PrivatBank is the largest commercial bank in Ukraine. The Q&A is focused on innovation strategy of the financial institution to provide steady development, regardless of the troubled economy and serious political instability in the country.
Q: Mr. Dubilet, we are pleased to talk you about PrivatBank. Could you please tell us about yourself and the part you play in PrivatBank?
I have been working at the bank since its foundation in 1992. In 1997, I became the Chairman of the Board. The bank was founded from the ground up; it is not the result of privatization or use of former state-owned property. PrivatBank is the only 100% domestic capital bank to lead the local market for more than 12 years. It also grows its business in the European Union and surprises with unique technologies. PrivatBank is the only Ukrainian bank placed in TOP-15 CEE banks according to The Banker of 2016 and its TOP-1000 World Banks.
Q: Ukraine is experiencing one of the most difficult crises in its history. How does PrivatBank operate in order to survive in such a difficult situation?
The bank has been on the frontline of attack, not only an information attack, but physical attacks by terrorist forces, extensive Internet attacks on our facilities, including the server attacks. It is difficult to schedule the ordinary operations of the bank due to military actions. Nevertheless, against all odds, it is important for us to continue the technological development. The advanced technology helps us reduce banking costs and provide the best support for customers. Currently, PrivatBank serves 1.6-2.5 million clients daily. The majority of these people come to us via Smartphone's, our ATMs, branches, and self-service terminals every day; it is a demonstration of our unique clients. The Bank managed to significantly reduce the cost of operations and increase the number of clients by transferring them to remote service or self-service facilities. Today, we can confidently say that PrivatBank is a technology company. Our team is not only financiers but also process managers in a wider extent.
Q: Could you tell us a little bit more about your business model regarding management technology?
On the one hand, our technological advances allows us to seriously change the management mechanism of the internal business processes, digitize it, and extend the rapid transformation of business processes using Corezoid cloud operating system, which we now publicly offer for use by colleagues around the world. Corezoid is a platform on the basis of which Western Union launched money transfers in Ukraine in cooperation with PrivatBank. Once created, the processes are now easily copied throughout the world, adding the necessary local settings.
Today, the introduction of some new services from concept to practical implementation may take several days or weeks – a rapid pace for the banking industry. On the other hand, we believe that the bank can give the consumer not only those services, which are used to give since the 18th century, but also a broader perspective of the processes. We do not spy on solutions from successful colleagues; we go in a creative mode instead, developing our own ideas. For example, there are opportunities to purchase tickets, clothes, food, order a taxi, in addition to traditional payments in Privat24 mobile bank. Our app is not just a digital bank; it is management for enterprises. We bring the client-company relationship to customer-consumer and any legal entity cooperating with us can use Privat24 for this purpose. Our bank ranks 9th, between Rozetka e-shop and Facebook, in the top-10 Ukrainian web resources according to TNS Ukraine. This is an accurate representation of the work that we do. We want to serve our clients every day, and not just for payments – but for transactions as well.
Q: Could you give some examples of the latest technologies of your bank?
In 2014, the bank introduced the world's first contactless "cloud" electronic purse, which is based on Privat24 electronic banking system and allows you to make payments via Smartphone's with the integrated NFC module without any additional cards, stickers, etc. Apple, then Samsung, adopted a similar technology a little later. More than 9.2 million clients use PrivatBank online banking and mobile, which is a significant result even for the European financial markets. According to the results of the recent study of Gfk, 87% of Ukrainians, who use smartphone payment applications, use our Privat24 application. 3.6 million people have downloaded our Android and IOS application. We use iPads in our branches instead of computers, not only for better quality, but also for the ability to easily learn how to do the same operations from the comfort of home.
In 2015, the bank initiated and became one of the first members of BankID national system, which allowed the verification of the users according to their payment cards for access to the new system of iGov (electronic public services). This was the first step to introduce a full-fledged e-government in Ukraine. In March 2016, PrivatBank launched a unique P2P lending service for Ukraine, Good Investment Service, with the help of which individuals can directly invest in loans of other individuals, with the Bank as the site organizer undertakes scoring and helps to insure investments.
