With 87 thousand people working in more than 1,200 branches across 70 odd countries,Standard Chartered Bank (SCB)continues to be a vital global force in banking and finance. In its century old presence in Bangladesh, 112 years to be exact, the bank has always been a trend setter in the industry.
Having the distinction of being the first international bank to extend credit lines to Bangladesh and open the first external letter of credit (LC)in Bangladesh in 1972, the bank’s list of credentials and milestone successes are as big as its long and rich history.It is the largest international bank in Bangladesh with 26 branches and employ over 2,000 people.
Fintech had the opportunity to sit down with Standard Chartered Bangladesh’s Managing Director,Head of Transaction Banking Apurva Jain for an in depth interview. A man with a meticulous, yet engaging,speaking style, the young banker talked about his career, transaction banking, fintech, security, the future of banking and a lot more. Here is the full interview with Apurva Jain:
FINTECH: Could you start by telling us a little bit about yourself and when did you start your banking career and what led you to where you are?
AJ: Sure. I grew up in India and completed my education there. I am a computer science engineer complemented with MBA in International Business. After completing education in 1999, I joined a technology company as a sales consultant, selling cash management platforms to banks internationally. At that point of time I was covering South East Asia and selling to banks in Thailand,Indonesia, Malaysia, Vietnam, etc.Then, in the year 2000 the company I worked for, got PE funding by an American company. At that time, it asked our company to set up office in Singapore, and since I was covering South East Asia, I moved to Singapore in early 2000.
I joined Standard Chartered in 2007.Since I was selling to banks, I had very good relationship and understanding of the environment and joining the bank seemed like a natural progression. After joining the bank in2007 in global product management role, I was in Singapore till mid-2009.Then an opportunity came to do a regional role in Africa based out of South Africa. I was in Johannesburg for three years, and then moved to Nairobi for three and a half years managing transaction banking business across Kenya, Uganda, and Tanzania. I moved to Dhaka about a year and a half ago, in Feb 2016.
FINTECH: Please tell us about what your work entails as the managing director of transaction banking at SCB?
AJ: Me and my team’s primary responsibility is to work very closely with our clients and our relationship teams, and provide efficient and effective working capital solutions to our local clients here, and to our international clients that operate in Bangladesh. When I say working capital it means their day to day trade finance, and their cash management.As a bank our primary objective is how to increase the operating efficiency of our clients and reducing their operating cost. At the end of the day each and every organization, be it manufacturing or retail or trading,these two challenges are very common. They have to increase their operational efficiency, in terms of access to information, automation,reducing the working capital cycle between payables and receivables,and managing their day to day cost in running their operations.
FINTECH: Tell us about Standard Chartered’ s strategy in the field of transaction banking. What is the vision and what are the policies that drive that vision?
AJ: Transaction banking is a very core part of Standard Chartered Bank,globally as well as in Bangladesh. We believe that transaction banking is something which is very close to our corporate clients as well, in terms of access to information, enhancing their efficiency, and reducing their costs.
Our strategy is to remain not just close to the client but to the client’s ecosystem as well. So, who does our client deal with for their business,who are the suppliers of the client,who are the buyers, and not just domestically, but internationally. So,if the client is selling the services across border, how can we assist the clients in not only accessing the markets, but also having connectivity in those markets through our presence and local market knowledge, and how can we assist them in the entire transaction and information flow across the two countries.
FINTECH: Tell us about your main product sand services?
AJ: Transaction banking can be broadly broken down into three parts.
One is cash management which is not just handling physical cash (as lots of people think), but the entire payables ,receivables, and liquidity management of the cash flow cycle.Each and every client needs to make regular payments, like salaries,utilities, vendors, taxes, etc. These are under client payables and the primary need here is speed and efficiency of payment with the right information and authorization. Similarly, they need to receive monies regularly from their buyers, which may be large distributors, or individuals like you and me, or both. These are under receivables and the primary need he re is ideally to avoid cash, and quick receipt of funds along with the information on who has paid. This is very important for the clients to“apply” the received funds. And while the money is sitting in the bank they need to ensure that the money is being best used in terms of giving them the best return, which we call liquidity management.
