BSP, PNG’s largest bank, is being recognised globally as a major innovator with mobile technology. In our exclusive interview, Group CEO Ian B Clyne reflects on a momentous year for the bank and its plans for future growth.

BSP’s Ian Clyne holds the award for ‘Best Bank-led Mobile Money Programme’.

Business Advantage PNG (BAPNG): I gather BSP opened a record number of new accounts last year. How was this achieved?

Ian B. Clyne (IBC): When we did a project three years ago to streamline the account opening process, we found that it could take up to an hour and a half for a teller to open a new account. But now that we have the right systems in place, after investing in state-of-the-art technologies, we have the capacity to go out and really start to open accounts.

Thanks to the Galaxy Tablet we now use, which has wireless Bluetooth connectivity, we can open up a bank account anywhere around the country in five minutes, giving you a working debit card, issue a PIN, and take a deposit. Technically, you could then walk to the nearest EFTPOS terminal or ATM and withdraw that deposit immediately.

BAPNG: And congratulations on winning the Connected World Forum Award for the ‘Best Bank-led Mobile Money Programme’ in recognition of the technology you have used …

IBC: BSP is one of the first banks in the world to utilise this cutting edge technology to reach more customers in the most remote areas, to open new accounts and increase financial inclusion. Winning this globally-recognised award is an amazing achievement and one in which all staff of BSP have contributed. It recognises that BSP is a world class innovative bank and also very clearly puts Papua New Guinea and BSP on the world banking map for all the right reasons.

BAPNG: They say necessity is the mother of invention. Would you say you had to be so innovative because PNG provides such a challenging environment for retail banking?

IBC: Yes, you have no choice. If you look at the nature of the PNG retail market, it is unprofitable in the traditional format.  Only 15 of our 41 branches used to cover direct and indirect costs. Today, nearly all cover their direct costs.

The only way we could make a branch network profitable was to actually re-engineer or refocus it to service the high-income customer and the lending customer.

In short, every time a mass market person goes to our teller, we lose money.  Every time that same customer goes to an ATM or an EFTPOS terminal, we make money.  So we had to motivate people to move away from cash as the source of doing their business and into electronic banking.

Our whole strategy had to be built around how to service each customer segment and that’s why we set out some time ago looking at electronic solutions.

But to do that you also need to have the bandwidth and the capability of processing. Historically, Papua New Guinea has had very poor telecommunications infrastructure, based on satellite, but in recent years Digicel has revolutionised banking in Papua New Guinea. Thanks to their network, we’ve got ten times more bandwidth between the main towns.

BAPNG: The programme must be having a massive impact on the rural economy?

IBC: We did a pilot project with agribusiness Agmark in Kokopo (East New Britain Province). There was a woman who had been a grower for 20 years, but when she got paid cash all her wantoks [relatives] came and she had no cash left.  If, instead, she gets a cheque, then it just goes to the local trade store.  Since we’ve done that pilot she’s been saving a thousand kina (US$475) a month and now she’s talking about going into chickens and pigs, you name it.

We’re also working with all the major commodity buyers, so the commodity buyer is now using a wireless EFTPOS unit or an electronic solution.  We actually have a mobile phone solution coming shortly, and we go out with the tablets and we open accounts for all the growers.

BAPNG: You’re opening all these new accounts and accepting all these deposits. Who are you going to lend this money to?

IBC: BSP has been working for some time on building a new lending platform because you cannot cost effectively do retail lending on a manual basis. Therefore, BSP’s strategy is to automate the whole retail lending process—both for retail and for small-to-medium business lending.

We now do an enormous amount of data mining. We’re building a scoring model, based on seven years of data on defaults. The idea is: the client will come in to the loans office, our staff will input the data into the computer—obviously, we have to have the correct data—and they’ll get a decision on the spot about whether their application is referred for review.

Bank of South Pacific (BSP) is the largest bank in PNG, with 41 branches throughout the country. It is operates in four countries, with assets of K11.7 billion.