By Saumitra Sehgal and Luca Turba

In an era where digitalization is redefining industries, the banking sector stands at a pivotal crossroads. Historically, the banking industry's strength was anchored in substantial market entry barriers, chiefly characterized by regulatory licensing requirements and the necessity for a vast physical distribution network. This network not only signified capital strength but also was instrumental in fostering customer trust and loyalty. However, the advent of digital technologies has begun to rewrite this narrative, introducing new dynamics in customer relations and competitive strategies, especially in the GCC region.

With the digital wave sweeping across all sectors, the banking industry has not been immune to its impact. New market entrants, leveraging digitally-enabled solutions, have begun to challenge traditional banking models. These innovators are reshaping the landscape by offering scalable and efficient solutions that circumvent the need for extensive physical assets. Initially focusing on straightforward banking products like payments and money transfers, these digital entities are progressively expanding their offerings, steadily encroaching on the domains traditionally dominated by incumbent banks.

The recent global pandemic has acted as a catalyst in this transformation. It has not only increased customer readiness for digital banking solutions but has also heightened expectations for digital service levels. This shift has put additional pressure on traditional banks, which have long relied on their branch networks for competitive advantage. The challenge now is to adapt and reinvent their strategies to remain relevant in this rapidly evolving digital landscape.

This publication delves into the critical question facing the banking sector today: In the digital age, do physical branch networks still hold their competitive edge, especially in the GCC region? To answer this, we explore several key areas: the current state of branch network footprints in the GCC, the evolution of these networks in response to digital disruption, the potential for further optimization in this new environment, and strategic recommendations for leveraging branch networks amidst digital transformation.

As the banking sector grapples with these transformative changes, our analysis aims to provide valuable insights and strategic direction. By examining the interplay between traditional banking practices and emerging digital trends, we seek to offer a comprehensive view of the future of banking in the GCC region, a future where adaptation and innovation are not just beneficial but essential.

This article has been coauthored by Domagoj Vlahovic. We would like to express our sincere appreciation to the author for his valuable contributions.