Online Banking Services in the UAE: Abu Dhabi Islamic BankIntroduction
In 2019, most banks around the world offer online and mobile banking services. The advantages of the Internet and communication technology have immensely improved the speed and convenience of banking operations for customers and financial institutions alike. The availability of these functions is no longer a mere competitive advantage over others; it is a necessary requirement for a bank to remain in business. The UAE is considered to be one of the most advanced countries in the Gulf Cooperation Council (GCC) in terms of technology, communication, and social media. Typical mobile applications provide various services such as online billing, transactions, purchases, credit, and transfers between accounts. Therefore, the influence of mobile banking on the industry is significant. The purpose of this paper is to analyze modern online banking practices in the UAE, using Abu Dhabi Islamic Bank (ADIB) as an example.
Literature Review
Online banking has experienced tremendous economic growth following widespread use of the Internet and mass adoption of smartphones by the general public. Laukkanen (2017) investigates some of the factors related to the successful use of mobile banking services, which include customer perception and satisfaction as the foundation of successful services, and a technology acceptance model in accordance with the theory of planned behavior. Laukkanen discovers that customer satisfaction and customers’ pre-existing relationships with the bank in question are the primary drivers behind the adoption of mobile applications. The usefulness of an app is the main driver behind its staying power among customers. The primary factors are efficiency, security, and ease of use, as customers who find an application to be too difficult or insecure will revert to utilizing conventional banking services (Laukkanen, 2017). Finally, the theory of planned behavior suggests that the “one size fits all” approach utilized by most banks is not efficient, as different customers have different needs and preferences based on their income, age, gender, and nationality. Laukkanen (2017) supports a personalized approach towards individual customers in order to ensure higher adoption rates of e-banking practices.
The UAE was one of the first countries in the GCC to adopt online banking. One of the primary factors that influenced the early adoption of online-based applications in the region was the widespread availability of the Internet to the general populace. Mansumitrchai and Chiu (2012) report that the availability of Wi-Fi, mobile Internet, and cable Internet in the UAE is 98%, meaning that the vast majority of the population are potential users of online banking services. The study also investigated the reasons behind the early adoption of these services by UAE banks such as ADIB.
The researchers report that the primary difference between online banking users and physical bank customers lie in the significance of human contact. Online banking respondents had high scores in compatibility and trust, whereas the other group scored high in social communication (Mansumitrchai & Chiu, 2012). The reason the popularity of mobile billing services was low on the eve of its adoption could be traced to the relative novelty of the technology. After the trustworthiness and usefulness of the practice proved itself with time through trial and error, as well as the introduction of human interaction surrogates (hotlines and chats), the popularity of mobile applications started to grow.
The subject of personal interaction in relation to online banking is further developed by Ayyagari and Parahoo (2018), who investigated the relationship between the convenience offered by mobile services, the personal touch provided by bank employees, and customer perceptions. According to the study, the majority of the respondents associated personal preference and customer satisfaction with customer service representatives (CSR), whereas negative perceptions of ATMs and online banking applications were significantly reduced as long as their performance was considered adequate (Ayyagari & Parahoo, 2018).
According to the diffusion of innovation theory, users’ offline experiences affect the adoption of online banking practices. Estrella-Ramon, Sanchez-Perez, and Swinnen (2016) report that prior to the adoption of online banking services, the majority of private and corporate customers develop a history with the bank in question, which helps establish a sense of customer loyalty and trust. As a result, customers are more likely to use the online banking application of the financial institution of their choosing. Therefore, loyalty facilitated through physical interaction influences the use of Internet technology, not the other way around (Estrella-Ramon et al., 2016). This correlation also helps explain the lower parameters of online banking across the world. In Europe, only 44% of customers utilize mobile applications and related Internet services, whereas in the UAE the score is 61% (Estrella-Ramon et al., 2016).
The issue of cybersecurity is crucial to online banking practices, as vulnerability to outside intrusion is greatly increased compared to standard banking operations. According to Kiljan, Simoens, Cock, Eekelen, and Vranken (2016), most banks use secure channels to conduct their operations and transfers. Online banking, when done using a personal computer or a smartphone, is vulnerable in numerous ways. Portable devices are potentially accessible to other individuals, the Internet connection is not always secure, and gadgets with an active Internet connection are prone to being hacked. Kiljan et al. (2016) foresee potential dangers to e-banking and mobile banking users due to a lack of security standards in the industry.
