with regard to opening of more banks. “Saudi Arabia has 11 banks despite its large population, which raises the possibility of banks taking advantage of customers. In contrast, neighboring Gulf countries have smaller populations; yet have more than 70 different operating banks. This represents a flaw in the policy-making strategies of SAMA, because interest rates on loans and the fees for banking services and products are still high. The limited number of banks doesn’t compel this sector to introduce incentives to attract more customers,” he added.
He explained that the proliferation in the number of branches aims to attract new customers, but electronic services do not serve this purpose, as branches are there to promote and enhance bank products for competition purposes. “The increasing numbers of foreign labor do not use the new technologies in banking services,” he pointed out.
“The most important influence is the entry of more banks, not more branches of existing banks, with the aim of reducing the costs of services and interest rates,” said Sultan.
He also stressed that the decline in the performance of a few licensed banks should not deter other banks from entering the Saudi market, as their experiences do not represent a flaw in the Kingdom’s market.
“The market can absorb more banks, but the problem lies in the dysfunctional management of these banks,” he concluded.
On the other hand, Abdullah Baashen, an economic analyst, said that every individual bank conducts a feasibility study of the market, the segments targeted and the usefulness of the technology to decide whether to expand or not. “Saudi Arabia is a vast country and the population’s awareness about modern e-banking services is still poor,” he added.
Baashen elaborated further that the culture of electronic banking is still limited, especially in emerging countries, including the Kingdom, which emphasizes the need to interact directly with customers.
Saudi Arabia ‘needs more banks, not branches’
