By James Bennett
RAK Bank has combined a dynamic financial and customer strategy with aggressive focused marketing - with astonishing results. James Bennett meets the team behind one of the UAE's greatest banking success stories.
What is my competitive advantage to go and fight outside of the UAE? We have no ambitions to fly over our border. Birds that fly over borders these days tend to be very ill," says Graham Honeybill, ironically referring to the success of RAK Bank and the potential bird flu pandemic the fast-rising financial star has had on its disaster planning radar for over a year.
"I was watching Sky News the other day and the UK's chief medical officer said there was nothing to worry about. A colleague of mine then said ‘if he's saying that then we should all start worrying'."
Both RAK Bank and its CEO for over 10 years don't have many things to worry about, however, but when they do, they address it both immediately and with full force.
"It's a threat and has been part of our disaster planning meetings for some time. We said ‘what's going to happen?' We don't operate overseas therefore we have that on our side, our customer base is largely internal, but what happens if it comes into the country, is there an injection against it? It is available but would probably be distributed by the Ministry, but we also said ‘you know what, we'll plan well ahead too', we have to."
Soon to be 30 years old, the institution formerly known as the National Bank of Ras Al Khaimah, has
undergone a massive transformation under Honeybill and his hand-picked team, including David Martin, the CEO's right-hand man and one of the bank's top business advisers, who also joins us for the interview. Asked why the bank has seem such a steep growth curve over the last decade, the bubbly 60 year-old Welsh chief executive simply replies "because we're good", but scratch the surface and a bigger picture emerges.
Back in the seventies the bank was merely ticking along, had no set growth plan in place and the word ‘commercial' was at the heart of its long-term strategy. But as the nineties were coming to a close and the UAE was being recognised as one of the fastest growth countries on the planet, it was then that things changed. Honeybill and his team were hired to take the bank out of the doldrums and to spread the brand and its services across the Emirates. His first decision was arguably his best, to ditch commercial banking in favour of retail: the simpler the product and the more mass appeal, the better.
"The bank then suddenly came into it's own," says Honeybill. His first move was the clincher and the foundation stone was laid for the bank to grow. From 60 staff and, in Martin's words "absolutely bog standard products" including a personal loan, fixed deposit savings account and current account with a total asset value of US$136m (AED500m), to today's 1500 employees, entire suite of consumer financial products, 250,000 UAE-wide customers and well over US$1.77bn (AED6.5bn) in loan assets, the bank has made massive strides - all in just seven years. "We were uncompetitive in the corporate market, dollar rates were going down and we didn't like the markets. We took a decision and it worked. I then hired David, who I've known for many years, and the retail strategy began in January 2000 after it was accepted by the board. Since then we have gone from strength to strength," says Honeybill.
Martin agrees and suggests that "keeping it simple" and "getting basic customer needs spot on" has been the key. "Our success has been providing products that people want, at prices they are happy to pay and at a service level which is better than anyone else in the market.
"The customer just wants a decent product, at a good price, efficiently delivered to him with the least amount of nonsense. In the trade, going to a bank is known as a ‘distressed purchase', but our customers don't think like that."
Honeybill and Martin's mentality, alongside their constant push to maintain ultra-high service levels, has enabled RAK Bank to step up to the plate very quickly, becoming the UAE's third largest retail bank, below Mashreqbank and HSBC as well as being voted the best bank in the Emirates by Ethos Consulting.
Banks often have a bad reputation and complaints are commonplace, says Honeybill, but his insistence on service quality has extended further than many of RAK's competitors. It even pays its customers US$27 (AED100) in cash for every validated complaint that is made. So far, he claims, he has only had to dig into the bank's coffers once.
"The thing we spell out to staff is if you're wrong, say so, tell the customer and number one apologise. Every customer who makes a validated complaint gets US$27 (AED100) in cash, a small gesture of apology, as well as a formal letter of apology and the issue is resolved.
"As with every bank we receive lots of complaints but there has only been one that has been validated. This is not a waste of time, if we only had one a year it's not wasting time. The issue is service quality, either you take it seriously or you don't bother. If we're wrong, then we admit that we're wrong."
One area that Honeybill and company haven't got wrong, however, is in the credit card market and the institution's aggressively targeted and advertised Titanium - a product that has taken the UAE by storm and dramatically grabbed 23% of the card market in a mere 10 months due to its range of benefits.