Case Study Analysis and Discussion: Abu Dhabi Islamic Bank
Abu Dhabi Islamic Bank (ADIB) is one of the largest Islamic banks in the UAE. It was established in 1997 and began commercial operation in 1998 (Nobanee & Ellili, 2016). The bank itself is a public institution not owned by the government, as its founders are in possession of only 29% of its stock, with the rest being owned by a great number of major and minor shareholders (Nobanee & Ellili, 2016). The bank operates based on Sharia law and follows the Islamic principles of banking, which regulates and prevents the use of “non-Islamic” practices, such as taking interest and providing credit, participating in hedge funds, and other activities that may threaten the integrity of the bank, its deposits, and its customers. ADIB operates using all five modes of Islamic banking, such as profit-sharing and loss-bearing, safekeeping, joint ventures, cost-plus, and leasing.
Based on the literature research provided above, ADIB’s implementation and promotion of online banking practices will be analyzed using the following parameters:
- Options and parameters of the online application. At the very least, a banking app is expected to have all of the basic features to allow the user to save time and avoid a trip to the local bank office for trivial matters.
- Customers’ existing relationships with ADIB as a precursor for banking app adoption. If the bank is not trustworthy and does not cultivate meaningful relationships with its customers, the likelihood of them adopting a banking app would be low.
- Customization options and customer-program interface. A fool-proof design in addition to a personal approach towards individual customers is likely to create a unique customer experience.
- Cybersecurity issues. How well is the app protected against outside interference, glitches, and program failures that might lead to the customer losing money or potential business opportunities?
In many aspects of banking, ADIB provides services and products similar to conventional banks. It can be used to pay bills, make safekeeping deposits, transfer finances between accounts, and other operations (Karambelkar, 2016). In order to compete with other Islamic and conventional banks, ADIB developed its own online and mobile banking apps to be accessible to users through smartphones and computers. The bank offers services to private and corporate users and acts as an intermediary between customers and businesses. In terms of functionality, ADIB online banking apps are relatively standardized when compared to those of other UAE banks. It provides services such as mobile check deposits, money transfers, bill payment, and transaction history search.
Additional functions include an ATM locator, individual retirement account tracker, and personalized credit history info bar, meaning that it is possible to estimate one’s own credit history (Karambelkar, 2016). However, the usefulness of the latter is doubtful, as taking out loans from ADIB and other Islamic banks is a very complicated matter. Due to Sharia law forbidding the bank from receiving interest on loans, it is impossible for ADIB to profit from lending money for small-scale purchases and business ventures. The mobile app also allows direct payments to various UAE-based enterprises as well as global trading enterprises. Finally, ADIB allows for account integration with online payment systems such as Zelle (Karambelkar, 2016).
Customers’ existing relationships with ADIB are based on several important factors that are attributed to the bank’s business model. As an accredited Islamic bank, ADIB enjoys a high degree of confidence among customers in the GCC and the Middle East as well as in various Islamic communities outside the country’s immediate sphere of influence. The UAE is an Islamic country, with insignificant influence of other religions. Sharia law imposes very strict physical and moral restrictions on banking operations in order to ensure that no non-Islamic practices are used to extract profit, which increases the bank’s trustworthiness among Muslim customers (Nobanee & Ellili, 2016). At the same time, the association of a bank with a particular religion often drives away non-Muslim customers, which reduces the likelihood of them adopting ADIB’s e-banking practices.
In terms of conventional customer relations, the bank has a remarkably good score. According to the most recent surveys, almost 35% of ADIB’s customers would recommend the bank to their peers, which is a significant achievement considering that the average score in the UAE is 15% (Nobanee & Ellili, 2016). The company has a strong work ethic and a responsible approach to safeguarding customers’ interests and investments. During the financial crisis of 2008, Islamic banks did not suffer the losses faced by European and American commercial banks because they did not invest in hedge funds and high-risk ventures. This reputation also assists in establishing a lucrative and trusting relationship between ADIB and its Muslim customers. However, this information is largely unknown outside of Islamic banking and does not play a strong role in establishing a foreign presence.
