Transfer to an open platform demanded a cultural shift from us
Georgy Kravchenko, director general, BSS Company, told about the advent of the open platform era, the difficulties of cultural shift in a traditional company, omnichannel, and interest in chatbots in an interview with editor-in-chief of Bankir. Ru portal.
Ability to change
— It is generally accepted that the financial sector is now rapidly transforming, banks are changing, becoming digital. Is this true?
— I hear a lot of talk about the need for change, but there is much less real action by banks. Banks often limit themselves to declarations of their desire to transform. It is interesting that many banks, without changing inside, without changing internal processes, nevertheless begin to expect that now everything should go faster and cheaper. But this is impossible. For something to happen faster and cheaper, it is this something that needs to be done differently, both by banks and vendors.
Everyone heard the key words about the transformation, about the need to change. German Gref speaks a lot about it, it is done in practice by leading IT companies (Google, Facebook, etc.), which are considered as potential competitors of banks. Their main difference from banks is that they are much more mobile in their offers to the consumer. They are much closer to him in the remote channels. They implement as many innovations in a quarter of a year as banks do in a decade. So, probably, the need for faster implementation of innovation does not require evidence.
— Should a bank change at the same speed as Google? But they have a regulator, bureaucratic processes, compliance...
— Whether it is necessary for a bank to change at such a speed or not depends on what they want to achieve. Everyone should decide for himself. Probably, there are some traditional banks that do not need it, for example private Swiss banks, for which traditions and conservatism are their main value. The question is which segment you target as a bank, what you offer it. Many still do not get it right.
Nonetheless, everyone needs to change today. The ability to be faster is determined by the organization of IT business processes. The basic principles of how to organize them correctly are formulated by the aforementioned IT giants, and we all need to strive for this.
Time of open solutions
— And how a bank can become a driving force of changes?
— Efficiency and the speed of change is achieved today due to the transition from closeness, from the closed way of product formation to open platforms where most of the functionality and services can be formed by the use of open APIs and the creation of marketplaces.
All industries undergo certain stages of reorganization. The market passes through an evolutionary spiral through phases of consolidation, incorporation, integration, and expansion into neighbouring areas, and then again disintegration and focusing on key activities. This happened, for example, in the telecom at the turn of the last century, when monopolists were forced to sell the channel capacity to independent operators. As a result, principally new players appeared, and the whole market changed.
The situation is very similar in our market. All my life IT vendors wrote their software so that nobody could understand it, especially do something over it. The competitive advantage in many ways consisted in the ability to write very complicated software, where no one could change even a line. Thus, vendors provided themselves with a stable money flow for support and update. And each next year only strengthened this dependence.
— That’s great... for vendors. Why change such a profitable business model?
— It’s great for vendors of the old formation. But we remember what happened to the telecoms mentioned above. The customer in this model becomes a hostage to one company, a very narrow circle of people who can develop the systems. Trying to accelerate its development, the customer will always bump into, first of all, the limited resources, and, secondly, their high cost. Open platforms are good because a huge number of creative people who try to make interesting applications and services through the SDK are involved into the development process. It turns out to be a cheap enough source of innovation. A number of European banks, for example, in Spain, have been doing so for several years so far.
To implement such a strategy, a company needs a fundamentally different culture and architecture. If we talk about BSS, it was impossible to create any open platform on those products that had been developed earlier. Open solutions should not require knowledge of exotic languages. If you want to attract the creative forces of a broad layer of external developers, your solutions should use the languages that they know and are used to.
Banks can win a lot if their platforms become open. They will have the opportunity to develop faster.
The advantage of outsourcing
— There is a popular slogan "a bank as an IT company." Many banks now define themselves as technology companies. If all become IT companies, what are vendors for then?
— It has absolutely different meanings for banks of different sizes. You can, of course, try to turn any bank into an IT company. The bigger the bank is, the more it makes sense. When it comes to a bank of such fantastic size as Sberbank, then it has enough tasks in order to be an IT company. But I cannot say with certainty whether this is optimal. But it is quite obvious that for medium and small banks it makes no sense to develop their IT companies on their own. At a minimum, one should well define the tasks that are really appropriate to be done internally.
Banks are highly regulated organizations in all countries. They perform a limited set of standard operations. Some conditions for clients, for example, can be non-standard, but the operations themselves are standard: a loan, a deposit, an overdraft, etc. Why should a bank employ expensive IT staff who will support that part of the back-and-middle office, which performs standard actions? And it should be supported not least because there are always changes from the regulator.
In my opinion, it does not make sense either for Sberbank, or, especially, for a small bank, to do it alone if they can buy such a service from a company that makes it for a whole pool of banks. Firstly, it is economically more appropriate, and, secondly, the bank’s internal resources may not be enough if the number of required changes suddenly dramatically increases. Such things clearly need outsourcing. It is this part of banking IT that we call a platform; it supports the basic functionality, compliance with legal requirements, and must support API, SDK and so on.
— What does bank IT then have to do? Do not develop anything at all?
