To realise the kind of challenge facing Arab banks, look at what is happening in the US financial market because where it leads, the rest of the world is likely to follow, especially in finance and technology. The US banks now have only 28 per cent of the domestic financial services market, one third of what they had 25 years ago. The percentage in the Arab World is still high at 95 per cent. Around 40 per cent of banks' revenues in the United States come from fees, i.e. from selling services rather than extending loans or financing projects. These include commissions from trading currencies and securities, issuing credit cards, managing mutual funds and providing custody and investment banking services among others.
Arab banks continue to derive most of their revenue from taking deposits and extending credit.
There has been a large drop in branch utilisation in the United States from 70 per cent of total banking services in the 1980s to 40 per cent today. In the meantime, ATMs have seen their share rising to 30 per cent, telephone banking to 28 per cent and Internet banking to two per cent. Customers prefer the conveniences of 'direct delivery channels' instead of going to the branch. In the Arab region, on average, more than 90 per cent of customers use branches. The banking ratio in Arab countries measured by the number of residents per branch averaged 8,800 last year compared to 4,000 in the developed countries.