In terms of trade finance, it covers basically the documentary trade and open account trade. Documentary trade meaning bonds and guarantees,Letter of Credits, etc. Open account trade meaning import/export invoice finance, Vendor prepay etc.
And then in terms of Securities Services it’s basically being the custodian on behalf of other global custodians or local brokers.
FINTECH: Being one of the major global forces in banking, what kinds of advantages that provides you over your competitors?
AJ: One of the key advantages which I believe we as a bank have is although we are an international bank, we are very well established in the markets that we operate in. So,for example in Bangladesh, we have been here for 112 years. We were the first bank to open a letter of credit in independent Bangladesh. We were the first bank to issue a credit card in Bangladesh. We were the first bank to install ATM in Bangladesh.
So, with that degree of expertise and our knowledge of the local market,we have very good connectivity with the clients and the regulators. We understand the local environment extremely well, and are in a position to assist our clients effectively and efficiently.
On top of that, because of our global presence we operate in multiple markets some of which are more matured than Bangladesh. Our teams on the ground there have seen the journey in their respective country,which Bangladesh is going through,and therefore we have that experience within our organization. So, today if I’m facing a particular challenge in creating a structure or a solution for our clients here in Bangladesh, I can reach out to our wider network and seek their experience so that I can support my clients here.
And third is our global reach in terms of connecting our clients in Bangladesh to clients that we have across the network. Now, I know what my clients are doing here in terms of manufacturing or trading. I also know in Europe/US or Asia or Africa who want to buy these products. I can connect the clients accordingly. So, when one of the clients wants to expand overseas in a foreign country we are best suited to facilitate that. Since we have presence in that country, we understand the regulations, the banking laws in that country very well. That helps our clients to go out in that country and have the comfort that they are still dealing with Standard Chartered Bank and like we have our position in Bangladesh, we are equally well positioned in that country as well for over a hundred years. I think that is the primary strength that we bring on the table.
FINTECH: Where would you say you are seeing the most growth?
AJ: In terms of products or geography or…?
FINTECH: In terms of products and trends.
AJ: In terms of products we are seeing growth across all facets. I mean, if I look at the client balance sheet, be it in trade finance or cash management, if I look at the payment volume that is going through our system, the growth is there, it’s a healthy double digit growth. But if I want to really focus on a particular area I think trade finance is an area which the country is really focusing on considering the number of infrastructure projects that are getting executed and growth of import and export volumes.
If I look at ready made garments segment that contribute about 80percent of the country’s export, that is a particular area which we, and others, should be working towards making it a continued success.
Other aspect (of growth that) I have seen is in digitalization, the adaptation of electronic channels by ours clients, by various industries, and by the regulators. And that is something which is helping in increasing higher degree of transparency, having better access to information and creating more trust between the parties who are dealing with each other.
So, digitalization is here to say. If I can give an example, we can leave our wallet at home, but we can never leave our mobile at home. That’s the degree of dependence we now have on technology. And in terms of getting more efficiency, once you do a backward integration of the banking system with a client’s ERP system,and then the client only needs to have a single window where they can do their accounting, and their bank reconciliation is taken care of by itself and the entire information flows seamlessly. As a result, once clients get more comfortable and they can increase their business because they see the efficiency and transparency.
FINTECH: One of our recurring themes in the magazine is that we look at local software developers and how they are faring in the solution market,particularly in providing CBS and other solutions to the banks. And the issue that gets discussed the most is that banks are choosing foreign companies over local companies,even though the local developers feel that they have the competence. What are your thoughts on this?
AJ: It’s a good question because at the end of the day banking and technology have to merge to a higher degree to what it is now. What local software developers need to also understand is that apart from their technical and technological knowledge, they need to ensure that they are also equally strong in banking knowledge. Because, you may not expect a typical banker to understand technology, and similarly a banker will not expect a technologist to know banking. So,how do you solve the problem? How does a technologist know banking and vice versa?
