From Open Banking to AI-Driven Operations – The Future of Financial Services in the Gulf
The GCC banking sector is experiencing a technological revolution that is fundamentally reshaping how financial services are delivered, consumed, and regulated. As 2025 unfolds, four transformative trends – open banking, artificial intelligence, embedded finance, and cashless payments – are converging to create unprecedented opportunities and challenges for Gulf banks.
The Cashless Transition Accelerates
The shift away from physical cash is happening faster in the GCC than almost anywhere globally. In the UAE, only one in six purchases are made in cash, while in Saudi Arabia, fewer than one in three transactions involve physical currency. These numbers continue to decline rapidly.
Dubai’s cashless strategy, launched in October 2024, aims for more than 90% of all transactions to be cashless by 2026. This transition is being driven by government initiatives, consumer preferences, and the proliferation of digital payment options from traditional banks, fintechs, and technology platforms.
Open Banking: Competition and Collaboration
2025 marks the implementation of open banking frameworks across GCC markets, following models established in the UK and Europe. The UAE, Saudi Arabia, and Bahrain have published open finance regulations, with the eight major UAE banks implementing open finance systems in 2025.
What Open Banking Means
Open banking enables data sharing between banks and third-party service providers, particularly fintechs, that can pitch products to customers. This creates a more competitive environment but also offers significant advantages for consumers: easier everyday banking, more accessible financial services, and better value for money.
The Competitive Dynamic
Will open banking threaten the dominance of larger GCC banks? The answer is nuanced. While fintechs gain access to customer data and can offer specialized services, established banks possess advantages in scale, trust, regulatory expertise, and capital. The most successful institutions will be those that embrace collaboration with fintechs rather than viewing them purely as competitors.
Deutsche Bank’s “Global Hausbank” strategy exemplifies this approach, supporting clients’ regional ambitions through partnerships and integrated solutions. As one banking executive noted, “The cooperation reflects the two key trends that will shape economic growth in Saudi Arabia and other countries of the GCC: infrastructure investment and digital transformation.”
Embedded Finance: Banking Everywhere
The embedded finance market, valued at $116 billion globally in 2024 and growing at 17% annually, is reshaping how consumers access financial services. In the GCC, super-apps like Careem and Botim in the UAE, and the Saudi government’s Tawakkalna tool, exemplify this trend.
Embedded finance integrates financial services – payments, lending, insurance – directly into non-financial platforms where consumers are already spending time. This means banking capabilities become invisible infrastructure rather than destination services, fundamentally changing customer relationships and value propositions.
For traditional banks, embedded finance presents both opportunity and threat. Banks can serve as infrastructure providers, offering banking-as-a-service (BaaS) capabilities to digital platforms. However, they risk becoming commoditized if they fail to maintain direct customer relationships and differentiation.
Artificial Intelligence: From Hype to Reality
2025 is the year when artificial intelligence becomes operationally real for GCC banks, moving beyond pilot projects to production deployments. According to regional research, nearly 60% of Middle Eastern firms report fast AI adoption, though only 14-28% have scaled AI across business functions.
High-Impact Use Cases
Customer Service: AI-powered call centers and chatbots handle routine inquiries, enabling human agents to focus on complex issues
Credit Decisions: Machine learning models analyze alternative data sources for instant credit decisions, particularly for consumer products
Fraud Detection: AI systems identify fraudulent patterns in real-time, reducing losses and improving customer trust
Back-Office Automation: Digital labor solutions process documents, reconcile accounts, and perform routine tasks with greater speed and accuracy
Software Development: AI assists in bug-fixing and IT development, accelerating digital transformation initiatives
Impact on Workforce
One significant consequence: recruiting will slow down in GCC banks as AI handles tasks previously requiring human labor. However, demand for AI specialists, data scientists, and professionals who can work alongside AI systems will increase. Banks must invest in reskilling programs to prepare their workforce for this transition.
Managing AI Risks
Over 60% of GCC firms cite cybersecurity threats as their top AI-related concern, while more than 50% identify compliance challenges. Banks must implement robust AI governance frameworks addressing model risk, data privacy, algorithmic bias, and explainability requirements. Regulators are paying particular attention to AI applications in credit scoring and fraud detection to ensure equitable and explainable outcomes.
Treasury Software and Banking Technology Evolution
The digital transformation of GCC banking is driving significant demand for advanced treasury management and banking software. The global corporate treasury management software market, estimated at $15 billion in 2025, is projected to reach $40 billion by 2033, growing at a 12% CAGR.
Key Market Drivers
- Increasing regulatory compliance needs across jurisdictions
- Enhanced risk management requirements in volatile markets
- Rising adoption of cloud-based, scalable solutions
- Demand for advanced analytics and AI-driven forecasting
- Integration requirements with ERP systems and banking platforms
Regional Adoption Patterns
Middle East and Africa markets, including the GCC, are experiencing particularly strong growth driven by:
- Government digitization initiatives supporting Vision 2030 programs
- Infrastructure investment in fintech and banking technology
- Growing sophistication of corporate treasury functions
- Regulatory modernization requiring enhanced reporting capabilities
GCC Banking & Financial Services Innovation Day 2024 highlighted how regional technology leaders are prioritizing digital transformation, cybersecurity, risk management, and sustainable finance initiatives. The focus has shifted from whether to digitize to how to digitize effectively and securely.
Infrastructure Investment: The Foundation Layer
Supporting these digital transformations is massive infrastructure investment. Saudi Arabia’s NEOM project, including plans for a US$5 billion net-zero AI data center in partnership with DataVolt, exemplifies the scale of technology infrastructure being developed.
The UAE has established itself as a hub for blockchain and cryptocurrency innovation, receiving over US$30 billion in crypto transactions and launching its first AED-backed stablecoin in December 2024. These developments create new opportunities for treasury operations and cross-border settlements using digital assets.
The Imperative: Transform or Fall Behind
As one industry expert summarized: “2025 will be an exciting year. The industry is facing fundamental restructuring brought on by open banking, AI, embedded finance and neobanks.” For GCC banks, the imperative is clear – embrace these transformative technologies or risk being left behind.
Success requires:
- Strategic investments in digital infrastructure and capabilities
- Partnerships with fintechs and technology providers
- Commitment to continuous innovation and experimentation
- Balanced approach to managing transformation risks
- Focus on customer-centric design in all digital initiatives
The banks that navigate this transformation successfully will emerge as leaders in the region’s evolving financial landscape. Those that hesitate may find their competitive positions eroded as nimbler competitors and new entrants capture market share and customer relationships.
Want to know more?
Visit our MORS Solution page, Book a MORS Demo or contact our Sales & Project Management, GCC Countries Elliott Cherneski
References:
- AGBI. GCC banking trends for 2025: the rise of AI and the fall of cash. Arab Gulf Business Intelligence, September 25, 2025.
- Deutsche Bank. GCC: four trends corporate treasurers should be aware of. https://flow.db.com/cash-management/gcc-four-trends-corporate-treasurers-should-be-aware-of
- Data Insights Market. Treasury Software Market Expansion Strategies. https://www.datainsightsmarket.com/reports/treasury-software-541064
- Cognitive Market Research. Corporate Treasury Management Software Market Report 2024. April 24, 2024.
- Euromoney. Transaction banking: 2024 wrap-up, 2025 warm-up. May 7, 2025.
- GEC Media Group. GCC Banking & Financial Services Innovation Day 2024.