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Mamun Rashid in exclusive interview with FINTECH

We scheduled to meet for this interview at his office of Price Waterhouse Coopers (PWC) in Gulshan where he holds the incumbency of the managing partner. I went early; he was stuck in the traffic. When he arrived, decked in a charcoal black business suit and a red tie, a sense of hurriedness was evident in his body language.

He had an unscheduled, urgent meeting with the State Minister of Finance at Baridhara. He apologized and offered me to take the interview inside his car enroute to Baridhara from Gulshan.
It was 6:30 pm and crossing that stretch of three odd kilometers would have taken at least 20 minutes. Good enough for me, I thought.

We hopped into his red SUV.

It took little over 26 minutes to reach there. By that time the sexagenarian banker discussed about the commercial banks, their adaptability with the technological disruption and cyber security measures with the Fintech magazine.

FINTECH: You have worked in the senior positions of a number of multinational banks including ANZ Grindlays Bank, Standard Chartered and Citi Bank NA. Do you think the commercial banks of Bangladesh are on par with those banks in terms of operation and service?

Mamun Rashid: Bangladesh has 57 commercial banks. When you consider the size of the economy, this number is much more than what we require. Now, the local commercial banks are obviously not lagging far behind their global peers. But there are some differences. The way the multinational banks manage risks, structure package new products, solutions are still of superior quality than that of the local commercial banks. Especially with regard to large loans, cross border loans, structured finance products as well as structured trade finances, the differences are evident.

Suppose you want to arrange a large finance for a government or private entity, or want to conduct monetization of the asset or cross border M&A (merger and acquisition) for some large corporations, still the multinational banks will be your preference. This is because the global banks with their knowledge base, corporate governance, research capability, knowledge about how the global economy runs and more importantly because of their regularly updated risk management practice, are still ahead in the race.

Having said so, we are observing that few local banks are also adopting the global best practices and becoming smarter. They too are using and applying the processing or service delivery platforms of same origin, from the same vendor in their respective banks, whether it is ERP, core banking or customer relationship management solution.

On the customer service side, I would say many local banks are now in a way more aggressive than their foreign peers. Foreign banks, because of their overly strict compliance requirements or at times market knowledge gap, are a bit shy in providing a lot of services to the clients. In this area local banks can work more freely.

FINTECH: So you want to say that the local banks are doing well and they are catching up?

Mamun Rashid: Of course. If you do have a proper, adequate and modern service delivery platform, efficient customer service model and quality management behind the wheels, I don’t see any reason why the local banks cannot become like DBS in Singapore or ICICI of India. Some of the local banks are really doing well in offering world class products and services, though yet at a smaller scale.

FINTECH: You have mentioned some local banks are doing well. What do you think has led them to such success?

Mamun Rashid: For the local banks which are doing really well, I would like to give credits to their people at the top. The people in those bank’s policy making positions have gone for centralization of their banking operation. They have brought in changes to their customer onboarding and risk management processes. They have go tten themselves prepared for a broader, effective, adequate, forward looking service delivery and IT model. Especially, I would rate Card division and Retail banking division of few local banks to be at per with any of the global banks in the world.


So without a massive landscape shift of our banking culture, it is very tough to avert this crisis. Occasionally we will see that bad loans are piling up because of few specific borrowers or because of the management failure of the state owned banks.


I have not only worked with some of the global banks here in Bangladesh, I have also audited many global bank branches in Europe, North America, Asia and Africa. Based on the experiences, I believe that if these local banks make adequate investment on their people, learning, knowledge, product development, as well as solution building and most importantly have proper risk management culture in place, they will be able to become at least regional banking giants.

FINTECH: Some banks have been taking the service of global technological advisors since the BB heist. Do you think getting the service of one of the big four auditors makes them a better bank?

Mamun Rashid: After the central bank cyber heist, the security systems of the commercial banks were put under scanner. Few banks came forward to take expert services to boost their cyber security measures. To provide full-proof security solutions, the “Big Four” and others do things like ethical hacking, vulnerability assessment and penetration test (VAPT). They do these because they want to make sure that clients are safe from any possible cyber threat, IT threat or any possible technological threat. These firms cover the whole security overhauling from different angles. Other than VAPT we help setting up long term technology plans, formulating technology strategy, conducting IT gap analysis and IS audit. We also customize any of the platforms our clients want to upgrade. We want to make sure a bank is safe not just today, rather it is safe tomorrow and the day after. We have to understand that investing on IT has become imperative now. In older days, we used to see the recruitment of lots of manpower in the airlines industry. Now you don’t need a number of co-pilots to run a large aircraft, it has been automated and the job of co-pilot, to a large extent, is being done by the cutting edge autopilot systems which are much more effective. You can say it is going to be the same for the banking industry in near future.


FINTECH:
Do you think the commercial banks of the country are adopting well with the technological changes that is happening around the world?

Mamun Rashid: To tell you the truth, there had been lots of talks regarding technological transformation for the banks in the last one year but only few have actually been done to get out of the perilous situation. One reason for this can be, the entire banking industry of Bangladesh is in most casessponsor driven. They still rely mostly on the traditional thinking process which has possibly led them to success till now. It is very hard for a head of IT of a bank to bypass the higher authority, who usually come from traditiona or typical banking background, to create an intellectual pressure on the board to go for technological transformation.

The people at the policy making level needs to be more open to the ideas of the new world. They have to understand why the banks across the world are focusing on ensuring IT, cyber and operational security. Although we are yet to see these kinds of investments, we are hopeful for a dramatic change in the future.

FINTECH: Most of the commercial banks of the country are still in practice of not using genuine software, rather they are using pirated software. With pirated software in the core system, do you think it is possible to ensure full-proof cyber security?

