Transformation becomes Business Imperative for Banks

You might be one of those who question an ability of traditional banking institutions to adapt to a digital world. And if you are, here are key insights to prove that some institutions are well along the path of true transformation and for them transformation is no longer a choice, but a banking business paramount.

“As Bill Gates stated, banking is necessary, banks are not. So, from that perspective there is always a risk that banks as institutions are not adaptive to that, are not fast and responsive enough and are not flexible enough to adjust to change and transform. Meanwhile, the stronger, the more advanced financial institutions are seeing that they need to act somehow. So, I do not think that Google, Apple or Amazon would kill banks. What they will, and what they actually are doing to the banks is that they are forcing them to the transformation. So, ten years from now banks and banking will be different. This is evolution, this is survival of the fittest,” said Andrey Popov, Ex-Member of Management Board and Head of IT Directorate at Raiffeisenbank.

Andrey Popov
Andrey Popov, Ex-Member of Management Board and Head of IT Directorate at Raiffeisenbank, at Caucasus SME Banking Club Conference 2019

One of the big things that Raiffeisenbank was working on during recent year was actually pushing the physical boundaries of its network, but doing it outside of really building out the branch network. Popov expresses his concerns that the Bank’s business model, transitional one, was very branch centered.  “Of course, the Bank was developing digital channels, internet and mobile banking but still a lot of processes, lots of interactions with clients and especially with SME segment were branch centered,” he added.

The team of Raiffeisenbank was obviously realizing that this way they were sort of cornering them to do business in the cities where the bank was present. So, the Bank fundamentally changed approaches and realized that it needed capabilities and tools and processes that would enable them to operate beyond the cities of their presence. That was the biggest change for Raiffeisenbank during last year. As Popov said, the Bank has started with some experimentation and they saw that the clients really needed them.

For Ukrainian Oschadbank it was not easy to break the shackles of old business models, but in 2014 when the Bank started comparing their profitability and efficiency with their competitors’ they saw that it could be much higher. For that time the Bank’s income shortfalls were huge. Consequently, in 2014 Oschadbank realized that fundamental changes were required for reaching leadership position on the territory of Ukraine.

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In this purpose, Oschadbank developed a strategy and for its realization involved international consultants. By this strategy the Bank started conducting quarterly, annual reports to reveal which steps they had taken in time and which they had not.

Natalya Butkova
Natalya Butkova, Head of the Department of Micro, Small and Medium Business at Oschadbank, at Caucasus SME Banking Club Conference 2019

“The Bank gathered strong skilled top management that was attracted from various commercial banks and structures, which involved in implementation of this strategy. This strategy contributed in our strengthening on Ukrainian territory. Finally, the Bank is ready to attract international investors. In some niche we are leaders, in some we are second and third leading bank. However, the second and the third place are no longer satisfying for our team. We want to be the first, the largest universal bank in the country. This is our mission and our task,” said Natalya Butkova, Head of the Department of Micro, Small and Medium Business at Oschadbank.

Build Your Own or Budui Svoyo in Ukrainian, is a program launched by Oschadbank for entrepreneurs and those who only dream of becoming them.

Oschadbank measures success or failure of the program with several criteria. The number of new customers that were attracted by that program is one of them. The number of credits that were issued is another criterion. The Bank also closely looks to the number of subscribers to this program which are studying and developing via that platform. “We are glad to observe their transformation from individuals to entrepreneurs. Build Your Own has 77, 000 subscribers on facebook. The number of new customers, those who opened new accounts at the Bank amounts to over 17, 000. Our credit portfolio was boosting three times faster,” said Butkova-Vitwitska.

As Butkova-Vitwitska explained, social content is the second component of the program. “It is focused on advancement of entrepreneurs and increasing their literacy. The success of this component is harder to measure. However, we evaluate it by the number of clients that passed the studying program, passed the tests, and used assistance of mentor”.

The main objective of Oschadbank is the development of two key directions: SME and affluent segment. “We are focused on developing infrastructure and complex of services for both of these segments. This year, for SME segment we plan to launch a new service model. We will continue development of micro lending, to issue credit cards for entrepreneurs with automatic credit limit, auto overdraft will be also offered to our customers soon, which means having credit limit automatically since opening account at our bank. CRM system will be soon implemented at our Bank through which we will continue working with our clients. New services will be added to our digital channels. The majority of services are already included and the new ones that will be added will be related to salary accounts, corporate cards”, Butkova-Vitwitska told.

Agile system is an innovative practice recently adopted by TBC Bank. Agile is a new method of work, which means simplifying processes, reduction of bureaucracy and increasing efficiency.

It is a modern system of work adapted to the leading organizations of the world that facilitate professional growth of employees on the one hand and on the other, to achieve the best results. The principle of working of the Agile implies the unification of employees of different competencies around one project, focusing on the task and more independence.

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Tamuna Zhizhilashvili
Tamuna Zhizhilashvili, Business Banking Tribe Lead at TBC Bank, at Caucasus SME Banking Club Conference 2019

“Transition to this new structure will give more freedom to our employees and the work process becomes much more interesting for employees,” said Tamuna Zhizhilashvili, Business Banking Tribe Lead at TBC Bank.

Automation of processes, constant simplification is critical to reduce costs and accelerate processes. It is positively reflected on consumer satisfaction. Accordingly, Georgian TBC Bank is constantly upgrading its digital services. As Zhizhilashvili said, the Bank is focused on innovations and improvement of processes and products to its customers to force their business activities and prolong life expectancy.

TBC is actively involved in financing start-ups. This year TBC Bank has upgraded its internet bank and soon will offer renewed mobile bank. “Together with that we are offering non-financial services to our customers who are not directly linked to banking products,” Zhizhilashvili added.

In case of start-ups TBC Bank has zero percent of delay. “While issuing credits, we never leave creditors alone. Our consultants are intensively involved and assisting creditors in various directions in order to minimize risks. It contributed to proper development of business and supports start-ups to avoid problems,” Zhizhilashvili, TBC Bank, told.

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