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Ahmed Kamran, Head of Services, Faysal Bank
Ahmed Kamran comes from a strong banking background. In 2004, he moved from the position of Head of Corporate Banking into the realm of IT for a specific purpose. “I was never an IT person, but I moved into technology because the bank wanted me to spearhead a very specific project.” This was the time when Faysal Bank was contemplating changing its core banking system. When Kamran migrated his job function more towards handling the Technology requirements, he managed to balance a critical equation. “Until the time I took over, the bank was considering whether or not we should change the system. I came with a clear objective; I knew there was no option for us but to change it.
What started as one project, transformed into a long-term career move. “My original plan was to simply spearhead a migration project and then move back into banking. Everyone felt that the migration would only be successful if someone with a strong banking background was on top.” That’s why in mid 2007, when Faysal Bank’s core banking solution was finally in place, Kamran also took over the function of Country Operations of the bank with a view to fuse technology with the delivery of banking services in the branches. To leverage the newly implemented centralized system, Kamran initiated another project of centralizing the back office operations from branches into few regional hubs in the first phase. With the successful completion of the first phase of centralization of banking operations project, a decision was made to bring in and empower someone with a more technical background to take over the IT operations. And that’s why, last year, a Head of IT was brought in to head the department. “In the current hierarchy we have, the IT Division reports to me, as does the Operations Division and the General Services and Property Services Division. Together, these functions combined into one single continuum enable me to carry out my core function here, which is to continue the seamless integration between the technology we have in place, and the bank’s back office operations and delivery of services.” Kamran’s title was also changed to Head of Services.
Tracing Back the Pressure Points
“To me, the Pakistani Banking industry, until the late 1960’s and early 1970’s, was fairly advanced in the use of technology of that time. UBL was spearheading computers, including several others and in the region, Pakistan was relatively advanced. The ATMs were still there as were the portfolio of services which other institutions in the region provided.” When the Banking sector came under the ownership of the Government, things changed. “For the next 30 years, as far as the investment of technology in Banking is concerned, practically nothing happened.” In the 1990’s when some private banks were allowed to operate in Pakistan and the mistake made was that those banks started with very small capital base. “Because the banks had such a small capital base, there was already a resource crunch. With limited resources, the banks were forced to use the older, legacy systems already available in the market. Most of them used UNIBANK of United Bank, and started their operations. By that time, the larger Government banks had already become stale in their technology operations.”
By the middle of 1990’s, the foreign banks began making inroads into consumer banking. “You see, the foreign banks who already had a great deal of exposure to technology-oriented offerings, were also making their presence felt in Pakistan. And as the banks began opening up shop in Pakistan, the pressure of all this technology was being felt by the local institutions.” By 2000, every bank felt the heat and realized that if they didn’t ramp up their technology platforms, they would have been out of business.
Kamran explains that the need to increase technological integration in banking institutions originates from three main sources. “Competition is a major driver. When Citibank, for example, introduced credit cards in Pakistan, they were suitably placed to offer solutions to consumers that no other local banks could have dreamed of at that time. The ‘demand’ per say was not there, but when the products were made available, the markets began to level out automatically in order to retain their customers.” Secondly, explains Kamran, is the physical expansion that banks were making. “In order to serve a larger customer base, banks that were opening up branch offices across the country, had to invest in technology platforms which would support the kind of coordination and growth required.”
And finally, explains the Head of Services, the need to be able to roll out products and services quickly, sent the message home that if a bank wanted to remain aggressive in its growth and portfolio, it must make strong investments in technology. “Most of these retail and consumer products, be it a car loan, credit card or anything else, depend on a number of processes which can only be logistically feasible if you have a robust network and information system in place.” No bank can be successful in Consumer Banking if they didn’t have a strong technology infrastructure. “Also, the time frame we are talking about, was a time when, due to political reasons, very little was happening in corporate banking. Institutions, who wanted to succeed at consumer banking, were already planning their infrastructure and support back then.”
But there was already a challenge that banks were faced with. There were no local system integrators or solution providers to meet the technology demands the banks were encountering . “This meant we had to shop outside the country for packaged solutions who could match our needs. MCB and Habib Bank took the lead at that time by signing on new Core Banking Systems.” Faysal Bank soon followed the giants into the arena.
