· Brand Finance launches banking market research on UAE bank brands
· Emirates NBD deemed trustworthy by 81.8% of its customers, claiming top spot in the ranking
· 27.5% of customers of UAE bank brands declared they were ready to try banking with the competition, revealing plasticity of the market
Brand Finance conducted research on bank brands in 22 markets to see how customers’ opinions have changed in an era of major disruption to the industry. As global banks retreated after the Great Recession, the traditional banking model has changed. The prevailing trends suggest FinTechs and niche “challenger banks” are biting into banks’ profits and luring their customers away with better quality service at lower prices. Traditional banks tend not to be set up as quick innovators. Instead, they compete for customers’ trust and our research indicates which banks are the most trustworthy.
The study has revealed Emirates NBD as the most successful UAE bank brand in terms of building trust and loyalty among customers. Emirates NBD recorded the highest trust levels in the country, with 81.8% of its customers and 74.6% of the general population declaring their trust in the brand. The brand also had the most loyal customers with 36.0% stating they were unlikely to switch to competition. At the same time, it was the most popular bank among those customers of other banks who were looking to leave their current wealth managers, with 15.4% of respondents choosing Emirates NBD over other brands.
On the opposite end of the ranking, 31.4% of First Gulf Bank’s customers stated they were very likely to leave their bank, a higher proportion than for any other bank brand in the country. The data was gathered after the merger with the National Bank of Abu Dhabi was announced but before it was completed in December 2016, demonstrating the impact that M&As and associated risk may have on perceptions of a brand and therefore on customer loyalty. The next issue of the study will reveal how the First Abu Dhabi Bank, created after the merger, fares relative to its predecessor brands and whether the clarity of the situation has had a positive impact on customer loyalty.
In general, the UAE banking market is more flexible when it comes to customer preferences than some of the long-established banking markets, especially the United States or Britain. Growth market customers are generally more likely to switch between bank brands, in the UAE on average 27.5% customers declared they were ready to try banking with the competition. This is also the case for instance in India, where on average 34.5% of customers stated that they were likely to switch.
Andrew Campbell, Managing Director, Brand Finance Middle East, commented: “Customer-friendly digital banking used to be an extra service that could help bank brands get ahead of their competitors in the race for attracting new customers among millennials. These days, this is a given. The banks that are slow to adopt new technologies risk losing their customers’ trust and pushing them to switch to more technology-savvy competitors. However, the vast majority of bank brands in the UAE have understood this phenomenon and keep up do date with new technology."
Note to Editors
Brand Finance researched 19,000 people in 22 markets. We asked the respondents to state which bank they were a customer of and whether they were likely to switch to a competing bank brand by selecting Might/Very Likely or Might Not/Very Unlikely. Bank brands with the highest proportion of customers “very likely” to switch are those with the least loyal customers. Whereas, others can boast a loyal customer base if the respondents were, in majority, “very unlikely” to switch.
We asked the respondents separately to state if they considered particular bank brands to be trustworthy. The samples were randomly selected and consisted on average of over 850 respondents, representative of each market. The data was gathered with the help of online questionnaires and completed in November 2016, ahead of the release of the Brand Finance Banking 500 in February 2017.
Brand Finance is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance, Brand Finance evaluates the strength of brands and quantifies their financial value to help organisations of all kinds make strategic decisions.
Headquartered in London, Brand Finance has offices in over 20 countries, offering services on all continents. Every year, Brand Finance conducts more than 5,000 brand valuations, supported by original market research, and publishes nearly 100 reports which rank brands across all sectors and countries.
Brand Finance is a regulated accountancy firm, leading the standardisation of the brand valuation industry. Brand Finance was the first to be certified by independent auditors as compliant with both ISO 10668 and ISO 20671, and has received the official endorsement of the Marketing Accountability Standards Board (MASB) in the United States.
Brand is defined as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services, or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.
Brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors. Brand Finance evaluates brand strength in a process compliant with ISO 20671, looking at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance. The data used is derived from Brand Finance’s proprietary market research programme and from publicly available sources.
Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding Brand Rating up to AAA+ in a format similar to a credit rating.
Brand Finance calculates the values of brands in its rankings using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.
The steps in this process are as follows:
1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity, and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.
2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, while in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.
3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.
4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.
5 Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.
6 Apply the royalty rate to the forecast revenues to derive brand revenues.
7 Discount post-tax brand revenues to a net present value which equals the brand value.
Brand Finance has produced this study with an independent and unbiased analysis. The values derived and opinions presented in this study are based on publicly available information and certain assumptions that Brand Finance used where such data was deficient or unclear. Brand Finance accepts no responsibility and will not be liable in the event that the publicly available information relied upon is subsequently found to be inaccurate. The opinions and financial analysis expressed in the study are not to be construed as providing investment or business advice. Brand Finance does not intend the study to be relied upon for any reason and excludes all liability to any body, government, or organisation.
The data presented in this study form part of Brand Finance's proprietary database, are provided for the benefit of the media, and are not to be used in part or in full for any commercial or technical purpose without written permission from Brand Finance.