Plotting a path post-Covid for the Middle East's banks
In late October we spoke in-person, in Dubai, to Joel Van Dusen, head of corporate and investment banking at Mashreq Bank, to understand how the bank and its clients were navigating the long journey that the pandemic has become.
Euromoney: Seven months in, how has the pandemic impacted the bank and your clients?
JvD: The impact [of the pandemic] has been extraordinary and many companies have had to respond in drastic ways.
Many sectors have been impacted particularly travel, hospitality, aviation. We have a merchant point of sale business and we see the credit and debit card swipes in the UAE and businesses are rebounding.
We’re seeing some retail off 20%, auto off about 10% and some food and grocery store business actually up. Each company responds differently and it’s good that governments around the world have responded very quickly to the pandemic and in particular, the UAE has been very responsive with a fairly aggressive stimulus package which has really helped.
Euromoney: How important is continued support from the UAE central bank?
JvD: Central bank moves have been very important to business continuity. The Targeted Economic Support Scheme (TESS) was put in place by the government.
Now this was a large program and it provided guidance as to how banks could help companies from a lending perspective, and it provided a fair amount of liquidity into the marketplace.
In total, the stimulus package was 256billion dirhams (US $70bn).
I should also mention that the UBF [UAE Bank Federation – the collective body for all banks in the UAE, chaired by Mashreq Bank Chairman, Abdulaziz Al-Ghurair] has been working very closely with the Central Bank. The group has taken a collective response and has helped the sector as a whole respond in the way best able to support companies.
Euromoney: What has the TESS achieved in the UAE?
JvD: The TESS included zero cost funding to banks which allowed the banks to extend the same benefits to corporations. It allowed for the deferral of interest and principal in selected cases. The governor of the Central Bank, at a meeting in September, indicated that 100,000 consumers, 15,000 SMEs and 1500 corporates in the UAE had benefited from TESS.
Euromoney: What digital initiatives are you working on?
At Mashreq we’ve spent a lot of time and energy on digital transformation. We have transformed our branch network into digital self-help kiosks and flagship retail branches, and this has helped many of the corporations with whom we used to deal manually to move to our digital platform, Mashreq Matrix.
We’ve seen a lot of progress during Covid and we’ve hit a 90% rate of digital transactions for our clients. We aim to move that to 100% in January 2021.
This is in response to what they want – it’s become much more efficient for them, there are cost savings and I think that one of the effects of the pandemic has been for corporations to try to reduce their costs but in a good way and this digitalization is helping them save money and increase efficiency.
One of the other digital components that we’re working on to digitize as many of the client journeys where companies touch the bank as we can. We’ve been working with the region’s first blockchain-based KYC platform which is up and running in partnership with DIFC and Norbloc.
Now there is a digital avenue where companies can onboard into the banking system very efficiently.
Euromoney: What does Mashreq Bank’s vision to be a digital banking platform mean to you and your clients?
JvD: The way I think about it is that Covid-19 has accelerated trends which were already in place. It’s no secret that the banking industry is undergoing dramatic change. Clients want an easier to use and more customer-friendly digital experience.
The other interesting trend is that fintechs are disintermediating the banking business in general. If you look at the mortgage business or supply chain and trade finance, you can see that fintechs are making inroads. So, it’s important that we transform our business to stay competitive.
We’re doing that on the corporate and the personal side in many ways. On the SME side we have NeoBiz, the UAE’s first digital platform for SMEs where we have been actively onboarding an increasing number of customers.
The growth at NeoBiz has been dramatic – 20% month on month growth in deposits, 25% month on month in revenues. Our consumer digital product, Neo, is approaching 100,000 customers and we’re constantly adding features to our corporate digital platform, Mashreq Matrix.
Euromoney: Final question. You joined just before the pandemic started and have managed transformation at a time of great challenge. Are you enjoying it?
JvD: I am very much enjoying it. It’s been a trial by fire, sure. We’ve had a perfect storm of low oil prices, Covid, disintermediation by fintechs all coming together in a rapid pace and that’s what makes the job fascinating. The nice thing about Mashreq is that it’s a very nimble forward-thinking organisation, and we’re investing in all the right areas to transform the business to be what clients are going to expect for the future.