by Brett King
Endnotes
1Source: Forbes/Internet Retail—“Sixty-four percent of US households have Amazon Prime”, June 2017.
The author traces the highlights of Emirates NBD’s digital journey. Emirates NBD is one of the largest banking brands in the Middle East and a leader in digital innovation in the region. The bank won BAI’s prestigious “Most Innovative Financial Services Organization of the Year” award for 2017.
With some of the highest smartphone penetration on the planet, emergence of a young Millennial population and advent of FinTech disruptors, the UAE and the Middle East are witnessing the perfect storm on banking digitisation.
Starting with offering online banking and SMS banking in the 1990s, Emirates NBD was one of the first in the region to embrace digital. Our digital transformation program started in 2012 with the enunciation of a top management-led vision that set digital as a critical priority. For us, it was a digitise-or-die moment.
In 2013, Emirates NBD put together a strategy to execute a multi-year digital transformation. We started our journey with the setting up of a young multi-channel transformation team and drawing up a blueprint built around six pillars: improving service and sales through digital touch points, optimising branch and contact centre journeys, end-to-end process digitisation, enhancing data management and analytics, transforming technology platforms to become more agile and enhancing fraud.
ENBD is fortunate to be based in Dubai, UAE, where the government has a proactive Smart City strategy centred on digitisation and innovation. As part of the country’s transition to becoming a knowledge-based economy, 2015 was declared the Year of Innovation and 2020 is the year the UAE aspires to send a mission to Mars.
We had a task ahead of us, to transform a generation of bankers, teaching them to think outside the box. We wanted our customers to know that we were listening to their demands for digitally disruptive products that suit a newer lifestyle. And we wanted startups to bring us their latest products so we could be the first to market, even during this rapid pace of change. The digital world being a great equaliser, ideas can come from anywhere, allowing us the possibility to crowd-source innovation from various stakeholders, including staff, customers and vendors.
Walking the talk
We started our journey with fixing the basics and addressing prominent customer pain points, such as introducing electronic statements, enhancing our call centre IVR and launching a next-generation mobile banking solution.
One of our early winners was in the area of money transfers. The UAE is the third largest outward remittance market in the world, sending out US$44 billion in 2016. Remittances are an integral part of our expatriate customers’ routines, a significant majority of the population today. We launched a DirectRemit service that makes possible 60-second money transfers at zero fees using mobile or online banking to a multitude of home markets. Today, DirectRemit volumes have grown almost ten-fold since launch and has garnered close to a five percent market share. Today improvements in that platform enable our customers to make on-the-go money transfers to friends and family, simply by using the beneficiaries’ mobile numbers.
To encourage customers to save, we rolled out Shake n’ Save, the first gamified savings account in the region, enabling customers to save when and where they want to, simply by shaking their mobile phone. Rising obesity levels in the region was bringing health and fitness into focus, so we provided customers with an incentive to become more active with the launch of the Fitness Account, the first savings account linked to the Apple Watch. The account earned interest based on the number of steps the customer walked or ran every day, encouraging them to be healthier, physically and financially.
In branch we developed in-house tablet apps that helped reduce queue times as well as improving our processing capabilities. Our CRM systems were enhanced to offer paperless signing up for new products: today, about half of our personal loans are originated without any paper documentation and two-thirds of all customer requests are fully straight through. A new mePay service was launched, enabling customers to transfer cash to anyone in the UAE through the ATM without the need of a bank account number, as well as allowing for cash withdrawals using one’s mobile phone without the need for a card. Today, 92 percent of all our transactions happen outside the branch and our branch network is transforming into a sales and advisory space.
To drive continued digital transformation and become future-ready, Emirates NBD has announced an investment of circa US$300 million over the next three years to support digital innovation and multi-channel transformation of processes, products and services. This has been focused initially on integration with the UAE’s smart government initiative (including blockchain) and reducing friction. Additionally, we’ve set up an incubator for FinTech startups in the region.
One of the outcomes of these developments is the creation of the Emirates NBD Future LabTM. Among other activities, Future Lab works with vendors and partners to conduct research on emerging technologies such as blockchain, artificial intelligence, augmented reality and the Internet of Things, while acting as an accelerator for creating viable products.
One of the successful outcomes of this lab is our futuristic branch at Emirates Towers, Dubai, part of the Dubai Future Foundation’s prestigious Museum of the Future, where customers can get acquainted with futuristic beta-concepts of banking and payment solutions. Innovations include the Connected Car in partnership with Visa, integrating day-to-day payments seamlessly; the Future of Shopping with MasterCard, showcasing immersive virtual reality-based shopping experiences; and augmented reality-based home purchase in co-operation with SAP. The most popular exhibit is, however, Pepper, our humanoid robot that greets customers as they enter the branch, converses with them in English or Arabic and provides assistance on products and services.
