Gabriel G. Tabarani
For more than a century, banks competed on capital, branch networks and balance sheet strength. In the decade ahead, they may find themselves competing on something entirely different: data, intelligence and the ability to influence decisions made by algorithms on behalf of customers.
That shift is already underway.
As artificial intelligence evolves from a productivity tool into an autonomous decision-making platform, it is beginning to challenge one of the banking industry’s most valuable assets: its direct relationship with customers. The institutions that understand this transformation early will emerge stronger. Those that treat AI as merely another technology upgrade risk discovering that the real disruption was never technological at all.
Much of today’s discussion about AI in banking focuses on efficiency. Executives talk about reducing costs, automating workflows and improving productivity. Those benefits are real. Yet they obscure a more profound reality. AI is not simply changing how banks operate; it is changing how customers make financial decisions.
The emergence of agentic AI — systems capable not only of analysing information but also acting on behalf of users — represents a turning point. Today, consumers may ask an AI assistant for advice on savings, investments or mortgages. Tomorrow, they may authorize those systems to compare products, move funds, negotiate financing terms or manage portfolios automatically.
When that happens, banking will no longer be defined primarily by who owns the customer account. It will increasingly be defined by who owns the customer interface.
That distinction matters.
For decades, banks built competitive advantage through physical presence and customer relationships. Then digital banking shifted competition toward mobile apps and online platforms. The next phase may be even more disruptive. Customers may interact less with banks directly and more with intelligent digital agents that constantly evaluate financial products on their behalf.
In such a world, loyalty becomes weaker, transparency increases and pricing power erodes.
The result is a paradox that many banking executives have yet to fully appreciate. AI may make banks more efficient while simultaneously making the banking industry less profitable.
As intelligent agents compare interest rates, fees and financial products in real time, competitive pressures are likely to intensify. Just as e-commerce transformed retail pricing and online marketplaces reshaped travel and insurance, AI could compress margins across financial services.
Much of the value generated by automation may ultimately be transferred back to consumers.
This is why the strategic question facing banks is not how much cost AI can remove, but how much value it can create before competitors do the same.
For Arab banks, this transformation presents both a challenge and a rare opportunity.
The Gulf states have spent the past several years investing heavily in digital infrastructure, artificial intelligence, cloud computing and data centres. Saudi Arabia, the UAE and Qatar have all positioned technology and AI at the centre of their long-term economic strategies. Their financial institutions operate within some of the most ambitious digital transformation programmes in the world.
This gives Gulf banks a potential advantage. They possess capital, scale and increasingly sophisticated digital ecosystems that could accelerate AI adoption.
Yet the opportunity extends well beyond the Gulf.
Banks in Jordan, Morocco, Egypt and even Lebanon — despite the severe challenges facing its financial sector — possess different but equally valuable assets. They benefit from deep pools of talent, strong technical expertise, growing digital adoption and decades of experience serving highly diverse customer bases. In an AI-driven economy, agility may prove just as important as size.
History suggests that technological revolutions rarely reward the largest players automatically. More often, they reward those capable of adapting fastest.
The winners of the AI era may therefore not be the banks with the largest balance sheets, but those that move first to redesign their business models around intelligence rather than infrastructure.
This is where many institutions risk misunderstanding the nature of the challenge.
Too often, AI remains confined to technology departments. It is treated as an innovation project rather than a strategic transformation. But the banks creating lasting value from AI are not simply deploying new software. They are redesigning workflows, rethinking customer engagement, retraining employees and reshaping decision-making processes across the organisation.
The question is no longer: “How do we implement AI?”
The more important question is: “What does banking look like when AI becomes the primary interface between customers and financial institutions?”
The answer points to an uncomfortable reality. Scale alone may no longer be enough. Data is becoming the defining competitive asset.
Large language models and AI tools are increasingly accessible to everyone. What cannot be replicated as easily is decades of customer history, behavioural insights and contextual knowledge. The institutions that succeed will be those capable of transforming proprietary data into personalised advice, predictive services and superior customer experiences.
In this sense, banking is entering a new competitive era.
For decades, financial institutions competed for deposits. In the years ahead, they may compete for something even more valuable: the trust of intelligent systems making decisions on behalf of their customers.
This transformation also carries implications beyond banking itself.
The global race for AI is becoming an economic and geopolitical competition. Countries are increasingly divided between those developing the technologies that shape the future and those merely consuming them. For the Arab world, the question is not whether AI will transform financial services. It is whether the region will help shape that transformation or simply import it.
That distinction will determine far more than the future of banking.
It will influence investment flows, productivity growth, economic diversification and the region’s position within the emerging digital economy.
Arab banks therefore face a strategic choice. They can view AI as a tool for reducing costs and protecting existing business models. Or they can view it as an opportunity to reinvent themselves and become leaders in a new financial landscape.
The institutions that choose the latter path will not simply gain market share. They will help define the architecture of the Arab digital economy.
In the past, a bank’s success was measured by the size of its assets and the reach of its branch network. In the future, it may be measured by something far less visible: the ability of its intelligent systems to understand customers before they make a decision and deliver the right solution at precisely the right moment.
When that day arrives, competition will no longer be fought primarily between banks. It will be fought between the AI systems that represent them.
This article was originally published in Arabic on the Asswak Al-Arab website
