retail banking groupThe Retail Banking Group (RBG) of alrajhi bank retained its top position as the largest retail lender in the Kingdom in 2024, with 41.2% market share during the reporting period.
While the operating environment remained largely favorable, the reporting period presented a number of challenges to the retail business; RBG faced growing competition from domestic and regional FinTech players, as well as Big Tech companies entering the financial services domain, in addition to new banks entering KSA. Following our far-sighted transition to digital-core banking systems supported by bank-wide automation, digitalization, and unprecedented infrastructure and technology upgrades during the previous strategy cycle, alrajhi bank remains well-positioned to adapt to evolving market demands and meet the growing expectations of retail customers.
Now, with the launch of alrajhi bank’s new ‘Harmonize the group’ strategy at the onset of 2024, RBG extended its role from core banking vertical to become the foundation of the first of four key pillars of the new strategy - Business-to-Consumer (B2C) offerings. RBG plays the key role of leveraging synergistic connections within the bank and across our subsidiaries to bring together seamlessly integrated banking and financial solutions to meet the varying needs of retail customers. During this new strategy cycle from 2024 – 2026, RBG will focus on several strategic imperatives to sustain and grow our strong retail franchise; to ‘Enter New Customer Segments’, to ‘Develop Customer-focused Value Propositions’, and to ‘Leverage the Customer Base via Cross-Sell’.
We conducted quantitative analyses to understand existing retail market share, and identified key customer segments to further penetrate or grow our presence in, based on projected economic and social indicators of the Kingdom powered by Vision 2030 objectives. This needs-based segmented approach allowed RBG to develop unique customer value propositions to cover the fundamental financial needs of each retail customer segment; to transact, to access credit, to manage risks, and to create wealth.
The needs-based segmented approach proved successful during the reporting period, with RBG recording growth across all key target customer segments. Overall, the bank recorded a 2 Mn. YoY growth in new customer acquisition against the FY2023 baseline, reaching a total of 18.0 million customers at the close of the year. Significant growth was recorded in the Expat segment with an increase of +1. 3M new customers, with the surge in acquisitions driven by targeted National Day Expat Promotions. The youth segment also showed notable growth, with an increase of +200k young retail customers, with the growth resulting from the successful launch of targeted products such as Student Credit Cards and Gamers Prepaid Cards.
From building this primary banking relationship with our retail customers, RBG now aims to leverage the bank’s unmatched digital and data capabilities to create seamless, connected journeys and personalised experiences within the alrajhi group ecosystem, thereby leveraging the existing customer base via cross-sell. Such focused efforts to bundle products for customers to meet their varying needs saw more than 42.4% retail customers with 2 or more products from the alrajhi ecosystem at the close of the reporting period.
Against a challenging backdrop of intense competition, RBG demonstrated a strong performance across key metrics against the new baseline year of 2023. This included a noteworthy 26% YoY increase in the overall Expat segment at the close of 2024.
In 2024, we sustained our position as the market leader in retail financing in the Kingdom during the year in review; our leading position in personal finance was maintained by holding 41.6% of the market share. We retained a robust presence in the auto leasing sector, holding a significant 40.3% share of the market, and maintained a steady 41.1% share of the mortgage market at the close of the year.
Challenges to the retail business stemmed from margin compression, resulting from increased Saudi Arabian Interbank Offered Rate (SAIBOR) borrowing rates, which impacted the bank’s asset demand and liabilities position. To mitigate the impact, the bank launched higher yielding products to increase yield income by 13% YoY, and increased consumer finance rates during the year, resulting in a significant 27% increase in fee income YoY. The increased need for external funding to support the bank’s asset growth during the year was also a challenge, and swiftly addressed by diversifying the bank’s funding sources and accessing debt capital markets.
With a diverse retail product portfolio that covers all consumer financial needs, from banking accounts and cards to retail finance and insurance, RBG is now focused on curating customer experiences by connecting a wide array of products and services as distinctive client propositions, to meet segmented customer needs.
RBG introduced several new and innovative retail products during the year in review; key among them is SWAR – a payment bracelet for children introduced as a secure way to carry out their daily transactions with parental control, EIRAD+ real estate financing product, and the Overdraft Murabaha and Automated Margin Lending products from alrajhi Capital.
With the issuance, management, and processing of credit, debit, and prepaid cards now fully under the bank’s advanced card management system – Cortex, RBG continued to introduce a diverse array of card products to retail customers during the reporting period, including the newly launched and widely purchased Student Credit Card and Gamer Prepaid Card for youth customers.
