Interviewed by Akhlaqur Rahman Sachee, Team MBR

Syed Ibrahim Saajid is a tech-savvy banker with over 10 years of experience stretchedacross the telecom, fintech, and banking industries. He is a graduate of the Institute ofBusiness Administration, University of Dhaka, and Cranfield University, and is currently working as the Vice President and Head of Citytouch Digital Banking at City Bank. He is passionate about public speaking and helping young professionals grow in their careers. Team MBR was in conversation with Mr. Syed Ibrahim Saajid and was fortunate enough to receive his take on the prospects of digital banks in Bangladesh.

Akhlaqur Rahman Sachee: The banking sector of Bangladesh is entering a new era with the introduction of digital banks, which will not require any physical branches to operate. Would you kindly share with us the changes you are expecting to take place in the banking landscape of the country with this revolutionary step?

Syed Ibrahim Saajid: This monumental and timely decision from Bangladesh Bank will take our banking industry miles ahead in terms of the ‘Smart Bangladesh’ vision of the government. This will ensure that banking services will become very convenient for general customers and that a significant portion of the unbanked population will come under the banking umbrella. Interestingly, now even conventional banks will have to digitalize all their services in order to stay competitive with the newly launched fully digital banks.

Akhlaqur Rahman Sachee: The funds that banks lend out are mostly collected from the market in the form of deposits, and the trust of depositors plays a big role here. Do you think that digital banks will be able to collect deposits smoothly without having any physical existence, which may create difficulties in gaining the trust of the depositors?

Syed Ibrahim Saajid: I believe the consumer trust factor will not be an issue for digital banks. Bangladeshi customers have been doing mobile banking through MFS companies for over a decade now. There are over 10 crore MFS account holders in the country, meaning they are doing financial transactions mostly digitally and without any significant physical presence like a branch, ATM, etc. Besides, major retail banks have also increased their digital banking capabilities in recent years, resulting in more and more customers adopting internet-based banking. For example, Citytouch, the digital banking platform of The City Bank, has over 5 lakhs customers and handles more than BDT 200 crore worth of transactions every day. So, I believe that customers are quite used to experiencing financial transactions digitally, and the trust factor will not be an issue here.

Akhlaqur Rahman Sachee: Account ownership in Bangladesh, a major indicator of financial inclusion, now stands at 53% as per The Global Findex Database 2021, which is far behind the neighbouring country of India (78%). What role do you expect the upcoming digital banks to play to ensure better financial inclusion?

Syed Ibrahim Saajid: As I said above, digital banks will make banking services extremely convenient for customers. Currently, the Bangladeshi digital financial landscape does not offer a fullfledged digital user experience to customers. For example, banks still require customers to visit their branches for certain account maintenance and other services, which requires time and costs from the customer. On the other hand, MFS operators cannot offer the full suite of banking services as they have limitations in their licence. Now, the new digital banks will have the mandate to offer full-fledged banking services while being totally digital. So, now that 53% number is definitely going to increase to a great extent.

Akhlaqur Rahman Sachee: Digital banks will implement AI-driven credit scoring systems in the loan disbursement process. Would you kindly share your thoughts on the readiness of the market to implement such systems, considering credit assessment in Bangladesh involves numerous subjective factors alongside objective ones?

Syed Ibrahim Saajid: Well, there are already a few AI-driven credit scoring-based loan products in the market. The City Bank and bKash have been offering digital nano loans up to BDT 20,000 to customers for over 1.5 years now and have already disbursed over BDT 200 crore through this product. Other banks are also coming up with similar product propositions. However, I do agree that there is a shortage of skilled human resources in Bangladesh in regards to machine learning and AI development. So, initially, there might be dependence on international service providers for this part. But with many digital banks coming and creating job opportunities in this sector, I believe more and more bright young talents will be motivated to learn and practise these skills to become prepared for the industry requirements.

Akhlaqur Rahman Sachee: The NPL ratio of the overall banking sector stood at approximately 9% by the end of June 2022, as per the Annual Report 2021-2022 of Bangladesh Bank, which clearly indicates the necessity for enhanced monitoring. As digital banks will not have branch operations, what suggestions do you have for digital banks to address this issue?

Syed Ibrahim Saajid: If you look more closely at the NPL situation in the country, you will see that it is primarily caused by the defaults of large corporate borrowers. Small retail loans typically do not have a high NPL ratio. Also, if you look at the microfinance industry, it also enjoys a much lower default rate. So, I believe NPL would not be a major concern for digital banks, as long as the AI-based credit scoring is done with the proper algorithms and with experienced resources.

Akhlaqur Rahman Sachee: The banking sector of Bangladesh is often called oversaturated, with 61 scheduled banks operating in the country. Do you think that the entry of digital banks into this sector will make it even more crowded, which may promote unhealthy competition?

Syed Ibrahim Saajid: Bangladesh still has a huge unbanked population, and the primary vision with digital banks is to bring these unbanked masses under the banking umbrella. So, I believe the primary target segments of conventional and digital banks would be different, and both types of organisations can operate within their own niche.

Akhlaqur Rahman Sachee: The banking sector has created nearly 200,000 employment for human resources will surely decline with the introduction of digital banks. What skills do aspirant bankers need to equip themselves with so that their skillsets remain relevant to the changing employment scenario?

Syed Ibrahim Saajid: Be it a digital bank or a conventional bank, students and young professionals who are aspiring to become bankers must level up their skillset. The banking industry of today’s world demands more tech- savvy and digitally native human resources. Technical resources must have a good grasp of machine learning, artificial intelligence, data- driven automation, IoT, etc. At the same time, soft skills like problem-solving, critical thinking, and emotional intelligence will be key differentiators across all divisions of the bank.

Akhlaqur Rahman Sachee: Digital banks will have some limitations, such as not being able to offer foreign trade finance, term loans to medium and large industries, and so on. Do you think that the guidelines are adequate to ensure the sustainable growth of the upcoming digital banks? Is there any other concern to be addressed?

Syed Ibrahim Saajid: Globally, digital banks are primarily focused on retail banking. Similarly, policymakers expect this new industry to mainly serve retail customers, especially the unbanked population. So, the guidelines are quite adequate in terms of the range of products and services that digital banks can offer. However, some critical factors need further clarity and elaboration from the central bank. For example, it is mentioned that digital banks cannot have their own physical channels. To date, no country in the world has been able to become 100% cashless. That means digital banks will eventually depend on other organisations like conventional banks, telecoms, or MFS operators for cash conversion purposes. This is where a clear guideline is required regarding who can be a partner for this service and what the commercial framework of this partnership would be.

The views, thoughts, and opinions expressed in the interview belong solely to the interviewee and not necessarily to his employer.