In November 2016, Emirates NBD announced the set-up of the region’s first intelligent, voice-based, chatbot-driven virtual assistant, EVA (or Emirates NBD Virtual Assistant). EVA allows customers calling our call centre to interact and receive assistance using conversational English or Arabic (a first in the world), offering a more intuitive and personalised experience than wading through an IVR maze.
We are also the banking partner for the FinTech Hive, the UAE’s first FinTech accelerator program, which is run by the Dubai International Financial Centre and Accenture along the lines of similar initiatives in London, New York and Hong Kong. A recent study says that there could be over a 100 FinTech companies in the MENA region, with one fourth of them in the UAE alone. Startup fever is reaching tipping point in the region, with over US$3 billion raised in 2016 by tech firms and inspired by the region’s first unicorn, Careem, a ride-hailing service.
Social media to social banking
It may seem more straightforward now, but for traditional banks, making the transition from being formal entities that spoke to the customer from behind glass partitions to being “liked” and “followed” on social media was a difficult paradigm shift.
We partnered with Twitter to be the first bank in the region to offer customer support through our @EmiratesNBD twitter handle. Our extensive series of “how-to” videos on YouTube guide newer customers on day-to-day banking and which products are best suited to their needs. Our worthy.ae platform publishes independent content on financial literacy and wellbeing.
Emirates NBD also has been making significant strides in the area of social banking by making many of our branches disabled-friendly, piloting of an automated sign language to text translator, creation of digital donation platforms and distribution of Braille currency.
New vistas
With sustained investments behind digitisation, banks have now the opportunity to up the ante and become disruptors in their own right.
One such opportunity is e-commerce. With the UAE e-com industry on the cusp of big change—Amazon recently announced their entry into the market with the purchase of locally-grown market leader Souq.com—online shopping in the UAE
is growing rapidly and set to double to US$10 billion by 2020.
As Brett mentioned earlier in the book, in mid-2017 we launched our own shopping portal, SkyShopper, that allows customers to shop and pay for a wide range of goods and services, ranging from flights, hotel bookings, electronics and fashion to entertainment and groceries, all under one digital roof. While it is early days, customer interest in the platform has been high and we see the service as being a strong catalyst in the growth of this industry, and longterm in helping the transformation to a cashless society.
The emergence of a large Millennial segment and their digital affinity prompted us in 2017 to launch Liv., the UAE’s first digital lifestyle bank targeted at Millenials. Liv., built from the ground-up by a Millennial team, provides customers with a unique digital banking experience built around lifestyle. The app is a friend and wing-man first and a bank later, helping customers manage their daily life and social engagements apart from a cool banking experience that includes instant account opening, free transfers, POS payments, bill-splits and the like. Liv. already accounts for one-fourth of our new accounts acquisition.
Our new FaceBankingTM video banking service allows customers to bank face-to-face from home or office, or carry out live chats with a banking advisor. The new service empowers customers to connect 24/7 with an advisor through our online or mobile banking platforms, and carry out enquiries and transactions, including signing up for a personal loan or credit card instantly.
Back in the 1960s when I grew up in a small town in India, the branch manager of the neighbourhood bank was an iconic figure. He knew everything about every family in town, and took lending decisions after a subjective assessment of factors, both financial and social. When my father wanted an education loan to send my elder brother to university, the bank manager sat him down to discuss my brother’s choice of subjects, lament the state of education in the country, and after multiple cups of milky tea, signed off on the loan with a handshake and a hug.
Today, a loan can still happen over a cup of tea, or dinner. But the difference is that you can do it from the comfort of your office or home, without even knowing the name of your bank manager. You go online, chat with an advisor—perhaps even a robot advisor—complete a digital form, upload a couple of documents, and the loan is credited by the time you finish your cuppa. It is high-tech but also high-touch. And that’s what will continue to win the day for progressive banks like Emirates NBD if I have anything to do with it.
Suvo Sarkar is a retail banking professional with over 30 years of multi-functional experience with five leading financial institutions and in multiple geographies across Asia, Middle East and Africa. Currently, he is the Senior Executive Vice President and Group Head of Retail Banking and Wealth Management of Emirates NBD, the biggest bank in Dubai. In 2018, Suvo was recognized as the “Retail Banker of the Year” at the Retail Banker International global awards. He can be reached [email protected].
Part 04
Which banks survive, which don’t
9 ➡ Adapt or Die
10 ➡ Conclusion: The Roadmap to Bank 4.0
9 Adapt or Die
Neither RedBox nor Netflix are even on the radar screen in terms of competition.
—Blockbuster CEO Jim Keyes, speaking to investors in 2008
Disruption is not new. When you look back over the last couple of centuries, you see time and again evidence that incumbents underestimated the impact of change on their industry. In the banking sector today, the huge potential changes we’re facing are no longer just focused on front-end user experiences. We’re seeing currency, capital markets, wealth management, bank licenses, labour force and economics all under attack from new emerging systems, paradigms and technologies.
