TAdviser Interview: New CIO of "The Moscow credit bank" Sergey Putyatinsky – about big reform of IT
Sergey Putyatinsky in January, 2019 appointed the vice-president of board of "Moscow Credit Bank" (MCB) and who headed the IT direction brought big changes. In an interview of TAdviser he told how strategy and the organization of work of IT department and what calls MKB faces during digital transformation changed.
Sergey, you joined the MKB command not so long ago. What KPI were delivered before you the management of bank?
Sergey Putyatinsky: Among key reference points of development there is a decrease in time to market. The IT direction often is "bottleneck" during creation of products and functionality. Besides, a lot of working time on completion of the back office systems owing to their rather difficult architecture is spent. Therefore the main objectives are a reduction of time of an output of products and support of all developing directions of business – investment, corporate and retail.
If we reduce time to market at least twice, it will already be good result. By my rough estimate, they make about 8-9 months, set the task to finish up to 3-4 months, but also it is not a limit yet.
What changes you are going to introduce in IT strategy, in the IT culture of bank and why?
Sergey Putyatinsky: One of key changes which I introduced at once is a transition from multilevel hierarchical organizational structure of IT to a matrix. This approach assumes creation of commands which work for the specific directions: either on business, or on important back office functions, such as HR, compliance, risk management, etc. Now there are commands, everyone with the leader and developers, analysts, testers though it is formal and belonging to different divisions, but working on one business challenge.
One more important change – we considerably reduce the cost of ownership of IT infrastructure. Often "iron" as the weight hangs on a leg of business and pulls any project down profitability. Recently we agreed about transition to other infrastructure: on cheaper hardware solutions which are arranged by other principles and which we manage differently to receive the most optimal load of infrastructure resources.
Also we aim to synchronize as much as possible work of divisions, to bypass resource restrictions and to solve disputable situations quickly and effectively. We want to speak one language with business, but also serious reconfiguration of processes is required. To an example if business and back office divisions plan the initiatives and activities for one or two years, and IT and block – plans monthly, the dissonance turns out. Similar "gaps" are eliminated, we together with colleagues learn to plan resources better and for a long-term outlook. All these projects in fact: full-scale reorganization of work of all IT function.
It is unlikely now there is a large bank which would not speak about digital transformation and would not carry out it. What means the concept "digital transformation" for you, and it is how possible to call MKB digital bank?
Sergey Putyatinsky: In difference, for example, from the Agile-manifesto which does not allow different treatments for a didzhitalization, there is no digital transformation of determinations, everyone understands them in own way. And not just to operate with slogans, and to agree with business, to undertake obligations and to execute them, it is necessary to enter determinations. For ourselves we defined digital transformation as follows: this number of transactions, functions which the client has an opportunity to perform the channel through online. It is the first indicator. There is also an indicator of the actual use of the online channel: how many transactions pass through them in relation to offices of bank.
Thus, our first task within digital transformation – to digitalize those products and services which are provided only through departments so far, and the second – to entice clients in remote links, to make so that clients considered them the main.
It sounds, maybe, simply, but actually "pumping" and diversification of online channels, increase in their availability and convenience is very big initiative in the IT strategy of MKB.
Whether is going MKB to develop in the direction of an ecosystem with open API?
Sergey Putyatinsky: Yes, we are going to enter Fintekh association and we expect that there we will be able to begin to work with API. Also we have resources to create an own ecosystem. We already try to do it by means of digital channels, use of other approaches to work with the customer base.
About priority projects
What IT budget of MKB in 2019? Whether you are going it to increase in the next years?
Sergey Putyatinsky: I will not disclose the IT budget size in digits. But I can tell that it is approximately equally distributed on development projects and the current maintenance. The budget rose rather last year almost twice, but so far it is the plan. There is a planned budget, and there are actual costs. Last year the planned budget was about 20% lower, than present, but actual – is twice lower. It is connected with the fact that in 2018 not everything from planned was implemented. One of the reasons of it, I will repeat, - what IT was "bottleneck".
Only about 15% of the budget were spent last year for development – projects, products, functionality, the rest – for the current support. The proportion is very important: if in the company the IT budget on development less than 20%, so problems of development are not priority.
If in 2019 we implement the plan for new projects, then the budget will correspond to the given number.
What development projects are for you the most priority?
Sergey Putyatinsky: We have big development plans for retail products, programs of loyalty and mobile bank. Besides, we are going to increase convenience of mobile bank seriously.
The second direction is products for corporate clients where there is a most transaction and commission part connected with payments, calculations, guarantees and related services. Here we also want "pump over" our risk management system regarding work with corporate clients.
At the end of last year we started the project on change CORE BANKING SYSTEM: we pass to uniform CORE BANKING SYSTEM CFT. Transition should come to the end at the beginning of 2020, at the same time "combing", completion of the back office systems takes the important place too in plans because any completions in the front office systems often restrain them. As a result, improvements in this block of systems should affect time of an output of products for the market positively.
