Subroto Som, Executive Vice President, Head of Retail Banking Group.
Subroto Som, Executive Vice President, Head of Retail Banking Group, tells Bloomberg Businessweek Middle East about the latest trends in retail banking and how technology is helping transform the sector.
How is technology affecting the industry?
To me, the fundamental thing is technology and people. Retail is about people and technology, and it’s more pronounced now than it’s ever been. Today’s successful retail banks are technology companies. That’s the migration most banks are trying to do. They’re becoming a technology companies, and this means they are employing and working with very different kinds of people compared with the recent past, and they are looking at different ways of working.
At Mashreq, we have changed the way we work by adopting Agile which helps us as a company to solve problems by working together in cross-functional teams. This is something that a lot of leading technology companies do, and we are already seeing the benefits of adopting this approach.
Technology was often seen as a cost and a challenge for most banks in the past. This perception is changing though as banks come to realize that technology is helping them to improve and offer new services, reduce costs, gain market share and win new customers. This is certainly our experience at Mashreq. We have been innovators for the last 50 years in this country and innovation is the DNA of the company. Our CEO, Abdul Aziz Al Ghurair, spends a lot of time looking at technology. He has been experimenting with new technology, new processes and new ideas.
How has the retail division’s growth been in 2018?
Since 2016 things have been challenging across the retail market. That has been driven by a couple of global issues including slowdown of global trade and oil prices. Here in the UAE, the credit bureau brought in measures that allowed banks to see what kind of lending leveraged people have and this led to a drastic reduction in lending, so if anything, lending may be less now but it is also more sustainable. Retail banking is now growing at about 3-5% a year, compared to 10-12% a few years ago.
Our growth, particularly in the last 18 months, has been driven broadly by three things. One; new customers: you always get growth when you get new customers and that has been a big effort to get new customers in the retail space. The second thing is growth in the area of payments, E-commerce and FX – because most people who are in Dubai are from somewhere else regularly transfer money. Third area of growth has been in mortgages and personal loans.
Will you be making further investments in 2019 in online and mobile services?
This is an area that we have been investing in continuously. It needs a continuous investment and the bulk of the investment is in the continuous upgrade of platforms. The second area of investment is in adding new features to our mobile banking and online banking capabilities. The third area of technology investment is in our digital presence in terms of reaching customers with advertising about offers, services and so on.
Our level of investment in 2019 will be higher than in 2018, which was higher than 2017 so we are increasing our investments in this space. This is in line with changes in customer behavior that we’re seeing: They’re adopting these channels more and more, hence we are reshaping our branch network more towards a digital experience.
How many physical branches do you have now?
We have a network of have close to 50 branches. Almost 14 of them have been remodeled with a completely new approach. The whole look and feel of the branches is very different: When customers come in they can do a lot of activities on automated machines and they have specialized rooms for consultation with relationship managers or remote advisory specialists. This entails significant investment but, once implemented, will deliver cost savings from the traditional channels and infrastructure.
How is your purely online bank performing?
We launched our digital bank, which is called Neo, in October 2017. Our whole intention was to make Neo intuitive and user-friendly. You can open an account in four clicks. You don’t need to visit a branch and it meets all of your banking needs on a mobile, tablet or computer. It has multi-currency accounts, a checkbook, a debit card, a credit card. It has wealth management services for buying gold and currencies. It gives you access to trading on some 38 stock exchanges around the world It has seen good growth. Close to 40% of our new accounts are retail our now coming from that channel, and that I see as the area of growth. So we are adding more capabilities to Neo, we’re adding more functionality to Neo and it is going to become the real engine of growth.
Neo is not only aimed at Millennials; it’s designed for anybody who’s digitally savvy and is comfortable with banking on the go. Millennials are more likely to be bigger users of it but even people who are older, wiser or richer may want to use it, and we are seeing a good mix of people adopting the service.
I think to the millennials as well as to the changing pattern of human or the banking behavior what we are seeing is multiple like transactions that are embedded in their daily life. So, you buy a particular good, you want a loan, it’s instantly decided, they’re getting paid in six installments and it’s all done instantaneously. So embedding basic banking services along with customers own journey is the trend, and that is what we are doing. Millennials like that more than anybody else. So that’s what we focusing on.
How about fintech partnerships and investments in the retail banking space?
The retail space is where the fintechs have been focusing the most globally, starting with payments, then wealth management, credit underwriting, and then in KYC (know your customer), so there’s a lot of interest. We work with a lot of them. We make sure that we have technology platforms that are based on open source with open APIs (application programming interface) so that we can more easily integrate different technologies. We are currently working with at least five fintechs, based in London and Singapore, and that number is only going to increase. So we work with fintechs that are based here, fintechs that are from London, are from Singapore.
Have you invested in any fintechs yet?
We have not invested in any yet, although we’re aware other banks around the world are doing so. We could explore that in future but we have a pretty solid technology team in house, based in Bangalore, which builds a lot of our capabilities including interfaces with fintechs. We’re definitely open to fintechs and we have a dialogue with a fintech almost every week about what they can bring and how we can work with them.
Where are fintechs most active at the moment, in terms of areas within backing?
We are seeing a lot more proliferation of them in the payment space followed by the wealth management. They’re also becoming more active in lending and of course in customer identification and know your customer.
It’s great to see this level of innovation in finance, but how can banks stay relevant when they’re also competing against other companies such as telecom operators?
As long as the retail bank is technology lead and is technologically innovative, it keeps reinventing its capabilities and it will always be relevant both to our partners and to our customers. We don’t worry about either fintechs or telcos: we are a perfect partner for them, and it is the partnership which is more important. To make the partnership effective, your technology platform, technology architecture and your spirit of working has to be modern and technology led. To be relevant, you have to change in line with the customers’ adoption of technology and expectation. Banking is fundamental and I think you can be a player in any part of the ecosystem, so it actually throws more opportunities than threats.
Are you investing much in AI, data analytics and the like?
Data has a lot of power and is used for advanced analytics and for artificial intelligence which allows you to use machines to analyze and use the data which is what we need in retail banking. We are investing heavily in that. We have a center for data analytics in Bangalore that works on all of our solutions and opportunities. We’re also using robotics to automate a lot of operating procedures, manual entries and manual activities that are repetitive in nature. We are both early and advanced users of AI and robotics.
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