Generative AI is poised to unlock up to 340 billion dollars in annual value for global banks, translating to roughly 3 to 5 percent of industry revenues, according to analysts. However, this potential upside comes with competitive risks, as AI agents empower customers to optimize deposits, switch products swiftly, and demand more tailored pricing. Jamie Dimon, CEO of J.P. Morgan, warns that there will be “no job, no function, nothing that won’t be affected” by AI. He urges banks to leverage the technology to “do a better job” or face being left behind. For banks in the Gulf Cooperation Council (GCC), with relatively modern technology stacks and supportive shareholders, the integration of AI presents a unique opportunity to leap ahead of slower Western incumbents by embedding AI across credit, compliance, and customer engagement, rather than merely piloting chatbots.
In tandem with AI, embedded finance is transforming the landscape of financial services. Customers are increasingly able to receive instant credit at checkout on e-commerce platforms, ride-hailing apps, or B2B software dashboards, rather than visiting a bank. Global estimates suggest that embedded finance could generate hundreds of billions of dollars yearly by 2030 as payments, lending, insurance, and investments become integrated into non-financial customer journeys. This evolution is not merely a tale of fintechs usurping banks; instead, a new “coopetition” model is emerging. In this framework, regulated balance-sheet institutions provide licenses, risk management, and compliance capabilities, while fintechs and large digital platforms manage customer interfaces and data-rich engagement layers. The future of banking is increasingly utility-like: consistently available, often invisible, evaluated on reliability and intelligence rather than traditional branch networks.
Payments, traditionally a steady revenue stream for banks, are undergoing significant changes. Over 100 countries now operate real-time payment systems, with instant transactions projected to constitute roughly 27 percent of all electronic payments. Enhanced options for account-to-account transfers and digital wallets are gaining traction, offering faster and more secure alternatives to cash and cards. In the GCC, payments innovation is central to national digital agendas. Countries such as Saudi Arabia and the UAE are implementing instant payment infrastructure, interoperable wallets, and pilots for central bank digital currency (CBDC) corridors aimed at diminishing trade and remittance friction. Local banks face the dual challenge of defending fee income amid price compression while investing in richer, data-driven services for consumers and merchants.
The landscape for digital assets is similarly evolving, moving from speculative endeavors to integral infrastructure. Stablecoins—reserve-backed digital tokens typically pegged to the US dollar—now process annual on-chain transfer volumes in the tens of trillions, surpassing some of the largest card networks and expanding over 80 percent year-on-year. Tokenization is transforming previously illiquid assets into digitally native, fractional claims that facilitate easier issuance, trading, and settlement. In the GCC, real estate has emerged as a leading use case, with Dubai preparing multi-billion-dollar development pipelines for tokenization. Pilot frameworks from the Dubai Land Department and the virtual asset regulator envisage tokenized properties potentially representing a mid-single-digit percentage of city-wide transaction values within the next decade.
As these innovations accelerate, regulators and societies are increasingly scrutinizing issues of safety, fairness, and resilience. Regulatory bodies from Europe to the GCC are tightening expectations regarding AI explainability, cloud concentration, cybersecurity, and financial crime controls while simultaneously encouraging experimentation through sandboxes and open banking regimes. A report from McKinsey cautions that while AI could boost productivity, it may also erode traditional profit pools by enhancing price transparency and diminishing customer inertia, potentially impacting bank profits by billions if incumbents fail to adapt. Experts suggest that classic “Know Your Customer” regulations will evolve to include “Know Your Machine” and “Know Your Agent,” holding banks accountable for their AI systems’ behaviors alongside those of their employees.
Sustainability and inclusion are also shifting from peripheral issues to core strategic imperatives within Middle Eastern financial systems. The region stands to gain billions of dollars as economies pivot towards low-carbon growth, infrastructure investments, and diversification beyond hydrocarbons. Green bonds, transition-finance structures, and ESG-linked lending are generating interest, while consumer applications are beginning to integrate carbon-footprint visualizations and sustainable spending nudges into daily financial experiences. Additionally, digital wallets, instant payments, and SME-focused fintechs are broadening access to formal financial services for younger and underbanked populations, a crucial priority in the demographically youthful GCC nations.
In light of these developments, the forthcoming year for Gulf banks and policymakers will hinge on strategic repositioning rather than incremental digitization. Institutions that adopt AI-native operating models, integrate into embedded finance ecosystems, invest in modern payment infrastructures, and prioritize trust, security, and sustainability will be instrumental in shaping the region’s financial landscape over the next decade. Conversely, those that hesitate may find themselves marginalized in an era of intelligent, invisible banking where size alone no longer guarantees relevance.
See also
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