Which Way does the Wind of Change in Banks Blow

Digitisation, transformation, convenience for the clients - this is the direction of development for banks that was outlined at the Financial Forum Innovations organised by the Bank of the Year Association in Sofia at the end of April. Banks aim to become digital, most of them combining it with their physical presence. The client is their main focus. Mobile technologies are a priority, but so far only 5% of Bulgarians use online banking. Investments in digitisation and new services are seen as investments in the future. Interaction and co-operation with fintech are key concepts in this change so that it happens in the right way. In the age of creating Artificial Intelligence, the human factor is very important, emphasised Vanya Manova, MasterCard’s Manager for Bulgaria and Macedonia.

Custom-Made

The world is digital and most people have access to the Internet. Every bank is making a digital transformation in some form. Most of the changes are similar in terms of automation and process simplification, product and service digitisation, new technologies for improvement of the IT infrastructure, use of analyses and techniques for sales growth. This is what everyone is doing, and at one point, all banks will look the same - in this environment it will be hard to be different in order to attract attention, said Petko Rangelov of McKinsey, Dubai. According to him, the bank is not at the clients’ centre of attention; that is why every bank has to build an image that distinguishes it from its competitors. Existing products and services are digitised, but there are already players who think about the client’s real needs and create custom-made solutions. Rangelov gave China as an example of what banks can do when they use the fact that most people today have a smart phone. AliPay offers an easy way for clients to use their money - they can spend it or invest it. A credit rating is created for everyone and on its basis a credit is offered at a time when the client needs it. That is why banks now need a new kind of talent, because the new needs give birth to new professions.

Digital Champions

In 2011, there was only one digital bank in Europe, and the latest Deloitte survey shows that there are now 55. Everyone wants to be considered an innovator, every bank wants to be on the front line and offer the digital functionalities the clients want and are useful for them. It was found that among 208 banks in Europe, the largest five banks in the countries Poland, Russia, Spain, Switzerland and Turkey have the highest indicators of modern, innovative banking. They are digital champions. Bulgarian banks are innovative, they invest in modern banking and functional diversification of services, commented Daniel Martyniuk, a partner at Deloitte Digital for Central Europe. The survey shows that fintech companies offer much less products than banks, but unlike traditional banks, they have much more mobile products. Digital champions change the way a bank operates. Its activity is diversified and, more and more, it becomes an integral part of the connected economy. Banks that find the right balance between connected services and connected economy will be the next digital champions that can reach the heart and needs of the client.

Personalisation

The banks of the future will not have the same structure and everything will depend on their focus. Clients put pressure on them and care about the personalisation of their needs more and more. The personalisation of users will grow; there will be a new attitude towards them. Artificial Intelligence will help. The competition is becoming ever stronger and fiercer, fintech companies are becoming part of it, too. Innovations increase in number and financial institutions have to constantly reorganise, manoeuvre and be flexible in order to deal with them, said Pablo Padin, Global Banking and Digital Modernisation Director, IBM. He believes that the efficiency of banks can increase through partnership with fintech companies.

Maneuvering Mastodonts

We need to understand the change and everything that it imposes on us more and more. The change has to reach the clients in a convenient way. Transformation through innovations and new technologies is a great challenge, which, however, allows banks to be successful, said Tsvetanka Mincheva, a member of the Management Board of UniCredit Bulbank. Ten years ago, the bank came to the realisation that the future belonged to digital technology and made a strategic map for development and implementation of novelties, while thinking about the convenience of its clients. But in a large bank, the change requires a lot of coordinated efforts and big investments as well as bold technological solutions, Mincheva explained.

Time and Paper

Fintech companies are bullets that make way for the further development of our business; they provoke us. They are an alarm that wakes us up, said Valentin Galabov, CEO and member of the MB of TBI Bank. He believes that time and paper are the biggest problem in consumer loans since banks have started considering digitisation: "We follow our clients' needs but we also create new needs. Around 75% of Bulgarians have smart phones. E-commerce is developing and TBI has begun offering online consumer loans, which supports the development of e-commerce. A comprehensible outcome of a natural process is to simplify the application process for a credit - a one-time electronic signature is also available, which can become permanent, too."

To Raise a Fintech

In the last 2-3 years, people have been talking about fintech companies that would kill banks, but there already is a cooperation among them, said Daniel Aleksiev, Head of Digital Banking and Innovation at Raiffeisenbank. Last year, the bank's central office launched the Elevator Lab 1.0 acceleration program aiming at banking innovation and technology. The project was successful and this year Raiffeisenbank organised Elevator Lab 2.0 for Bulgarian startups. The winner will be eligible to participate in the final international competition. The winning developments will be tested in a natural environment and can be further developed and deployed at a later stage. There will be also cash prizes.

Fast and Easy

Speaking of innovation, digitisation and transformation, we are actually talking about the change. It has no end and it must be already clear that new problems cannot be solved with old approaches, said Rumen Radushev, a member of the Executive Committee of Postbank. A US study shows that the new generation is more likely to go to a dentist than to a standard bank branch. That is why we have to take into account the changes, otherwise the huge investments will be wasted, Radushev said and added: "The important question is whether we are too big and cumbersome to adapt to the new environment. Banks are considered conservative, slow, expensive and inefficient, and every client expects speed, transparency and service at the lowest possible price. In this changing environment, banks have to figure out how to transform - evolutionary or revolutionary. By the end of the year, three banks will offer phone payments via mobile portfolios." Postbank will introduce Predictive Analytics. Eva will be the first chatbot that the bank will use. And all this in order for clients to have access to the right products in a quick and easy way.

 Vasil Dimitrov, DSK Bank's Digital Transformation Project Manager, believes that banks are in a battle for the client of the future. Retailers could help for the expansion of the banking services. It is important for the bank’s clients that the service is available and works at a relatively high speed, as for clients of fintech services - novelties and added value will be crucial. Simplicity and security are also essential for every client. Banks will be needed as long as there is a need for payments, but they will become more and more technological and invisible.

The Figital Concept

After nearly 25 years of experience in technology and building consumer experience, I have the feeling that in the process of digitisation, technology companies have won. They assure us that digital innovations are of utmost importance. However, people continue to go to the bank offices and 95% of the transactions in Bulgaria are in cash. Young people use new technologies more and more, but we must also realise that some of the world's technology companies have succeeded in creating the hysteria that everything around us will be only digital. However, we still see people on the streets, not robots," reminded Shakir Ahmedov, CEO of OmniChannel. According to him, it is a shared responsibility to create the digital skills of all users, and technology and marketing companies, banks and mobile operators must be involved in this process. The Figital Concept means that digital information is given to clients in the physical environment and they are trained: "A lot of effort has been put into digitisation in the last ten years, but what is neglected is that it has to happen inside and outside of the bank branch at the same. It is a common ecosystem and not two independent systems that do not speak to each other.

Change is a long process that goes through the Figital stage until one day we achieve a complex digitisation. The good side to the fact that in Europe and Bulgaria the digitisation process is slow, is that it helps the introduction of newer technologies, which also have a lower price."

It is worth considering the words of Shakir Ahmedov that digitisation is overextended in order to increase the influence of technology companies. It is good for change to happen at a well-measured pace.