Inaugural F-Squared Podcast - Episode #1 - The Story Behind Kenya’s Most Ambitious Banking Transformation

How I&M Bank defied the 70% failure rate of digital transformations and became Kenya’s challenger bank — a discussion with Shameer Patel.

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Launching this podcast was harder than I expected, this email was meant to be sent way earlier. Going forward, podcast episodes will be coming into your inbox every other Thursday at the same time that other emails arrive at your inbox. The podcast will be fortnightly and not weekly.

Why I wanted to have this discussion

Doing digital transformation as a successful bank is hard, doing it whilst also expanding from a niche corporate bank to a universal bank is even harder. The hardest parts revolve around culture and specifically dealing with the inevitable initial setbacks. I’ve been there and I know how difficult it is. It’s easier when the bank is losing money, it’s 10x harder when it’s already successful. Tech or strategy is rarely the differentiator, getting an entire organisation on board is where the heavy lifting really is.

I wanted to have this conversation with Shameer Patel. Shameer is the Executive GM of Retail and Business Banking. Prior to this he headed up Strategy at the CEO’s office and played a key role in creating Project Imara, I&M’s ambitious transformation plan. Within this, he was key in conceiving I-Cube, a digital factory that would play a key role in developing I&M’s tech roadmap.

Close to 10 years later, I&M sits comfortably at the top of NPS charts in the Kenyan banking system. Moreover, their top of mind score has grown from 2% to 34% within the space of a year. I’ve written before that I&M is a bank to watch in the region. This conversation will cover the aspects of cultural change, getting your tech philosophy right, getting the right partners on board and having real leadership. As Shameer says “You can’t fake it”. I really enjoyed this conversation and I hope you do too.

What you will Learn;

From this podcast episode with Shameer Patel, you will learn about:

1. I&M Bank's successful digital transformation journey from a niche Indian corporate bank to a leading digital player in the Kenyan market.

2. The key drivers for this transformation, including the introduction of interest rate caps and the strategic decision to tap into the significant retail and SME sectors in Africa. I&M figured out that sticking to corporate banking wasn’t sustainable in the long-term;

3. The implementation of the "I-Cube" initiative, which was central to fostering a new culture of agile practices and attracting digital talent within the bank.

4. The critical role of leadership at all levels, from the board to management, in championing and driving the cultural and strategic shifts required for digital transformation. This includes the importance of active involvement, setting the right tone, and consistent communication. Hint - Playstations and Cornflakes came in handy;

5. The value of learning from the experiences of other successful digital transformers, specifically mentioning ING and DBS, and adopting relevant lessons.

6. The strategic decision to partner with Backbase as the core platform for their digital transformation, driven by the need for control, agility in development, and access to a wider talent pool.

7. The challenges and roadblocks encountered during the transformation, particularly issues related to integrating new systems with legacy infrastructure, including middleware and core banking systems, which initially impacted app performance.

8. The importance of a "fail fast and learn" mentality in navigating the inevitable challenges and setbacks that occur during large-scale innovation projects.

9. How I&M Bank balanced its focus on maintaining its core corporate banking business while simultaneously building its retail and SME digital offerings.

10. The significant acceleration of digital adoption driven by the COVID-19 pandemic, which highlighted the necessity of digital engagement.

11. The impressive growth in I&M Bank's customer acquisition and the factors contributing to it, such as a high Net Promoter Score (NPS).

12. The counterintuitive strategy of branch expansion alongside digital growth, explained by the need to build trust in a heavily cash-based economy and to act as an enabler for digital onboarding. Interestingly, where they open branches, they see ramp ups in digital onboarding. People will open accounts with no intention of ever visiting the branch but what’s key is that they can “see” the branch;

13. The positive impact of customer-centric decisions, such as the decision not to charge for transfers between bank accounts and mobile money platforms like M-Pesa.

14. The aspiration of moving towards "lifestyle banking", recognizing the vast potential of leveraging customer data and partnerships to offer value-added services beyond basic transactions, while acknowledging the current gaps and the ongoing journey.

15. The opportunities and challenges in serving the SME sector digitally, including the need for digital records and verification processes.

16. The strategic approach to partnerships and building digital ecosystems, with a focus on creating impact and aligning with the bank's overall goals rather than pursuing every potential collaboration. I&M Bank aims to be an enabler within these ecosystems.

