The UAE is home to many major and renowned banks from across the globe. This is remarkable considering the size of the country and its modest population. What’s even more interesting is the presence of people from over 200 countries, some of which do not have a very formal banking system or presence in the UAE's banking landscape. This also explains how money changers, hawala, and cash-carrying come into play.
Having said that, banking is a sector that undergoes rapid changes. UAE banks are seamlessly serving retail clients and the corporate world, especially with the trade finance opportunities and term credit requirements. The future will focus on digital banking, AI implementation, and blockchain, alongside an emphasis on manufacturing and the SME sector, as there is still a lot to be achieved in manufacturing.
Future trends in banking can be understood by delving into four major areas: retail banking, digital banking, investment banking and wealth management, and corporate banking, which dominate the UAE banking space.
While 2024 saw digital banking and fintech growth as some of the prominent advancements, the use of AI, open banking, and pilot work on Central Bank Digital Currency are important areas of success for the UAE banking landscape. Blockchain-based cross-border payment systems, the open banking infrastructure, fintech innovations, and seamless trade finance solutions are some of the areas of interest in the retail and digital banking space.
This has led to enhanced security measures for data protection and responsible data mining. Wealth management has been a focus in the last few years, and it is continuing to grow, considering the shift of ultra-high and high-net-worth clients to the UAE. Infrastructure finance and project finance have gained impetus in the last few years, and long-term project finance has emerged in the last two years. Real estate growth is continuing, and so is the expected growth of mortgage finance. Green finance is picking up, and the year 2025 is expected to see further growth in this area.
Digital banking has been growing with a Compound Annual Growth Rate (CAGR) of over eight per cent for the past two years and is projected to grow at a CAGR of 4.8 per cent from 2024 to 2029. However, digital banking is still more popular with the young generation and professionals, and it needs to reach other segments. SME finance is still marred by high interest rates, but it is expected to do better this year. However, corporate banking is not expected to see a flurry of deals. Islamic banking has also seen growing demand and is expected to grow faster than conventional banking.
On the commerce side, the country's growth has been characterized by trade, tourism, finance, and the oil sector, making UAE an important centre of trade and commerce. UAE has also established itself as a balanced player in geopolitical shifts, making it an important destination for traders in oil, gems and jewellery, coal, and fertilizers. A gateway to Africa, it also provides additional access to Central Asia.
Oil, construction, real estate, telecommunications, healthcare, tourism, food processing, gems and jewellery, aviation, and manufacturing are some of the areas expected to have better prospects in 2025. Fintech and innovation are areas where the UAE will see companies making it a base to reach the MENA and GCC markets. This year will also see equity raising through IPOs by a few successful companies.
The growth momentum of business, banking, and commerce will continue, with the UAE expected to achieve one of the strongest growth rates in the region as the focus shifts to non-oil growth. Wealthy residents and businesses from across the globe are relocating to the UAE amidst geopolitical uncertainty, drawn by the country's reforms, vision, diversity, and tolerance, which support both businesses and individuals alike.
The author is the Chief Executive Officer of State Bank of India, DIFC, Dubai, with over 21 years of diverse experience in banking and the steel sector. His views are personal and do not represent those of his organization.
This story is done in collaboration with DataLEADS, which is an award-winning global digital media and tech company.
