Interview: Bernd van Linder

Lending to small and medium-sized enterprises (SMEs) remains limited. What more can be done to support these companies?

BERND VAN LINDER: While lending is important, it is also about providing full banking services to SMEs, including support for trade, risk management transactions and cash management solutions. Moreover, non-financial services are important to help SMEs grow and develop. These services include providing templates to help SMEs plan, manage and develop their business, providing market insights, and information related to exports, for example. Offering full banking services and non-financial services, the support provided by the government, banks and large corporates, and the successful Kafalah guarantee scheme will all combine to ensure the further growth of the SME sector.

Are any steps being taken to ensure that both mobile and internet banking are secure?

VAN LINDER: The increased importance of mobile banking and internet banking has put security at the forefront. Banks are aware of the importance of having the right defensive measures in place against cyber threats to ensure consumer confidence is maintained.

One of the sector’s strengths is its conservative regulations, but are there areas in which they can be eased for the benefit of banks and their clients?

VAN LINDER: The main regulators in Saudi Arabia comply with best practices and international standards. For banks, these comprise the standards set by the Basel Committee on Banking Supervision (BCBS) and other international bodies. Although not all regulations may equally apply to the Saudi banks, which in essence are well-managed, conservative, commercial banks, on the whole the regulations have contributed to the soundness and stability of the Saudi banking system. Banks are encouraged by the regulator to be active participants in the consultation process that surrounds new regulatory developments. The BCBS’ recently published consultation on revisions to the standardised approach to credit risk are a good example of how the banks and the regulator have the opportunity to seek to ensure future regulation reflects local circumstances, and provides an appropriate regime reflecting the risk profile of corporate, retail and SME borrowers.

How are banks working with the government and private sector retailers to encourage a shift away from Saudi Arabia’s cash culture?

VAN LINDER: The Saudi Arabian Monetary Agency (SAMA) and the banks have made substantial investments in upgrading and expanding infrastructure for non-cash payments, such as point-of-sale machines in retailers. This will help reduce the amount of cash in circulation. In 2013 the government introduced the Wage Protection System. A beneficial side effect is that wages can no longer be paid in cash but have to be paid through a bank. Although employees will at some stage still require cash, there will be an impact on reducing cash in the society. Cash is risky for all stakeholders, so there is a shared agenda between SAMA, the banks, retailers and other companies to continue to push for a further reduction of cash in the economy.

From the customer’s point of view, do you think that the importance of branches is diminishing?

VAN LINDER: Physical branches continue to play an important role, primarily at the time of customer acquisition. By many measures, the Kingdom is still under-branched compared to other countries, particularly in the more remote areas. We expect the number of bank branches to continue to grow. The key will be to have these branches integrate seamlessly with other channels. Customers should expect to be able to initiate a transaction at one channel and finish it at another, without having to restart or duplicate activities.

Branches will continue to play an important role in future, but as part of the overall customer experience rather than as the main point of customer interaction.