"Unlike other cards it is free for life, gives you 2% cash back, has a very low interest rate, and you can win prizes of US$272,000 (AED1m).
"We have four winners so far. What more benefits do you want?" asks Martin.
Honeybill admits that the bank's advertising for the card has been "a bit in-your-face", but doesn't shy away from the success that large, loud, brash banners planted all over the UAE, have had in the 10 months the card has been on offer. "You drive down Sheikh Zayed Road in Dubai and these ads come up. On average I think you have 2.3 seconds to react and focus your attention, and suddenly there's a lot of colour. Ours are designed to get: one, the product message; two, the phone number; and three, the name across the bottom. And it works."
A further advertising campaign, entitled ‘the card shark', has also managed to capture a wide-ranging UAE customer base. Martin says that the campaign went so well, however, that during an internal review about the possibility of changing it to a soccer-related theme following the UAE team's victory in the Gulf Cup, 20 of his colleagues in the room pleaded with him not to alter the design. "Our competitors are now being seen as card sharks, while we're not. The campaign has had completely the reverse effect.
"The benefits on the Titanium are tangible benefits. If you take an Emirates Skywards card, for example, the redemption rate is less than 1%, here you get 2% cash in your account," adds Honeybill.
"Other credit cards range from 2.5% flat down to 1% a month at Lloyds but they only give credit cards to customers whose salaries go through the bank. We're giving cards to non-bank customers - 80% of them are not bank customers."
Banks and credit card companies, however, face a huge problem and open themselves up to huge risks when allowing so many ‘non-bank' customers access to their credit products - bad debt and, as the trade labels it, a rising number of ‘skips'.
RAK Bank's CEO says that if an institution goes into the ‘non-sub-prime' (non-bank customers) sector it gives people the opportunity to skip the country, leaving large debts behind. "There is no security, no salary coming in, no credit profile on the guy if you're dealing with non-bank customers, and you're taking quite a risk. Ourselves and our competitors know that a lot of these people tend to skip the country and leave their debt behind. We know it happens, but there is no credit reference bureau to take care of a growing problem facing the industry."
A credit regulator, however, is set to open its doors to financial institutions in Dubai in the coming months (see box) and a large proportion of bad debt will finally be able to be eliminated from the Emirates' banking sector - but the problem will always exist in some form or another, says Honeybill.
"It's quite peculiar that the UAE hasn't had a credit reference bureau until now. Once it opens banks will be able to read the credit rating of borrowers. It will also reduce risk, and you can see the credit profile of a customer, and then you can cherry pick or price accordingly.
"You will never get rid of this because there will always be a class of individual who will say ‘I'm off'.
"As we're now in a high inflation environment the lower levels in society are being squeezed out, they're finding it difficult to keep up with rent and school fee increases, for example."
The northern emirate's bank CEO says that ‘skips' were previously not an issue, but that the cost of living and a surge in rent levels in both commercial and residential properties, has caused major problems.
"In a fantastically fluid environment people come in and out as they want. Plus, over the last year we've seen an increase in the number of skips and that's down to the economic conditions in Dubai, generally in the lower salary levels.
"We've noticed growing incidences of bad debt and customers leaving in the below US$1080 (AED4000) salary level, and this is also common with our competitors. Credit card companies are losing up to 8% but it varies between banks.
"Those banks such as Lloyds are losing very little, but banks such as ourselves, that have a lot of non-bank customer portfolios, can often lose up to 8%." The bank however hasn't done much wrong since Honeybill took the hot seat, but he does laugh and suggest that he hasn't paid himself enough. Although on a serious note, he adds that he regrets not launching an Islamic division at an earlier stage rather than later this year. "Islamic banking is growing at double the rate of commercial banking. That was an area we neglected and we waited for a long time [12 months] for the Central Bank to approve the licence because we were one of the first banks to ask for a specific Islamic finance company.
"We were one of the first to ask for that specifically, but the rules and regulations weren't in place so the wheels turned slowly, and by the time we got the licence we were flat out on a number of other things."
Nevertheless, with the number of new account openings in January this year running over 300% ahead of forecast, the bank's astonishing speed of growth is set to continue for many years to come.