FINTECH: You have a computer science background; do you think you sort of connect both worlds?
AJ: Yes, I have that background, but technology is moving really quickly. I finished my engineering in 1996, and that is 21 years ago. So, technology has moved on and it’s very difficult to keep pace with technology, if you are not working strictly in that field.
But going back to software companies, in my view a software company should try starting with smaller projects, without starting with core banking system or very complicated internet banking system straight away. They should start with smaller systems,try to get a foot in the door. While they are developing the smaller applications, they should try and gather their knowledge around the surrounding system that touch the particular solution of theirs and what are the functionalities from a banking perspective that touch that particular software. And slowly they should start expanding from there.Once they develop one application, they should look into how they can develop more.
We, at Standard Chartered Bank, decided many years ago to have our own subsidiary to manage our global technological needs, and that’s based out of Chennai in India and Kuala Lumpur in Malaysia. It’s a hundred percent subsidiary and that’s where we do our own in-house development of application systems.Having said that, we also engage vendors at a country level as and when required, especially for some of the satellite systems which touch our core banking platform.
FINTECH: Technology is going to be inseparable from banking, it already is actually, as you discussed. So, talk a little bit about technology that you employ and what sort of platforms you provide in delivering the services.
AJ: Well, most important reliance now is on two particular platforms,one is internet based and the second is mobile based. So, in terms of in house, there are new technologies(that) are being developed, like Blockchain, which we as a bank are adapting progressively.
And in terms of overall connectivity with the clients, we have now enable dour platforms onto internet as well as on mobile phone. So, if you look at Straight2Bank, which is a transaction banking platform for initiation and reporting for the clients, it’s available on the App Store as well as on Android. And we are constantly evolving, we are coming up with anew version of Straight2Bank, which will be launched in Bangladesh in quarter four this year.
We are also conscious of the fact that it’s not just the software, it’s not just the technology (that is important), it’s the ease of using it. That’s most critical. Because you can get any technology or any software, but if clients find it difficult to use then the adaptability rate will remain low. So,apart from functionality and capability, we believe that adaptability is a very critical aspect in any software or any access we provide to the clients. If the clients don’t adapt, the solution will fail.
FINTECH: You mentioned Blockchain technology being developed at SCB. What sort of integration is happening and where you envision this is going?
AJ: We have successfully piloted cross border payments using Blockchain, where end to end transaction was settled in under 10 seconds with complete transparency on fee and FX. In current scenario,such transaction may take up to two days to settle. Blockchain is underlying technology being used for cryptocurrency and this can be a disruptive technology in payment space in years to come.
Now, whether cryptocurrency is inevitable or not, I think it is a little bit early to say. Bitcoin started in 2009. If you look at the overall usage,it has increased dramatically in the past few years. The last I read there are about 20 million users globally,and about 20 billion dollars equivalent in cryptocurrency. Now,it’s a very interesting thought and it’s a very disruptive approach, because it is basically a currency which is managed by the people. It is on open source, and the value is driven on the market situation and the market condition. There’s no regulation on that currency. Considering that the base is relatively small as of now, we have seen a reasonable degree of volatility in the currency. But I personally believe that as time progresses, say in next five to eight years, the 20 million users might become probably a billion users.Considering the advent of internet accessibility to mobile phones and the importance of reducing the dependency on cash, more and more of governments and regulators are now insisting on reducing physical cash and bringing digital cash.
Closer to home we have seen the success of mobile money like bKashand Rocket. The number of transactions that are going through these networks on a monthly basis is close to 50 million. That’s a huge huge volume. If you look at the distributor network that that some of these mobile money entities have developed, its more than the number of all bank branches put together. So,that way, we believe that digitalization is helping financial inclusion. And financial inclusion is always beneficial for banks and the country. Banks should not believe that this is a competition to us. It is more about how we align and adapt to these new capabilities and we satisfy our clients’ needs. Because at the end of the day atypical banking service, like deposit,a letter of credit, will remain for some time(more), at least for the foreseeable future. There is jury out there which says that ‘no, banking can become obsolete very quickly.’ You look at the likes of Uber, and you look at the likes of Amazon, they have changed the entire industry.
