IN CONVERSATION WITH GAZI YAR MOHAMMED
Gazi Yar Mohammed, Co-Founder & CEO, Dana Fintech had an impactful career in the financial sector, particularly in retail banking. Starting his career in Eastern Bank (EBL) as Management Trainee, he went on to serve crucial roles in The City Bank, Mutual Trust Bank, and ONE Bank – where he served as the EVP & Head of Retail Banking and later he took up the role of Head of Agent Banking and MFS. He received his MBA from the Institute of Business Administration, University of Dhaka and holds a Masters in Bank Management (MBM) from Bangladesh Institute of Bank Management. He is also an adjunct faculty at the MBA program at University of Dhaka.
In 2021, he co-founded Dana Fintech with an aim to address the fintech space of Bangladesh. Bangladesh Brand Forum recently held a talk with Gazi Yar Mohammed regarding the banking sector, fintech, innovation, and his career.
BBF: Can you share a brief story about your banking career and last organization?
Gazi Yar Mohammed: In my 18-year banking career, starting form EBL as Management Trainee, I was privileged to have the opportunity to work with and learn from some wonderful changemakers and leaders. I learnt to build winning teams that built successful retail bank, retail credit and collections, retail branches, sales team, wallet and agent banking and cards business in couple of banks from the scratch. At ONE Bank, my last organization where I worked for the longest tenure of my career, retail banking now makes operating profit of around Tk 130 crore plus every year by having strong home loan portfolio in the market. My team had to build the multiple business at this bank from scratch and it was most rewarding journey for me.
Why could only a few banks do well in retail banking, retail lending and digital financial service space?
Only a few banks did well in retail banking since most of the banks could not develop the building blocks and eco-system for retail, and DFS business. A Good number of banks think retail banking is an HQ-driven division that should only launch a couple of products and deposit campaigns. Some banks launched cards and retail loans without setting up proper retail factories (underwriting, collection process, products and RM teams) and therefore could not scale up due to very high NPLs. It never works abruptly.
The bank has to build supply chain with branches to promote and build sustainable retail banking along with sales force. Branch retail RMs play a vital role and the retail branch concept needs to be rolled out to make retail banks successful. We launched a hybrid model at ONE bank where branches were categorized in retail, SMEs, and corporate branches to ensure proper focus in all businesses and all branches had other business goals too on top of core business specific goals. Most importantly, now customers are more critical of UI and UX of banks´ mobile apps, wallets, and websites. So digital transformation needs to be clubbed with retail banking and DFS propositions to make it successful.
What drove you to shift your career from banking to fintech entrepreneurship and how is your banking experience helping you in this endeavour?
The biggest risk you can take, is not taking any. Career aspirations change at a certain level. For me, it was not just about big titles, attractive perks and packages but rather building something big in the digital space which was driving me for the last 2 years. Frankly, it is not a big career shift considering the financial domain and the areas we are working for.
I started Dana Fintech with Zia Hassan Siddique, Co-founder & COO, Dana Fintech who had been my colleague as we both started our career at EBL as MTs. Zia had worked for SCB for 10 years and had deep insights on retail banking, Islamic banking, and retail underwriting. As we reconnected years later to solve the pain point for access to finance, we found that this is still a major pain point for banks and underbanked consumers. We found a major missing link in the lending system which is the lack of credit scores. Both of our exposures, networks, and experiences are helping us to design solutions with technology. Connecting the dots is very crucial now. Home loan customer’s psychology is not same as SME customers and a credit card customer’s psychology and credit behaviour does not match with that of wallet customer. Those insights are invaluable for us and are helping us in designing solutions for customers.
What are the key propositions of Dana and what pain points are you going to solve?
Dana is embedded fintech and mainly focuses on embedded finance. Embedded finance is the future of the financial services industry and offers a new, very large addressable market opportunity worth over $7 trillion in ten years’ time – twice the combined value of the world’s top 30 banks today. It’s the merging of a non-financial service provider, such as a retailer or ride-sharing company, with a financial service, such as payment processing, lending, or insurance.
Dana will be the bridge and middleware for financial institutions, retailers, e-commerce platforms and customers to facilitate embedded finance through Dana AI credit scoring engine, financial wellness propositions, and digital onboarding tools. We observed financial organizations cannot offer digital lending due to lack of soring model and alternative data funnel. Only wallet data is not enough to build solid credit score and there is nothing called one size fits all. Credit assessment is dynamic due to behavior of consumers. Here, we are solving these pain points of both consumers and financial institutions. We just finished our AI driven digital score engine and we are getting significant response from local financial institutions and outside fintech who want to tie up with our middleware.
