M. Mudassar Aqil discusses FINCA’s transformation journey, and how the bank is positioning itself as a platform for enabling lifestyle services.
With CEO M. Mudassar Aqil at the helm, Pakistan’s FINCA Microfinance Bank has achieved rapid growth and recognition as an innovation leader in serving low-income entrepreneurs. Being open to the possibilities of the digital world has been key to the bank’s successful transformation.
“Banks need to be ready to accept new possibilities across the board,” says Aqil.
“The world is changing faster than ever; digital applications and a new way of work have impacted every human interaction with each other and with their environment. Faster decision-making, whether personal or professional, is required, with increasing choices available on any smartphone. Therefore nimble, proactive and increasingly automated decision-making must be adopted digitally at every level of internal and external interaction. With the blessing of a forward-thinking regulator, much can be rewritten in terms of how banks can deliver financial services.”
To capture this digital opportunity, Aqil says, banks need to marry digital banking with core business and exploit technology to create a delightful customer experience – in many cases becoming a platform for enabling financial interactions involving other businesses.
“This puts the bank in the background, but also at the heart of the future socio-commerce experience,” he says. “To enable such a change, infrastructure needs to be realigned for roundthe-clock services with open APIs ensuring new fintechs and startups can build exciting customer experiences on top. This would be a win-win situation where banks can profitably become part of many value chains.”
Aqil describes the impact of technology on the payment ecosystem as incredible, with the dismantling of technology, regulatory and cost barriers enabling banks to leapfrog and embrace the next wave of digital merchants and customers.
“The key is to get the pricing, support systems and processes right,” he says. “Interoperability among isolated platforms is already happening, and banks must reinvent their business model to deal with this high-scale, low-price, fastevolving ecosystem. Simplicity in products, processes, infrastructure and communication is needed to manage the growth that is inevitable in underserved ecosystems like in Pakistan. Today, global fintechs like Ant Financial, Tencent and local innovators like Finja are partnering
with forward-thinking banks, creating a unique opportunity for digital payment space both online and at point of sale terminals. As well as changing not just daily behaviors, this is expected to bring a multi-tier benefits to the national economy.”
Partnerships are integral to the success of banks and fintechs in the digital payments landscape.
“Partnerships are how we bring the real value of convenience for customers that pay digitally,” says Aqil. “Banks simply by design can’t move, innovate and pivot at the speed of fintechs. But they can leverage their resilient platforms, technical knowledge, retail footprint, trusted brand and regulatory assets to let fintechs focus on doing the jobs customers desire. Banks may interface with fintechs that can build a unique user application or be an agent to acquire users, or both. The possibilities are constantly growing.
“For example, FINCA Pakistan partnered with Finja on a revenue share basis to launch the SimSim digital banking platform, where FINCA invested in building the core wallet platform and Finja took the responsibility to build consumer and merchant applications. The partnership reduced the load of broad-scale innovation for each party while allowing both to focus on their relevant strengths.”
Aqil says every company can learn from the big technology firms about the value of data to aid in decision-making and increase productivity, citing the examples of Google building an empire out of a search engine and data-driven companies like Amazon and Uber reinventing old value chains. Banks, already sitting on data goldmines, need the ability to collect and assort data in an insightful way.
“It’s important to dig deeper than just balancing transactions, to understand a customer’s real motivation behind a purchase in terms of choice of item, where to buy it, amount paid, time of payment and payment beneficiary,” says Aqil.
“Such data, when acquired and understood, can really help a bank to not only identify redundancy in services and processes, but also make customers’ experiences more delightful, fast and economical. To do this, banks must digitally invest in business intelligence and commercial teams to obsessively gather and make sense of data, and package it for decision-making at all levels internally and for the consumer.”
Evolving the right skillsets and capabilities is crucial to delivering change. To achieve this, Aqil says, FINCA first built a separate digital division to identify and cultivate a seamless partnership with the fintech, Finja.