The application has a relatively intuitive layout and design, making it easy for new users to get acquainted with the system and use it independently. It is also remarkably similar to applications provided by other major banks in the UAE, making the transition from one to another easier for the users. The company uses a planned behavior approach and utilizes different versions of the client for different customers. For example, ADIB has a specialized application for women called DANA, which involves specialized protocols and systems to allow women to independently conduct operations while remaining in concordance with the laws and traditions of the UAE and Islam. At the same time, the program features no significant customization options, meaning that customers have to learn to use the program as it was intended by the bank instead of customizing it to fit their own needs.
In terms of cybersecurity, the bank’s systems are in need of an overhaul. The current versions of ADIB’s online client and mobile app have been around since 2011 (Al Neaimi, Ranginya, & Lutaaya, 2015). Although they have received timely updates, the inner workings themselves have long since been analyzed by various lawbreakers, making the system vulnerable. In 2014, the world experienced an onslaught of cybersecurity threats targeting the banking systems of various countries, including the UAE. The current version of their online banking platform suffers from the following issues (Al Neaimi et al., 2015):
- Weaknesses associated with the mobile systems (not the program itself);
- Weaknesses associated with insecure Internet connections;
- Outdated core functions and security standards;
- Vulnerabilities in the bank’s master system.
At the same time, ADIB uses a rather intricate access system for its mobile apps, which requires not only the use of a password and a login/e-mail but also the application of a graphic key or fingerprint identification. Overall, while the application has some security issues, they are not unique to ADIB and can be found across the entirety of the UAE online banking sector.
Conclusions and Recommendations
As it stands, ADIB has a solid and long-standing relationship with the majority of its customers, a high percentage of whom use online banking as their primary means of conducting operations. The online and mobile applications have decent functionality and a familiar interface, ensuring ease of use for both old and new clients. However, the major weakness of ADIB’s online banking strategy lies in cybersecurity. As stated above, the core functionality of the mobile app is outdated, and the weaknesses of the old platform have not been remedied yet. To that end, it is recommended to upgrade the mobile and online client by using the latest tools and engines available to both the Android and Mac platforms (Al Neaimi et al., 2015).
The security measures affecting ease of access should also be updated. A graphic key is not a reliable third factor, as it can be easily guessed and replicated by a potential culprit. Fingerprint scans must be mandatory for all mobile clients. The majority of computers and laptops do not have this functionality and still rely on passwords, login information, and mobile verification codes, which could be circumvented (Al Neaimi et al., 2015). Almost all computers nowadays are equipped with a web camera, making it possible to develop software to recognize individual customers and attach their biometric information to the account.
Finally, ADIB should seek to further improve its relationships with customers in order to increase the percentage of online clients. This would enable the bank to save money on physical offices and associated expenses, while significantly expanding users’ freedom. ADIB should focus on providing a pleasant experience and improving its reputation with non-Muslim clients if it wishes to expand outside of the Arab influence zone.
References
Al Neaimi, A., Ranginya, T., & Lutaaya, P. (2015). A framework for effectiveness of cyber security defenses, a case of the United Arab Emirates (UAE). International Journal of Cyber-Security and Digital Forensics, 4(1), 290-301.
Ayyagari, M., & Parahoo, S. K. (2018). Personal touch or convenient tech? An investigation of customer channel preferences in retail banking. International Journal of Financial Services Management, 9(2), 103-118.
Estrella-Ramon, A., Sánchez-Pérez, M., & Swinnen, G. (2016). How customers’ offline experience affects the adoption of online banking. Internet Research, 26(5), 1072–1092.
Karambelkar, D. (2016). Revealed: The UAE’s top 10 banking apps. Gulf News. Web.
Kiljan, S., Simoens, K., Cock, D. D., Eekelen, M. V., & Vranken, H. (2016). A survey of authentication and communications security in online banking. ACM Computing Surveys, 49(4), 1-35.
Laukkanen, T. (2017). Mobile banking. International Journal of Bank Marketing, 35(7), 1042-1043.
Mansumitrchai, S., & Chiu, C. (2012). Adoptation of Internet banking in UAE: Factors underlying adoption characteristics. International Journal of Management and Marketing Research, 5(2), 103-115.
Nobanee, H., & Ellili, N. (2016). Corporate sustainability disclosure in annual reports: Evidence from UAE banks: Islamic versus conventional. Renewable and Sustainable Energy Reviews, 55, 1336-1341.