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Retail Banking is Essentially Moving Some Numbers Around

Photo: Arif Mahmud Riad

A half an hour session with Muahammad A Ali, popularly known as Rumee Ali, would enlighten a layman about the banking industry of Bangladesh. An hour long session would almost bring out a banker out of an ordinary person.

Fintech had the privilege of having a session that lasted an hour and half!

Decked in a charcoal black suit, Rumee Ali was in his usual authoritative posture throughout the time at the conference room of Bangladesh International Arbitration center (BIAC) where he holds the incumbency of the Chief Executive officer (CEO). “Not wearing a tie though,” he said laughingly to us.

During the long session, we had conversation on multifaceted topics ranging from general banking to technological disruption in the banking sector. Here is the excerpt of that interview for the Fintech readers.

FINTECH: You have been to all spectrum of the banking world in Bangladesh and you have done well in all the sectors. What is your success story behind this diversified career?

RA: Someone once asked me what your biggest success is? I answered him- it’s not about success rather it’s about satisfaction. If I look back at my life and career and if I want to highlight my biggest satisfaction, I would say-my colleagues- who have reached positions of importance and are leading the industry now.

That gives me a sense of satisfaction which I cannot describe in words. I am especially talking about the colleagues with whom I have worked in ANZ Grindlays Bank. I started my banking career there and became the CEO later. Almost all the members of my last management committee later become the CEO, Managing Director or Additional Managing Director or Deputy Managing Director of different banks. I believe that to be a great feat for me as well as for the ANZ Grindlays Bank. This is because, it was not a large bank but it had created people with large potential and I am glad that I played my part in bringing out those people’s potential.

I have recently posted a photograph of the last management committee of the bank on my Facebook page. There were pictures of 13-14 people around the table. Out of those people, nearly everyone has reached the highest position in their respective organizations.

Shahed Noman became the MD of Dhaka Bank, Kaiser Chowdhury became the CEO of AB Bank Ltd, Imran Rahman became the CEO of Brac Bank, Mamun Rashid became the CEO of Citi Bank, Mahmud Sattar became the CEO of Eastern Bank, Anis A Khan became the CEO of Mutual Trust Bank Ltd, Imran Ahmed became the CEO of Duncan Brothers and the Chairman of United Leasing, RQM Forkan became the CEO of Bangladesh Commerce Bank Ltd, SAA Masrur became the Country Head of Bank Al-Falah, Sohail RK Hussain became the CEO of City Bank, Selim RF Hussain became the CEO of Brac Bank and Abrar Anwar became the CEO of Standard Chartered Bank.

The lady in that picture, Nasrin Sattar has been the first Bangladeshi woman to become the CEO of a foreign bank outside Bangladesh. She was the CEO of Standard Chartered Bank in Afghanistan. She had ventured to go there and run a bank. It’s quite amazing. All these people were in my management team in ANZ Grindlays. Now when I look at their achievements, I feel a sense of satisfaction.

FINTECH: ANZ Grindlays Bank was one of the oldest foreign banks in Bangladesh and you have spent a big part of your banking career there. How was the banking sector of the country when you joined there?

RA: I had joined ANZ Grindlays Bank in 1975 and at that time there were no local commercial banks. Only government banks and some foreign Banks like ANZ Grindlays and Chartered Bank Ltd (which later became Standard Chartered) and American Express. Those were the players in the market. When the banking sector was made open for the private entities in the 80’s, then the commercial banks started to get their entries.

One of the things I saw when I started my career in the banking sector was that the bankers had confined themselves only within a very conventional structure of banking. Everything was going in a very basic manner. You come to the bank either to deposit money or to withdraw money or for getting a loan. Usually the loans were taken by companies. Individual customers didn’t take any loan. There  were only three types of products-current account, savings account and the last one was Fixed Deposit Receipt (FDR). The loans were only given to the corporate and those were very limited too-overdraft, loan against merchandise and land. I didn’t see any products beside those when I entered the banking sector. So my thought was that we have to get out of this.

