KARACHI: In recent years, as foreign banks have announced either their outright departure or at least a severe curtailment of operations in Pakistan, one name has been conspicuous for not having any apparent desire to leave the country: SCB. Its success in Pakistan is a case study in the virtues of a long-term investment horizon, and a lesson on how foreign banks can use technology to capitalise on growth in frontier markets.
The first thing to understand about Standard Chartered is that it is no ordinary foreign bank. “We do not have a home market,” said Raheel Ahmed, the head of retail banking for the Middle East, Africa and Pakistan, in an interview with The Express Tribune.
What Ahmed is referring to is the fact that while Standard Chartered is headquartered in London, it derives more than 90% of its revenues from outside the United Kingdom, primarily focusing its business on Asia, Africa, and the Middle East. It is listed in London, but also in Hong Kong and Mumbai.
It opened its first branch in Karachi almost exactly 150 years ago, in 1863. This is clearly not a bank in the business of leaving when things get rough. “We have a very long term investment horizon,” said Ahmed. “Our view is not just of a few years. We look at the next fifty, even hundred years of growth opportunity.”
Standard Chartered Bank Pakistan is listed on the Karachi Stock Exchange, though 99% of it is owned by the bank’s global parent. At 130 branches in 29 cities, its Pakistani retail branch network is the second largest for Standard Chartered Bank globally, second only to its network in South Korea. Part of this is the result of the successful merger with Union Bank in late 2006. Regardless, the large branch network is a huge advantage for the bank.
“We know Pakistan as well as any local bank,” said Ahmed.
Size is not always useful, however, and acquisition of a local rival is not always a successful strategy for foreign banks. The now-defunct ABN Amro Bank bought out Prime Bank in 2007, but that merger was broadly seen as a disaster.
What distinguishes Standard Chartered from its rivals is the relentless pursuit of delivering a better customer experience, leveraging technology to a greater degree than most, if not all, of its rivals. “The paradigm of customer experience being paramount has been a key differentiating factor,” said Ahmed.
The bank offers one of the most convenient suite of technology solutions for banking customers. It has the highest number of cash deposit machines in Pakistan, for instance. It was the first bank to introduce ATMs for the visually impaired. And it is a dominant player in internet banking.
There are over 800,000 users of internet banking in Pakistan, and Standard Chartered has a 37% market share in that category, despite accounting for only 4% of all deposits. The ease of use of its online banking platform has resulted in the bank being preferred for online money transfers. “We are the transactional bank of convenience for a larger number of people,” said Ahmed. He is being modest. Standard Chartered is involved in 80% of all online interbank transfers in the country.
Positioning itself as the primary transactional bank has been a shrewd move: if customers prefer the bank for making their payments, they are likely to make sure that their account at Standard Chartered has as much money in it as possible. The results of this strategy show up in the bank’s deposits-per-branch ratio: at more than Rs2 billion per branch, it is the highest in the country.
Yet the bank’s management is anything but complacent. “There is no barrier between local and foreign banks in terms of technology anymore,” said Ahmed. And so it is upping the ante: using satellite imaging to decide branch locations and revamping the design of many of its branches.
That investment has shown up in the bank’s profitability: it is the tenth largest by deposits, but sixth largest by net income, which clocked in at Rs6 billion for 2012, up 8.9% for the year.
Courtesy: The Express Tribune