The legacy system that Faysal Bank had its disposal ran a distributed database system. Like a lot of other banks, this meant that every branch had its own database. “We had already grown to 56 branches, which meant 56 different databases! Of course we had a great challenge in consolidating the MIS and reports from the branches.” Imagine that. Every time the bank wanted to launch a new product or make any policy change, it would need to go into the main layer of the core banking system, which was turning into one big jumble of codes. If the bank didn’t make the move when it did, it would not have been able to compete in the market.
According to Kamran, previously there was no need or pressure to produce the kinds of MIS reports as is the demand today, and neither was the regulatory environment this demanding. “The State Bank of the 1980’s was not asking for that kind of customer-centric data which they are now asking for. The systems that were in place at that time were already bending over backwards to provide the reports that they were, and with a growing network at the pace that it was, this was becoming an impossible task. I think we should have changed the system much earlier than we did, though even at the time we did, a lot of banks in Pakistan were still struggling with the older, traditional banking systems.”
Getting the Priorities Straight
The bank’s priorities are still very clear as far as a technology roll out is concerned: how can the bank’s services be continually integrated with technology. “I have always been an advocate for change. We needed change desperately at that time or I think we would have not been able to sustain the kind of growth we were experiencing. And every IT department wants to think that they have the best solution implemented, which may not always be the case.”
Kamran explains the user perspective. “A bank may have all kinds of customers, but the IT department has its customers within all the bank operations.” Since he was just a ‘user’ at the time the bank was grappling with the issue of whether or not to make the switch over, he recalls that solutions back then were more technical than business oriented. After all, isn’t it now the golden rule of integration and development that the solution or system being implemented should be more user friendly so people can actually focus on their own core functions, as opposed to relearning the technology?
“And that’s why it was important for a non-technology person to take over the role of the CIO and oversee that the criteria of the banking operations were met. The technology had to match those criteria.” CEOs and Management Executives know their field. When it comes to shopping for a technology-based solution, it is vital that the CEO keep their executive caps on. “Every banker knows that changing a core banking system is a very risky area and what the implications are. A common misconception is that they need to understand the system. The right approach is to have the technology understand the operational side so that the maximum benefit can be incurred.”
Key Lessons Learned
If you confer with business consultants about what sector they think has been the most productive for technology, the majority would agree that the large chunk of their revenue streams were coming from the financial sector. This shows the tremendous commitment Pakistan’s financial institutions were having on the development and progress in the local economy.
“My view is that going forward, many banks will be grappling with the dilemma of keeping up with customer demands and keeping operational costs down. The second opportunity which Pakistani banks may get now, is that no foreign banks will be influencing the market in these circumstances. This just means that there is more opportunity for the local banks to service the local market.”
Talking about the selection process and criteria when Faysal Bank was considering various solutions, Ahmed Kamran explains what the process involved. “In assessing what kind of system we should be finalizing, the process had been ongoing for a long time. But with my background in corporate & investment banking, one of the key trainings I had was in evaluating and managing the ‘risk’. The risk involved in the deployment of the core banking system is immense and we needed to asses not only which solution best meet our needs, but also which service provider gives us the attention we need. We may go for the best brands in the world, but we might not be large enough for them, which mean they would not be able to service our needs on the priority basis we needed.”
Considering the Pakistani market is comparatively smaller, a challenge companies across the board face is that of being small fish in a big global pond. Companies need to see the level of commitment a brand has for a country, which can be transferred to the company. “A local office or trained personnel. Take the example of iFlex. It was a major global player in banking systems. At the time we were evaluating that system, they did not have a local presence or much interest in the market. Same is true some other big names in core banking systems. At least not at that time. Things have obviously changed tremendously since then.” Organizations want to select companies who are able to demonstrate confidence in the market and preferably have a footprint in the local economy.
In Kamran’s view, the evaluation, selection, contract negotiation, implementation, post implementation always have teething problems, I think most of the systems are equally good or equally bad. The failures usually lie inside the organization.” Kamran explains that the failures are usually in the strategy or planning process.
