Awards for Excellence 2020
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The Covid-19 pandemic has accelerated the move towards cashless economies as governments advise against the use of cash because of its role as a vector for the virus. That has left many financial institutions scrambling to upgrade their systems.
United Arab Emirates’ Mashreq continues to be ahead of the competition when it comes to digital innovation, making it well placed to operate in the new digital post-Covid-19 world. Already 80% of new account openings have come through digital channels, while 97% of financial transactions and 60% of non-financial transactions are done digitally.
Mashreq is reaping the benefits of its four-pillar innovation strategy: it has been successful in digitalizing the front end, and has now embarked on an all-in digital transformation.
“Tech and innovation are in our DNA,” says Subroto Som, group head of retail banking. “We decided to change the core of our tech and upgrade it. We’ve developed a faster, better, quicker integrated approach across the bank. We’re a tech company in the banking space.
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Ahmed Abdelaal |
“Our customers want things almost instantaneously,” he says. “Two or three years ago, almost 55% visited branches, now it is less than 20% twice a year.”
If a positive outcome of Covid-19 is greater digital and financial inclusion, then Mashreq is taking a leading role in both providing access to both digital financing and education.
As well as improving its offering to customers, the bank’s digital drive should improve its efficiency, bring down costs and enable it to take greater market share.
“In the last couple of years, a lot has changed,” says Som. “We’re reducing the cost of acquiring new customers on the retail side, we’ve reduced the cost of infrastructure and branches, and improved the turnaround time for customers. All of these things are measurable.”
Som adds that the investment costs of Mashreq’s digital drive are covered by costs cut elsewhere due to the more efficient system.
“The whole process is self-funded,” he says.
The bank says that once customers are onboard digitally, the cost to the bank of capturing greater market share or share of customer wallet, is much lower.
Mashreq’s cost efficiency ratio remains fairly high, at 43.8% down from 44.1% a year earlier, while its net profit for 2019 remains flat on the year at Dh2.1 billion ($571.7 million).
It has seen strong deposit growth of 9.3% to Dh91 billion from Dh83 billion and a jump in loans and advances to Dh76.2 billion from Dh69.3 billion a year earlier.
Mashreq educated 18,000 clients on the benefits of using digital technology and reports that even the most committed to manual have switched to digital. As part of its outreach programme, the bank has partnered with MEED to offer services and tech webinars.
With lockdowns across the region, the bank went live with its first blockchain know-your-customer (KYC) onboarding platform in March 2020.
In line with the UAE Blockchain Strategy 2021, Mashreq partnered with the Dubai International Financial Centre and Swedish fintech firm Norbloc to create the platform, which aims to streamline and simplify the KYC and onboarding process. Now, 80% of Mashreq’s new accounts are opened digitally.
SMEs
As well as greater financial inclusion, Mashreq is driving private-sector development by improving access to banking and finance for SMEs.
In September 2019, Mashreq launched NeoBiz, the first digital banking proposition in the UAE aimed at small and medium-sized enterprises. It has so far accounted for 50% of new small business accounts.
NeoBiz follows on from the launch of Neo, a full suite digital bank aimed at retail customers. The bank has almost 100,000 customers.
The bank has also continued to innovate in corporate and investment banking, enhancing its debt capital markets capabilities by arranging the first ever fintech sukuk run on the Wethaq platform. The deal was the first automatic sukuk issuance in the region.
“We see it as another channel for issuers, which will enable more ready access [to financing] for medium-sized companies,” says Joel Van Dusen, head of corporate and investment banking.
The next step for corporate banking is to use advanced analytics and predictive mining of data to help it better understand risk and its clients, says Van Dusen.
Ahmed Abdelaal is group chief executive officer at Mashreq Bank.
