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Monday, December 11, 2023

‘Imminent Supremacy of the Fintechs’

An in depth interview of Southtech Group’s Managing Director and CEO Syed Mamnun Quader with Fintech

Syed Mamnun Quader started his career in 1983 as a bank management trainee in the City of London. He worked for Banque Nationale de Paris plc in London, Banque Paribas in London and Investcorp Bank EC in Bahrain and thus acquired a well-rounded experience of retail, commercial and investment banking. His last assignment at Investcorp was as Risk & Controls Manager of the Proprietary Trading Group of their Bahrain, London, and New York offices. Here his responsibilities included setting and monitoring risk and trading limits of hedged and sometimes open positions in financials products such as options, futures, warrants, bonds, equities and foreign exchange, assessing computerized trading models developed by traders and implementing hardware and software technology in the trading rooms.

His heavy involvement with technology eventually led him to think about setting up a software house in Bangladesh.  In late 1995 he decided to come to Bangladesh when his long entrepreneurial journey began.

 An MBA from Cass Business School, London, Mr. Quader is also a Founding Member and a former Senior Vice President of Bangladesh Association of Software and Information Services (BASIS), the national trade body for Software and IT Enabled Services. Currently, he is the Managing Director and Chief Executive Officer of Southtech Group.

Syed Mamnun Quader set up Southtech Limited in 1996 at a time when there was very little in terms of software development in Bangladesh.  Southtech Group now comprises of six entities, two within Bangladesh and four overseas.  He is an iconic figure and a pioneer in the Bangladeshi tech industry. His leadership qualities, deep knowledgeof the financial industry, innovative ideas, and willingness to confront difficult challenges make him special. He inspires startups and a number of his former employees are now successful entrepreneurs in their own rights.

In a recent interview with FINTECH, Mr. Quader talks about Southtech Group and his assessment of how the Fintech Industry is evolving.  He gives a glimpse of what might be happening in the near future and how people’s lives may be changing for good.  Here is the excerpt for FINTECH readers.

Tell us a bit about yourself and Southtech

Childhood was fun with green playing fields, blue sky and trees to climb but school work was also important since my father was a highly driven,hardworking man, setting high standards for all his children. Our dear mother was always there to cheer us up!  So we had no choice but to be serious about our careers. Even though I wanted to embark on a business career from an early age, this was not really a choice; at a minimum, a master degree was a must and working for a big international organization was preferred.  And at high school, once when the principal asked how many of us would like to be doctors or engineers and some of us did not raise our hands for either of these professions, he lamented that there was no future for us!

Soon of course, enthusiastically driven by my loving parents I was doing a degree in Statistics in London with lots of Computer Science in it.  I was not supposed to stop there, a master’sdegree was required, right?  So, soon after completing my first degree, I got enrolled in Cass Business School, London and obtained my MBA degree!  A friend andI went to a local bank for a loan to start an international trading business but we got refused.  However, pointing at me and getting to know that I was a Bangladeshi, the bank manager said that he would be willing to fund me only if I was to start a tandoori restaurant!  Thinking of my loving conservative Muslim parents, that was a no-go! Tandoori restaurants had to sell alcohol! So I said “no” and looked for a job!

My career started with banking in 1983 as a management trainee. I underwent a 14-month long training program, during which time I had to work in different retail and commercial banking departments of the bank and at the same time attend theoretical classes on various aspects of banking.

After completing this course I was given a choice to join a branch as a credit officer or join international audit.  I chose the latter which allowed me to travel to different parts of the UK and at the same time get even greater insight of the workings of a large bank since I had the right to ask and look at anything!

During my 13-year long banking career, I worked for several banks. I worked for BanqueNationale de Paris plc in London, Banque Paribas in London and Investcorp Bank EC in Bahrain.  In all these great institutions I came across many highly talented individuals who were willing to share their knowledge and experience. Learning was a passion and I remember working many late hours reading books and training manuals and appearing in professional exams on banking and electronic data processing in the banking industry.I was working in London, the largest financial center in the world, and so working in the two huge French banks, BNP and Paribas, allowed me to learn about many different types of financial products and services.  My last banking role was in Investcorp Bank EC in Bahrain.  Here I was the Risk and Controls Manager of the Proprietary Trading Group. This arm of Investcorp was involved in trading and taking positions in various financial instruments such as options, futures, equities, bonds, warrants, and foreign exchange.  I was responsible for setting and monitoring risk and trading limits of hedged and sometimes open positions in these financials instruments, assessing computerized trading models developed by traders and implementing hardware and software technology in our Bahrain, London and New York trading rooms. I reported to the CFO and the Partner responsible for Proprietary Trading.

