Sergey korolev, forbank: “you will always find your customer if you understand what product they need right now”
Interviewer: Stanislav Komarov
In an interview with NBJ Editor-in-Chief Stanislav KOMAROV, Deputy Chairman of the Executive Board, Chairman of the Board of Directors at ForBank, Sergey KOROLEV, talks about how a small bank managed to achieve significant success in developing digital service channels, which are comparable to the results of the largest Russian credit organizations.
NBJ: Sergey Viktorovich, the topic of our conversation today is RBS, and the project under discussion is directly related to remote banking. But first, please tell us a few words about the bank itself.
S. KOROLEV: Let me give you some background. ForBank was established in 1992. The bank began its activity as a regional bank in the Altai Territory and is developed for a long time there. About five years ago, the bank changed the structure of shareholders and participants. The bank was re-registered in Moscow, where the head office is now located, but a significant part remained in the Altai Territory: there are a Siberian branch and a network of branches.
The first business idea for which the bank was acquired, unfortunately, did not work due to various market reasons. About two and a half years ago, we began to think: “Where is our place?” and “How to live on?” We came to understand that for a bank of our level it will be very difficult to compete today with large state and semi-state banks which receive substantial support.
We decided: we shall focus on technological development, the development of remote channels to attract and service customers. At that time, an industry leaders group in technological development had already formed. These were Tinkoff Bank, Module Bank, and Tochka. Other banks also began to move in this direction. We have assembled a technical development team from scratch to start a greenfield project. First of all, these were business process developers and software developers.
Now we have our remote banking system for legal entities and individuals, a technology that helps open a current account without a visit to the bank. At the beginning of our project, we operated in nine regions including Moscow, Ufa, Barnaul, Altai Territory, Novokuznetsk, Novosibirsk, and Smolensk. And today we can open accounts in eighty-two cities of the Russian Federation, in fact, throughout the whole country. Further development is limited only by our marketing capabilities, as well as by a load of courier service that delivers our cards to customers. Indeed, customers have the opportunity to open accounts wherever they stay: from Kaliningrad to Kamchatka. As you can see, geography coverage is the most extensive.
NBJ: How do you compete with the giants? What are your competitive advantages? Why do you think customers go to ForBank?
S. KOROLEV: When we started making this product, we focused on micro and small business. I call it the “ground floor business.” This business needs high-quality and quick cash management services. Our preliminary marketing research showed results that even for me, a banker with great experience was unexpected.
We immediately turned to customers and asked: “What do you want from the bank?” You have a small shop, you make bread, pour coffee, repair cars. So, you provide a variety of services and create products that are used every day in everyday life. As a rule, these are legal entities with one or two founders maximum. And they ranked their needs for us: maximum online, preferably 24×7, with a minimum service cost. A special loan product appeared only the seventh in this rating. But to get it, they didn’t want to go to the bank and bring heaps of papers and documents.
It turned out that this category of customers doesn’t need large loans! They need a small loan for current needs, a maximum of about three million rubles. Knowing this, we began to build a bank for them. Moreover, for such entrepreneurs, the bank’s name does not matter. At that time, our current customers (the small business) had been serviced by banks for many years. And, as a rule, they do not keep money in their accounts: their capital is always circulating. Sometimes they don’t have enough money, but most of all they need services: so that the entire bank is “on the tablet” or “on the phone”, so that the bank understands what they want and, preferably, treats them better in situations involving possible blocking of accounts and other force majeure.
Thus, we began to develop in this paradigm. Entrepreneurs told us: “We understand what is happening in the past few years. Of course, we have accounts at large state-owned banks, however, now our business has concluded that we need a reserve current account.”
NBJ: What is the structure of your customers in the end? Which category is most important to you? Individuals, large enterprises?
S. KOROLEV: There are no large ones! All our customers are truly small and medium-sized businesses.
NBJ: But not every bank wants to work with them… It’s hard, they say.
S. KOROLEV: It is hard. But there are no other options available on the market. Gazprom will not come to our service and Rosneft neither. And we don’t need them. Let them be served at large banks. It is a real problem for a bank of our level to serve such large customers.
When we started making this product, we focused on micro and small business. I call it the “ground floor business.” This business requires high-quality and quick cash management services.
NBJ: It seems that this specialization allows small and medium-sized banks (the number of which is getting less and less) to survive in the competition with large credit organizations.
S. KOROLEV: You will always find your customer if you understand what product they need right now. In my opinion, it is difficult for a “small” customer to work with a large bank due to the bank’s bureaucratic procedures and “over-regulation”. Thus, we built our system assuming that it should be flexible, quickly adapt to the changing customer needs and requirements for banking products. So that we can quickly create, test, and bring services to the market. And if it didn’t work out, we change or upgrade it…
NBJ: Could you tell us more about the system itself?
