The US Federal Reserve’s move to maintain interest rates higher for an extended period presents a challenging scenario for loan holders in the retail banking sector, both in the UAE and globally. The prolonged interest rate environment could lead to increased borrowing costs for consumers, potentially affecting their ability to repay loans, a senior official said.
However, amidst these challenges, there emerges an opportunity for customers seeking attractive returns on their deposits and investments. “Banks, including Mashreq, can offer competitive interest rates on savings accounts, fixed deposits, and investment products, providing customers with alternatives to traditional borrowing. This creates a favorable environment for individuals to grow their wealth and secure their financial futures,” Fernando Morillo, group head of retail banking, Mashreq, told Khaleej Times in an interview.
As interest rates eventually normalise, loan holders stand to benefit, as borrowing costs may decrease, making debt management more feasible. “This normalisation will also open up avenues for investments in various asset classes,” Morillo said.
Mashreq, known for its prudent risk management practices and boasting one of the lowest NPL ratios in the industry, is well positioned to navigate the changing interest rate environment, Morillo stressed. “This positions the bank to capitalise on emerging investment opportunities and continue to provide to its customers in the evolving retail banking landscape,” he added.
The digital payments landscape in the UAE is undergoing significant transformation, with a notable decline in cash usage, Morillo said.
Data shows that digital wallets have become mainstream, especially during the Covid era, jumping from 0.5 per cent to 10 per cent of payment volumes and continuing to grow at a robust 30 per cent to 40 per cent annually. Mobile wallets are also rapidly rising in popularity as part of nationwide initiatives to replace physical cash, with the UAE ambitious goal to becoming fully cashless by 2030. “This trend is expected to continue and consolidate in the coming future, particularly with the adoption of centralized digital currencies, further integrating mobile and digital wallets into everyday financial transactions,” Morillo said.
While cryptocurrencies are gaining traction to trade, cash management and capital markets, retail applications remain limited. “However, there is promising potential in areas like atomic payment for in-game transactions and emerging platforms that could support these innovations,” Morillo said.
Open banking and real-time payments are poised to create new business models, particularly empowering small sellers. This technology is becoming increasingly accessible to everyone, Morillo said. “By enabling instant access to funds and detailed financial insights, small sellers can improve cash flow, make more informed decisions, and offer enhanced customer experiences. These advancements also foster greater financial inclusion, allowing even the smallest businesses to thrive in a competitive marketplace,” he added.
Mashreq remains committed to sustainability goals, Morillo said. “Pioneering in the region, Mashreq was the first bank to implement a carbon footprint calculator. A pivotal aspect of our approach is the introduction of climate conscious banking initiative, empowering clients to monitor and control their carbon footprint through their consumer spending. By providing tools and insights, we enable customers to make more environmentally conscious financial decisions while using their credit cards, aligning with our commitment to sustainability and environmental stewardship,” he added.
Additionally, the bank has taken a significant step towards sustainability by issuing credit cards made from 100 per cent recycled plastic for all our plastic card products. This initiative not only reduces plastic waste but also sets a new standard for eco-friendly banking practices in the UAE.
In terms of promoting financial inclusion, Mashreq leverages digital banking solutions to offer accessible and convenient services to a broader customer base. “Our commitment to financial inclusion ensures that all individuals, regardless of their background or circumstances, have access to essential banking services through our credit card offerings,” Morillo said.
A customer centric approach is key to driving sustainable practices. “Mashreq’s launch of Climb2Change, the bank’s global ESG initiative to accelerate its social and environmental impact, underscores our commitment to a customer centric approach. By tapping into our customers’ enthusiasm for sustainability, we can develop innovative products and services that meet their needs while advancing broader environmental goals,” Morillo said.
A standout initiative by Mashreq is the Nature Saver account, which enables clients to actively contribute to the preservation of the UAE’s biodiversity through the bank’s partnership with Emirates Nature-WWF. “This initiative not only supports critical conservation efforts but also engages customers in meaningful environmental action,” Morillo said. The bank also provides Neo Next digital banking platform for children aged eight to 18, which educates the next generation on financial management and responsible banking. This program fosters financial literacy and instills values of sustainability from a young age, he added.