In the wake of banking sector liberalisation in the 1990s, Alain Law Min, head of retail at MCB, tells Parveen Bansal how and why the bank has restructured and how it has improved its business. Established in 1838, Mauritius Commercial Bank (MCB) is one of the oldest banks in the region. The bank’s performance has been driven by strong growth in the economy, which, once highly dependent on sugar, is now well diversified.
In the process, significant investment – both domestic and foreign – has been directed towards manufacturing, tourism and banking. Economic growth has been accompanied by heightened demand for sophisticated financial products.
Against this background, MCB has constantly evolved its approach to doing business. “The banking sector has largely benefited from substantial growth in the economy since the mid-1980s,” says Alain Law Min, head of retail at MCB. “Growing competition and customer sophistication, coupled with relatively lower growth rates, prompted MCB to redefine its strategies in 2000.”
Liberalisation brings competition
In the early 1990s, the Mauritian economy was marked by accelerated liberalisation of its financial services sector, which was previously heavily regulated by the Bank of Mauritius (the central bank), especially in the area of lending. This has led to the emergence of new competitors, such as insurance and leasing companies. “Within this context, it was deemed appropriate to revamp our products and services delivery,” says Mr Law Min.
As a result, in 2000, MCB defined its vision, which is “to be the obvious choice for financial services in the region and beyond”. To live up to this vision, the bank engaged in a major business process re-engineering project (BPR) aimed at improving cost effectiveness and customer satisfaction by providing cheaper products and services.
The project was implemented in two stages, consisting of decentralising front-office capabilities and centralising those of the back office, followed by customer-focused strategies. Standardised processes and tools across a stabilised network and improved sales force effectiveness was expected to contribute to better understanding and anticipating customers’ needs and offering suitable products with the ability to cross-sell.
Decentralising decisions
The decentralisation process has enabled quicker decisions and better advice to customers. An important part of the reorganisation was a human resources project with the aim of promoting employee empowerment to fit with the new strategy. “Decentralisation allows us to be closer to the customer,” says Mr Law Min.
As a part of the decentralisation, the bank divided its retail network business into five different regions, each with its own regional office, to help with the approval process, previously mainly done at the headquarters. Mr Law Min explains: “Now each branch reports to a regional manager, whose responsibility it is to manage the branches in his region.” The bank has 42 branches covering most of the main residential areas. The rest are spread around the country.
Mr Law Min notes that the demand is different in the rural areas, with a larger proportion of customers requiring basic products such as small value loans and a single account with a debit card. “Each branch has its own portfolio of clients, so now we can better assess the local customers’ needs and better adapt the organisation and branch design.”
The bank has around 800,000 accounts, which Mr Law Min is quick to point out does not mean 800,000 customers. The change project is highly focused on customers with the aim of better understanding their needs.
“We have changed from an account-oriented approach to a more customer-oriented [one] and are in the process of matching the accounts and customers,” says Mr Law Min. “We are trying to get to know the customers better and to improve the database of information we have on them, so we have introduced the concepts of customer segmentation and client executives who act as a single point of contact.”
Speeding up
The decentralisation was accompanied by the centralisation of the supporting back office systems to eliminate replication and enable faster time to market.
In 1997, MCB invested in the SYMBOLS core banking solution from System Access. “We have a large client base and we want to maintain consistency but need to be more efficient in terms of having a lot more automation. In this respect, we are improving back office processes to better support different customer segments, i.e maximum automation for mass customer segments and service differentiation for more valuable customers,” says Mr Law Min.
Credit risk and portfolio management have been a high priority for the bank in its process change. The bank has moved away from a manual review and approval cycles within the various branches and departments with limited process control.
A workflow platform was also implemented to automate and track credit at each stage of the process and enable performance measurement. “This tremendously improved efficiency and customer service while reducing paperwork and risk,” says Mr Law Min. Commercial actions have positively impacted the retail loans portfolio with an increase of more than MRs700m ($25m) over a six-month period, representing a 10% increase.
As part of its customer focus strategies, the bank is improving its salesforce effectiveness by training them in sales and communication skills so that they can do business more effectively. MCB is introducing the concept of cross-selling by offering customers the opportunity to settle their electricity or water bills by direct debit when they take a housing loan. “This is a good way to make customers think of related products,” says Mr Law Min. Similarly, the bank is trying to anticipate customers’ needs, for example, by offering investment solutions to parents towards financing their children’s education.
Mr Law Min says: “The bank places a lot of emphasis on the development of new and innovative products and services in order to meet the expectations of an increasingly sophisticated clientele to maintain its edge over competition,” claims Mr Law Min.
Using IT and tools in line with its business strategy, the bank can now easily deploy new applications across its branches and also offers an efficient way to support remote users. Through the change process, the bank has positively impacted the cost to income ratio of its retail network which has dropped by around 4% in the period October 2003 to April 2004.
Change management has been taken seriously at MCB, with staff trained two to three months prior to any implementation. “Training is key to success,” says Mr Law Min. The bank employs around 1800 staff across the organisation, with 800 within the retail network.
MCB has historically been very open to technology and in 1987 was the first bank in Mauritius to install ATMs. A year later, it was the first to issue credit cards. A total of 72% of transactions are automated, including ATM transactions, standing orders and direct debit instructions. In 1994, MCB also introduced the telephone banking service Telbest, followed by internet banking. According to Mr Law Min, use of the telephone banking facility has not been high, this is expected to increase when the bank launches a dedicated contact centre later this year. Mr Law Min says: “There has not been such a great need for call capability because people still like the face-to-face interaction.”
Customer base
MCB enjoys a very stable customer base from among Mauritius’ 1.2 million-strong population, built mainly on the strength of the franchise. The strong relationship with the customer base has been promoted by the comprehensive network and presence at both local and national level and the bank’s involvement in community projects across the country.“We feel that we have a social responsibility; we sponsor a lot of sports events and recently sponsored the regional games,” says Mr Law Min. The bank also funds education programmes for the underprivileged and for promising students. The bank is actively addressing the needs of the illiterate market. Tellers in the branches are demonstrating to these customers how they can use the ATMs and such remote channels utilisation will be further enhanced by the introduction of a rewards scheme.
Beyond Mauritius
MCB has regional ambitions for further growth. It already owns a subsidiary with two branches in Madagascar, and is also present in the Seychelles and in Maputo in Mozambique. The bank used to own BFCOI (Banque Francaise Commerciale (Océan Indien). It now has a 50:50% strategic partnership with Société Générale, operating branches in Réunion island, Mayotte and Paris.
The branches in the various countries use their own systems. Mr Law Min says: “Eventually we aim to better integrate the banks’ systems across the region.” He adds: “MCB has a customer base that is very loyal and now wants to capitalise on that trust as the income level increases. People have known MCB for generations. The next step now is to capitalise on this relationship and generate more revenue notably by cross-selling.”
