THROUGHOUT THE Middle East banks are rebuilding through technology, replacing ten-year-old core systems in a bid to offer their retail customers a broader range of services and automated access to the bank. Technology is a key strategic weapon for retail banking in the region, with automated teller

The banking industry is in something of a flux in the region, with mergers and acquisitions on the one hand, and privatisation and granting of new licences on the other. This sea of change has forced banks to change their attitude and their market positioning, and the degree to which they succeed in this aim, along with the speed at which they advance technologically, may well determine who survives and who doesn't.

Bankers are having to push through changes that are radical in the true sense of the word, dealing with problems of infrastructure as a prerequisite to looking for new and innovative products to parade before customers. New, central automated banking systems are being installed by most of the larger banks, giving them the flexibility to build new product delivery mechanisms for customers.

Priorities vary greatly across the region, though a quick survey reveals a uniformly invigorated industry eager to deliver sophisticated banking services. The Gulf States have developed a strong enthusiasm for electronic banking in recent years, whereas elsewhere in the Middle East banks are seeking primarily to improve the basic infrastructure of the banking system. The Gulf states will become the role model for the non-Gulf states to follow as they enter the electronic banking revolution.

In retail banking a chief aim is merely to cut down the queuing time faced by customers in the branch by offering one-stop teller positions, redesigning branches and installing ATMs. Traditionally customers have had to stand in line to conduct one type of transaction and then join another line to deal with a separate matter. A brief survey of the region gives an indication of the extent to which change is afoot.

Saudi Arabia has the undisputed lead, having pioneered Western-style banking practices and electronic banking, with widespread automation and the formation of a national ATM network sponsored by the central bank, Saudi Arabia Monetary Authority (SAMA), and the 12 leading banks. Telephone banking is also commonplace and all the major international credit card brands are present.

Other countries are not far behind the Saudi example. Kuwait has been rebuilding since the Gulf war, and banks have been trying hard to get back to business as usual and controlling costs. The Kuwaitis are dealing more with a new business environment than an outmoded banking system. Prior to the war, Kuwait did enjoy a modem banking system, much of which has survived.

A boom in consumer lending in the 1990s has marked developments in' Oman, giving; the banks the funds and the motivation to forge change. As banks seek to modernise they need a workforce able to run the new services on offer. Much attention is currently being paid to training Omani staff and depending less on expatriate workers, underpinned by a government policy calling for 90% of bank staff to be of local origin.

Banking in the United Arab Emirates has seen the banks tending to focus on mobilising deposits and short-term lending. However, they are now extending their provision of personal banking facilities, whilst declining interest rates allied to improved lending margins has led to a surge in banking profits and investment in the banking system. The central bank plans to have it national ATM switch connecting all the banks within the next year, although Bank Mashreq is currently canvassing for membership of its own proposed switch.

Islamic banks within the region have not been slow to adopt new technology either. Qatar International Islamic Bank (QIIB), which has taken just three years to join the ranks of the top 100 Middle Eastern banks, has invested heavily in technology, specifically to handle Islamic banking requirements, and has worked with Western software suppliers to adapt their systems to such needs.

Qatari banks have embraced electronic banking in order to offer new products and attract new customers. Last year the Commercial Bank of Qatar launched a debit card called Tejari Payment Card to allow electronic shopping, and also introduced Electronic Fund Transfer at Point of Sale (EFTPOS), which instantaneously processes customer payments charged to Visa, Diners Club, MasterCard or American Express. Telephone banking has also been launched by Doha Bank.

Outside of the Gulf states one can see the stark contrast, though privatisation of banks signifies a general trend in the Middle East towards innovation. Egypt, with over 100 banks, is in much need of both. Criticised for being over-banked, Egypt may have large bank networks, but this is not matched by much diversity of product offerings. Egyptian customers are starved of both product variety and electronic access, although the Arab Bank is thinking of introducing telephone banking.

Bankers were among the many expatriate worker groups to be repatriated to countries seen to be siding with Iraq in the Gulf war, and this curiously enough had a very positive effect. These bankers were able to take back sophisticated techniques to their new positions in more conservative states, much to the benefit of the indigenous banks.

Jordanian banks are among those who have done well out of the repatriation from the Gulf. Well-established banks now have access to trained staff, and new banking licences are being issued, creating banks that are more innovative in their methods and better able to respond to new ideas.

What the revolution in electronic banking offers is a cheap and diverse means for retail customers and small investors to access their funds and create savings. Products and services are increasingly made available to retail customers that were previously the sole (and very expensive) preserve of big corporations and wealthy families.

By following in the wake of the electronic banking revolution in North America and Europe the Middle East banks have a tremendous opportunity to learn from the mistakes made by others, and there were many expensive errors made. Western banks were far too eager to offer products that were either not wanted or not needed, a good instance being home banking, which despite numerous attempts has never been popular. If Middle Eastern banks can avoid those mistakes, while maintaining a good momentum, they will be successful.