The CEO of ANZ Royal says he’d like to see banks in Cambodia adopt a voluntary code of banking practice to raise industry standards and improve the banking system for customers at every bank.
Grant Knuckey, who serves on the executive committee of the Association of Banks of Cambodia (ABC), said that unlike in the case of “the strong survive” evolution of the telecommunications companies, the same formula wasn’t an optimum paradigm for the banking system.
“For a banking system the optimum is to make sure everyone is strong. Failure in the banking system is not the same as in telecoms. Failure in the banking system can create potential systemic risk for an economy,” he said.
“At present I don’t see any particular risk, but the key is to make sure it doesn’t get there. If you continue to have a large number of providers targeting a relatively small target population, it is unlikely to lead for a healthy economic outcome for all those banks.”
In Cambodia where only about 12 per cent of the population use banks, Knuckey says it would be difficult to describe the country as generically “overbanked”, but at the same time, the 35 commercial banks here constitute a crowded marketplace for the amount of available customers, he says.
“When you look at the target space that commercial banks are occupying in Cambodia, the true ‘bankable’ population for commercial banks is not that large, and is in my view over banked, even though the population of the country overall is not overbanked. There are too many providers all targeting the same customers – which in the short-term is good for the customers, but in the medium-term is unhealthy for investment and the system,” he said.
While some people would look at regulation as a way to address the issue of so many banks operating in a relatively small market, Knuckey says the Cambodia banking industry needs to move toward greater self-regulation in terms of standards.
With the Association of Banks in Cambodia, he is taking the lead in the development of a code of banking practice.
“This is a hallmark of any good mature banking system. You’re attempting to impose good standards on yourselves. It means things like setting baseline standards of the way that customer accounts will be operated, the minimum obligations of banks and the way complaints are dealt with.
“I think the time is right now for Cambodia to look at something like this and personally I’m quite determined to lead the charge on that because everyone will be a beneficiary,” he said.
He said there’s a supervisory challenge among the large number of banks in Cambodia, which banks must take some ownership of.
“It is increasingly difficult for customers to make an informed choice. If you put a code in place that all banks must sign up to and adhere to, you’ll raise the bar for the entire industry, and I think that’s important.”
With the recent development of a National Arbitration Centre, Knuckey said that organisation could develop and provide an industry-level dispute resolution mechanism.
Some examples of what Knuckey suggests should be targeted are the imposition of penalty fees in a non-disclosed way, in cases where an unaware customer suddenly gets charged a banking penalty.
“This is the obligation of disclosure. You’re trying to ensure full disclosure so that the obligations of a bank to its customers are well articulated and understood”.
Asked to differentiate ANZ Royal from other banks in Cambodia, Knuckey said its point of difference in consumer banking was the level of customer service, and in corporate banking it was the relationship-based approach of the bank.
“I believe we have the market leading level of customer service in Cambodia. It is about the quality of the interaction you have and that ultimately comes from having the best trained people in the market. We put a huge amount into training,” he said.
Knuckey says ANZ Royal is on a strong growth trajectory, but not by opening more branches because he believes 10 years from now a great deal more of banking transactions in Cambodia will be electronic.
“In our view in the medium term, the best delivery channel for our customers won’t be more and more branches, particularly as Cambodia transforms from a cash economy to more electronic economy,” he said. “Increasingly the preferred and channel for consumers and business, as well as the economic channel for banking provider, will be electronic. For us, and it’s not the same for every bank, over-investing in physical branch infrastructure would be inconsistent with our strategy and not likely to be economic.”
Knuckey says Cambodia is not going to transform from a cash-based to an electronic economy overnight.
“But equally we are not setting our strategy for next week: we are setting it for the next decade. We have to set that strategy with a view to where Cambodian banking is heading over the next 10 years and it will be toward greater use of electronic channels. I would think Cambodia will do that in an accelerated way.”
Knuckey said ANZ Royal’s overall strategy is based on “primary customer segments” including institutional clients, the top end of Cambodian corporates and the international community.
In the mid-market commercial segment, the focus is on working with local Cambodian corporate customers and using ANZ’s regional relationships to support the supply chain.
“Our target and positioning is around customers who are part of the supply chain of larger customers, and they may be suppliers to or buyers from large multinationals who are already our customers.”
Knuckey said there are also industry-specific areas of focus such as agriculture that are the focus of attention.
The other important segment, he says, is consumer banking where ANZ Royal is targeting what it describes as the “emerging affluent” customer.
“These are people who are building their wealth. They may be young professionals or business owners, but the common element for all of them is they are looking to build their wealth. That’s the target for us in consumer banking.”
ANZ opened an office in Yangon in April, an office which, along with ANZ’s significant presence in Laos, is under Knuckey’s leadership.
“We’re in the beginnings of what will be a long term process of learning as much as we can about that market and looking for ways we can monetise our presence in Myanmar,” he said. “What I’ve found very pleasing so far is the sheer amount of interest from ANZ’s customers around the world in Myanmar and various opportunities there. I don’t think by any stretch it will be a straight line trajectory, but it is still clearly a positive trajectory and the amount of customer interest is a pleasing sign.” he said.
From the current small representative office in Yangon, Knuckey plans to eventually have a full-scale operation in Myanmar.
“We will scale up at the pace the regulator allows us to. If you look a decade in the future, Myanmar should be a substantial part of ANZ’s presence in the region and we‘re willing to take the time to get us there.”
In addition to his executive committee role at the Association of Banks of Cambodia, Knuckey also serves as president of the Australian Business Association of Cambodia (ABAC) and is working on a plan to work together with other Australian business associations in Vietnam and Laos to create regional integration between the chambers.
“We’d like to get a blueprint in place for taking these three Australian business chambers to the next level, more professional organisations,” he said. “They won’t be one entity, but we’re going to work together on what will be a relatively common blueprint for the future strategies of these chambers.”