In addition to the uniform core banking system whether you are going to move also towards a single frontal system?
Sergey Putyatinsky: Concerning a single frontal system there is no confidence yet. Some time ago in bank such project began, but this approach requires careful review. Perhaps, we will continue it, and, maybe, we will disperse according to separate solutions for call center, for retail and corporate tasks.
I do not see yet in bank of the ready platform on which it would be possible to implement a united front surely. Creation of such system on the basis of modern technologies quite costly, and at first it is necessary to count and prove how invested funds will pay off.
What plans concerning development of CRM?
Sergey Putyatinsky: Development of CRM is interesting in terms of cross-sellings and work with the partner customer base. We already have good technologies for cross-sellings therefore the functionality of CRM will develop. We are able to analyze client data, Big Data and on their basis to find interesting versions of offers for different clients.
Bank contact centers become more and more cheloveko-independent. What your plans concerning their development?
Sergey Putyatinsky: Our contact center is in Moscow, and we would like to begin to work in other region and to save, and for the purpose of transition to less competitive market of resources. Further we, of course, want to reach bigger technological effectiveness to be above average market benchmarks. At the same time, certainly, also modern technologies in this area, such as speech analytics and the maximum robotization are interesting to us. Replacement of people with robots leads to economy. For March, 2019 we discuss the development strategy of call center which assumes huge changes until the end of 2019.
In the known rating of efficiency of Markswebb online banks in 2018 MKB took only the 15th place. As far as it is fair, in your opinion? What main directions of development online and mobile bank for the next year?
Sergey Putyatinsky: In general, positions in this rating do not match my personal addictions, I would make this rating in a different way, especially it concerns leaders of the list. Our bank still precisely in leaders of such rating does not enter, and the attention is deserved by leadership – the first three places.
But we seriously treat development of online bank, we have big plans for development of the interface. We recognize that we should work hard over what, and we want to improve considerably design and convenience of use online and mobile bank. At the same time the feature set there already very good, but the current interface complicates their search. The whole team of mobile developers since October, 2018 is already engaged in it. The release will leave in the first half of 2019.
In September, 2018 in MKB there was a large-scale failure which affected online and mobile bank, operation of the equipment in bank departments and lasting several days. It led to delays on carrying out a part of transactions of clients. What systems were the "weak link" which caused failure and what was undertaken since then by bank that similar did not repeat?
Sergey Putyatinsky: The architecture of the core banking system became a basic reason of failure, our installation of this system quite independently developed by own forces of bank many years. It is possible to tell that it is own development which long ago gemmated from the initial platform. And weak government of architecture and development of a system led to what happened in 2018.
Change of the core banking system in our case – the best strategic decision for prevention of similar situations, in terms of costs one completion more profitable to implement other system from scratch.
And tactically we, of course, carried out a number of optimization and removed the cause which led to failure in September. As it stands a system will allow us to conduct uninterrupted activity before transition to the updated core banking system. We calculate that we will make it already in the first quarter 2020.
About the latest technologies and perspective methodologies
The banking sector more actively than other industries experiments with modern technologies. What your approach to the most haypovy technologies of our time?
Sergey Putyatinsky: My approach – very practical. Concerning each technology it is necessary to understand accurately what benefit finally it will bring the companies. At the same time not always the benefit is connected with earning of means directly: it can be shown also in reduction of back office costs, and in increase in attractiveness of bank as HR brand, etc.
It is very important not to make large investments in the appeared technologies at once, it is necessary to be able to try them "cheap". The expediency of involvement of consultants from outside in this case is doubtful: they are always ready to come and help, but are inclined to offer at first services of consulting in high price and then also for big money suggest to purchase technology.
It imposes additional requirements on IT. It is necessary to have in staff of specialists who could select, check quickly, the technology approaches or not and to adapt it. Happens that the technology appears also by itself in some division of the organization, out of IT. In the absence of own competence it can fall down IT department unexpectedly as a snowball.
As well as in what volume in MKB apply and are going to apply artificial intelligence technologies?
Sergey Putyatinsky: So far artificial intelligence technologies in pure form in our bank are not applied, but there are areas where quite complex, intelligent systems work for us. For example, at adoption of credit solutions, search of the most attractive offers for retail clients, in cross-sellings and for a raising of amount of sale and also in the marketing companies for retail clients. Still intelligent systems are used for recognition of documents.
We have plans of use of artificial intelligence technologies. First of all, we intend to implement them in the field of customer service – in call center, in divisions of support. Perhaps, we will apply them and in the area risk management. But there are doubts, it is how reliable to give to the machine decision-making on risks. Though AI potential in this area is high.
