How can it continue to set the standard for high-quality service with so many nimble new players entering the market? For Al Rajhi Bank, it is a case of continuing to observe its time-honoured formula of combining innovation with deep-rooted Islamic values and Shariah-compliant practices.
Since its foundation in 1957, these principles have helped the Saudi Arabian market leader to build combined assets of $90 billion and a customer base of 18 million. Along the way, Al Rajhi Bank has earned international recognition from prestigious publications such as The Asian Banker, as well as being named ‘Best Islamic Bank in Saudi Arabia’ in 2014 by Euromoney.
In early 2018, Al Rajhi Bank began investigating breakthrough technologies like Blockchain, and was poised to introduce fingerprint identification and electronic signatures. But it also came to realise that it faced a similar challenge to many banks around the world: aging core infrastructure that threatened to restrict future product innovation.
In the Saudi banking sector, time to market has traditionally been a major differentiator between the leading operators and those lower down the ranks. To develop, launch and manage its offerings, Al Rajhi Bank relied on legacy systems that had been in place since 1998. While well-suited for the marketplace of that time, the bank realised that continuing with this strategy threatened to limit agility.
Ahmed Anwar, Strategic Projects Advisor at Al Rajhi Bank, explains: “We operate in a crowded market, where many banks offer similar services and look to seize first-mover advantage to get ahead. With our legacy systems, we had to perform increasing amounts of time-consuming development work to bring new services to market or adapt to changing regulations, increasing our risk of falling behind.”
Embracing the digital revolution
Customer preferences have changed dramatically in recent times in the Middle East, with a steep increase in the uptake of digital banking. Research firm McKinsey discovered that 80% of consumers in Saudi Arabia and the United Arab Emirates prefer to bank online, and half would happily open an account with a digital-only bank. Smartphone penetration in Saudi Arabia also stands at 88%, almost double the global average.
Small digital-only banks and fintechs are already entering the Saudi market with next-generation services, determined to win customers. For established players, the pressure is on to provide engaging digital services to protect hard-won market share. Al Rajhi Bank developed a successful digital presence, but wanted to continue evolving its online and mobile services.
Ahmed Anwar adds: “The majority of our customer transactions are now completed through our digital channels. This makes it vitally important that we continue to enhance the user experience and deliver more innovative, intuitive products. Trying to achieve this by adapting and re-configuring our legacy systems was leading to unsustainable levels of complexity.”
Al Rajhi Bank had the ability to launch new locations in just 4 to 6 months with the Temenos solutio
Identifying a vendor with strong Islamic credentials
To continue to thrive in this new banking landscape, Al Rajhi Bank launched a project to transform its core banking platform, issuing a request for proposal to leading international software vendors in mid-2018. After narrowing the search down to a shortlist of four candidates, the bank decided to deploy Temenos IslamicBankingSuite, which provides Shariah-compliant core and digital banking features.
Ahmed Anwar explains: “Of all the solutions we considered, Temenos offered the most comprehensive set of Islamic finance capabilities. We also noticed that many other leading banks in Saudi Arabia, Egypt and the United Arab Emirates run Temenos, which gave us great confidence that Temenos could support us with expert resources in our region.”
Accelerating product development
Working with Temenos, Al Rajhi Bank kicked off the first phase of the implementation process in January 2019. When the platform is fully deployed, the bank will benefit from increased automation, an agile development framework that enables it to bring products to market faster than ever, and the ability to enhance its digital services and respond to changing customer requirements.
With the Temenos solution in place, Al Rajhi Bank can facilitate the launch of operations in locations beyond the borders of Saudi Arabia. Over the last 15 years, the bank has established 18 branches in Malaysia, seven in Jordan as well as a presence in Kuwait. Temenos IslamicBankingSuite ensures that Al Rajhi Bank can continue this expansion at speed.
Ahmed Anwar continues: “Building an international presence is a strategic goal for us, but brings challenges in terms of local Shariah customs and other banking regulations. With the Temenos solution providing pre-configured compliance features along with the ability to adapt our existing service offerings in line with local rules, we believe that we can launch new locations in just 4 to 6 months—a tremendous result.”
He concludes: “Today’s fast-moving market presents many challenges, but with Temenos on our side, we are well-placed to win new customers and maintain our hard-won position as a leader. The Temenos solutions will ensure we continue our long and successful history, and continue to deliver a first-class service that meets the needs of modern consumers, while staying true to Islamic principles.”