An RBI
roundtable held in Dubai brought together senior retail bankers
from the region to discuss the challenges and opportunities ahead,
as the banking market recovers from the downturn. The overall
conclusion was that what has worked historically will not work in
the future. Douglas Blakey reports.
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For the
participants of the VRL retail banking roundtable in Dubai in
September, the key messages were a need to bank smarter and avoid
the mistakes of the past.
While there remains scope for
the leading banks in the region to expand product ranges and fine
tune their multi-channel strategies, there are more fundamental
challenges to be met.
Douglas Beckett, executive
vice-president and head of retail banking at Mashreq Bank, summed
up the mood of the majority of participants.
“The world has changed. Our
whole model has been built around customer acquisition and product
sales. It is no longer going to be enough to take your share of the
new expat arrivals.
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By GlobalData“We are now in a different
game. That means a deeper and broader relationship with our
existing customers and the implications are monumental.
“It means having to build
primary relationships with our customers and there are knock on
issues which emerge: in productivity, analytics, loyalty,” said
Beckett.
The clear message was a need
to avoid a return to any damaging price war and instead, to compete
on service.
It was a message echoed by
Suvo Sarkar, the recently appointed general manager of consumer and
elite banking at National Bank of Abu Dhabi (NBAD).
“The good old days of [banks]
getting new customers in and targeting market share are over. We
have to look at revenues after bad debts,” Sarkar said.
“The entire dynamic will be
very different in the next 10 years compared to the last 20 years
as we move from targeting market share to share of
revenues.”
As Sarkar told RBI
in August (see RBI 638-639), he has set an ambitious
target: to double retail banking revenue in the next three
years.
He has also set the goal of
doubling NBAD’s cross-sell ratio. It is currently under two which
is consistent with the market in the Gulf countries but Sarkar said
he wants this up to four in the next three years.
Beckett was less specific
about Mashreq’s cross-sell goal, but said:
“While I am not going to tell
my rivals our cross-sell [metrics], it currently begins with a two
and we want it to begin with a four or a five, with an emphasis on
more affluent customers.”
Tweaking its segmentation
strategy is not a problem facing Citigroup.
Sanjoy Sen, Citigroup’s
consumer and local commercial banking head for the Middle East, and
a member of Citigroup’s Global Consumer Council, highlighted Citi’s
successful mass affluent strategy and strong performance in the
region during the downturn.
“We are focused on our
segment of customers,” Sen said.
“Although retail banking
success is closely linked to the state of the market and there are
a diverse set of challenges in different markets – in the UAE risk
management is the top priority for example – we have succeeded in
riding through the crisis.
“We have posted sustained
growth and profitability in the Middle East. Our customers expect a
very high level of customer service… they have global
expectations,” said Sen.
Sector-wide
challenge
The quality and crucially the
consistency of customer service is, however a sector-wide
challenge.
Sarkar said: “We have issues
in terms of consistency of service and we are addressing these. As
for the customer experience, there is significant scope for
improvement.”
NBAD’s solution is to set up
an in-house academy, with a focus on training front line staff (see
pages 4-5).
Sarkar expects the results to
become apparent within the next 12 to 18 months and said he expects
staff to complete the first stage of a three stage qualification
process, in the first year of the academy’s operation.
“This is not something we can
outsource and is one of the key things we are spending our money
on,” he added.
Ravi Nair, head of customer
experience at Abu Dhabi Commercial Bank (ADCB) also stressed the
importance of raising customer service levels.
“Customers are demanding
international standards so we are benchmarking our service levels
against banks at international level,” Nair said
“We have a clear and
differentiated strategy and a tagline: ‘long live ambition’. That
is not just a marketing statement but something we have built into
our customer loyalty programme.”
“We are also looking at micro
segmentation as well as the challenge of addressing the consistency
of service across electronic and branch channels.
“We have a very balanced
multi-channel growth strategy, expanding our physical presence in
shopping malls, increasing ATM numbers and investing online, ” said
Nair.
Sarkar joined NBAD at a time
of continued growth in the bank’s physical network, now totalling
110 units – in the first six months of 2010 the bank opened six new
branches in the UAE, a branch in Jordan and one unit in Oman – but
said that further growth will have to be measured.
Beckett was blunt about
Mashreq’s branch ambitions.
“It is not a priority to grow
the network.”
In the past year or so,
Mashreq has closed 12 units and opened 20 new branches and
continues to focus on reconfiguring and upgrading its
network.