“It’s really important to create a fence around innovation early on so the right capability can be built or acquired,” says Aqil. “In parallel, the current workforce is being rationalized and equipped with the tools for long-term digital transformation. In the next stage, the line between digital financial services and core business may further blur, creating economy of scale, new business models and operational efficiency. We believe the best way to acquire digital knowledge for our employees is to practice with a digital
change agent; therefore FINCA has invested significantly in attracting digital evangelists and thought leaders at various levels who are helping the organization morph into a forward-looking, tech-savvy financial platform. The culture of fenced experimentation where failures are celebrated and successes are quickly scaled has helped FINCA to break out of its digital inertia into a rapidly growing digital platform.”
Creating an environment to attract and retain the right talent is also critical.
“Fintech is an area where exceptional skillsets are still scarce,” says Aqil. “With ever-increasing competition to acquire and retain digital talent, monetary benefits are not enough. Employees now expect leaders and workplaces to be agile in an environment of intense digital disruption. An organization’s culture and structure must catch up to fast-evolving digital opportunities where employees feel relevant, hungry to innovate and fully engaged with challenges to explore themselves. They must find opportunities to
learn not just from digital-savvy talent among themselves, but also from formal trainings directly impacting their future prospects. When employees are given well-defined goals that they can own and share socially, they are more likely to engage with the organization on multiple levels.”
One thing those skillsets must include is full awareness of the risks that come with digital expansion. Although banks have been at the forefront of cybersecurity preparation, they remain the top targets for cybercriminals, and Aqil notes that the rapid growth of digital banking puts customers’ data, assets and confidence increasingly at stake.
“It is crucial for banks to be fully prepared to prevent, detect and respond to cyberattacks in near-real time,” he says. “That may mean a complete strategic rethinking of cybersecurity outside traditional IT silos, essentially taking a collective view of risks stemming from credit, payments, third parties and compliance.
“New ideas involving third parties with realtime customer interaction should be promoted but there is a need to iterate on them while being fenced for in-depth testing and consistent monitoring and improvement. For banks like FINCA that operate on the forefront of new technologies, regulatory compliance with cyber/data security will remain a challenge, therefore it’s critical to build an open communication channel at industry level and work with regulatory bodies to draft effective regulations circumventing threats across the ecosystem.”
While several global standards and best practices have been adopted in Pakistan including EMV and the Payment Card Industry Data Security Standard, Aqil says complete compliance is a work in progress.
“Due to prevailing challenges on money laundering and issues related to terrorism financing, regulatory standards for data security and KYC are increasingly stringent, leading to possible curtailment of innovation and a less conducive environment for digital business,” he says. “Banks are internally and externally under stress to comply with security regulation while simultaneously preparing for ever-more sophisticated cyberattacks. It’s a constant work in progress.”
As it rises to the challenges, FINCA foresees its future as a platform for enabling lifestyle services.
“Staying true to its microfinance roots, FINCA’s vision is to lift Pakistan’s underserved population out of poverty by offering financial solutions that break the status quo,” says Aqil. “We believe that is only possible by fully embracing digital partners and focusing on core strengths.
“In partnership with Finja we have launched SimSim, the first network-agonistic smartphone wallet account enabling free payments anywhere in Pakistan, a powerful self-service payroll solution for corporates, the first EMVenabled PAYPAK debit card, instant digital loans, an in-app marketplace, life, health and auto insurance, and a built-for-purpose URDU application for microfinance customers. Additionally, FINCA is one of the few banks in Pakistan to successfully merge core banking with digital banking by disbursing and collecting all microfinance loans from mobile wallet, effectively changing customers’ behaviors around usage of microcredit.
“For us, the ultimate goal is to cement the bank in the background while delightful experiences define customers’ engagement with our brand.”
If you want to know more about retail banking in the Middle East, please download the 2019 Efma Middle East review