Thursday, 17 November 2016

What we learned at the North African Banking Exhibition 2016

Enterprise attended parts of last week’s North Africa Banking 2016 Exhibition, which included discussions on innovation and technology in banking.

Takeaways from speakers at the conference:  

Ihab Dorra, Head of Retail Banking, Bank Audi Egypt, on financial inclusion

Financial inclusion is “one of the hottest topics” in the industry right now, said Dorra, noting that 2.5 bn adults worldwide don’t have bank accounts — that’s half of the world’s adult population. In numbers: 34% of firms have bank loans in developing countries, compared with 51% in developed economies. In developing economies, 35% of small firms find it difficult to deal with banks compared with 16% in developed economies.

In Egypt, only 10-12% of the population is banked.

Dorra says inclusion needs to take place “responsibly.” Speaking of low-income consumers, he says “it is not very wise to have inclusion through facilities or loans.” New entrants to the banking system need access to savings products, medical loans and educational loans.

Who is excluded? Low-income households, the unemployed, single parents, people with disabilities, the youngest and oldest in society, the less educated, ethnic minorities and migrants. Services they are excluded from? Transactional bank accounts, remittances, deposit accounts, savings or products like assurance, stocks, bonds, credit and charge cards, cash and consumer loans.

Impact on the economy? “You cannot grow the economy on the 10% who live in the [formal economy]. It’s a no-brainer,” says Dorra. “If everybody is in the system, the economy will be strong enough to mitigate shocks.”

Egypt Post is has the largest network of savings accounts, says Dorra, with 18 mn savings accounts, compared to banks who have a combined 10-12 mn accounts.

Ways for financial inclusion? Public-private partnership through government regulation of mobile banking, internet banking; innovative non-bank services such as mobile wallets.

Mobile payments: He encouraged using mobiles for money transfer, purchases, payment of salaries, mobile bills, as a way of financial inclusion, given a 110% mobile penetration of mobiles in Egypt:

Kicker: “The future is a global economy that is closer to being truly global,” stressing the need to expand the middle class, provide equal opportunities, increase social and economic mobility and narrow down income inequality.

Best quote: “When you can go to the grocery store and pay by mobile, this is the day you will know you have a successful inclusion model.”

Mohamed El Sabban, Group Head – Digital Banking – Consumer Banking Group, CIB Egypt on consumer payments for the unbanked

Speaking at a panel on the role banks play in providing services to the unbanked population in terms of consumer payments, Mohamed El Sabban echoes Dorra, noting the gap between mobile penetration (110%) and banking services (3 mn credit cards). Microfinance institutions, banks and tech providers are responsible for bridging the gap.

Increasing penetration through agents: Instead of having new branches, banks can work through local shops they license to deliver specific services on the bank’s behalf. The idea hasn’t picked up, says El-Sabban, largely because of consumer mistrust.

You need to utilize all points in the country that can offer [financial] services,” says El Sabban.

Again, mobile payments: El Sabban emphasized payments through mobile wallets as the way to go for financial inclusion. The problem is not in tech, he says, it is in the engagement mode, in “how to convince the consumer.”

On a question about whether fintech will replace banks, he said banking will remain because people trust banks — but banks will need to understand the importance of data and of partnering with startups. No more than 2.3 mn customers have access to microfinance, he says. “[Banks] need to modify their business models.”

Best quote: “No doubt the future of payment will be relying on mobiles to interact with customers.”

Nizar Hannachi, Head of Corporate Banking, Bank ABC, on Business Intelligence and corporate banking

Enterprise spoke Nizar Hannachi to get a primer for non-bankers on business intelligence (BI) and its impact on performance in corporate banking, which he presented at a session at the conference.

BI and Technology: Business Intelligence is not tied to technology, it is a way of thinking, he explains. It is an approach based on analyzing data, drawing conclusions and making decisions based on them. The need to use technology in BI emerged due to the variety in sources of data, the velocity at which information changes and travels, and the volume of data.

BI and CRM: Business Intelligence is applied in Customer Relationship Management (CRM) for customer profitability, tracking deviations from business trends to avoid a decrease in profitability, for segmentation, to adjust prices and offer products based on which segments they succeeded in, for cross-selling and upselling, by tracking product use to maximize revenues or, for example, pricing a short-term loan higher with more flexibility, and for channel effectiveness, by learning each customer’s most preferred communication channels to promote products.

Other than CRM, BI is used for improved marketing, by finding potential new customers through access to data, and for performance analytics, by studying objectives and tracking the budget within each quarter.

Risk management: Following the customer’s cash inflow and outflow can minimize credit risk, to be able get an Early Warning Signal. BI can be used to minimize concentration risk through assessing the concentration of portfolio on certain products, as the failure of any such products would incur drastic losses to the bank.

How are we on BI in North Africa? Hannachi says international banks in North Africa do well with BI as they have the model from their mother institutions. But: “We do not have data governance,” he says, adding that we do not give importance to inserting raw data accurately.

Hannachi thinks there needs to be more access to data within banks, especially to the management, not just the IT department. It is a culture, a mindset. There is a need to convince people that BI will give more value to the data you’re managing.

Best quote: “We can live without BI, but BI takes you further,” says Hannachi.

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