Unlocking the Potential of Payments

Ankur Joshi:

Hello, everyone. Welcome to Nuclei’s Podcast. I'm Ankur Joshi, the CEO of Nuclei. We build products to aid banks in their digital transformation journeys. For our podcast today, it's my pleasure to host Mr. Ramana Kumar, the CEO of Magnati, a fully-owned subsidiary of First Abu Dhabi Bank. Ramana has been a leading banker in the Middle East and Africa region for a long time, and it's a pleasure to have you on our podcast, Ramana. Welcome.

Ramana Kumar:

Thank you, Ankur. Great to be here.

Ankur Joshi:

Let me start this podcast by going back a few years to your origin and where you grew up, your time at Durgapur. What were the key highlights of some key learnings from that era that you still carry with you?

Ramana Kumar:

Yeah, that's a lot of years. So, yeah. I think one cornerstone of our upbringing was the growing middle class, being a teacher's son, always having discipline. While many of us went through different stages of our competitive life as students, during the time I was giving entrance exams for engineering, like IITs and regional engineering colleges, there were hardly a few seats, and the competition was intense. For us, the fight was about survival. We even had the concept of negative markings. The education boards didn't make it easier for us to survive or give us a chance to fail. Coming from that perspective, one thing ingrained in me, and many people during my time, is about survival and proving yourself different from others. In a populous place like India, where you're fighting with millions for a few seats in IIT, IIM, you have to be different. If you're not, you may end up in the herd, not standing out. That's a principle I've always kept in my journey and life – always be different, do something that creates value for you. When people think about you, there are a few things they always see in you rather than a boring 8 to 5 job, just finishing what you're assigned to do. It's about thinking about what's next and what different thing you have to embark on in your journey.

Ankur Joshi:

Awesome. That's really insightful. To pick up from there, there's a saying in one of the podcasts that you should always be an interesting personality. You should never be boring. So you should surround yourself with people who are not dull, who have different facets to them. It gives you an edge as a team, and you get to learn a lot from them. I've noticed this in many people from tier two towns and middle-class families, this fire to do something extra, to stand out, and I'm sure it's been helping you throughout your journey. Going from Durgapur, how did you transition to the UAE?

Ramana Kumar:

I was fortunate to work in the core industry before doing my master's and MBA. When I graduated from engineering college, there was a challenge due to Y2K, and the manufacturing industry struggled with lower-paying jobs compared to software. Looking back, the best experience I gained was working in a foundry and a steel plant. Building a country's second-largest plant, dealing with the challenges of engineering and metallurgy, explaining projects to bankers— it was a massive experience. I always had the luck to work on something that gave a wider perspective than a specific job. I consider myself lucky for that. I earned much more experience than a typical person in a specific field. For example, working in a steel plant, you only know about that section. I worked on setting up the plant from scratch, and it was a fantastic experience. After two years, I went to business school, and post-business school, my career started with consulting jobs at a research company in India. Then, I got a call from an acquaintance about a friend setting up a company in Dubai. I moved to Dubai as a consultant and had the opportunity to set up 2-3 banks from scratch. All my experiences have been about doing something new with a 360-degree view, setting up something from scratch to big. I was lucky not to fall into job boxes, giving me a wider understanding of any problem I wanted to tackle.

Ankur Joshi:

That's very interesting because it aligns with what Charlie Munger speaks about, having a lattice work of mental models across different segments, whether it's biology, finance, HR, or metallurgy. Incidentally, I'm also a metallurgy engineer, so I can relate to understanding not just the setup of pipelines or factories but also the financing behind it. Being a generalist provides a 360-degree view and allows you to perform at a higher level. It's insightful, and I'm sure listeners would find it encouraging that they don't need to be siloed in a specific vertical to grow. Your journey from consulting to setting up banks from scratch and becoming CEO of Magnati sets an encouraging trend for generalists. That's really good to see.

Ramana Kumar:

I have a life principle – every three years, do something different, something bigger, refreshing, and adding value to our professional lives. I've followed this since the late '90s. My career book always has the view that every three years, I have to do something new. It's like the career span of a football player, about 8-9 years, where they have to be the best to shape the rest of their life. We're not different; our probability of success is relatively higher, but the concept is the same. You have to be different, continuously do something different, and take different roles in different situations. I've had amazing mentors and bosses who trusted and gave me independence, and I've always delivered or exceeded their expectations.