FINTECH: At least the brick and mortar model…
AJ: At least the brick and mortar model, absolutely. Brick and mortar model has seen changes. If I look at retail clients, why do they need to go to the branch? 90 percent transactions are either a deposit or a withdrawal.Only 10 percent go and talk about value added needs, like credit card,mortgage, home loan, car loan etc.But deposits, withdrawals, transfers etc have moved out into different channels, like ATM, internet banking to a certain degree, and to mobile banking where people can transact,they don’t need cash anymore. So,brick and mortar is definitely changing.
FINTECH: You spoke a little bit about credit finance, could you also talk about the credit market at large?
AJ: I would say there are basically three aspects to credit. One is about the clients and the clients’ business.The second is the liquidity in the market, i.e. availability of credit in the market. And third is, that is if the first and second are available, at what cost is that credit available.
As a market matures, the cost of credit keeps on reducing. If you look at Singapore, or look at Hong Kong you can probably get credit at two percent to a maximum of two and half percent.
In Bangladesh, till recently cost of credit was double digit, 10 percent plus; 12 percent, 14 percent was the norm. But off late we have seen the cost of credit has come down to single digit. And we have also seen the GDP growing, our per capita income increasing. As long as the first aspect is concerned, the clients and the clients’ business, that I think will be always unique on a transactional basis. In a developed market a very well established bank will not give credit to a client whose business they are not convinced about.
Liquidity in the market is something,again, which is a function of how the economy is doing, and how the balance of trade is doing. So, from that perspective, I think at this point of time locally there is no liquidity problem. There’s lots of liquidity in the market and banks are keen to lend to their clients.
And the third part is cost of credit.Yes, cost of credit is pretty controlled as of now. It has been the situation forthe last one year. Let’s see how the new budget takes shape.
FINTECH: Islamic banking is quite big in Bangladesh, as you know, Islamic Bank Bangladesh being the biggest bank across the board. So, what is SCB’ s approach toward Islamic banking?
AJ: As you may know, we launched Islamic banking in Bangladesh in August 2012, and call it ‘Saadiq’.
In Islamic banking, Mudarabah,which is sharing of profit and loss, is the most relevant to transaction banking. Because, as you know, in Islamic banking you can’t give interest, but it is a profit and loss sharing. That gels very well with the structures that transaction banking offers. So, we are working with a number of clients in Bangladesh,where we are offering them Islamic banking onshore, as well as from our Dubai office, as that’s where we also have our global headquarters for our Islamic banking.
So, we believe that Bangladesh is obviously very well positioned.Currently 20 percent of Bangladesh’s trade is on Islamic banking, and we have seen that grow in the last few years.
FINTECH: Could you talk about the regulatory challenges that you face, particularly in cross-border transactions? Do you think the policy makers are moving in the right direction?
AJ: For any country that is in the phase of moving from under-developed to developing country, importance of volatility (the lower the better) and dependence on foreign exchange is very critical. And I think that Bangladesh Bank is taking right steps in terms of regulation in ensuring that the right controls are in place before any foreign exchange leave the country.
Sending money overseas, as long as you follow the process, is not difficult in Bangladesh. I think it’s been made out, in terms of perception, to be difficult. But as long as the documentation is complete, the remittance does go out. And we as a bank, have at times worked with clients to ensure that their documentation is correct, so that there is never a delay in making a payment out. As time progresses, we believe that the regulators across the world will adapt to more open environment.
FINTECH: Tell us about how you have evolved to stay important to your clients? What are the challenges?
AJ:We believe that transaction banking is a core to our clients’ corporate needs. And as I said technology plays a very important role. Gone are the days when you want to be relevant to your clients only. It’s very important that you are relevant not only to the client but the client’s buyers, client’s sellers. And if you are not adding value to the client then it only becomes a price game.And we are not in the business (for that), you know, we don’t want to compete on price. We want to ensure that we add value to the client’s business. And that’s what any bank,which has got aspiration in transaction banking, should consider;like what is the value that you are adding in the entire working capital of the client. If you believe that price is the only value that you are bringing in, then there will be too many competitors.
