An interview with Noman Azhar, Country Head of Branchless Banking at JS Bank 'Pakistan's digital banking space is opening up'

Noman Azhar is currently working as Country Head of Branchless Banking at JS Bank. He is a passionate technologist working on Mobile Money, Digital Payments and Digitization. Having worked in Leading telecom operator, Banks and Technology provider for over 12 years and being one of the youngest leaders in this arena for Pakistan, he has developed his expertise for empowering people of Pakistan through Financial Inclusion and digitization.

BR Research recently sat down with Noman and discussed matter surrounding Pakistan's digital banking sphere and the future prospects. Following is an edited excerpt of the conversation.

BR Research: What are some of your key digital products and what markets care they catering to?

Noman Azhar: Digital banking in general targets customers who are more tech savvy with more interaction with digital interfaces. In Pakistan, we are gradually evolving from agency banking to digital banking. Pakistan's banked population is only 12 percent, and whatever we do in terms of digital, we are only targeting that 12 percent. We are now elevating customers from agency to digital banking by introducing unique use cases.

At JS, we had our agency banking, which could also be termed as branchless banking, with the name of J-Cash. This gives us access to the unbanked segment as well, and we have 370 branches, and a well spread agent network. The agent network helps us tap the unbanked where we may not have a branch. Through that, we engage our customer on any transaction. Money transfer is the most basic transaction that occurs on the platform.

The idea is to convince that person who is transferring or receiving money, to open up a mobile account. We competed heavily on domestic remittances, but the agent has complete power unlike telecom. The moment you go for domestic remittance; it is the agent's discretion which platform he uses. It makes more sense for us to have a wallet, so that the players stick with us.

BRR: Is sending and receiving money the only use case and value that you want your mobile wallet to be catering to?

NA: That is surely not the only value. We figured out that we need use cases to enhance the usage. Everyone in the market is working on creating and shaping up new use cases, from QR codes to utility bill payments to domestic remittances and airtime recharge.

At JS, knowing our limitations as a midsized bank, we needed to figure out our green field. We identified that we will focus not only on the agent led transactions, but we will bring in customers only where there is sufficient pull. We devised a pull base strategy to execute our plan.

BRR: What exactly is a pull based strategy?

NA: There are pull and push based strategies out there. When the customer is asking for a product, you push it into the market. Pull based is when the customer has no other option or explicitly wants to buy and work with your product.

We wanted to develop products around the pull strategy where the customers approach the product themselves, instead of the other way round. We did not want to compete in the agent network market. We assumed at that time that the agent would not mind making money, irrespective of the product. One way was to give the agent extra money to entice him. The other way was to build a use case where he could see the opportunity of making money.

BRR: What is one use case which you built specifically over the past two years that may or may not have become your flagship?

NA: We first created a use case of digital traffic Challan and policing, in association with Islamabad Police. We offered complete digitization of the entire Challan process and Sergeant tracking. To digitize a financial component, it is a must to have a digital solution at the backend.

We launched this couple of years ago, and people had just two options back then. We went ahead in partnership with the National Bank of Pakistan, which has the mandate to collect this money. We signed an agency agreement with the NBP, and the whole payment mechanism was smoothened. The only options at that time was the old method of personally taking out time and effort to queue up outside a bank and later collect the papers from one of the checkpoints. And the other was paying through the J-Cash mobile wallet right there, or use a nearby agent to pay the same.

The day we launched, there was a mess across Islamabad, as agents were not active. That day, 2200 Challans were booked, and people in Islamabad were looking for J-Cash agents. We ensured at least two agents in a radius of every 3 km. So when customers went on searching J-Cash by name, even those who were not with us, despite us asking them to be our agents, approached us to be enrolled with us.

Almost one-third of traffic tickets in Islamabad before digitization, were unpaid, as corrupt practices were aplenty. Today, the rate is 99.9 percent, that too in a timely manner, without any corrupt practices.

BRR: Who invested on the technology end of this arrangement?

NA: It works on PPP mode, where private entity invests in it, and we make our ROI out of the transaction fee, which is split between us and the partner. The pull that we generated from that exercise was massive, and it activated our agent network to new highs. You go in the rest of Pakistan and ask about J-Cash, most people would not know, because we do not invest in marketing. But in Islamabad, the pull is such that it is everywhere.

