Wednesday, 28 September 2022

Mashreq’s Fernando Morillo: “About 92% of our core banking systems are in the cloud”

5 min read

By Namir Kaissi

Mashreq Bank’s group head of retail banking, Fernando Morillo, spoke with Emmanuel Daniel about leveraging cloud-based infrastructure to grow its consumer business and expand into neighbouring markets.

  • Mashreq’s retail customer base increased by 20% in 2021
  • Retail business gross revenue grew 11.5%
  • Experience of converting 45 million customers into digital users

Fernando Morillo joined Mashreq Bank in July 2021 amid a surge in COVID-19 infections as the more virulent Delta variant hit the United Arab Emirates (UAE). But by then Dubai had already become the fastest and most vaccinated city in the world. Soon after, cases began to drop, and in August, its borders were fully open to international travelers. It is an important move for a country that has become a hub for international trade and finance, and counts almost 90% of its over nine million population as expatriates.

Part of the UAE’s success in managing COVID is the level of digitalisation of its public infrastructures including healthcare and logistics. Data is digitised and managed centrally that allows the efficient distribution of vaccines and citizens can make their appointment to get vaccinated in real-time using their mobile apps.

Similarly, when Morillo joined the then 54-year-old bank, he discovered that it had already undergone a high level of digitalisation. Mashreq Bank has been developing its technology infrastructure for the past three years, moving from legacy systems to the cloud.

Mashreq’s retail customer base increased by 20% in 2021

“Currently, about 92% of our core banking systems are in the cloud”, Morillo said. The bank has an advanced IT architecture, with all microservices utilising application programming interfaces (APIs) to connect and integrate its various systems. The bank has an open API gateway, connecting all products and services. This has allowed the bank to become more agile and efficient in managing and leveraging data to develop products and services that meet customer need. It has made it a much more data driven and customer centric organisation. Morillo remarked, “If we keep up with the client, we can win the future.”

In 2021, the bank witnessed a 20% increase in its retail customer base to reach around 642,000 customers, of which 90% have been acquired digitally. Revenue contribution of digital customers has increased from 50% to 57% over a year to reach around $176.1 million in 2021.

Over the past few years, the bank has invested heavily in digital innovation, particularly data analytics, AI, and the use of robotics to automate processes. More recently, Mashreq has been moving towards an open banking-enabled marketplace, which will provide the bank with capabilities for seamless integration with its partners and ecosystem. Mashreq is investing in  critical human capital and talent to digitise its processes and operations.

In the past year, the bank co-created innovative products along with its customers, such as the NRI accounts, designed for non-resident Indian customers to open a bank account in India via the Neo app; Neo Boost, a community savings product; Neo Insurance, digitally and instantly issued without any paperwork; Neo Credit, small-ticket sized instant loans, Roll the Ball, gamified virtual draws; and Activation Tracker, real-time updates of application on the app. In 2021, Mashreq claimed to be the first digital bank in the UAE to introduce facial recognition-based onboarding in partnership with the ministry of interior.

Retail business gross revenue grew 11.5%

In line with its aggressive branch rationalisation, Mashreq Bank has closed 80% of its branches in the past five years as customers shifted to online transactions, evidence of its younger digitally savvy customers and that its digital transformation is working.

“While the cost-to-income ratio (CIR) of its retail business is still relatively high by international standard at 59%. However, in the span of the three years since its digital transformation, the bank managed to reduce retail CIR by more than 20% and has set a goal to go sub-40% by 2023”, said Morillo.

According to Morillo, Mashreq’s retail business is not only growing locally but regionally. Mashreq bank has a retail banking licence in Egypt and is applying for one in Saudi Arabia too as it looks to leverage and expand its customer-centric ecosystems into these markets.

As compared to local peers, Mashreq’s balance sheet witnessed a 20% growth in assets and liabilities. It is the second fastest growing bank in the market, with over 20% increase in revenues year-on-year (YoY). In 2021, the bank registered the highest retail banking profits in history, when it grew its gross revenue by 11.5% to reach $308.99 million. It decided then to revise net profit growth target for 2022 to 50%.

Morillo said that the retail banking business is growing on the back of mortgages which have increased market share. It is targeting affluent customers through relationship pricing, by offering better or preferential pricing based on their total product holding with the bank.

He believes that the edge that Mashreq Bank has over other banks is the entrepreneurship culture of its workforce, supported by an advanced technology Infrastructure. “Mashreq Bank is much faster, much more executionary, and much more dynamic,” he said in comparing it with other banks and organisations that he had worked at or known.

Experience of converting 45 million customers into digital users

He had come from an engineering background, graduated from Universidad Politécnica de Madrid in 1992 with an aeronautical engineering degree, and obtained an MBA from Instituto De Empresa – Madrid, a year later.

He promptly began his career with Mckinsey thereafter and covered markets such as Spain, Portugal, USA, Turkey and Morocco in the retail finance sector.

At Mckinsey, Morillo realised that the future of financial services is digital. And In 1996, he decided to hone his digital expertise and focused on the development and adoption of digital business models. By the year 2000, he headed the digital banking practice in Europe for Mckinsey.

After nine years, he left to join Bankinter in Spain in 2002. He considered Bankinter as one of the most advanced digital banks in Europe. It had completely digitised the retail services including mortgages and implemented end-to-end straight through processing (STP).

He also helped launch a real-time SMS-based customer notification system for card transactions, one of the first in the world at that time.

After spending around eight years at Bankinter, Morrillo joined BBVA Spain. During his time at BBVA, he engaged in a global retail and consumer banking unit created to digitise the bank. In those six years, BBVA introduced one of the first mobile banking applications in the world.

He was also part of a team tasked to convert 45 million customers in diverse markets such as Mexico, Spain, Turkey, and the United States, into digital users.

In 2015, he joined Standard Chartered in Singapore as global head of retail products and segments. where he launched a secure instant messaging and file-sharing feature on its mobile banking app.

Morillo said that the number of initiatives and the dynamism that are found in Mashreq Bank remind him of the good years of Bankinter.



Keywords: Digitalisation, Technology, API, Data, STP
Institution: Mashreq Bank, Bank Inter, BBVA Spain, Mckinsey, Standard Chartered
Country: UAE
Region: Middle East
Guest: Fernando Morillo
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