So, you have to focus on the solution,ease of doing business for the client,increasing their operation efficiency,and reducing their operating cost.
FINTECH: Could you talk about some of your biggest successes in transaction banking?
AJ:I think one of the biggest successes we have achieved is bringing our clients closer to digital platforms. So, if I look at, for example, something like writing a cheque, lots of our clients were complaining that they have to write50 cheques or 80 cheques a day. This is because the cheques are still very popular in the market. We devised a solution whereby the clients could still pay with cheques, but they could initiate the cheque writing throughStraight2Bank, on our internet platform. So, their accounts officer,he says, ‘fine, today I’ll have to prepare 10 cheques; these are the beneficiaries, these are the amounts’. The approver logs onto Straigh2Bank,looks at all the details and approves it.Once he approves it, the printer in his office will be able to print cheques,and the approver can be anywhere in the world, he doesn’t have to be in Dhaka. They can also approve through the Straight2Bank app on their mobile.
Previously, these promoters used to sign blank cheques and travel abroad.Now they don’t have to do that. So, in terms of efficiency, it’s much more efficient. He can now approve online,instead of signing each cheque physically. He has the control,because he can see all the details. And it’s cost effective, because it’s saving him his time. These are the kinds of solutions which we believe have really helped our clients to be much more efficient and also have control on information. Once you have digitalized a transaction, the information is stored forever. And then analysis of that information,audit of that information, access of that information becomes so much easier.
FINTECH: Do you generally find clients receptive of these new changes, even though eventually they probably find these changes beneficial? But generally do you find that changes are being resisted?
AJ: Right,there is a reluctance. I will accept that fact. And I would say that it depends on the maturity or the generation of the individual you are talking about. And I will say it not a corporate issue, rather I will say it is an individual issue.
In Bangladesh lots of companies are still run by promoters who are actually founders. And they believe they have come so far and by doing things manually and they may not be in a position to adapt technology as quickly as their next generation would have. So, what we have seen is as the new management is taking over, the next generation, they are much more adaptable to technology,because they also want to take their company to the next level. And they do understand that without adapting technology it will be very difficult to gain efficiencies.
About adapting technology there is this assumption that you end up giving up control, which is not necessarily true. You still have the full control and as you progress with it you realise that your dependence on it increasing. So, it’s a journey and I am glad to say that we are moving in the right direction. The pace could have been a bit faster. But it’s in the right direction.
FINTECH: Security has been a massive issue lately, at least it has entered the public discourse, particularly after the Bangladesh Bank heist. It’s a very hot topic globally as well and it’s going to be even bigger with the coming proliferation of IoT and Big Data and so on. What sort of security concerns you have on a day to day basis during your operation and how do you deal with them?
AJ: Well, the biggest challenge that any bank would face, in my opinion,would be information leakage and data leakage. Our concern is primarily two fold. One is someone hacking into our system, with genuine credentials. For that multiple control scan be put in place like disabling USB ports on laptops, whenever you are sending emails to external parties they should be monitored etc. So,these are the kinds of control that any bank would want to implement.
In terms of (protecting) credentials,genuine credentials, I mean, of course, technically now you can track what software get installed on a particular hardware you have. You can have a positive list and a negative list. We ensure that all the blacklisted software can never be installed by any external party into your hardware.
Obviously, you have to invest in it.You have to invest to make sure that you are up to speed in terms of your firewalls, antiviruses, the version of your software, your operating system etc. Moreover, it is important to invest in the right people. You have to invest in the right kinds of expertise,because once data is lost, the amount of reputation or financial risk that you may face can wipe off your years of profit or income. So, I think no organization should be penny wise and pound-foolish. Investing in the right man power is crucial to minimize the risk of these kinds of incidents.
FINTECH: Thanks very much for making the time to speak to us.
A Jain: You are welcome.■