Ankur Joshi:

Thanks, that's good to know. Changing benchmarks every three years or doing something new that's bigger than three years ago is a nice mental model to live by. By the way, which football team do you follow?

Ramana Kumar:

I'm a die-hard Liverpool fan.

Ankur Joshi:

What are you saying?

Ramana Kumar:

Absolutely.

Ankur Joshi:

So my, that's the same.

Ramana Kumar:

I mean, Liverpool has been the team I've been following now for almost 18, 20 years now.

Ankur Joshi:

I started following them after their 2001 victories, the treble with the Cups. I began in 11th standard, and then I was in college when they won the Istanbul final. The last few years have been good for us.

Ramana Kumar:

It shows how a single manager can transform. Football is a great parallel for understanding many management theories. Despite any personal dislikes, I have great admiration for Sir Alex Ferguson. The way he leads by objectives, as highlighted in his book, is awesome to read. It's about leading by example and instilling belief within your teams. People need to believe in you, not just do it because they have to.

Ankur Joshi:

One of the best learnings from his book "Leading" was during the mid-2000s when they won three consecutive leagues. He emphasized the inversion principle – avoid failure, prevent other teams from scoring, and the probability of success increases. Rio and Vidic's 15 clean sheets run is a testament. Both his books are amazing, and one has been taught at Harvard Business School. It's about sports psychology and sports management, but the learnings are...

Ramana Kumar:

It's people management. The same people excelling under Sir Alex Ferguson might not do as well under other managers, proving the point. Back to our discussion, it's about focus and clarity on what you want to do. Things fall in place when you know where you want to go.

Ankur Joshi:

Correct. Moving on from our football discussion, transforming payments into possibilities. That's a really awesome catchphrase, it stuck in my mind. Can you explain what Magnati is doing, building payments as a platform, and transforming payments into possibilities? What new benchmarks are you trying to achieve with Magnati?

Ramana Kumar:

Yes, payments have always been viewed as a transactional aspect of business. For instance, you go grocery shopping, come out, and then you pay, encountering friction in the process. It takes as much time to pay as it does to shop, if not more. This transactional nature has been a constant. However, for us, the concept of payments transforming into possibilities revolves around four key quadrants.

The first quadrant focuses on the potential for new growth. There is valuable data in payments that we can mine, monetize, and translate into opportunities for new growth. Payments open up a realm of possibilities.

The second aspect is the innovation potential, where we explore new payment methods continuously. Instead of limiting ourselves to accounts or cards, why not explore a token that combines them all? The ongoing evolution of virtual payments and the ongoing meta wars are examples of the innovation possibilities within the payment sector.

The third aspect is what I term as the possibility of killing the money in the black box – the potential for commerce. Numerous industries, including merchants and even government finance departments, struggle with visualizing the total money within the country due to disparate systems and money stuck in the black box. Our vision is to open up new commerce possibilities by bringing real-time visibility and reporting, eliminating the black box concept.

The fourth and final possibility is the potential for an exceptional customer experience. Why should customers stand in line or wait? Why not deliver a seamless, frictionless service? Providing an exceptional customer experience encourages repeat business.

These possibilities, encompassing new space, new commerce, and new growth, form the backbone of Magnati. When we engage with our customers, our conversations extend beyond mere pricing discussions. We convey that if they seek a partner to reduce costs, we are not the right fit. However, if they are looking for a partner to enhance their cost-to-income ratio, we are the right partners for facilitating growth.

Now, let's delve into the payment platform. Traditionally, every integration with a merchant is treated as a separate project. The merchant, focused on selling goods or groceries, doesn't want to deal with various payment systems, labeled as A-Pay, B-Pay, or C-Pay. We present a solution – a single API that connects to their systems, eliminating the need for multiple integrations. This follows the app store model, where all services, from A to G, are available on our platform.

Consider a scenario where a merchant chooses Service A. In a traditional model, if they decide to switch due to dissatisfaction, it involves canceling the existing investment in IT, calling the new provider, and going through a new integration – a new project. However, with our API, the merchant can seamlessly switch to Service Zero without any additional investment. This underscores our commitment to reducing the merchant's IT project costs by 40%, 50%, or even 60%. This approach aligns with how platforms evolve, akin to supermarkets where you enter through a single entrance and find everything you need.

Ankur Joshi:

That's quite intriguing. I'm sure there are similar models globally. I know a few in Indonesia and India that have created a layer for payments, allowing merchants to bypass multiple integrations and easily switch between providers. Are there other platforms across the globe that you find impressive or look up to, whether in the payment sector or any other industry?

