At the end of May this year Anelik Bank announced rebranding and introduced a new trademark and name: IDBank. Business Development Director and Member of the Management Board of IDBank Karen Nalbandyan gave an exclusive interview to Banks.am, told about the main purpose of rebranding and covered the key aspects of technical transformation of the bank.

Mr. Nalbandyan, following the rebranding you are now positioning the bank as “the bank of the present” and not one of the future, noting that this “present” already experiences revolutionary changes. Nonetheless, together with rapid development of the technologies, what is innovative today may become ordinary tomorrow. How do you plan to keep up with the times?
 
Indeed, coming up as the bank of the present and at the same time positioning the modernized bank as an innovation-oriented structure, we would like to stress that global transformations in the landscape of financial services are already taking place, and we plan to be at the forefront of those changes.

As you mentioned, technologies are incorporated in everyday life more and more often. Namely, financial sector brings in technologies with elements of AI, machine learning, biometric identification, point marketing, based on data collection and analysis of behavioral characteristics, as well as risk management with use of big data analysis etc.

All the above mentioned will sooner or later become mainstream in banking activity. Definitely, bank-pioneers benefit from the short-term leadership effect that advanced technologies bring, but new banks start to follow the trend and do the same. It is important to use technological novelties if you want to be modern, though it is also critical to change the paradigm of outdated thinking, elaborate business model, which would be relevant in the long run.

Technological solutions is a tool set, and not an end in itself. Consumers dictate changes, and they reasonably anticipate speed, quality service, convenience, flexibility and personalized approach. This is what we mean by the bank of the present. This is not about banking, but about customers, as they are the ones who set high demands, while we change to be relevant.

As a rule, consumers see only the external side of the rebranding, which is proceeded with very hard work. What was happening in the “internal kitchen”, how involved was shareholder Lebanese Credit Bank?

In fact, when the idea of complete rebranding was born (although some of our team members experienced similar process in other organizations), we couldn't accurately estimate the volume of the work that we were set to plan, organize and implement. It was undoubtedly a tough job, but the team accepted the challenge with enthusiasm, which contributed to the efficient implementation of the work at all stages.  
 
At the same time the “internal kitchen” was in full swing, especially at the beginning of the creative process, when we were elaborating the visualization of the brand, based on the philosophy of our new strategy. Without going into detail, I would only like to say that we cooperated with a team of international specialists. They did a great job and courageously tolerated all our “self-discoveries”. We came to consensus for 3-4 times, but shareholders decided to continue the research at the last moment.
 
Representatives of all the shareholders took part in making the final decision. Frankly speaking, we are satisfied with the results of this titanic work. We are hopeful that our clients will also like this fresh brand; first reviews showed that it is so in the absolute majority of cases.

Technological transformation implies forming a strong IT team. Nonetheless, it is said that IT specialists “reluctantly” choose banks for a number of reasons. What is your view on this?  

In my view, this opinion is justified. Think of that: the demand for strong IT specialists is high now, while the sector has been developing at double-digit rates recently. The work model in this case is the following: one can physically be in Armenia and accomplish tasks for a company at any corner of the world without a work schedule, taking into consideration only the deadlines of the project. This means they do not have to deal with timetable, dress code, and many other factors, that are strictly regimented at banks. In this case IT specialists prefer flexibility and minimum restrictions, which banks actually lack.

The solution to the problem is often outsourcing of IT aspect, but this scenario requires trust in the partner and fast interaction, as third party developers are actively involved in the tasks of the bank. Fortunately, we have already got a successful experience of similar collaboration.
 
In one of his TV interviews co-owner of the bank Vartan Dilanyan told in relation to Russia that “it is necessary to look for more advanced niches and create more sophisticated programs; not just incorporate anything, but rather invent.” Will we possibly see “super-products” at your bank?

Definitely, I will agree with Mr. Dilanyan in the sense that developers, innovation “factories” and know-how dictate the trends and skim off “the cream”. This is the only way to be a technological leader even in narrow specialized segments and leave a niche in global economic system. This applies not only to Russia.

On the other hand, efficient incorporation of know-how, elaborated by others, is also an advantage, which is evidenced by the experience of China and other countries of Eastern Asia. We do not have that level of human resources in Armenia, as well as the same logistics, infrastructure and capital for mass production in international market of innovations. We need to try to create value added in the elaboration of complex intellectual systems and solution of IT-related unusual tasks. The country has the potential and, as it seems to me that the government adopted the right policy of supporting IT sector. It is necessary to continue favoring companies, especially startups in the sector.
 
Touching upon “super-products”, it is worth noting that for centuries credits, deposits and calculations with certain variations have constituted bank products. We have only changed the way of providing these services. First of all, we are committing to offering the mentioned standard services on high technological and quality level. It is going to be so. Secondly, we see opportunities and perspectives to move forward and provide our clients with complementary services, create financial ecosystem around their demands. In case of success, we will consider this pursuit a “super-product”.

Very often we hear forecasts on soonest “end” of classical banking. In particular, the new principles of the PSD2 (Revised Payment Service Directive) that has come into force in EU countries in January 2018 obliges the banks to provide client databases and APIs to third parties in financial sector. What is your view on these developments?