— I think the independent development of functional modules considering the business logic of a bank: whom to and what services does a bank offer, is the most reasonable thing to do. This is where a bank can differentiate from competitors. The more open is a bank’s platform, the less specific IT competencies a bank needs to have inside to conduct such development.
— And your solutions — how do they correspond to the thesis of openness?
— Earlier, we made software that performed its tasks well, but only very limited number of people could change it. Any change led to a dramatic rise in the software ownership cost. Adding to platforms that are not adapted to this leads a vendor to the necessity to review code, to create a separate side branch of product development, and to maintain a separate team that will start supporting all that. And then the effect of gaining on scale is largely lost.
Now, BSS Company is gradually replacing the old solutions with new ones. We headed for a completely new configuration. The new platform on the horizon of the next few years should become truly open. We will launch a marketplace, which will provide the opportunity to make new applications based on it, implement integration with other solutions through the API, the ability to include functional elements depending on the needs. Much has been done for this already today.
— And you will have open API?
— CORREQTS Retail v. 3.3, the solution for individuals by BSS, already contains open API for the interface layer. This radically changed all our approaches to interface development. Previously, those were not only external developers who experienced difficulties. It was difficult for everyone who tried to change the interface in our system. It was not easy for us! Now we have a completely different approach: all the functionality in the system, all the parameters that it can give out, can be obtained through the API and used in the interface.
The second step will be the ability to design new functional modules using the capabilities of the system core.
— To what extent are ABS developers willing to work with such open platforms?
— Nothing is required from them. To provide a user with a new product, the ABS must make the necessary postings, calculate this product. We, in turn, should be able to pick up this data and give them to a client. For ABS, it does not matter who takes them from or gives them to it: the front-line system of the bank or we.
ABS developers can complicate, of course, but they cannot completely close the possibility of integration for us. The installation, in fact, belongs to the bank, and the bank determines how to solve the tasks facing it.
Mobility and omnichannel
— How relevant is the mobile first approach to banking?
— Mobile first means that the mobile channel becomes predominant in terms of content distribution. Therefore, when systems are being developed, they start with a mobile application. Everything else later, it can wait. It is a separate channel for banks. The use of mobile bank is growing very quickly.
The problem here is that the mobile platform and the Internet banking platform usually have different kernels, different systems. This means that you need to integrate with each of them. The development of these systems also goes in different ways. Sooner or later these systems inevitably diverge, and this is inefficient and uneconomical.
Now, the number of users’ different device types is increasing. Can a system support them all? For tablets, for example, you need to develop a separate version because they have a principally larger screen. A tablet user may have different expectations for the functionality and scenarios for using this functionality.
— Do different channels and different devices require omnichannel from banks?
— The traditional approach meant that separate platforms multiplied for each channel, which, in fact, was happening. Therefore, the question arose about the omnichannel: is it possible to make such a solution that could support all the channels on one platform, minimizing the costs of innovations in all channels for a customer?
Our solution can deliver any product to any channel, and a bank technologist or a marketer decides whether he wants to install this product or not.
Omnichannel is needed to provide a coherent user experience that uses various devices, with minimal channel maintenance costs.
Innovations and corporates
— Usually, when they talk about financial technologies and innovations, they mean solutions for individuals; is something interesting happening in the sphere of corporate business?
— The bank’s corporate business is quite conservative due to the traditions and requirements of the regulator. However, changes are taking place. First, the traditional model of the bank’s work with corporate clients: extensive, associated with the build-up and subsequent maintenance of network units, reduces the profitability of the bank and therefore is a thing of the past. Striving to reduce operating costs, banks do not just cut branches, rebuild sales models, centralize operational functions, but also transfer the process of communication with a client from sales to subsequent maintenance to electronic channels. Depending on the scale of the bank, the process proceeds at different rates, but in the same direction, that is, global changes are inevitable. In this regard, here and now, we are ready to offer banks a necessary and sufficient at this stage set of non-payment services for remote banking services — Client’s electronic office.
The Electronic office will allow bank’s potential clients to quickly select a set of banking services and tariff plans, reserve an account, prepare a questionnaire, and send the necessary package of documents to the bank. Convenient, friendly, and laconic interface of the electronic office, in our opinion, will be convincing, but, unfortunately, not the only argument for the client to make a decision to be with the bank.
The electronic office will allow current bank clients to effect deals, contracts with the bank in electronic form, provide the client with remote access to a wide range of products and services of the bank, that is, it will become the main communication channel with the bank.
Secondly, a standard set of products for a corporate client: a bank account, remote servicing, two or three deposits, a set of active operations — is a thing of the past. Banks, depending on the scale of economic activity of clients, not only create a specialized product line, but also, if possible, transfer it to electronic channels. Thus, it is necessary to talk not just about corporate business, but about products for small, medium and large businesses separately.
Small business clients have already tried out mobile banking, which will become the main service channel in a year or two. Our mobile bank will provide not only convenient payment processing and analytics, but will also become a full-fledged channel for selling banking services, that is, it will provide personal banking offers, banners, and text chat for all or VIP clients — an online channel for additional communication with the client for providing technical support, consulting on products and services of the bank.