Corezoid is our cloud operating system. It has become the first start-up of the Eastern European Region in 2016 and is presented on Amazon Marketplace. In March 2016, the bank launched PrivatMarket – Ukraine's largest free trade area that allows companies and entrepreneurs to present their products and services, and directly participate in tenders, including public procurement. PrivatMarket obtained special accreditation of the Ministry of Economic Development to conduct public procurement.
The technologies of PrivatBank have been repeatedly recognized as the winners in the Innovation in Banking Technology Awards of The Banker. Among the most memorable victories in this international competition of banking innovations were such bank projects as "Without coins" and "Online Collection”, being in advance of other competitors and having become the winners in Innovation in Banking Technology Awards in 2010 and 2011 as well as SMART ATM-VIDEO project which took 2nd place in 2013. We are proud of other innovations too: the E-antifraud electronic system, 24\7 corporate customer service technology, online practice for students, AirPay contactless payment, and scores of others. Due to the constant participation and a large number of interesting projects in 2013, The Banker’s panel recognized PrivatBank as one of the most impressive players in the international market of financial innovation, along with such banks as BNP Paribas and Citi. Twice we have won the title of Best of show at the Finovate conference. PrivatBank is the only bank in Ukraine, which has been recognized as the Bank of the Year in the ratings of the leading financial publication for more than 10 years in a row by The Banker and Global Finance.
Q: You mentioned earlier about the trust of customers. What are the steps of your bank in this area?
Studies have found that every third customer of the Ukrainian banking system is PrivatBank’s customer, and every 4th considers PrivatBank his/her principal bank. Our share of the plastic cards market is about 53%, the number of ATMs is more than 30%, and the number of POS-terminals is more than 60%. This is the result of confidence in the bank and the proper technologies. The proper technologies are, first of all, good service. Our large market share in Ukraine is mainly explained by the quality of service to our customers.
Q: How has your business operated amid the crisis in Ukraine?
We primarily focus on retail lending to entrepreneurs and micro lending for self-employment development. This is the business segment which does not require large capital expenditures, because today people becoming entrepreneurs use their existing premises, land plots and facilities. We have built a proper risk assessment system based on understanding the customer and their payment history. We know the customer’s credit standing in the past. We have accumulated a large enough amount of information to provide these loans. The reduction of the cost of borrowing for small businesses can be done with new lending formats. In April 2016, we launched the first KUB (Ukrainian Business Loans) service in Ukraine, which was called "Ukrainian Kickstarter". The service allows entrepreneurs to present their business and development projects, and directly receive investment from private clients. This is could be small amount of loans, up to UAH 300 thousand, but it is a very important tool for real economic growth. The programs of PrivatBank stimulate self-employment and family business development. According to our estimates, these programs are now able to give Ukraine one million jobs while investing about UAH 20 billion. PrivatBank acts as the operator for the KUB platform: we conduct scoring of loan applications and help investors to insure their investments in order to have this method of investment as safe one.
Q: What can we expect from PrivatBank tomorrow?
Our strategic goal is lending to small and medium-sized businesses and the diversification of the liabilities portfolio. We have a lot of ideas related to the improvement of interaction efficiency with customers, not only at the stage of effecting of payments, but also at purchasing. We are thinking of migration to Smartphone's, Web-based applications, as well as connecting these applications to not only banking services but also to the services that organically help customers solve their problems. In addition, we want to teach everyone to use electronic banking. The screen on the tablet in our branch is the same as your screen on your computer and Smartphone. And when the customer sees and understands how to conduct a transaction, the next time they won’t have to come all the way to the branch. All of the infrastructure, the branches and so on, are increasingly becoming necessary, only for the first time the person comes to the bank. You cannot open an account remotely; this is a worldwide practice and the nature of financial identification. When the financial identification is conducted, we have to make sure that you are able to obtain services through the Smartphone, and at the same time enjoy it. That's our job and that's where we see our contribution to the increase in labour productivity in the banking sector of Ukraine.