There is a lot of talk about open banking that is supported by legislative initiatives in the EU and certain countries. It is definitely a positive layout from the viewpoint of fintech companies, who will be able to promote flexible solutions more efficiently, and clients, who can now receive interesting services tailored to their specific needs along with banking services.
 
But we need to remember that there is GDPR in the EU as well (the General Data Protection Regulation). So, the service providers are not entirely free in managing client data, which is only logical. Some say that GDPR and PSD2 are contradicting, but I believe they balance the possibilities and limitations, which is in clients’ interests. In general, the possibilities for providing improved services are bound to increase and the banks will lose the monopoly on storage of client database.
 
On the other hand, the banks themselves have to change the way they interact with clients and meet the customers’ expectations with better services, otherwise risking to lose the clients’ loyalty – that is an evident trend. Obviously, the success of fintech companies is rooted in the sluggish, slow manner the banks operate. They need to become more flexible, agile and client-oriented, introduce new things quickly. That is the “decline” of traditional banking as we know it, in my opinion.
 
At the same time, I think the opinion that banks will die out because of fintech companies is far-fetched. Actually, the partnership of fintech companies and banks will be very productive. Banks have a significant advantage in terms of client trust, regulation, license and transaction capacities, infrastructure, and resources. We need to use that advantage and the achievements of fintech to build a platform for better customer service.
 
We hope balanced initiatives such as PSD2 will be promoted by our regulator too, who, I have to say, is changing the regulations to match the new, leading trends in EU and USA quite effectively and operatively. We will welcome similar initiatives even given the possible increase of competition with fintech companies in the field of client solutions. We are ready to compete.
 
Unfortunately, Armenian banks are often reluctant to share the basic client data (allowed by the law) with each other, perceiving it as a risk of getting their clients stolen. But I think the bottom line is that there are more opportunities than risks. It is better to cooperate through open APIs and offer convenient interface than to lose the initiative and get beaten by other services once directives like PSD2 are adopted in Armenia. We will just lose time and the market.

There is another example, from Russia: the banks have started developing partner marketplaces at various levels, such as Sberbank’s joint project with Yandex.Market to create a “Russian Amazon” or the use of Banki.ru platform in issuing of online deposits. Are you interested in that kind of project?
 
As I have said before, our aim is the accelerated introduction of standard remote banking products at a high tech level in the first place. We are not quite satisfied with the ready-made solutions for mobile and online banking that we were offered. Now we are working with partners to launch the refreshed online bank and new mobile bank in accordance with our requests. They will have basic functions for full-fledged service and constantly develop in terms of functionality.
 
Unfortunately, another challenge for development of functional mobile and online banks is the core banking platforms, which are quite complicated and not open API-based initially. This is one more important task we are already fulfilling productively with our partners, who understand the significance of progressing in this direction.
 
Coming back to the platforms, it should be noted we are interested in those complementary to our services. We are already working on that and will make an announcement once the work is as good as done.
 
Technology is undoubtedly important and will be used, but one should also take into account the human factor. What and how is changing in the philosophy of your bank’s attitude to clients? What is the target audience for your rebranding message and how do you plan to work with large corporate clients?
 
Indeed, we don’t mean replacing people with robots when we speak about digitization and introduction of tech novelties in banking routine, although many like to take it that way. First, not any activity can be automated and algorithmized. The areas where service and creative approach are heavily involved can hardly be fully automated.
 
The landscape of financial services is constantly changing, which is why we are certain that bank employees should work on their own “transformation” to stay sought-after with new skills and knowledge. I mean that people will still get hired, just in other areas and with different competence. As for customer service, there is an opinion that the future is a bank without branches. We do not fully share that view. Of course, the format of mandatory large-scale physical presence in the form of branches is becoming a thing of the past as quality remote banking is emerging. You can easily follow that process if you research the statistics of the largest European and American banks, although other regions are experiencing the same too.
 
On the other hand, we believe that direct communication between the bank and the client is going to remain relevant in certain cases, and I think the format of a bank branch is going to change: it will transform from a transaction making point into a space for consulting and a representative office. There should not be many of those – the new format is sufficient for key client nodes.
 
As for the attitude towards the clients, we have simple priorities. In particular, every customer should receive online and offline service of high quality, and every customer should be treated individually, according to their actual needs and capabilities.
 
The rebranding signals a change of the key strategy of the bank’s activity for both current and potential clients. It does not mean that we didn’t aim to provide quality service or were inflexible before the rebranding. It just means that now we make a statement about our absolute priority and the direction we are taking.
 
We work with large corporate clients and we intend to keep cooperating with them. We aim for a good, balanced portfolio, and we give priority to the profitability-risk ratio we find appropriate, not to the size of the portfolio.
 
We do not want to put artificial limitations on our target audience. Our customers are the people and organizations who value quality, speed, flexibility, the range and convenience of services. We want to be a desired partner that provides the fullest ecosystem for servicing. We count on a high level of loyalty among current clients and an inflow of new customers. We will secure the tech part, we have an impressive development program in that area, and the clients will give the final estimation for the efficiency of our work.

Khoren Ormanyan talked to Karen Nalbandyan