The Economic Affairs had a candid discussion with Mr. Najeeb Agrawalla, Chief Executive Officer, 1Link. Here are the excerpts of the interview;
The Economic Affairs: How did you come to this field and what was the motivational factor?
Mr. Najeeb Agrawalla: I am actually a banker by profession but I would like to call myself a marketer because I graduated from the IBA in business administration majoring both in Finance and Marketing class of 89’. In those days it was very easy and if you don’t know which field to choose between the two, you would do masters in both.
I started with Unilever and then I went to Phillips, which used to be a big company back then. Then in 96′ I moved to the financial sector, joined American Express and was posted to Indonesia, and launched a co-brand card.
Then I joined UBL and I believe I spent the prime of my career at UBL when I was young and I spend 12 years there from 2001 till 2013. I did everything there, I mean from branding and corporate communication to handling the liabilities. I also headed their branch network of 1,100 branches and then in the end my last assignment was Group Head of Marketing and Corporate Communication including Product Management and I launched many products there.
Then I moved to Bank Al Habib as G.M Retail and there I spend another three and a half years. From there I got this opportunity to move here, which is a different industry but it’s also part of Banking called as Payment Industry.
Banking is all about payments and this industry has really boomed and banks were moving towards newer payments options like internet banking, mobile banking, and traditional forms of payments like cash were replaced by debit and credit cards, etc. I used to head these departments before as well and I was already on the board of 1Link.
I was among the founders of this company back in 2004 as a consortium of 11 banks. I used to represent UBL back then. Then when the position of CEO was vacant I joined here in 2016 and now it’s my sixth year.
The best part is that 1Link is now seven times what it was five years ago. If we talk about the number of transactions then I would say it has increased by almost 400 times. I wouldn’t say that it was achieved because of me, but mostly due to the fact that consumer behavior changed during COVID and it has made us very relevant now. We processed about Rs14 trillion and 2.4 billion financial and non-financial transactions.
TEA: Do you believe that 1Link has transformed the banking industry?
A: 1Link has a role to play in digitalization and moving away from cash, so our enemy to a large degree is a cash transaction. You might question why I would say this being an ATM company but that’s where we started and back then around 80% of our revenue came through ATMs.
When I came here the basic objective I presented to the board was that we should bring our reliance on ATMs down to 25% or lesser. When I joined back in 2016 it was around 50%, but today our reliance on ATM is with the grace of Allah only 19%. So we have really moved on since then and one of our major products is IBFT (Inter Bank Fund Transfer), which is good progress given the fact that other countries like Turkey had real-time IBFT in 2015 but in Pakistan, we did this in 2006-7.
Then there is a bill payment mechanism, we have 1,100 billers, including utility bill payments, charities, and schools. Then we have credit card payments, people can pay their credit card bills online as well. So, it has really changed the paradigm.
TEA: Where do you see 1Link in the next 5 years and if you are working on new products?
NA: Yeah, we are working on a few new initiatives, Pakistan is the 28th country that has become the issuer of a domestic scheme. What happened is that people in other countries realized that these schemes like Visa and Master Card operate with a very small number of people, so they don’t generate employment and they are able to take away precious foreign exchange because all the charges and fees are paid internationally. So, there is an outflow of foreign exchange and they also charge very well.
Therefore, many countries started their own schemes which means that local transactions should stay within Pakistan, there is no need to send them abroad for approval. Also, there were data security concerns. We are beginners in this but let’s take the example of India.
A few years back Master Card complained that the domestic scheme of India is costing them business and not giving them fair play. They are in a dispute with Visa as well, to keep the data inside India. So, it was a huge issue in the world and Pakistan was lucky that in 2017, we launched PayPak. PayPak is now 6.7 million cards, we have 20% of the debit card market share and we have more than 30 issuers.
We are also using cutting-edge technology, we are introducing tokenization. Three banks in Pakistan have started tokenized transactions, they are using us as their gateway. In simpler words, it means that your credit or debit card is on your mobile now.
You don’t need to take your card everywhere. From a security point of view, every transaction is a new token so you are not compromised. It is a very new technology and seldom used in other countries but in Pakistan, we have introduced it and it’s working.