But it was obviously difficult because most of them grew in a regulated environment and they couldn’t think outside the box, especially the bankers of the state owned banks. The deposit rate, lending rate, the method of providing loan- all were done under a certain guideline of the central bank. The central bank used to prescribe everything. So, there was not that much to think about for the bankers. They simply followed the rules.

FINTECH: What did you do to come out from that ‘copybook’ banking? What innovative things that ANZ Grindlays did to introduce modern banking practices in Bangladesh?

RA: Those of us who were in the foreign banks, we had the duty of leading the industry forward. But unfortunately, we too couldn’t do it properly. The main reason is that the banks were being run by the foreigners. The top management and the positions of importance were mostly being occupied by people from foreign countries. Those people came to Bangladesh for a period of three to four years.

The risk for a bank lies in coming out with new products and venturing the market with the innovative and adventurous ideas. But if you are being posted for a small period of three or four years then naturally you would have a tendency to play it safe. That exactly was what they did. They played it safe. The rule is simple, if you have inflation in your economy, then a bank, under normal circumstances ought to make some profit. Those CEOs were happy making ‘that’ profit. They found that maintaining

just a ‘status quo’ was the best option for them so they barely tried new things. I tried to change that on numerous occasions. In my Grindlays years, I was posted to outside branches for three times-first in Mumbai, then in London and lastly in Melbourne. Those postings opened up my eyes. I found that the banking that we were doing in Bangladesh was stagnated in primitive stage. After I came back from Mumbai, I tried to introduce some corporate banking products but I barely succeeded. Then I went to London and learned more about corporate banking. After coming back from there, I was able to introduce some corporate banking products for Grindlays.

The foreign banks however were very reluctant to give out corporate loans to local businesses. They only used to give loans to the multinational companies. I tried to make them understand that if they had continued doing so, they would become cash rich. As their cost per account was very high, they would soon mark losses as the local commercial banks started to make their entrance in the banking sector at that time with competitive rates. Then they realized and asked me to find ways to lend them money. Because the existing risk model of the foreign banks didn’t support lending money to the local corporations. We devised those ways and that was when we started lending to local corporate groups.

FINTECH: The journey of retail banking products also started with your management team. How did that happen?

RA: In London and Mumbai, I saw what retail banking truly was and I realized that Bangladesh didn’t have a clue about its potential. I then specifically asked the management to post me in retail banking when they had planned for me to go to Melbourne in Australia. They were a bit surprised because I was then a full-fledged corporate banker and no corporate banker ever wanted to go to retail section.

Now I believe that I made the right choice at that time because I saw a huge potential in retail banking sector. When I came back, I fully concentrated on retail banking. My aim was to make ANZ Grindalys the largest private sector bank in the country. I am talking about the year 1997. We were probably the no-13 bank at that time in terms of size. I had a vision to make it the largest private sector bank by 2000.

At that time, I had Imran Rahman in my team. Imran later became the Managing Director and CEO of Brac Bank. Imran also went to Australia and designed the whole retail banking plan for Grindlays under my guidance after he came back from there. We introduced a fleet of new retail banking products in the market. One of our most renowned products was Syfanz-Security of Future with ANZ. It was a very popular product. Another product was finanz-finance yourself with ANZ. We also started giving small business loans. We started these types of products both on the lending side and deposit side. Besides, creating proper brochure was one of our first initiatives. At that time retail banking brochure was an alien thing in Bangladesh.

From Grindlays, we had also started the investment banking in Bangladesh. Abrar Anwar who is now the CEO of Standard Chartered in Bangladesh was the first head of our investment banking division. We sent him to London to get training on investment banking. After he came back, he headed the division.

We also established the second ATM Machine in Bangladesh. The first ATM was brought by Standard Chartered which later acquired the ANZ Grindlays in 2000. I was also the CEO of Standard Chartered after the acquisition.

ANZ Grindalys was not just a bank, it was more than that. After the liberation war of 1971, Grindalys played a major role in building the financial sector of the country. At that time, the country was severely war torn and there were great crises all around. There was shortfall of everything in Bangladesh. At that time, the first letter of credit (LC) was opened by the Grindlays Bank. It also gave a 10 million pound credit line to import and food and other necessary goods. Now 10 million pound is not that much but at that time, it was a huge amount. It aided the war torn country in immense measures.