I guess the question should be asked, though: when looking at the likes of Kodak, Blockbuster, Borders, Yellow Cabs, record labels and cable TV, when could we have known with certainty that they were going to be disrupted? What are the warning signs, and are there those same indicators for banks and financial institutions today?
The biggest question probably is: why is it, when faced with disruption, incumbents don’t react faster? The threat of Amazon to the retail sector has been clear for over a decade, but despite their steady increase in capabilities and reach, incumbents who had plenty of time to plan a response, have mostly been left reeling1. It’s like a mixture of disbelief in the speed of the change, combined with fear over being disrupted, often creates a condition like a deer in the headlights of an oncoming vehicle. You know you need to move, but you still get hit anyway.
What are the indicators that banking and financial services, more specifically, is about to be disrupted?
1. Power is consolidated
One of the most typical elements of predicting when an industry is ripe for disruption is imbalance or dominance by a few leading players. When industry behaviour is consolidated amongst a cabal or oligopoly—a few small players that have consolidated vast market share—the likelihood of change is lower, as those incumbents feel they dominate their sector so completely that they are immune to competition. That sort of entrenched behaviour leads to greater incentive to preserve the status quo, especially when it comes to shareholder returns in the medium term.
Figure 1: US bank share of assets by type (Source: 2015 Fed Data).
In the US, UK, EU and China banking sectors, this dominance by a few players tends to skew regulation in favour of these larger incumbents who wield enormous power politically. The “too-big-too-fail” movement during the global financial crisis is a simple indicator of the inflexibility of the industry in allowing disruption of these dominant players.
In the US in 1995, US majors held just 22 percent of market share by assets; today that’s closer to 70 percent2. When consolidation leads to a few players driving the industry, this leads to less likelihood of an orderly transition to new technology states.
2. The Industry is inflicted by outdated technology
When Netflix, Borders, Polaroid, Kodak and others went under, it was largely considered a failure of adaptation to emerging technologies. The biggest banks often have the most complex legacy systems, and that makes it difficult for them to implement new technology quickly. Creating a smartphone app seems pretty simple, until you realize you have to deal with your core banking backend and a business model, which requires compliance based on customer signatures on a physical piece of paper.
Figure 2: Transforming a bank is like turning a massive freighter; startups are more like speedboats.
Responding to new, agile disruptors takes extremely flexible technology and organisational structures. The bigger the ship, the longer it takes to turn.
It’s not just the 1960s’ era core banking systems coded on COBOL. It’s the fact that at the very core, most banks still require manual processing and paperwork for account opening, accessing a line of credit or, in the case of cheques, even sending money from one person to another. While some incremental changes are taking place on top of this layer of legacy process and technology, the reality is that when disruptors look at this tech they see an opportunity for disruption. If you still require a signature, you are probably going to get your butt handed to you in this story.
Think about the technology failures at banks of late3. Transaction system failures of POS, ATM networks, internet and mobile banking hooked into antiquated back-end technologies that were never designed to cope with the load they’re experiencing today. Swift network failures and hacks have also accounted for hundreds of millions in losses. Massive card and credit score database hacks and compromises. Bank-to-bank payments networks that still take three to five days to send your money from one bank to another. The requirement to see someone in a branch when your account is locked up because of some administrative mistake, or because you simply forgot your password. The requirement to submit 15–20 pages of documentation to open an account and prove your identity. Everywhere these historical processes and outdated legacy techno
logies make an appearance, we know there is some startup already in the process of attacking those outmoded operations.
3. Trust is still an issue
I think the public trust in us might take a generation to re-establish itself.
—Antonio Simoes, UK Chief Executive, HSBC Banking Corp, 2016
According to Gallop research4 only one in four Americans trust their banks after the global financial crisis. In the UK it’s even worse, with just 12 percent of UK respondents having a strong or very strong level of trust in banks. In the EU in general trust in banks varied between 14 percent (Ireland) to 36–38 percent in the Nordic region. Obviously trust in banks hit a historical low in 2008 during the financial crisis and it has been slow to recover—primarily because banks have not really changed in the minds of customers since the crisis. This lack of trust appears now to have become somewhat embedded generationally in Gen-Zs’ and Gen-Ys’ attitudes, which significantly lowers the barriers to new competitors emerging and capturing market share.
The argument that a potential technology major5 or FinTech “doesn’t have a banking license” is certainly not a barrier in this environment, where trust in banks is a penalty rather than an asset. The argument that a banking license is some magical standard of trust could not be further from reality today.
I believe trust is essentially a function of utility. The more usable a banking service is and the more the brand demonstrates its effective utility, whether from a licensed institution or not, the more consumers will tend to trust the brand’s capabilities.
Figure 3: Trust in UK banks (Source: Statista 2018 data).