In addition, banks began to create application windows. In fact, clients can not only make payments, use bank services, but also check their counterparty, get access to online accounting, consult with a lawyer, prepare a package of documents for the registration of a legal entity in a single window. In some cases, we are talking about the lease of software and the capacity of the data storage and processing center!
One can say the ecosystem of small business life is being created. At the same time, the bank, on the basis of mutually beneficial partner programs with external organizations, is gradually being transformed into an open technology platform, an online store for selling external financial services, which entails additional transaction income without significant investments in the operating and IT infrastructure. We see this trend as well, accordingly, our RBS becomes a platform open for cloud services.
For clients of large and medium-sized businesses, the classic RBS system as an intermediary between the client and the bank in making payments is gradually giving way to a modern platform of remote banking, directly integrated into client’s ERP system with the functions of multibanking (routing client’s settlement documents to the bank where the account to be debited is opened), financial management of a group of companies, as well as a powerful analytical service. Thus, corporations, enterprises, and medium-sized businesses should work in a familiar environment and manage finances without intermediaries in the form of several RBS systems in different banks.
Chatbots, robot operators
— Chatbots are becoming one of the most stylish remote channel...
— I really love this topic. It is a very interesting story. Today, there is much talk about this, but the proportion of people who use the channel in reality is not very large so far. However, I am absolutely sure that the share will grow. This channel is already spreading in telecoms. Bots, of course, will not displace people, because in many cases it is simply more convenient to communicate with a voice, especially when it is difficult to formalize a question. But companies’ desire to replace live operators with bots is great. And it will happen. We are now also studying this opportunity.
— And when will we be able to easily communicate with a bank without resorting to the help of a keyboard?
— Today, the development of technologies: computational resources and new algorithms makes it possible to seriously consider the industrial application of voice recognition and voice verification systems. And here we are in a trend. And I believe that this is another great opportunity to increase the efficiency of one of the most traditional channels of interaction, which is entirely analog now. By the way, this topic has a synergy with the topic of chatbots, where a voice interface is added. After all, the key task for arrangement of a robotic interactive interface, whether voice or text, is to understand the general meaning of what a person is saying or writing, and to identify key values in the received phrases. Recognition of each word separately is the second task in this case, because a person may speak ironically, allegorically, etc., and, formulate the idea not very clearly in general.
Our new smart services for speech analysis work on neural networks. We use DML (Deep machine learning) technology for the continuous development of data models, which allows for high accuracy and recognition speed. After analyzing and processing large data sets, our systems can understand the different user expressions no worse than real operators, and sometimes even better, because, unlike a person, they do not have an emotional component, and they diligently understand the meaning of what was said.
We can talk for long a lot about all the interesting cases of application of speech analysis technology in banks, there is really a great number of them. I only note that our approach makes it possible to build a unique architecture in the bank that allows using speech processing services in various business processes, points, and channels of client service, while special tools for developers enable easy integration and replication of application of such services on various devices and in any bank applications.
Cultural shift and communications
— You are no longer a start-up, but a large company with the history of established processes. How are you changing? How are you becoming open?
— We needed an entirely different approach to development. Some programmers perceive themselves as some kind of semi-divine beings, they write something for a long time, and then hand it over, it is even dangerous to ask them questions. Take what was given!
When I first asked the question inside the company, why we need such a closed platform, it was not understood at all. Everyone was sure that if we open the platform, our business will end. But it does not end for some reason at Apple, does not end at Google and so on. People could not understand why this should be done and did not believe in such an opportunity.
From the point of view of production arrangement, in order to produce something quickly, we must do this according to an absolutely different principle. Previously, a very long project was made, and it was planned in detail, as far as possible. The complexity of planning IT projects is obvious, any new software means R&D. And R&D is always very difficult to plan, especially for long time intervals. In reality, a lot of unexpected things always happen. And there are two ways out: either delay the release until all the plans have been completed, or release a product with limited functionality and then finish. The goal-setting and the result are always different for everyone.
This is a bad situation. If a company has two big releases in a year, and you promise one thing to your clients, when six months later they find out that the result is completely different or incomplete, you will spoil relations with partners. To prevent this, we must move on to another method of labor management. We need to switch to a much more frequent release of versions, say once a month or two. This is the time when you can predict what you will do. This process allows you to achieve small, but clear and actual successes — it’s impossible to work a month and do nothing in the end.
From the point of view of corporate culture, such organization of the process requires much more intensive communications within the team. The previous process assumed that someone with a truly cosmic mind would compile a detailed instruction in which everything is be taken into account, while someone else with cosmic work capacity will implement all that in due time. In reality, this does not happen. In the new paradigm, the team meets every week and collectively decides how to do simple things that are visible within several dozen hours of work. They always check how it moves along its way. Thus, the team comes to a real practical result, which they can present.
And if earlier people inside the company did not talk much, now the teams gather every day for short meetings, and every week — for detailed ones. It’s just a huge cultural shift — to learn how to communicate within the company!