S. KOROLEV: We needed to come up with a special technical solution that would allow the customer to remotely open an account. The traditional approach, which assumed the use of regular USB tokens (flash drive electronic keys) or MAC tokens, did not suit us. A token is a cryptographic protection tool; it cannot be delivered by courier, it must be received and signed personally. And it is better not to lose or break it! Its replacement is a waste of money and time. That’s why SafeTech’s PayControl (mobile digital signature) solution was the right one for us in terms of ease of use. You don’t need to go anywhere! Download the mobile application, register your mobile device on the website, sign it up, and use the service! The signature is generated both online and offline. The customer can always sign an order to the bank.
A token is a cryptographic protection tool; it cannot be delivered by courier, it must be received and signed personally. And it is better not to lose or break it! Its replacement is a waste of money and time. That’s why SafeTech’s PayControl (mobile digital signature) solution was the right one for us in terms of ease of use.
Those who don’t want to use this solution may confirm the transaction with a one-time code via SMS. However, we, of course, advise everyone to use a mobile digital signature. It is convenient, ensures the security of customer payments, and the security of bank communications. For us, it is very important! Of course, the mobile digital signature is free for customers. We recommend using it to anyone who wants to get a high level of security for their operations and to protect their money. Sign up for the service in the Security section of our RBS and use it! Anyway, in this case, the customer can easily connect to the RBS: the courier will deliver two payment cards for you, one for the CEO and a corporate one, you install the mobile application on your smartphone and that’s it, you can manage your account!
NBJ: How long did it take to implement the system?
S. KOROLEV: There was a period of integrating the solution into our system, training employees, and increasing customer awareness for the new service. The main thing is that our development team could easily integrate with SafeTech specialists, literally in a matter of days! Their experts proposed competent solutions, and our engineers understood them very quickly.
NBJ: As I understand it, they managed to satisfy your expectations, right?
S. KOROLEV: Of course! The logic of building our system is such that we do a lot ourselves, but not everything. We use many third-party services. And our project was developed within this vision, otherwise, we would not have been able to launch an entire RBS system in two years.
By the way, when we worked together with colleagues from SafeTech on the integration, the idea arose to create our open API. We have implemented this idea, and now we can connect any services. Generally speaking, a modern bank is a processing centre. It operates such concepts as “ecosystem”, “marketplace”, and “fintech”. All of them should provide the most comfortable conditions for doing business.
NBJ: You mentioned that ForBank has its development team, its own fintech…
S. KOROLEV: Yes, we founded a separate IT company: Fortech. However, we started not with software development, but with a description of business technologies and products. Thus, business processes form a basis for our solution. The system centre, the core of the platform is the “engine” of all business processes. Their logic is such that it allows them to modify quite easily. These processes include opening a current account, deposit, or currency transactions. That is, today an RBS is not just an online banking application, but a kind of “portal” where customers enter, log in and receive all the necessary banking services. Customers only interact with the bank once when opening their accounts. Then customers move to the website (in the online banking system) or to the mobile application, where they don’t just see the account balances and perform certain operations, but fully interact with the bank. If there are any difficulties or questions, customers communicate through our contact centre: live communication still exists. Such support is important and necessary for customers.
You correctly noted at the beginning of our conversation that ForBank is one of the few credit organizations that have such a level of technology. Nowadays, it is impossible to develop by only expanding the branch network.
NBJ: Not only ForBank has FinTech divisions in its structure. It’s FinTech teams who allow banks to adapt to today’s realities…
S. KOROLEV: You are right. However, we chose our way. ForTech is not a FinTech division of the bank, it is an independent IT company, geographically separated from the head office. The bank acts as a customer. They certainly interact with us, but they are not immersed in current operational activities. Otherwise, they may drown there, get lost in a heap of small tasks without solving a single global one.
GENERALLY SPEAKING, A MODERN BANK IS A PROCESSING CENTER. IT OPERATES SUCH CONCEPTS AS “ECOSYSTEM”, “MARKETPLACE”, AND “FINTECH”. ALL OF THEM SHOULD PROVIDE THE MOST COMFORTABLE CONDITIONS FOR DOING BUSINESS.
NBJ: What are the prospects for your ForTech? Can you also sell their solutions and services?
S. KOROLEV: We are negotiating with several banks now. This summer, we went through the accelerator at Skolkovo and got positive feedback on our technology. The solutions implement the most modern and progressive software stack.
NBJ: Aren’t you afraid of losing exclusivity?
S. KOROLEV: Technology is developing so fast that it instantly becomes a business story. When you have a base, implement it further! We are ready, if necessary, to transfer all the program code to a customer. The only thing we can’t transfer to customers is the exclusive license: you can use it, but you can’t sell it further. You can hire your developers, study the system as you wish. After all, this is not a boxed solution. And when they want to buy the remote banking system from us, we answer: this is not a flash drive that you connect and start using. This is a complex project to introduce a platform for modern banking business!