FINTECH: So, many of the innovative banking practices in the Bangladesh were introduced by you and your management team. What were the secret behind your success?

RA: You create leadership, you bring success. You need people with creative energy and you need to put them in the right place and nurture them for achieving great success.

I believe this should be the motto of every leader and every CEO in every institution. Many people who are in the top position in an organization want to keep the power within him/her but that shouldn’t be the norm. They should create leadership by delegating the responsibility and helping them to make decision, coaching them and mentoring them. That is the actual job of any leader, I believe. It is not written in your job description but you should believe that mantra by your heart.

There is a problem with the owners of any business including banks that they mostly ask the senior management about the profit but they barely ask whether they have created succession or not. In my opinion, creating appropriate succession is one of the most important and sacred duties of a CEO.

Now for being a successful leader in an organization, you have to look at two basic things – maintaining proper structure and making profit. If you are lucky to be in an organization that has a structure, then it’s OK. Because then you don’t have to start from the scratch; you only need to improve that structure. But if you land in an organization which doesn’t have a proper structure, then you have to create it and that’s not an easy job to accomplish. The two basic norms of creating a structure are standard operating procedure and sustainability.

Another important thing is that you have to make profit in a business. If you just make break-even, then your organization will not attain sustainability because then you will not have much to re-invest, without which, your company will not grow. You have to identify your short term, medium term and long term income streams for the proper growth of the company.

Suppose my company has products in the market and those products are doing well. It means, I have a structure and sustainability there. But unless I have a full-proof plan about the future set of products that I am going to launch in the market, then I will be lagged behind against the rival companies. To have that full-proof plan, I have to re-invest. All of these are linked with each other.

So when I worked in any institution, I tried to go by these norms. I chalk out plans to implement that properly. May be these are the secrets behind my success.

FINTECH: You had worked in several Brac institutions including Brac, Brac Bank and bKash. After working for several years in foreign banks, how was your experience in those organizations?

RA: I joined Brac to learn from Sir Fazle Hasan Abed. He is a great man. Learning from him was a treat for me. I still learn from him. He told me that poverty is not a god given thing. It is a socio-economic construct. We create poverty by excluding people. They are being excluded from health, education and financial system. You cannot change their fortune unless you bring them out from that exclusivity.

I also loved talking with Dr Mahbub Hossain. Mahbub Hossain was a brilliant economist but he was a very media savvy person. I was in the policy coordination committee with him. He used to look after the development side of Brac whereas I looked after the business side. It was a treat to listen to his thoughts on different issues.

The journey of bKash was of course very exciting. The idea was to form a new way of delivering financial products. Banking laws in Bangladesh don’t allow non-banks to deliver financial product because once you allow a non-banking company to enter financial product delivery then everybody will start doing it. Besides, as a normal consumer, you keep money with a bank because you have trust. Unless you start your mobile financial services under a bank, it will be hard for you to gain trust.

So we started the journey of bKash under Brac Bank. My business model for bKash however was outside of the business model of Brac Bank because there are some problems in doing so. If you keep your MFS inside the bank, then the customers of MFS will become the customers of your bank. Suppose your bank has 200 branches and your MFS, which is inside of bank model, has over 20 lakh customers. Now if 10,000 of your customers go to one branch and ask for service, you cannot deny the customers the services under any circumstances because they are your bank’s customer as well.

I, however,made it compulsory for bKash to write the line ‘A Brac bank company’ under its tagline because that was how people will learn that “If things got bad, they would have gotten support from Brac Bank.” bkash has gained the trust among people now and it doesn’t need the backing of Brac Bank anymore I believe.

FINTECH: The technological disruption is going to hit the banking industry. Do you think the banks are ready for that in Bangladesh, especially the local banks?

RA: All of the local banks are not in the same position in terms of technological adaptation. There are some banks which are doing pretty good. Brac bank is very good in terms of technological adaptation. It came up with a service like bKash which has revolutionized the mobile payment system in Bangladesh.The bank had proven that if you are technologically ahead in the game, you can give revolutionary product to your customer.