We recorded a noteworthy YoY increase in card spend by +17% at the close of 2024. This continued growth is indicative of the success of the segmented approach, as well as the resulting penetration into targeted market segments. It is also reflective of how we leverage actionable data insights on customer spending behavior to introduce card offerings that meet evolving customer needs.
A number of innovative liabilities products were introduced during the preceding financial year, including the Million Saving Account, the Awaeed Investment Account, the Future Savings Account and the Hassad Savings Account, all contributing towards increasing customer deposits during the reporting period. RBG recorded a strong 65% YoY growth in Savings Accounts at the close of 2024, with a 10% increase in total liabilities.
We maintained leadership in the mortgage market with our extensive mortgage portfolio as the Kingdom’s housing market matured, offering more personalised solutions for evolving mortgage needs.
Retail customers could also choose from a range of Shariah-compliant Takaful insurance products, as part of RBG’s expanding B2C offering:
A range of plans for outbound, inbound and student travel, with coverage against travel inconveniences, personal accidents and medical emergencies.
Investment plans for savings to achieve long-term goals and financial stability, with the flexibility of payment and contract terms at any time.
Comprehensive covers to provide financial stability for family members, as well as other health covers including protection for domestic helpers.
Comprehensive home coverage from unforeseen risks and associated financial costs, covering three categories: building, contents, and personal accidents.
A range of vehicle insurance cover from comprehensive to third- party liability coverage, supported by online claims portal for optimal turnaround times.
As a result of our unique customer proposition of bundled offerings, the Insurance product sales growth increased a remarkable 306% YoY, greatly strengthening our B2C offering.
The bank’s total outstanding residential real estate finance portfolio as of 31 December 2024 stood at SAR 266 Bn. We have prudently developed adequate policies and procedures to ensure appropriate insurance coverage is in place to hedge against potential financial losses associated with residential real estate portfolio. However, risk elements which are not part of the insurance coverage continue to be dealt according to the bank’s internal risk management framework.
Types of insurance covers that the bank could utilise to hedge various risks associated with its residential real estate finance portfolio, are listed below:
1
Life Insurance: provides financial protection in the event of death resulting from natural or accidental events, or a specified cause as per the insurance policy in order to recover the outstanding finance amount from the insurance company.
2
Disability Insurance: provides financial protection to recover the outstanding financing amount in the event that the policyholder becomes fully and permanently disabled and is unable to work or engage in an income earning activity.
1
Property Insurance: provides coverage for physical damage or loss to the property caused by events such as fire, flood, or natural disasters etc. This is aimed to mitigate the financial impact of property damage, allowing the bank to recover the costs due to unexpected/unforeseen events.
The customer-centric approach has empowered alrajhi bank to effectively harness group synergies, and optimise the customer lifetime value across multiple business verticals. With our entire suite of retail products and services made accessible via the internet and mobile channels, we empower existing and potential customers with increased accessibility to financial services, purposefully contributing to the realisation of Vision 2030 objectives.
During the course of the year, over 400 digitalisation initiatives were carried out across retail banking products and services, from enhancements and upgrades to existing products, to the launch of entirely new customer journeys, greatly improving customer experience, convenience, alongside operational efficiencies. (Refer Digital Transformation section on pages 186-190 for more details)
With all physical branch transactions now fully automated, we focused on rationalising the alrajhi branch network, with the relocation and merging of low performing branches to increase efficiencies, reduce costs, and eliminate idle capacities. This was complemented by the ‘Branchless Banking’ initiative carried out by the bank to enable more physical branch services via digital channels. The physical channel to digital channel ratio for account opening was at 1:20 at the close of the reporting period, reflecting the receptiveness of digital transformation by our customers.
Our efforts have resulted in notable improvements in customer satisfaction and retention rates, as indicated by an improved Retail Net Promoter Score (NPS) of 84 in 2024, an increase from 81 YoY. The continuous upward trajectory of the NPS emphasises the positive impact of our new initiatives on the overall customer experience, affirming the effectiveness of the bank’s new strategy in maintaining and enhancing customer loyalty.
RBG’s commitment to continuously deliver innovative, customer-centric, hyper-personalised solutions to meet evolving segment needs were recognised and celebrated in 2024:
Customer primacy remains top priority for RBG as we continue to execute the ‘harmonize the group’ strategy over the next two years. RBG will continue to strengthen alrajhi bank’s B2C offering by leveraging the bank’s collective capacities and business offerings, seeking to improve its customer value proposition through the orchestration of data, insights and technology.
