‘FinBank's acquisition is a win-win for stakeholders’
Executive Director, Retail Banking Division, First City Monument Bank (FCMB), Nabeel Malik
was recently enlisted among the top global 120 Retail Banking leaders by the Lafferty Group. A
Princeton University Graduate and Masters Degree holder from Yale School of Management,
Connecticut, in this interview with PHILLIP ISAKPA, editor, BusinessDay, speaks on the
transformation in his organization (FCMB), occasioned by the recent acquisition of FinBank.
Ahead of the conclusion of the merger, he says the new status of the bank will not diminish the
quality of service offering to customers but will enhance it. According to him, the bank is
targeting 50 percent of its earnings from retail banking by 2015. Excerpts:
May we know the history of FCMB as a retail bank?
FCMB has a very strong history in investment banking; it then went into corporate and
commercial banking. A few years ago, we decided to build our presence in retail. Due to the fact
that we had a smaller network, we were restricted to be a sort of niche player within the retail
banking space. So, the FinBank acquisition really gave us the opportunity to go out and expand
and open up new segments profitably. To give you an idea, we have been below the radar of
most other institutions while we have been quietly building our retail presence. Today, if you
look at our first quarter results and when we include FinBank as well, almost 32 percent of our
balance sheet in deposits is contributed by retail banking and another 30 percent is contributed
by FinBank. If you just look at FCMB, retail now contributes up to 40 percent of the balance
sheet. We have been actually growing. If you look at the recent survey by KPMG, we were
number seven both for retail and Small Medium
Enterprise (SME). We are (really trying to) establishing our presence and the FinBank
acquisition actually gives us a great opportunity to try and expand our presence in this segment.
As a retail bank, what does the customer mean to you?
The customer is always at the centre of what we do. That is why instead of looking at market
share, we are really trying to focus on customer satisfaction. We actually dropped out of the
KPMG top ten in 2010. What we have been doing is trying to figure out and listen to our
customers. We have been engaged in surveys ourselves to see where we can do more. The result
is that we moved back into the top ten. We have to be reliable so that when customers want to do
something we can actually deliver on it and be extremely supportive. So, those are the key
elements of our strategy. By being supportive, we mean providing credit to Nigerians. So, we
started developing models that are reliable for lending to the mass market and we have been
quite successful in doing that. We have been growing very steadily. You can see this in our
results. If you look at first quarter of 2011, we were, as a retail bank at minus N700 million.
When you look at first quarter 2012, we
were plus N1 billion. Now, how did we achieve this swing? It is really by focusing and building
our loan book and ensuring that our Non Performing Loans (“NPLs”) stay very low. In our first
quarter results, our NPLs have improved year-on-year. They went down from 5 to 3 percent. So,
we have been building a good quality loan book along with building our deposit book. So, the
key is really on focusing on customer satisfaction.
How seamless was your movement from corporate to retail?
The corporate banking space has become increasingly competitive. We found out that our middle
and mass market is generally underserved. So, our decision to enter the retail market is a natural
extension of banking services to these segments in the Nigerian market place. As you know, the
Central Bank of Nigeria (CBN) is keen that banks get into these segments and start providing
these services. A very small percentage of the population remains banked while most are
unbanked. So, the opportunity in this market place is clearly in the retail and small business
segment. We see this as a natural extension of building on our solid heritage and to now offer
retail banking products that are reliable and have the same quality that we are known for in the
investment and corporate banking world
Small businesses are critical to the growth of economies all over the world. How would your
intervention help support this in terms of building the nation’s economy?
In our framework, businesses that are below N2.5 billion in turnover are part of the retail space.
Businesses that are over this threshold are served by our corporate and commercial banking
segment. As you know, Nigeria is largely a trading economy right now. To give retail greater
attention post merger and focus on smaller businesses (who are really the underserved), we are
reducing the threshold to move into corporate and commercial. So, what we have is a number of
products specifically aimed at these segments. Then, what we have seen is that there are schools,
health institutions etc which are growing segments. With the help of the IFC, we will start
bringing experts into this segment so that we bring the best the world has to offer into the
Nigerian market.
How would you ensure that service delivery does not suffer?
You know that the biggest challenge is infrastructure. Our branches are running mostly on diesel.
