The banking business has been evolving rapidly in recent years. Digital channels have transformed the way people interact with their money – and the way banks interact with their customers. In Mongolia, banking has been changing in other ways too. The old delineation between commercial and retail banks has disappeared, led by commercial banks seeking to diversify into the less cyclical and more profitable retail business.
Today, most Mongolian banks serve both types of customer, increasing competition and raising standards for all their customers. Meanwhile, the growing number of fintechs also entering financial services has further intensified competition. So far there has been little competition from international banks, but this is also starting to change. China’s ICBC opened a Mongolia office recently. If more foreign banks enter the country, that will further increase competition.
Khan Bank welcomes this competition. It has already brought international experience to its clients via its management team, which includes a US chief executive and an Australian CIO. It counts a number of foreign businesses active in Mongolia among its clients, from countries like China, Japan and South Korea, and welcomes the opportunity to reach more.
For all the change, at its heart Khan Bank remains a retail bank, deriving the vast majority of its revenues from its retail business. A former agricultural bank, it is still often perceived as grand and distinguished, perhaps a little conservative, and certainly one of the foremost financial institutions in the country.
There is some truth in this. Khan Bank was recently named Euromoney’s Best Mongolian Bank for 2018, its ninth Euromoney award since the inaugural Mongolia award in 2006.
It is grand in the sense of having more than 6,000 staff across its more than 530 branches and offices around the country, making it one of Mongolia’s biggest employers – and tax payers. In a country with 3.1 million people, 2.4 million of them have bank accounts with Khan Bank. It is number three in Mongolia’s official top-100 companies list, the highest-placed privately listed company, behind two partially state-owned mining companies.
Years of prudent management have also made it one of Mongolia’s safest banks. In 2017, when the IMF extended a funding facility for the Mongolian government, an asset-quality review rated Khan Bank one of the healthiest banks in the country. While a number of Mongolian banks were ordered to raise additional capital to repair their balance sheets, Khan Bank was not.
But the perception has not quite kept up with the changing reality. Because while Khan Bank has been careful to retain the things that traditionally made it successful, it has also been open to new businesses. For example, last year the bank saw phenomenal growth in its new credit cards business.
It has also developed into one of the great innovators in Mongolian finance. Significant investment in its digital platform has made it one of the most sophisticated and widely used in the country, attracting many new young customers. Mongolia has a very tech-savvy population. Smartphone penetration is high, making it particularly fertile ground for innovative digital banking products. Khan Bank has been aggressive in rolling out and innovating in digital banking, recently enabling facial recognition on its smartphone app, to become the first bank in Mongolia offering that functionality on Apple’s new iPhone.
It has promoted other new products, like Qpay, Mongolia’s first QR code payment service, incorporating fingerprint log-in and e-billing functionality. By having the best online platform, the most innovative products and the biggest network of branches, Khan Bank can serve any of its clients’ needs, wherever they are, at any time.
Khan Bank’s efforts have been rewarded with a high market share of the country’s digital banking activity: around 65% of Mongolia’s mobile banking transactions to date were executed on its platform.
These changes to the way people bank have transformed Khan Bank’s business. Today only around 5% of the bank’s transactions in Ulaan Baatar occur at branches. Even in rural areas, where there is less commercial activity, it is only 15%. But while that general trend has encouraged some banks to divert resources away from bricks and mortar, it has not shaken Khan Bank’s commitment to its extensive network of branches, ATMs and point-of-sale terminals. This network remains one of Khan Bank’s key advantages over its competitors.
Khan Bank does not see digital banking as a replacement for its branches, but as complementary to them. Online banking reduces crowds and improves the experience for customers who prefer a human touch. Khan Bank has even invested in making the face-to-face banking experience more convenient, with 200 express banking centres and dedicated branches, for example serving priority banking customers.
Khan Bank’s extensive reach is also an important value-add for its corporate clients. With the largest network of clients in the country, the bank is a key partner for its business customers, helping them connect. It fosters business opportunities via networking and workshop events, or simply by connecting clients where it sees potential mutual advantage.
But Khan Bank knows this is only half of its job. As successful as the bank has been at growing the business and selling products, it recognises it also has a responsibility to educate customers about how to use these products to manage their finances efficiently.
The growth of digital banking has made this issue more urgent. Banks cannot leave clients to manage their online security alone.
Khan Bank, and all its peers, must do everything they can to protect their customers from things like ID theft, ensuring its products are as secure as they are convenient.