My work often took me to software houses in London and Mumbai from where some of our back office settlement systems were being procured.  My intimate involvement with software and technology gave me the inspiration to start something of my own in Bangladesh. My age-old entrepreneurial spirit was back and I had enough money to start on my own. So in late 1995 I came to Bangladesh and began working with a very small team as finding qualified people was very hard even though some former BUET professors in Bahrain had assured me that programmers were available in plenty in Bangladesh. It took several months for Southtech Limited to be officially incorporated in May 1996. Most of my first recruits needed to be trained ground up so I gave them lots of books to read and training videos to watch. Two of my initial recruits, Hafizur Rahman and Syed Shah Abdul Gaffar were Computer Science graduates and that helped me a lot. All of us were super motivated and were willing to face a challenging world.

Our first project in Bangladesh was to develop a stock brokerage system for the Dhaka Stock Exchange brokers.  This was the first automated brokerage system in Bangladesh. Soon we landed with a project to automate the microfinance business of BRAC. This too was a first of its kind.  This was a huge project but we did not disappoint BRAC. We went deep into rural Bangladesh, in places where we had to work with small generators.  Later from the same group we got orders to automate Aarong, which was fully automated with a retail ERP, from procurement of raw material, production to retail sale.  This too was a first of its kind in Bangladesh.  Soon we were asked to establish BRAC Information Technology Institute, develop software for BRAC HR and BRAC Bank. These projects kept us very busy for a while. I remember that I was asked to develop a front office for BRAC Bank in 40 days so that customers could do computerized teller transactions and yes, we did deliver in time! Later this project developed into a fully online banking system, once again, first of its kind in Bangladesh.

I remember, the Managing Director of BRAC Bank at the time, Mr. Aziz Ahmed, wrote a testimonial for us which read, “God made us men and women, our tailors made us ladies and gentlemen, Southtech made us efficient bankers”.

Southtech branched out to IT Infrastructure business creating a sister concern by the name of Southtech Systems Limited.  This unit is involved in hardware assembly, LAN and WAN implementations and various IT infrastructure related projects.

Soon we began exploring nearby countries and we landed up with a bank automation project in Bhutan which followed with providing a loan management system for the National Pension and Provident Fund of Bhutan.  Southtech established offices in the USA, UK and Myanmar which are primarily project procuring offices and a second software development center in Bhutan’s Thimphu Techpark where a certain amount of software work is outsourced.

We now have flagship software products and services in different verticals of the software industry.  We are in Fintech, ERP, retail management, human resource management, business intelligence, cyber security, e-commerce, and hospitality management. For example, Southtech Ascend Financials is a suite of products that cater to microfinance institutions, microfinance banks, non-banking financial institutions, and retail & commercial banks.  Southtech SCALED is an end-to-end HR management solution from recruitment to retirement.  Southtech EasyERP is a comprehensive solution for retail business. The newest thing now is Ascend BI, a business intelligence tool that can sit on top of multiple databases and give highly insightful information for business decisions.

You are a founding member and former Senior Vice President of BASIS. How is BASIS helping the IT Industry in Bangladesh?

Well, BASIS plays a pivotal role in developing the software and software enabled services industry in Bangladesh. We formed this association so that technology could be given more importance in our country. At the time when we formed this association, there were very few software companies in Bangladesh. During the early days, it was difficult convincing the Government that this industry can transform Bangladesh for the better.  Over a period of time, however, BASIS was able to influence the Government to take this particular industry seriously, thanks to the visionary leadership of our current government.  The tax holidays, tax-free import of hardware, and such measures taken by the government helped us a lot. I see a lot of potential for the Bangladeshi IT industry.  We are still very small compared to what we can be.   We hope to catch up with the RMG sector in the next few years.  BASIS must continue to brand Bangladesh in world forums and there are still lots of other things BASIS can do nationally. Hi-tech parks with easy access to amenities such as schools, hospitals, shops, etc. and easy commute to these facilities will make things much more vibrant for the IT Industry.

You have worked in multinational banks abroad and currently are working with the financial industry. So how do you think Fintech is changing the global financial landscape?

As I see it, in the near future banks will be forced to look more like Fintechs or Fintechs will begin to look more like banks. Regulators will not be able to catch up with these innovations fast enough and so regulations will be chasing these innovations. We already see the emergence of “challenger banks” which have no brick-and-mortar branches.