This means costs are up and security issues are also bringing up a number of problems that we as
banks have to address. We cannot ignore these, and we are addressing these challenges by
investing appropriately. Now, with the FinBank acquisition, we have doubled our physical
footprint. But we are also investing in our internet and mobile banking. With the Fin acquisition,
we also have access to the product called ‘FlashMe Cash’. This is one of the most stable mobile
banking platforms in Nigeria. It has been operating for the last ten years. We will now start
building on this foundation as well. Recently, we were certified by ISO 9000. Now, that also
helps us put in place processes that we can rely on. We are actually investing a lot on the
customer
experience to make sure that our customers receive a great experience when they come. Are we
there yet? (Not quite). But we have started taking the right steps and we hope to improve yearly.
What about the issue of products pricing?
In terms of pricing, we will be at par with the rest of the market. In this business, you cannot start
charging people more if you are not offering more. Again, our focus is making sure that we are a
reliable bank and people can trust us to do what we say. To us, that is the key thing. We will
never have the highest price in the market. We will make sure that we deliver services that are
better than competition. That is the challenge and that is why we are building scale which allow
us to give the right quality of service
You said FCMB is number seven in the market. I am sure some people may say that’s not
good enough. You have acquired FinBank, which means you have more branches. What else
are you looking at?
You know, FinBank although a smaller bank had more mass market customers than FCMB. In
terms of market size, there are about 80 million bankable adults. When you look at this, the
market share that all the banks have is fairly negligible. The market is large enough that all of us
can play and grow in it. Some of the banks that have been here for many years obviously have
much larger customer bases. Even at that, the percentage of banked population is still very low.
That is the real challenge. We obviously want to double our penetration in the next two and three
years. But, we want to do it in a sustainable manner.
Deepening penetration is important to getting onboard the unbanked population. How do you
intend to do this?
We are trying to invest in the right model to service this mass market. A person with an average
savings of N10, 000, you make very little money from him/her, which is fine. You cannot afford
to service customers by having them coming only to your branches. We are trying to work on a
low-cost-to-serve model that is also more convenient for them. You cannot push customers out
of branches and make life harder. Luckily, the CBN also has a supportive infrastructure to start
going into these segments. We will pilot a model that would make it easier and convenient for
small account holders. This will not just be through physical distribution only, but will also rely
on mobile and internet based offerings. We have a number of direct sales agents also who
currently go out and make it easier for customers to come to us.
Where do you see retail banking in the next ten years?
For FCMB, we are not going to ignore our heritage. We want to continue to be very strong
players in the corporate and investment banking. We want to have a balanced revenue
contribution from retail; may be, 50/50 going forward. In a growing market, we expect both our
corporate and retail banking to grow. For instance, Spar is expanding into the market. KFC is
doing the same. Obviously, we are all looking at a growing middle class. As this middle class
grows, they will obviously need banking service. CBN’s cashless initiative also supports the
trend. I see retail banking playing a bigger role in the general banking environment. It will
depend on each bank’s strategy.
The future of retail banking is in the cashless economy. How is FCMB going to play?
We are very active in the electronic space with the FlashMe acquisition, and our own mobile and
internet banking offerings. The key thing is that we look forward to hearing from our customers.
Every complaint is a gift because it allows us to then do a root cause analysis and fix it for all our
customers. Today, about 50 percent of our day-to-day transactions have already moved to our
ATM and call centre. Our retail customers now transfer over N1 billion a month on the internet
and this is growing at a very fast pace. We are building all these capabilities to allow people to
start using these channels and making it quite reliable and convenient. Today, for instance, I
don’t require people to physically come to our branch to order a cheque book. Customers can
use our call centre and pick it up from the nearest branch. We are really trying to build
convenience and reliability by investing quite a bit in the infrastructure side of it.
How is the cashless regime going to affect your branch network?
Globally, branches continue to play a key role in the banking services. In mature markets like the
United Kingdom and United States, people had thought that there would be internet only in
banks. But quickly, everyone has realised that the foundation is around ‘bricks and clicks’. It is
not just clicks only. The balance has shifted away from just focusing only on branch expansion.
All the banks have realised, and it is very important for markets like ours, that the branch will
still remain a key source of trust and comfort for customers. We will continue to reconfigure and
improve our branch network as we move forward. Our investment in alternative channels is not
at the expense of branch expansion, we will continue to invest in all channels
How do you intend to distinguish yourself from competition?
Providing good service is not a secret formula. Everyone is saying we want to provide good
service. The key would be who will be able to deliver it. We are regularly trying to figure out
what our customers think about us, and then doing a root cause analysis and fixing our issues.
This has already helped us to become better year-on-year. We will continue to listen to our
customers. We will continue to respond to their needs. The entire bank is committed to this and
our CEO is keenly interested to learn what our customer thinks about us. As we become much
more a customer-centric orgnaisation, we will continue to drive our customer experience to be
the best in this market. We want to be a listening organisation that responds to customers.
