Solving everyday challenges

All banks are investing in digital technologies to enhance the customer experience. But the constraints of legacy infrastructure – internal and external – is a bigger consideration for some than others. Bank of Palestine, for example, must contend with two unusual factors. First, it operates in two small territories in which daily commercial and economic activities have been regularly interrupted by military conflict, with inevitable consequences for key infrastructures, from banking to utilities to telecommunications. Second, many of its potential customers reside beyond the borders of the West Bank and Gaza. Of approximately five million Palestinian refugees registered with the United Nations Relief and Works Agency (UNWRA), more than three million live in Jordan, Syria and Lebanon, many in UNWRA camps.

Understandably perhaps, the bank’s efforts to get closer to its customers encompass disruptive technologies and positively old-fashioned approaches to relationship banking. As with many banks in emerging markets facing challenges on data collection, sharing and scrubbing, Bank of Palestine is not yet in a position to use data from digitised services as a key input into the personalisation of banking services. Nevertheless, it is already leveraging existing infrastructure in innovative ways and developing tools that will ensure technology plays a greater role in the future customer experience.

At the same time, Bank of Palestine is increasingly supporting the needs of retail and small business customers beyond core services. The bank realised its many small business customers needed business expertise at least as much as greater access to financing. This requires onthe-ground support from relationship managers via the bank’s branch network. “In markets like ours, to be the bank of choice and to contribute meaningfully to financial inclusion, you have to have local knowledge, understand customers’ challenges and aspirations, and you have to look beyond loans and accounts to non-financial services. In any market, banking is about trust and relationships, which can be undermined when technology is introduced,” says chairman and general manager Hashim Shawa.

Relying on relationship managers rather than big data to distil customer requirements, Bank of Palestine is providing small business customers with business advisory services, in areas from human resources to pricing strategy to branding to supply chain management, some, such as book-keeping software, via electronic means. “As a bank, we have strengths and resources that are sometimes overlooked, like the ability to connect one customer to another,” he adds.

Overcoming obstacles

So far, so traditional. But Shawa insists banks must also embrace change if they are to survive in a world where disruptive technologies are fast democratising and personalising the customer experience.

To this end, Bank of Palestine established PalPay in 2010, a subsidiary focused on developing technology-based solutions that meet the everyday needs of households and small businesses across the Palestinian territories. Both among the bank’s customers and the unbanked that make up around half of the Palestinian population, the difficult conditions and many obstacles to travelling between towns mean that a high proportion of the day can be spent paying bills for essentials, from water to power to education to micro-loan repayments. Direct debits were not going to help the unbanked, so the technology unit focused on leveraging an existing resource, a 6-7,000-strong credit card point of sale network spread throughout the West Bank and Gaza.

In short, the bank developed a solution that would turn points of sale into points of payment (POP), used by customers to upload payments to one or more of the hundreds of service providers that have signed up to a single online gateway operated by the bank. As such, billers are paid more promptly, in a more automated and auditable fashion, payers discharge their debts more efficiently, with immediate settlement, and POP-site owners benefit from more footfall and liquidity, with the circulation of cash concentrated in fewer hands. Banks make revenues from transaction volumes of course, but more important in this case is the data, the goodwill of the unbanked, and the cross-selling opportunities from a client base whose behaviour it is getting to know slightly better than before.

While the POP solution makes sense in a market where mobile telephony is under-developed and wifi is limited to core population centres, Bank of Palestine is anticipating the arrival of 3G with the development of smartphone-based banking apps. Customers can already make small payments (below USD 200) via their phones to other Bank of Palestine customers, but they will soon be able to send funds to a much wider range of contacts, without needing to know their bank account details.

The phone-based PalPay services will replace the POP network over time, and there is scope to extend the service geographically too. Bank of Palestine has discussed with UNWRA the possible provision of PalPay’s services to the registered refugees in neighbouring countries, but the bank admits that such developments are only in their early stages.

Empowerment though education

In parallel with these efforts to deploy technology to overcome barriers to the efficient provision of banking services to its customers, Bank of Palestine is relying on face-to-face interaction to meet the needs of a key demographic, while also building important brand awareness. In a market where women make up more than half the population, but barely 20% of the bank’s account holders (and an even smaller proportion of the bank’s loan book), Shawa saw that both the Palestinian economy and the Bank of Palestine could benefit by mobilising this under-utilised and under-educated resource. According to Shawa, the path to greater empowerment was blocked by an “alarming” lack of knowledge. To stimulate demand, the Bank of Palestine undertook an education programme, explaining basic products and concepts to women to engender an understanding of how banking and finance service can help to solve everyday household challenges. The bank now offers non-collateralised loans to female customers.

The bank has already run a seven-month MBA for female entrepreneurs in partnership with the World Bank’s International Finance Corporation, which is planning to roll out the concept to other countries. The course covered accounting, budgeting, HR, marketing and financial planning; every one of the 40-strong first year intake has agreed to serve as mentors for the next cohort.

Shawa is aware that the bank’s boots-on-the-ground approach to relationship management is hard to scale. As such, he is looking forward to the days when capturing, storing and sharing data from digitised services will be easier for him and his clients, not least because certain non-financial services for SME clients can be easier and cheaper to distribute via digital banking channels.

For now, the emphasis remains on providing solutions to everyday problems, with the aim of reaping the digital dividend in the future. “Banks should first invest in their non-financial services and then look to develop scale,” says Shawa.