“Anyone rolling out big
branch networks now has maybe got things a bit wrong. Perhaps
around 60 to 70 branches are about right for us,” Beckett
added.
Sen agreed, flagging up
Citi’s digital success in the region.
“We do not have a branch
intensive strategy and online has done very well for us,” he said.
“The lack of branches has served to improve our
profitability.”
That is not a luxury open to
Khalfan Rashid Al Tal’ey, head of retail banking at Oman-based Bank
Sohar.
“Bank Sohar is a new bank –
opened three years ago – one of 17 banks in Oman and we need to win
market share,” he said.
“We have 18 branches and are
looking to open about 10 branches a year. But one of the good
things about coming last into the market is that we can target gaps
in the market.”
Hassan Sajwani, head of
deposits and investment products at Al Hilal Bank, is in a similar
position.
“Our bank was established
only two years ago and has to expand in terms of branches and
product range,” Sajwani said.
“As a small bank and a new
entrant, we have to go about choosing the right customers and have
to give them something different.”
There was a greater degree of
unanimity in terms of the potential offered by further investment
in alternate channels, with Beckett especially upbeat.
“We will see a lot more
traffic on alternate channels but there has to be a consistent
presentation across the channels,” said Beckett.
“We must aim to present a
consistent look and feel across the channels and we are focused to
bring things together in a more consistent way.
“Nirvana is to start a
conversation in one channel and finish with a sale on another
channel.”
While it is early days – the
service launched little over two months ago – Mashreq has scored an
early hit with its iPhone app offering, topping the charts in the
UAE financial services iPhone app rankings.
Beckett said: “The early
signs are very encouraging. Penetration of high-end phones in the
UAE is very high and this is an opportunity to build relationship
with affluent customers.
“But let us not get too
excited and there is a long way to go to fix some of the [retail
banking] basics.”
One market Mashreq is not
targeting is the low end mobile payments stream.
By contrast, NBAD has
pioneered mobile phone money transfer and payments in the region
with its Arrow service.
Arrow teamed up with
MoneyGram, the global money transfer firm in June, enabling
customers to transfer funds directly from their NBAD or a prepaid
account to people outside the UAE via mobile phones.
It is big business for the
bank, particularly in terms of remittances.
For Sarkar, it is a case of
so far, so good.
“We are seeing huge take up
and are very positive about it,” he said.
Sarkar added that this is an
area which can be lucrative for the banking sector, but banks will
only benefit if they get their pricing right.
Participants generally agreed
that the changed landscape following the crisis will extend to
marketing, especially with regard to branding.
Sarkar said: “We have to
build a brand and differentiate that brand. NBAD is among the 50
safest banks in the world and our brand has to reflect
that.
“The bank’s proposition has
to be seen as something customers agree with to stay and grow with
us for the long term.”
“There has almost been a fear
factor among customers. Customers will have to trust their bank’s
brand and we must build on the trust factor. A different approach
is needed compared to just two years ago. Being just cool is not
enough any more.”
Beckett said the Mashreq
brand needed investment, notwithstanding having invested heavily in
a refresh of the brand in 2007.
At Citi, Sen stressed the
brand remained strong in the region, despite being hammered by
negative PR in its home US market during the crisis.
“We did not let go any people
in this region and, with the exception of some assets in Pakistan,
Citi’s assets in the region are part of our [key] Citicorp
division,” said Sen.
On the question of the
possible use of social media as part of the bank’s marketing mix,
Sen said it was a matter for research and that if mastered, it
could play an important role.
“But you need a separate unit
doing it 24/7 and is it a priority for us? I am not so
sure.”
ADCB’s Nair added: “We will
look very closely at it and we do have people monitoring social
media, but we are trying to understand it before we venture into
this area.”
As for Mashreq, Beckett said
he was aware of the possibilities offered by social media but it
was not at the top of his list of priorities.
One immediate priority for
Beckett is the successful implementation of a new core banking
system.
“This is for us a pretty big
investment,” he said. “It allows us to take advantage of new
software and will release capacity for staff to concentrate on
generating additional revenue.
“It will be a huge challenge
but it is I believe, well timed.”
The advantage of a new core
banking system is one already enjoyed by Nair.
ADCB has rolled out a new
core banking platform across all of its branches, giving branch
staff a 360 degree view of all customers.
As for future, it is clear
the majority of participants believe the banking sector has learned
some lessons from the crisis – about leverage being too high and
the need to avoid competing on price.
The mood was summed up by
Beckett.
“Though the centre of gravity has to change, there is
enough scope to grow quite quickly,” he said.