Mamun Rashid: Protecting intellectual property right (IPR) has been a major issue in all over the world. In Bangladesh, still the practice of protecting IPR is far from the practice prevalent in the developed countries. Global tech giants feels that there is no level playing field here in Bangladesh due to the prevalence of pirated software. Even the large banks and corporations are using pirated software. This is a very unsafe situation. Also this situation prevents global tech giants to open their customer service centers here because they cannot see the business to be in their compliance comfort. It has become a vicious cycle. I believe with the technological advancements, issues like patenting and IPR are becoming extremely important and Bangladeshi institutions, especial ly the banks should start adopting those. Otherwise they will suffer in the future.

FINTECH: Do you think this is happening because of the lack of knowledge at the top policymaking level of the banks?

Mamun Rashid: The thought process of the people sitting behind the wheels is still confined within traditional business development and recovery of the loan. They are yet to understand that there is a greater room for improvement beyond that. So we need an overhauling of our whole banking management- the way they think, decide and implement.

FINTECH: Many of the local banks are now sitting on a lot of idle cash. Investors are not coming because they are not finding the rates very lucrative. Do you think-beside the ratesbanks non-adoptability with the global technological changes has something to do with that?

Mamun Rashid: It’s hard to say. Obviously there is excess liquidity present now. And as a result, by being aggressive, the banks are burning their fingers. Also the large loans are going bad both in Dhaka and Chittagong because the risk management culture here is yet to be changed.

We also come to learn that a large portion of the bank loans are concentrated with few large borrowers-with few business houses under their actual name or pseudo name. In the recent past, we have seen that even the central bank had played according to the gallery. They seems to be biased on serving few of the large borrowers who has good connections with the political leadership.

So without a massive landscape shift of our banking culture, it is very tough to avert this crisis. Occasionally we will see that bad loans are piling up because of few specific borrowers or because of the management failure of the state owned banks.

FINTECH: I recently had a conversation with one of my friend in Oman. That person doesn’t know anything about the banking industry of Bangladesh except bKash. Why do you think bKash has become such a big name even into the outside world?

Mamun Rashid: There is no doubt that bKash has done well for themselves as well as for the country’s people in terms of financial inclusion. It was an innovative thought of course and they had been able to bag on the situation by being the first market mover.

The question however is that what we expect from a true mobile financial service provider. The answer is e-wallet. bKash is still controlling more than 80% of the mobile financial market of Bangladesh but it is basically confined within the money transfer model. We wanted to see more from it, especially when you consider the fact that bKash has investments from global entities like Bill & Melinda Gates Foundation. I am waiting for the day when we could see government subsidy is being disbursed through bKash or other MFS provider. That could revolutionize our rural subsidy economics and rural economy as a whole.

I am also little surprised to see the way Bangladesh Bank has so far been unnecessarily protecting bKash without allowing any other large investor to come here in the market. The central bank keeps on showing the example that it’s a bank led model and it can control BRAC bank- the owner of bKash and in a way they can control bKash indirectly. But considering all aspect, it is perhaps true that bKash is an independent organization. In all practicality, bKash is not a bank-led model. For the sake of argument, let’s say bKash is a bank-led model, then why doesn’t the central bank let others including Mobile Network Operators (MNOs) to come up to make it more vibrant and to have more investment solution building and encouraging innovation. It will create a space for competition which would ultimately benefit common people.

A leading foreign investor who has investment in bKash mentioned in a recent newspaper interview that in order to build up an inclusive financial system, we need to bring in more competition’. We want the digitization of our entire financial system where all the stakeholders will get to see the benefit of digitizing of our financial supply chain.

FINTECH: Do you think our central bank is well equipped to regulate this innovative and technological changes in the banking and financial sector?

Mamun Rashid: We have seen our central bank showing lots of success in delivering intelligence in launching some new product in Bangladesh. Necessity is the mother of invention and the central bank is well aware of that. Besides, the central bank is in a very good position of hiring qualified personnel from good academic institutions. A good number of their senior employees are from educational institutions like BUET and IBA. They are also being trained by international partners and institutions. So, if it is about putting the right people in the right place, I think Bangladesh Bank has no problem in doing that. Having said so, I can say about the mobile financial services- the immediate past governor wanted to revise the mobile financial services guideline but that has been put in to the refrigerator now. The central bank should work on bringing it back in active discussion.

FINTECH: Do you think Bangladesh’s success of having almost cent percent mobile network coverage could play a role in adopting with the technological disruption in the banking industry?

Mamun Rashid: No matter who said what, the central bank, if I am not mistaken, is thinking of allotting further opportunity space to MNOs for mobile financial services (MFS). The central bank is possibly aware of how much MNOs have achieved thus far. Engaging them further can build a more inclusive and diverse mobile or digital finance industry in Bangladesh. I’ve always felt that MFS should be led by MNOs. Unfortunately, I was binned by booming voices of few senior bankers and technology gurus. Well and good. I accepted the banker argument, championing better regulatory control. But, I believe that Bangladesh banking industry can drive itself forward, adapting well with technological disruption.

FINTECH: Even a massive chunk of the urban population of our country doesn’t have a clear idea what ‘Fintech’ really is? As a dynamic banker, can you please explain Fintech for the layman?

Mamun Rashid: Simply put- Fintech refers to ensure financial service and support with the help of technology. Fintech comprised of three elements – technology, platforms, and capable people. Fintech redefines how banks are going to borrow and lend money. More importantly, Fintech is going to transform the entire landscape of payments. It enables industry outsiders like MNOs to behave like a bank and create new business models.

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