Dana enables financial organizations to offer digital lending based on digital credit engine. Our key proposition is to enable multiple partners like banks, MFIs, NBFIs, and MFIs to offer digital financial services – deposits, loans, payment and insurance – for FMCG retailers, Micro retailers, factory workers and underbanked individuals. Only 9% people have access to formal finance and the credit gap is widening. Banks could only disburse 60% of the covid stimulus funds to small business due to lack of digital onboarding and digital unwriting tools. Banks and MFIs take a long time to process loans covering end-to-end process. Here Dana is building an ecosystem for both lenders and potential borrowers.
We are also building an OCR bot to strengthen our credit engine which will score any income document in a few seconds. The Dana credit engine and OCR bot combined will offer end-to-end AI driven scoring and underwriting solutions. Micro retailers, factory workers and underbanked individual can take loans from lenders through the platform.
In our next phase, we are bringing employee wellness program for corporate employers that will enable employers to democratize financial services for employees. We are working on fully embedded financial solutions for our partner FMCG retailers.
How does your score engine work? How will multiple banks or MFIs use Dana credit score engine?
By and large most financial institutions still use financial repayment history-based credit decision systems. These systems don’t work due to large and growing rate of NPL. Additionally, most of the people in our market don’t even have a credit score. Unbanked/underserved populations are completely excluded from financial ecosystems, mainly from access to finance.
Dana Fintech’s proprietary credit engine works on multiple pillars – demographic data, partner´s data for borrowers, transaction and device data as agreed by borrowers, and psychometric (financial psychology) assessment. Dana’s machine learning algorithm examines more than 8,900 data points for potential borrower and provides a score between 1 and 850. Dana credit engine can make any individual score-able in 3 minutes based on traditional and alternative data.
Local consumer behavior and transaction behavior is very critical to build data funnels. We have a brilliant development team and we are trying to offer a robust but flexible AI driven credit score engine where multiple lenders can use our platform to extend digital lending to SMEs or individuals. We built our AI driven digital credit score engine and used random forest and XG boost for training data and building the scoring model.
Dana credit scoring engine is very flexible and offers multi-tenancy options to enable lenders to offer customised score parameters. Now, we are working with two types of lenders – Banks and MFI – and three organisations to run our pilot and offer digital loans.
What are the key challenges and opportunities in the fintech space for the Bangladesh market?
Mindset and policies are important. Most banks are not fast enough to adopt digital transformation while the fintech space is moving fast. We have 11 crore bank accounts while internet banking users are still around 30 lacs. Digital wallet transaction growth is 30% whilst card transaction growth is only at 6%. The current MFS model is expensive and we all saw a good number of RMG factories refusing salary disbursal by digital wallets due to high cash-out charges.
Opportunities lie in the problems. We need solutions like unified payment which mainly focuses on bank account transfer by reducing card MDR on merchants. A good number of markets are adopting open banking where banks share secured public API with other banks and third parties and this significantly reduces transaction cost.
Credit gap and access to finance are still big pain points and these are big opportunities too. Digital credit score driven digital lending can tap this massive untapped market. Banks, NBFIs or MFIs can partner with fintech and tap this market with digital onboarding and digital lending platform. Only 5 lac consumer use 16 lac credit cards and there is massive opportunity for Buy Now Pay Later (BNPL). We have witnessed how Klarna and Affirm leapfrogged in this space. Consumers are adopting BNPL positively in a good number of markets.
How do you feel about the future of Neobanking in Bangladesh and do you think our current infrastructure can support widespread neobanking and drive financial inclusion in all target segments?
Neo bank, challenger banks and digital incumbent banks play differently. We have enough banks and NBFIs. Mobile money is very popular now. Banks can offer incumbent digital banks to attract millennials and to reduce transaction cost and those digital banks can tie up with agent banking outlets and MFS agent points to build a solid omni channel. Since IDTP is coming soon, this will play a vital role for banks to build sustainable digital bank. Banks can tie up with fintech and allow them to work as neobank and onboard customers with different products and services for the bank. For this neo banks don’t need any license and this is very popular in other markets now.
What policy support is needed to grow the fintech industry of Bangladesh?
Regulators can take initiatives to launch unified payment to significantly reduce transaction costs for consumers and merchants through bank account driven transactions. In the next phase, open banking or API sharing policy can play significant roles in building ecosystem for multiple partners and will spur the innovation in the financial landscape. Customers will have much better solutions and experience. CIB API is needed for banks where fintech can validate customers credit history based on certain secured key and financial institutions and this will help banks promote digital lending. Fintechs may be given permission to lend to certain ticket size from own funds under regulations like other markets. This will inspire healthy competition and will attract more venture capital funding from outside.