If two million Challan tickets have been paid through us in the last 30 months, those paid at the bank personally are only 16. When there is convenience at a minimal cost, it does not hurt. Not only did the E-Challan system bring ease, it also significantly reduced multitier corruption.

BRR: Is J-Cash the only option for Islamabad customers to pay their Challans?

NA: Initially, it was only us, now there is one more partner. As a bank, our strategy is not to engage in competition, because Pakistan it too big a country for that. We need to complement more than compete. We want to take a step in that direction and want the industry to follow us. Building use cases is what JS Bank as a strategy adopts.

We have a special focus on P2G, because no one has ever thought of digitizing payments in the government sector. The tricky bit in P2G is that the government runs at its own speed. Right now, there are around 20 big projects underway, which could digitize up to 30 percent of the entire government payments.

Luckily, our mandate gives us scalability on both the software and hardware. For example, very recently, we were working on one district of KPK where 70,000 tickets were binge generated per day. Then, we expanded to the entire province, which obviously means a much bigger scale, but it took us just one day to enable the solution. A few months down the road, in 33 districts of KPK and FATA, the only way to pay the traffic ticket would be J-Cash. We have a direct mandate over there, which does not involve the NBP.

The best part is that we do not keep the data and source code ownership with us. The interest of the government and data ownership is very sensitive, and we being a very responsible organization understand the significance. We are practicing the highest international standards that are opted in PPP in Pakistan.

BRR: What is your take on the payment security directives issued earlier this year by the SBP? Do you think they are realistic or overly ambitious?

NA: The kind of satiation we are in, we should be very ambitious, if we want to succeed as a country. It is very easy to say we are going to be digital, but it comes with a cost. The highest cost to it is related to security, and I glad that the BSP has been very proactive. The digitization that has happened to date in Pakistan is merely 5 percent of what is going to happen in the next three years. People may think it is ambitious, but I think they are looking way ahead of the challenges, or else we might have ended up with big blunders.

BRR: Why is there so little interoperability between banks and telcos when it comes to this whole digital scene?

NA: That is a very relevant question. Interoperability is the way to go. Everybody is coming with their own Apps and that comes at a cost. Someone may have a cheaper bus ticket; the other may offer a discount on an eatery. Problem is that I have a limited pocket to spend from, and I would not keep money in all of these different Apps.

What I do is I shift the limited money to one App when that offers massive value, and never use it again. Then I shift to another App to cash the value and so on. It is the usage that matters, not the number of downloads. You would not be selling on 70 percent discounts forever. This is where you develop use cases and put it on a single switch - which gives multiple options.

The SBP has set the stage, and it will be a matter of few months where there is a very good interoperable solution in the market, and that will take on, on its own. When the customer wants something, he will run it, and even be ready to pay a few extra bucks for convenience.

BRR: Why can't Pakistan have a unified payment interface to seamlessly integrate backend of commercial banks and telcos?

NA: Somehow, we are blessed in a way that the SBP is carrying a very progressive thought process and strategy on this front. Four years ago, the SBP was saying the same thing, when it launched PayPak, because it is a unified paying scheme.

We will eventually go in this direction as in industry, but since everyone thinks that the commercial benefit is higher with remaining in silos than opening up, it will take a mindset shift.

With the kind of investments coming in Pakistan in the financial services industry, it won't be too long before we open up, or are forced to open up.

BRR: What is your view in the regulatory guidelines on the EMI issued earlier in April this year?

NA: I had posted this question to a senior industry professional at a seminar not very long ago, and I will just quote his response. He said, "We are a country with 220 million people. If you ask any scientist in the world to define us into segments, and he defines us, I will not agree, because we cannot be defined in that way. The lifestyles are in thousands of numbers depending on various factors."

Because we have so many segments, banks as bigger institutions, cannot cater to every segment. It goes back to building use cases. The EMI is really going to make life easier, and will support startups and FinTechs to no bounds.

BRR: How do you intend to support the startups?

NA: We are the only bank in Pakistan with a clear intent of supporting startups in the last two years. We were the first bank to deploy Apigee, which is an open API based platform of Google. We have a dedicated portal, which enables digital registration for startups, where the APIs are available for everyone to connect with their products.

We need to reach the startups; it should not be the other way round. The financial services industry is the enabler to startups. We also have other initiatives, such as Hackathon.

We are very actively engaged with all the bodies that are associated with startups in Pakistan.