We are excited to partner with FintechOS to produce a report on digital-first SME banking. As part of the report, we interviewed SME banking executives from top financial institutions across Europe. This interview is one from a series of four interviews. To dive deeper into the world of digital SME banking and the transformation that is underway, be sure to access the full report here.How has your service model/value proposition evolved within the last 18 months?
Our basic service model hasn’t changed much in the last 18 months: we still focus on offering the best possible banking and beyond banking services to our SME and corporate clients. Our goal is to be their partners in various services from basic cash management through loans and more complex financial products to even beyond banking services, thus our clients can be sure that their financial and business administration can be easily managed with our services, they can focus on and grow their own business and serve their own clients.
On the other hand, due to the recent changes in open banking regulations, instant payments, and special Hungarian on-line tax reporting, together with the Covid-19 pandemic, the pace of digitalization in the processes of how we serve our clients increased a lot – some colleagues say that 2-3 years of digital developments have been done in little more than a year. We developed a new strategy where the development of a new internet bank, the renewal of existing loan processes and the enhancement of our CRM system are the key pillars of serving our customers’ needs.
In addition to the digitalization of services we put an enormous effort into serving our clients with, and according to, the special regulations of the Hungarian government related to the Covid-19 pandemic. The moratorium declared by the government related to ongoing loans and special priced working capital or investment loans can help clients to manage their cash flow or finance new investments during the pandemic – and to be prepared financially for growth after the economy recovers from the Covid-19 crisis.
What are your key digital initiatives and what benefits are you looking to generate from them?
In order to reach our goals mentioned above, we have to continue to digitize our processes and create easy and seamless solutions. In addition to the digital initiatives mentioned above (new corporate internet bank, renewal of loan processes, CRM development – all on the Group level) during the pandemic, the need to serve clients remotely increased, thus we are continuously developing our related processes (e.g. remote account opening, managing digital signatures, remote contracting). We expect that some of the needs – especially in case of simple banking products – will stay after the pandemic is over, while some more complex products will still require personal consulting or support. Overall, we expect that we will be able to serve our clients in a better way, with better processes and with digital solutions.
As previously mentioned, changing regulation leads to the growing importance of beyond banking services as financial third-party providers are entering the SME and corporate finance market. Thus, we intend to enhance our value-added services to be able to keep existing customers and acquire new clients similarly to how third-party providers are trying to acquire our customers. Our long-term vision is to create an ecosystem where clients can have all the services they need for their operations through our online banking platforms.
What are the challenges as a more traditional institution in creating more digital offerings as opposed to a fintech that starts out as digital on day one?
The biggest challenge we face is that we already have an ongoing business with ongoing operations and existing processes and IT systems that are built to serve different types of clients with different products on multiple channels, thus our existing architecture is much more complex than a potential solution that starts from zero. Existing regulations for financial institutions could also bring some challenges that new fintech startups often don’t have to face.
Does your institution have the required digital skills to build these new tools? How are you trying to acquire those skills?
OTP Bank started its digital transformation in 2015. In the beginning we created a dedicated team to work on digital development, and in 2018 we introduced agile development methodology in certain organizational units to have the skills in the right place. Since then we have gradually transformed the organization to work in agile, thus the continuous cooperation of business and developers can lead to better products with shorter time to market. We also started to invest heavily into building the required IT competence, we have even established start-ups for special beyond banking services, product Simple by OTP Mobil for developing mobile first e-commerce solutions and OTP eBIZ for integrating financial and business administration tasks for SMEs and for special corporate clients.
Do you have existing partnerships or do you have plans to develop partnerships to speed up time to market?
Primarily we believe that agile product development will be a key to speed up time to market. On the other hand, we have an Innovation Lab that is not just involved with supporting innovation within the organization; one of their key activities is to organize partnerships with start-ups and scaleups - they even run a start-up program where different organizational units and business areas work together with start-ups to develop proof of concepts. If the PoCs are successful, then we integrate the solution of the start-ups into our everyday business or operations.
How do you see yourself competing with the fintechs and challenger SME banks in the years to come?
We see that competition is increasing with the appearance of fintechs or challenger SME banks, and also big tech companies will play a huge role in the competition. We believe the banks that will be successful will those that are able to create ecosystems and offer complex value propositions to their clients – combining their financial products with some value-added services. Thus, we are planning to build partnerships with some of the new players and with the improvement and the continuous development of the more traditional banking services we will be able to keep our leading role against the new entrants.