All their services, including cross-border payments are delivered digitally within minutes. While the large multinational banks still dominate international banking, they are increasingly feeling pressured by these developments. For example, HSBC recently announced the redundancy of 10,000 employees in the UK; their cost structure is far higher than their light-weight challenger banks. A recent study shows that in multinational banks the average cost of a single transaction is a little above USD 7.

Fintechs such as Southtech can bring that cost down to less than a dollar. Having said that, the multinational banks offer a very wide range of services that cannot be replaced by Fintechs overnight but on every front challenge is building up. Cryptocurrency, blockchain and artificial intelligence will fundamentally change the way we do business.

I worked for investment banks and the kind of financial products that I used to work with are not available in Bangladesh yet. I remember, in the early stages when I came back to Bangladesh, we couldn’t even book a forward foreign exchange transaction and sadly things are only very slowly changing in this respect.  However, Bangladesh has done brilliantly in alleviating poverty through microfinance, thanks to the likes of Grameen Bank, BRAC and many other NGOs in this field.  Here technology has played a vital role and we are proud to have been a pioneer in the automation of these types of organizations. Currently, more than 112 million transactions per month are processed through our microfinance solutions.Due to these projects and other development initiatives, Bangladesh has now transitioned into a middle-income country. Alhamdulillah, people no longer go hungry in Bangladesh and we have built food reserves for bad times.

Cost of operations in advanced countries is very high compared to Bangladesh. We can therefore build Fintech solutions at a much lower cost than in any other country in this region. We could reach out to the rural poor with our technology solutions partly because of our cost advantage. Currently we are working in Bhutan and Myanmar also and there too we are able to offer our solutions at very affordable rates.  In fact, we have a second development center in Bhutan’s Thimphu TechPark and our employees there are partly responsible for the development of some of our global solutions.

Technology has allowed us to compete globally. Our cost advantage allows us to offer our solutions to the wider world where the cost of technology still remains high.  Some of the greatest Fintechs can therefore emerge from this region.

Syed Mamnun Quader/Photo: Arif Mahmud Riad

You are also working in Fintech industry. How do you think the Fintech industry is evolving in Bangladesh?

Look at what bKash has done. There are others also such as Rocket, Nogod and many more like that. As far as the remittance and payments business is concerned they have transformed society already. Connect these to MFIs, Uber, Pathao, Shohoj, HungryNaki, Food Panda and the likes – the evolution is endless.  The objective now is to lower the costs even further.

I see a more connected Bangladesh in coming days.  With fiber optics cable connecting all the unions, we can expect very big changes taking place all over Bangladesh. However, we hope that Bangladesh Bank will take proactive steps too.I keep asking myself, why can’t we have a national switch, big enough for all the banks and financial institutions to connect to each other instantaneously so that people could remit any amount of fund, large and very small, to any other bank account in seconds?

How do you see Southtech in the next five years?

We believe that there is a need to create a very large middle class in the developing countries where we work and we have a role in that mission.  In the next phase of development, we see the emergence of SMEs in larger numbers who will need technology support. Affordable ERPs for light engineering will be in demand.

We have therefore already built ERPs with best practices build-in for various sectors of industry so that the SMEs don’t have to wait.  ERPs will be required in very large government organizations also.  For example, we at Southtech have developed and implemented a highly customized 34-module ERP for the Civil Aviation Authority of Bangladesh that has 15 airports, 4 aerodromes, 5 operating units and an HQ. The software covers all types of aeronautical billing, human resource management, procurement, inventory and store, financial accounting, library management, legal case management, etc.

On the financial side, about 8 years ago we realized that microfinance institutions will wish to work up stream while banks will want to work downstream and they will be fighting for SME clients. Our prediction was right and we see that this is already happening now. In response to our analysis we began merging our banking and microfinance product into a single solution so that we could serve both these types of organizations. Our Ascend Financials is that product which caters to MFIs, NBFIs and banks. We have begun marketing it both nationally and internationally. With an API to our universal alternative delivery channel (ADC) solution we see a huge increase of financial transactions that will soon match the transaction numbers of some of the advanced nations of the world.

Two more areas where we are focusing, cyber security and business intelligence.Over the last couple of years, we have built strong teams to cater to these services that are in high demand worldwide. In coming days, we anticipate triple digit growth for the next two to three years where we would significantly increase our dollar revenue.

Our government is very supporting of technology. Our Honorable Prime Minister has a vision of Digital Bangladesh and we have to play our part in realizing this dream. Large and impactful changes can be brought in the country if we continue to work on projects with the support of our Government where our unique expertise could be of significant value.

Thanks a lot for giving your time to Fintech.

You’re welcome and thank you too.


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