Ramana Kumar:

I often refer to the app store model, and the Play Store is a fantastic example. They've essentially established a model where existence is tied to being part of their platform. It's not just about sticking to their platform; they offer a plethora of possibilities. Once you're on our platform, you can do so much more, and there's no need to worry about selling it to your customers. They take care of that for you because there's a vast customer base on their platform. You don't have to invest a single dollar in your sales pitch; they handle it for you. For instance, if someone mentions mobile banking, they automatically have access to all the mobile banking apps on the platform. This means they are essentially doing the selling for you, and what you gain is open access to everyone within that platform. That's the beauty of platforms.

Ankur Joshi:

Correct. Correct.

Ramana Kumar:

It’s a win-win.

Ankur Joshi:

Yeah, I can understand that. So, circling back to the last couple of years since the pandemic started, how has the pandemic impacted the platform you're building at Magnati or the banking industry as a whole? Where do you observe a key tectonic shift happening in the industry?

Ramana Kumar:

In the payments industry, COVID has been a game-changer, facilitating a significant shift from cash payments to digital payments, almost a twentyfold increase. It's remarkable and perhaps the only positive outcome from the pandemic. Additionally, it has opened up opportunities to collaborate with fintechs, enabling faster product turnaround. In the past, we dealt with a lot of paperwork flowing from one node to another. This situation underscores the resilience of mankind – when faced with challenges, innovation becomes imperative. Necessity truly is the mother of invention. Consider the shift from organizations restricting video tools like Skype on work devices to today's scenario where such tools are indispensable. The world has undergone massive digitization and impact post-COVID, and these changes have significantly benefited our industry. We are pleased to have been at the forefront of innovation, seizing the opportunity for growth. Achieving a 46% growth in total process volume in such a competitive market is no small feat.

Ankur Joshi:

You've been leading Magnati for some time now and have been a prominent and influential figure at FAB for an extended period. As a leader, someone I look up to, if an individual or a partner wishes to collaborate with you and your team at Magnati or join your team, what advice would you offer them? Separately, what advice do you have for potential partners and those considering joining your team?

Ramana Kumar:

Yeah. So, in terms of the team, it's straightforward. There was a time when certain individuals trusted me and provided an opportunity to explore something different, and all my bosses have followed suit. The approach is to lead by example. Whoever embraces the mindset I often refer to from the book "The Go-Getter," forget about working specifically in my team; you can excel anywhere and be a star. It's about being clear, passionate, and committed to getting things done, regardless of the business or field you are in.

Concerning partners, it's about creating value collaboratively by delivering services to our customers that they genuinely appreciate. Customer satisfaction is paramount. Working with partners should ensure we provide an additional value-added service for our clients, contributing to client retention. Everything needs to make commercial sense. Some fintechs approach us with initial integration costs of $2 million, and I straightforwardly advise them to reconsider. If they don't come forward for co-investment, ensuring a value proposition that promises tens of millions in the future, they are not the right focus for us. Partnerships are not about merely licensing software and charging fees; they involve collaborative efforts to create a compelling proposition. That, I believe, is the key to success.

Ankur Joshi:

Amazing, that's good to know. So, wrapping up this interesting conversation, let me close with a personal question for you. What is the kindest thing or act that someone has done for you?

Ramana Kumar:

Many people have shown kindness to me, and it wouldn't be fair to single out just one or two individuals. Those who believed I was capable of taking on something and making it happen have all contributed in a meaningful way. I believe that whenever you offer someone an opportunity, it shouldn't be based on their past 30 years, background, or lack of experience. Instead, whether experienced or not, one should leverage their expertise to approach things differently. Staying entrenched in the mindset of "I've been doing this for 20 years, and it should be this way" can hinder progress. Each year, during my team presentations, I begin by highlighting the importance of asking, "Who moved my cheese?" It's crucial to embrace change.

Ankur Joshi:

Thank you for sharing that profound and insightful perspective. This has been an engaging conversation, revealing the enduring passion that has fueled you since your upbringing in Dugrapur. Learning about your love for the Liverpool football club and their hard work, drilling out wins week after week, adds another layer to your character. Your vision for Magnati is truly enlightening, and I appreciate you being a part of the podcast. Thank you so much.

Ramana Kumar:

Happy to be here. Thank you. Take care.

Ankur Joshi:

Thank you!

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