Wednesday, 17 July 2024

FAB innovates services for SME banking in the region

5 min read

By Sana Louahidi

FAB’s digital transformation and a customer-focused strategy for the SME market is expected to further drive business in this thriving segment

First Abu Dhabi Bank (FAB) is one of the largest banks in the United Arab Emirates (UAE), with total assets of AED 1.15 billion ($312 billion) in 2022. The bank recorded 14% growth in assets in September 2022 compared to September 2021.

It gained 35% market share in assets, 34% in deposits and 26% in loans in 2022. The bank’s net profit increased by 19% in September 2022 since September 2021, driven by its diversified business model including small and medium-sized enterprises (SME), wealth management, and Islamic products for retail banking, serving over three million customers across all client segments.

SME banking makes up 24% of total revenue

The SME banking business is a key driver of the bank’s core activities, contributing 24% to its total revenue. Its commercial banking segment supporting SME is especially crucial; SME contribute 60% to the gross domestic product of the UAE.

FAB improved profitability by 31% in the third quarter of 2022 compared to the same period in 2021, driven by lower impairment charges and costs savings from digitalisation.

Retail banking income stood at AED 3.2 billion ($870 million), lower than AED 3.6 billion ($980 million) in 2021, primarily due to the deconsolidation of its Magnati payment gateway. Magnati was developed by FAB as a subsidiary for making payments seamless in areas such as government services, healthcare, education, real estate, hospitality and food and beverage.

The bank’s retail loans increased by 5%, supported by strong sales; retail deposits increased by 17% driven by strong current account and savings account (CASA).

With an eye on the rapid developments in customer experience in the UAE, FAB invested in technology and digital initiatives to drive transformation and future efficiencies in their services. The bank improved its mobile banking application for corporate and SME clients and enhanced functionalities in the corporate client banking portal.

Among its new initiatives, the bank digitalised the lending process for corporate customers who can now apply directly through the bank’s platform.

Salil Ahuja, head of consumer portfolio and value proposition, portfolio management and alliances at FAB, said: “In 2023, First Abu Dhabi Bank aims to innovate banking services for SME in a way that has not been done before in the region, with its customer-focused strategy considering every client need.”

FAB is building partnerships with other fintech players to upscale their business and meet the competition. In 2022, the bank recorded 65% of digitally registered users, with 88% of transactions being performed digitally. The bank recorded a 16% increase in digital transactions in 2022 compared to 2021.

To retain and improve customer engagement, FAB introduced an SME rewards platform for lifestyle services.

Partnerships pay off

FAB partnered with fintech players to revamp process automation such as improving customer onboarding by reducing turnaround time from 10 days to few hours. The bank delivered a total of 44 automations in the first nine months of 2022, 39 for UAE and five internationally.

In the same year, the bank’s bot automation processed more than six million transactions and saved 882,000 man-hours.

The bank launched green car loans in partnership with Tesla in 2022, contributing 2.3% of total auto loan funding. It introduced sustainable CASA for corporate clients and funded and facilitated sustainable projects amounting to AED 10.3 billion ($2.8 billion) with a target to reach AED 275.5 billion ($75 billion) in 2030.

Environmental, social and governance (ESG) will continue to be a focus for improving the bank’s financial services in terms of accessibility to green transactions in the region. The bank offers 10,000 hours of ESG training for its employees centered around awareness, strategy, risk, and creating a sustainable finance framework.

This year, FAB will continue to strengthen digital propositions, enhance digital platforms, and drive automation in different business areas, including SME banking. It expects more strategic collaborations, and partnerships with fintech players to continue upgrading its platforms.

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