RIYADH: Banking revenue growth in Saudi Arabia is set to outstrip others in the region as increased spending in the environmental transformation fuels profits, according to the Boston Consulting Group. Analysis by the US-based firm forecasts the Kingdom’s retail banking revenues to grow at a Compound Annual Growth Rate of 11.4 percent between 2021 to 2026 — a rise from 8.7 percent from 2016 to 2021. This is higher than the Gulf Cooperation Council countries — the UAE, Saudi Arabia, Kuwait, Bahrain, and Qatar — as a whole, which are forecast to see an 8.8 percent CAGR within the same period to 2026. Recovery in oil prices combined with increased interest rates are key contributors to a post-pandemic revival, boosting economic growth and consumer spending, according to BCG, which also said increased spending on environmental, social, and governance and sustainability is the next frontier for competitive advantage in the sector. “Saudi Arabia has deployed hugely ambitious projects under Vision 2030. Acting as facilitators, instigators and key actors of change for the nation will be retail banks,” said Martin Blechta, principal at BCG. “ESG in banking is very much a credit portfolio review and there is a significant first mover’s advantage – whereby, banks that start this activity ahead of competitors have more choice to prioritize the right clients. “As they consider a redirected future, retail banks must adapt to changing consumer preferences and utilize digital tools and technology to craft solutions that will fulfill customers’ needs in new and sustainable ways while advancing the overall ESG agenda.” The report reveals that one-quarter of retail banks surveyed globally report that ESG is a primary focus area for their digital transformation, and another 38 percent saying it is a key criterion in selecting and prioritizing digital transformation initiatives. In addition to ESG, through the five years from 2021 to 2026, payments, mortgages, and deposit products are likely to drive banking revenue growth in the GCC retail banking sector. An accelerated pace of digital payments and e-commerce adoption in the wake of COVID-19 will further benefit payment revenue growth. Bhavya Kumar, managing director and partner at BCG, said: “In today’s evolving marketplace, engaging with customers and other stakeholders on ESG issues is a matter of rising urgency. ESG assessments must now be expanded to include the changing needs and preferences of stakeholders. “As of now, banks are in the best position to execute that outreach through the promotion of sustainable customer behaviors, resulting in greater contributions towards the Kingdom’s Vision 2030.” He added: “Through ESG-related products, banks can shape the sector and the country’s leap forward.”