No implementation is easy and banks are generally hesitant to make the switch. “And then when the larger banks had such difficult times in their migration process, the news shook others who were still in the process of selecting a new system. This included us!” The Head of Services recalls the frightening stories that were coming out of the other banks that were doing their migrations before Faysal Bank, and all the problems they were facing, which scared Kamran into fastening himself behind a desk and focusing on all the things that were going wrong. He, quite literally, didn’t move until he had figured how the same mistakes were not going to be repeated at Faysal Bank.
“The banks did not focus on the type of people who were initially made part of the project. Fragmentation amongst the users often leads to failure.” Another critical mistake people made was the fact that the people who were part of the project were the ones who were either on their way out or on the verge of retiring. “As a result, by the time the initial project consultants came back for the implementation phase, all the people who had been a part of the initial user groups, had left. This created a large problem for the system integrators because there was no reference point left for them to begin from which meant they had to restart the project yet again.” There has to be integration and feedback from the operation departments who know what the usability needs and issues are as opposed to guidance from just the IT departments.
To counter this challenge, Kamran made a small, core team of 25 of the best people who had 5-6 years of experience working within the bank, having a diverse range of expertise. “We pulled them out of their comfort zone, had them together in Karachi, in one location where we could have them be a part of the Super User group.” Eventually the enthusiasm built up and the efforts paid off.
“Commitment from the top management was critical. If the top tier management wasn’t involved in the process, no matter how good your system is, it would never be adopted.” For this, a project steering committee was formed where the heads of all the relevant departments were forcibly inducted in. “No second tier person was allowed as a substitute. All heads attended the weekly meetings for the course of 20 months.”
When there was a user-test training and group meeting organized in Manila, Kamran only allowed one person from the IT department to travel. “All others were users. They owned the project therefore took ownership to make it successful. I think that accounted for a great deal of success of the project.”
Faysal Bank implemented Oracle Financials, Oracle HRMS, Siebel CRM, changed their hardware platform and changed their Wide Area Network architecture. “No migration is an easy task, but selecting Oracle made sense. We were running a legacy system which had been developed by the group back in the 1980’s. It ran on Cobol and the primary function of legacy systems of that vantage was to faithfully record business transactions and produce certain financial statements.” The core banking systems were never originally intended to be used as a delivery channel. “That was the challenge we wanted to overcome. When we were shopping for a system, we were looking for a few very specific attributes.”
The new systems in place provide powerful features through the MIS. “Centralized database pose new challenges in connectivity and the Wide Area Network, but it has given us tremendous flexibility in accessing Pakistan’s complete database for any site, from anywhere. So most of that we have deployed is an Oracle product and we are to a great extent an Oracle shop! We did a lot of research prior to the investing in Oracle as a platform, but the tipping point was the fact that Oracle had such a strong presence in Pakistan, that we selected them.” All indicators that the then CIO was researching, put Oracle in a very favorable light. “This is always a risk in selecting just one platform, but we were very comfortable in our evaluation and selection of Oracle.”
The Current Crisis and Forecast for Technology Investments
The global financial crisis has obviously impacted the larger, multinational banks in a very big way but the biggest impact that this crisis has had on the local banking institutions, is to scare them. “Banks are in a very uncomfortable territory with the global cash crunch and more than anything, the IT budgets will either be reduced or frozen for some time.” While everyone does agree that a downtime or slow time is the time that is ideal for organizational restructuring and reinvestments, it is also a reality that this is a constant struggle between the finance department and IT.
According to Ahmed Kamran’s wisdom, banks and financial institutions will continue to focus on IT governance, Monitoring and IT security and Fraud Detection and other compliance, regulatory requirements. “I think there will continue to be a great deal of scope in the retail business. That’s where local banks will need robust infrastructure, flexible architecture and the ability to offer new products to the market quickly at a lesser cost.”
But banks will have to move into the mid tier market and expand their schemes to a larger market. Banking, according to Ahmed Kamran, will also be moving into microbanking and SMEs. “The State Bank is focusing more on the unbanked population, more so now than before. Innovation will have to be undertaken by many banks to be able to reach out to those people. But even that will not be the challenge. The biggest challenge for all financial institutions will continue to bring down the average cost of transaction and use technology in a manner that costs are optimized.”
The approach and objectives may differ in every organization, but if the business and technology objectives can be aligned, there will definitely be movement in the forward direction.
You can find more information about Faysal Bank at faysalbank.com•
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