How did customers respond to the recent closure of some of your branches?
We closed about 44 branches and whenever we did, we made sure that there was a FinBank
nearby or an FCMB branch nearby. Both banks have the same technology platform, so when we
moved these branches, we communicated sufficiently to our customers. However, we have seen
some teething problems, but generally customers have perceived this to have gone well. It is not
just for FinBank customers but also for FCMB customers. All of a sudden, a bank has more
customers. It makes it even more important for us to make sure that our alternate channels are
working well. So, people do not necessarily have to visit a branch to perform banking
transactions. They can continue to bank with us satisfactorily. We have managed the teething
issues in a fairly smooth manner.
What assurances can you give to your customers following the acquisition?
It’s not just FinBank customers that are wondering, even FCMB are also wondering what will
happen to them. It is not just customers, members of staff also wonder. We are communicating to
staff, customers and shareholders. That’s why we are in business; we are trustees of their money.
When we chose FinBank, we did not want to go for something that was really big. We wanted to
get a nice sized bank that we would be able to merge with. For both set of customers, we have
told them that they are going to benefit from a stronger bank which is more convenient and
would offer them more products. There are lots of products we can offer to Fin customers
hitherto they did not have. We can offer a more versatile mobile banking offering to FCMB
customers. So, it is really going to be a
win-win for our shareholders, staff and customers.
“How would you push the message that following the acquisition of Finbank you have
adequate national coverage.”?
Actually, when we looked at our respective networks, it was very complementary. So, FinBank
was very strong in the North and the South-South. Now, while we have presence in the North
and South-South, it actually augments our very strong presence in Lagos and the South-West.
Together, we actually become a stronger and better spread-out bank than we were, individually.
Retail banking thrives on products, and people need to know what products you have. What is
the product suite like?
It is actually a double edged sword. Products have to be reliable and easy to understand. As we
merged the two banks, there are many different types of products. The first order of business is
to actually make it simpler for customers to understand our set of products and to make it easy
for our sales force to sell. Misselling is a big problem globally. People try and push products
down the customer’s throat. We are telling our sales force not to push products but to try and
first understand what the customers’ needs are and then see which appropriate product meets that
need. Product development for the sake of increasing the number of products is not top of mind
for us. We are making sure that we have easily understandable products and we that we have a
common product suite which of course we would roll out once our legal merger happens. Right
now, we are actually trying to see how to reduce the amount of products so they are easier to
understand for our customers as well as for our sales force.
In streamlining the products, how is FCMB ensuring that customers are not adversely
affected?
For instance, there might be a current account that is branded in FinBank. FCMB may have a
similar current account. We will map customers to the product that are as good if not better. That
is the guiding principle. It is not to deprive people. We will not shut down a current account but
will move all the customers to a new current account product. I will inform them that this is a
new product, these are the features which you did not enjoy earlier and clearly share the benefits.
Cards are key in this retail banking business. How is FCMB playing in the card market?
If you observe, credit cards have had a chequered history in Nigeria. There have been some
institutions that have burnt their fingers so to speak because they just went in. We are pacing our
entry into the space. Right now, we do have cards such as debit cards, pre-funded cards.
Unsecured credit cards are the products in which banks have not had very good experiences. We
do not want to rush into issuing cards without making the proper investments because we want to
make sure that our cards work. We also want to make sure that the infrastructure is able to
support our cards and that we are doing all the proper due diligence before we give a credit card
to a customer. We want to be known as a responsible lender in this market.
When the legal side of the tying up is complete, what are your customers, especially those in
the retail segment, going to see?
They would see a much stronger bank, a friendlier bank. We have almost 280 branches. We have
almost 300 ATMs, internet banking, mobile banking and a call centre that all work very well.
We would have a number of touch points and outlets that would be better and they would get
better products and services.
When do we expect this merger to be completed?
This merger is on its way. We just need some requisite permission to go forward with the
regulatory side of it. Right now, Fin Bank is a wholly owned subsidiary of FCMB, but it is still a
separate entity. So, when we get the regulatory permission to merge legally, we would move
very quickly. Right now, we still have FinBank branches and the FinBank brand. And, we
continue to support both the FinBank customers and branches as well as FCMB.
What is your outlook for the industry generally?
So many good steps have been taken by the regulatory authorities. The banking system has been
cleaned up so to speak with the introduction of AMCON etc. I see this in a very optimistic light.
With a cleaner banking system and with a regulator that is in touch with customers and with a
growing middle class, I only see positive things happening not just for the retail segment but also
for the corporate and investment banking segments. So, I am quite optimistic about the outlook
for banking in particular.