17. I&M Bank's geographical expansion into Kenya, Rwanda, Uganda, Tanzania, and Mauritius.

18. The critical importance of Artificial Intelligence (AI) for the future of banking and I&M Bank's current efforts in developing an AI strategy and implementing use cases, particularly in credit scoring.

19. The advantage of using platforms like Backbase that have marketplaces, facilitating easier integration with AI and other technology providers.

20. The need for robust governance and ethical considerations when implementing AI in financial services.

21. Counterintuitive learnings during the digital journey, such as unexpected issues with new national ID card features affecting digital onboarding processes.

22. A valuable piece of advice about celebrating failure as a means of fostering learning and driving cultural change, shared by the former CEO of ING.

23. The fundamental role of leadership in setting the tone and creating the environment necessary for successful organizational transformation.

Transcript

Samora: Hello and welcome to the F-Squared podcast, a podcast of the Frontier Fintech newsletter. Uh, in this podcast we discuss the business of fintech with leaders from across Africa's fintech ecosystem. Um Um today I'm joined by a good friend uh Shameer Patel who's been at the heart of I&M bank's digital transformation for over should I say but for quite some time. Uh he's introduced himself to the show um and so I'm super excited. This is our inaugural uh edition. So Shameer thanks and welcome to the show.

Shameer: Thank you.

Samora: Um before we go further you know would you mind just giving us an intro into who you are and what you do at I&M.

Shameer: Yeah, thanks a lot. And it's great to be here. Um my name is like you said Shameer Patel and I work with I&M bank. I&M bank is a tier one uh bank what I would say it's a challenger bank.

Samora: Yeah.

Shameer: In today's day and age and I'll obviously take you through the history of how we've transformed over time.

Shameer: But at the moment I head the retail and business and before that I was in the strategy and transformation office. I set that up and part of a whole journey on the digital transformation started at that time.

Samora: Got it. And I think that's why I really wanted you in today's show. Um the broader context is that I&M you know in the market has been known for at least used to be known for a long time ago as an Indian corporate bank. But now you've really transformed and I think there was a report that came out last year uh by some guys called data eq that showed that you know from a consumer sentiment perspective and this is just like looking at digital and things like that you were number one at like 72% and the second bank had like 26.4%. So that's like quite a massive you know gap and you know it's not easy like making that transition from like a very niche corporate bank into digital like a digital leader and not only that anecdotally when I speak to my friends almost everyone is saying like I&M has the best app in the market. Uh and so the core thing is that it seems like a you know a large part of your change started happening around 2016 2017 and in 2018 you had this thing called I think strategy and this is when you also launched something called I-Cube and so for me um it seems like this is a period when the penny dropped. for you guys and it's like now we need to take digital seriously. So you just walk us through like what was happening, why were these decisions being made at that specific point in time.

Shameer: Yeah, thanks. Thank you. So yes, you're right. That's really the time we embarked on a journey of a revised strategy called Imara. We're currently in our third iteration.

Shameer: um but just taking you back to that time, it was also a time of a lot of uncertainty for banks and and where I'm coming from it is the time of the introduction of interest rate caps.

Samora: Got it.

Shameer: So we went through a quite a deep dive into you know our core strengths uh and like you said we're very strong in the in the local corporate space, but the question was is that a sustainable business model and and given at that time we were not Tier one uh, a lot of efforts were were uh undertaken to understand what it would take for us to be a universal retail and a corporate bank so that you get the scale that you need over time.

Samora: Yeah.

Shameer: So based on that what was very clear is that we there was a huge untapped um market in the retail and so at the end of the day we know uh in this in in most of uh Africa actually SME’s you know they contribute almost 70% of employment uh as well as a big portion of the economic GDP and you need to be playing in this space. If you really want to scale as a bank. So what was the key area we were looking at? We needed to basically expand on the digital front to create a different experience for the consumers in the market.

With this we needed to undertake a significant shift in terms of our transformation culturally and that's where the idea of uh I-Cube uh came about. So we needed to bring in agile practices. We needed to bring new tools. Uh you know banks generally have very legacy systems. They're very monolithic in nature.

Samora: Yeah.

Shameer: And it becomes very clunky and difficult to basically innovate with these systems. Uh at the same time uh we needed to bring in the digital talent and you and I know digital talent doesn't want to work in a bank, you know, with people with suits, right? So, we had so we did a lot of homework, went out there, looked at other businesses across the globe uh that have gone through similar changes and you know took some learnings from them and decided to adopt uh some of those learnings and and develop uh this factory what we call I-Cube