So, since you asked where we would be in the next five years, we will be on tokenization and we will have PayPak credit cards and acquiring networks. We are going to have credit cards that will bring cheap credit to the customers of the banks and will allow them to launch PayPak credit cards.
We are also working on a POS (Point of Sale) network, we are trying to acquire a QR product. QR is a cheap means especially in countries where POS machines are infrequent, we in Pakistan have only 70 thousand POS machines and the target is 300k to 500k.
Then we have Sohni Dharti remittance, 1Link is now becoming the depositor of the remitter database so we will be able to do programs for the entire remitter base by giving them benefits, through the government of Pakistan. The MoF and State Bank of Pakistan have launched this.
TEA: What challenges do you face at the policy-making and government level, do you believe that they have been a great help in your growth, or do you believe that there is a lot to be done at the governmental level?
NA: The journey has been phenomenal, you will not believe it but the government is far swifter now in digitalization as compared to the private sector. In 2019, we started with zero transactions for FBR and customs, then the government said that 1Link should have this on our system. So we signed with the Punjab revenue authority and KPK etc.
As a result, now we have collected Rs.4 trillion only for FBR, all from digital means. People can now pay their FBR and customs taxes by accessing their bank accounts using the 1Link system.
Similarly, all the provincial authorities are benefiting from it, for example, if you want to pay your motor vehicle tax you don’t have to go to the Civic center anymore, you can pay it via billing system in 1Link that is available to all the banks. You choose your bank and if you want to pay it using mobile banking or net banking or ATMs or Over the counter (OTC). The only problem is that people don’t know about it and I guess banks should do a better job.
TEA: What challenges are you facing in the banking sector?
NA: There are many challenges, first of all, my complaint is the proliferation of the internet and mobile banking. After COVID, if we combine Mobile and Internet banking, only 15% to 20% of the banking base is using these channels. So, still, 80% banking base is not registered on the internet and mobile banking. How are we going to grow if we don’t bring more customers?
The current customers using these channels are good, they are educated, they have multiple accounts, and so while we are talking about the boom and everything, this has yet to reach a common man. We need the effort to bring everyone on this but yeah cards are better. In Pakistan, there are about 27 million debit cards and only about 15 million mobile and internet banking customers. So there is a huge customer base that is not aware of these alternative delivery channels (ADC).
TEA: Do you believe that we need to do more in the context of terror financing and money laundering?
NA: We are far more compliant than many other countries and we know that name-calling and scapegoating could be for various reasons. We have done sufficient for mitigating and safeguarding against these issues. Our home remittances are now increased via official channels, the KYC (Know Your Customer) and EDD (Enhanced Due Diligence) requirements are huge now, so things have changed a lot in the context of due diligence on the customer’s side. I think it is pretty satisfactory to me.
TEA: With a high influx of customers the probability of cyber-attacks and frauds will increase as well, so what are you doing to cater that threat?
NA: I will give you two answers, there are these individual-level frauds when you talk about an employee of a bank compromising security by using sensitive data, instances where fraudsters break the ATM or steal somebody’s ID from a database. These are instances which the banks should control better by more checks and balances.
Then there are these enterprises level frauds or national level frauds, you must have heard about the 2018 attack on a Pakistani bank, where they lost millions of rupees to international cash out on ATM’s, which is called a zero-day attack, it was never heard of before, the way they attacked the bank.
So the bank and customers both lost the money. We are taking many steps on both enterprise and customer levels. We are trying to monitor ourselves, if we get compromised an outside system should tell us that we are compromised. We have a Fraud Risk Management System, which does fraud monitoring for 33 banks. A lot has been done in recent years on security but a lot has to be done.
TEA: What needs to be done in the future?
NA: There is still a lot to do, I mean it will take some time to put Pakistan on the path of digitalization and we are far behind as compared to many other countries. There is a lot to catch up to, the government and State Bank are also eager to implement digitalization.
Hopefully, we will catch up, sometimes being last is good because then you make fewer mistakes. I mean B2B in Pakistan is horrible, around the globe it’s all done digitally but not here, it’s still very rudimentary.
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