City Bank is also trying to get there. They have invested in technology. EBL also invested in technology as I have heard.

But technological disruption is a completely different ball game. It will not only hit the banks, it will hit the whole industry badly since most of the banks haven’t adopted with the technological disruption.

Fintech: Do you expect that the millennial will write check to draw the money from the bank?

RA: Absolutely not. The truth is, banking industry is not about writing checks or not writing checks. The irony is that most banks in Bangladesh are still investing in outdated technologies. They are investing in outdated distribution system like branch. Opening a branch is so expensive. There is a huge risk in opening a branch because wherever you have your presence, you have to protect that presence as well.

There are also several risks of branch banking including the risk of failure of the system, the human resource risk and the technological risk. These risks are mitigated when you don’t have a presence in solid form rather in virtual form. You then will be able to better manage your environment. This virtual form can only be attained through technology.

If you distill retail banking, what is it basically? It is essentially the delivery of data from point A to B. A bank does nothing more than that. When you say someone that ‘this is your account’, you are basically assigning some numbers against his name and giving him/her the numbers as identity. When that customer writes a check, he/she basically transfers that number from point A to B. So, all the banking services can be brought down to just moving numbers around. If that is the case, then if a customer gets the opportunity to move the numbers from one place to another through a more convenient way, then he wouldn’t need any branch or to a larger extent any bank.

Let me tell you a story. The global CEO of Black and Decker (a large drilling machine company) once asked his top marketing people that ‘What do you sell?’  The employees told him that they sell the best drilling machines in the world. The Global CEO replied, “No, you are just selling a hole in the wall. All your machine does is creating a hole in the wall. If somebody invents a technology which can create a hole in the wall in a faster and cheaper way, then your business is dead.”

This is how you need to think; what will make your product obsolete? What will make the retail banking product obsolete? The answer is very simple- mobile phone.

This is because mobile phone or the smartphone that you have in your pocket has all the elements and ability to deliver any data and transmit any data to and from anywhere. So why you are going to need the branch, check books, debit card or credit card? If that happens, and I think it is going to happen, banks, if they do not prepare themselves for the transition, then they will be left out to the cold. They will simply go out of business.

So the question is what is stopping it from happening. The answer is-the regulatory framework and barrier. But I believe this will change too.

FINTECH: The Fintech culture hasn’t become vibrant here yet. Why?

RA: It will eventually become vibrant. All it needs is time. We have to think how we will be able to bring the huge unbanked population of Bangladesh under the banking service. To give them service, the best way is still to create a branch. But branch is very expensive and banks are reluctant to open branches in the villages. So, what is the way? There is where the opportunity for the Fintech comes because it will all be done through mobile phones.

That’s why there is a huge scope of Fintech here. Bangladesh is a land of 55 thousand square miles which has a population of more than 160 million. That means the farthest you can stay from each other is very little. It is very easy to cover the entire space through internet. It gives you connectivity. It’s high time for the regulator, the bankers and the phone companies to create right regulation which will leapfrog the development. The proximity of people, the size of the country and the penetration of mobile phone give Bangladesh a huge edge to develop a Fintech culture.

FINTECH: You have spoken vociferously against the mobile operator’s aggressive entrance into mobile financial service sector. Do you think that they shouldn’t be allowed to provide mobile financial services?

RA: The mobile operators in Bangladesh are so big that if you give them free pass, then they will push you out of the road. It’s very simple because they are controlling the road on which you are going to embark on your journey. So I want regulators to act out there. If they are allowed to create a cartel, then the Fintech companies will go down. The Fintech companies will not survive unless you give them some regulatory protection. I am not saying that the mobile operators will be completely excluded from the game. They can also participate but they shouldn’t be allowed to dominate through unfair advantage.



2 thoughts on “Retail Banking is Essentially Moving Some Numbers Around

  1. Thanks Rumee Ali sir. A lot of things learn from you. Now a days every one wants to be a manager only not leader & they trying to keep their position safe & they are not interested to make a successor for an organization . Again thanks to share your views & ideas through FinTech.

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