Sergey Putyatinsky: So far I do not see how we could for ourselves with real advantage use a blockchain. This technology especially is suitable for use where there is an interaction of a large number of participants in not entrusted environment – for example, in payment system, or the system of the distributed document flow or if the organization is the center of safe custody of any information to which others have access. And for conventional bank which has no global ecosystem I do not see interesting cases.
However it would be interesting to us to join as an experiment some already existing project to look how it works, and to get from it competitive advantages. For example, to some alternative system of exchange of financial messages.
Sergey Putyatinsky: No, these technologies are not used yet. But we have a big park of devices – terminals, POS terminals and also devices which are carried with themselves by the agents offering banking services. And potentially the subject of Internet of Things is interesting to us. From these devices it is possible to collect and analyze information, to use it in the activity. I think, it is a task for 2020.
Virtual and augmented reality?
Sergey Putyatinsky: For these technologies I do not see scopes of application at us in bank, except as in marketing area yet. My colleagues experimented with them and as the tool it looks externally interestingly, but we did not see real advantage for business of virtual and augmented reality yet.
Sergey Putyatinsky: Yes, it is very useful technologies in the financial sector because they replace with themselves work of back office employees. We already created pair of robots and we look at effect of their work. In terms of optimization of the state of a back office and reduction of operating expenses robotization – strategic direction. The robot, unlike the living employee, making similar transactions, requires much smaller costs.
In general, I see a lot more processes which we should robotize in such divisions as financial monitoring, treasury, operations department, HR, etc. Any process where the employee on some algorithm performs certain simple operations, is subject to robotization. Among interesting areas – search of candidates for work and answers to their questions, preparation of materials of the file and sending documents, their transfer to electronic archive, check of transactions and many other things.
At the same time this is not about surely to dismiss all released employees. They can offer retraining and other work in bank. We have for March, 2019 more than 200 vacancies. By the way, and nearly a half – in the IT block.
Public clouds and multiovercast?
Sergey Putyatinsky: We have no plans for use of public clouds yet.
In what part of departments of MKB it is possible to hand over biometric data? How do you see interaction perspectives with a Single biometric system for your bank? What new opportunities do you expect to receive?
Sergey Putyatinsky: There is a regulation, and that percent of departments which is required to be provided with a possibility of collecting of biometrics, we provide. Whether there will be this percent more, than it is required? Perhaps, but not at once - at first we will analyze as the biometrics influences our business, and according to the results of the analysis we will replicate it.
The culture of Agile is how close to your bank?
Sergey Putyatinsky: We separate culture and values of Agile, in that type as it is stated in the manifesto Agile. This culture concerns business development, it is directed to that service function supported business, but did not prevent it to develop. But any specific methodology, for example, of SCRUM, we did not manage to implement yet. It is the long and difficult way connected with reorganization of processes and for several months to make it it will not turn out. There are areas where it and it is not necessary to implement – a question besides expediency, but not a fashion.
As I already mentioned, I already carried out some organizational changes within transition to Agile-culture: we began to form teams by the matrix principle. Through some time members of these commands will get used that the business customer, partner IT-Business and the technical leader in her are the main link, and the hierarchical chief – minor, and for them will become natural such mechanism of work. Of course, it is necessary to bring also culture to organizational changes. It means that the result is more important than process, the customer is more important, than documentation. The permanent personal example, analysis of positive and negative cases, promotion of those who correspond to culture is for this purpose necessary, and it is periodically necessary "to eliminate" people who do not correspond to this culture and do not want to correspond. Process of cultural withdrawal pains will take a lot of time. I think, these are years one and a half hard works.
What your relation to DevOps methodology?
Sergey Putyatinsky: In my opinion, it is the next hype. Actually, very few people understand that he means this word and badly can describe it by the own words. Whether it is necessary "to pump over" specially function which will allow programmers to increase the culture of development and will allow to improve interaction with division of support? Yes, it needs to be done, for this purpose appeared - effective tools. But whether it is necessary to erase border between developers and support? Without a doubt, not.
Of course, it is formally possible to make so, but the effect of it will be doubtful. Separation of divisions on functions happened in due time not accidentally, and the current technologies of development and monitoring do not allow to erase border between development and support. All attempts of their artificial consolidation have conditional character.
If we understand the correct development process with robotization for programmers that it is more smooth to pass from a stage in a stage - from development to testing, acceptance and production as DevOps, then it needs to be done. Moreover, it is done by all, someone more, someone – in smaller.
About the personnel
What approach is closer to you – outsourcing or insourcing? For what tasks does outsourcing seem to you unacceptable?
Sergey Putyatinsky: I consider that here always there has to be a combination and that and another. We protected at a board meeting the strategy of a sorsing in which it is registered in what situations we want to use insourcing and in what outsourcing as decisions in this sphere as we manage the corresponding risks are made.
Under risks the dependence on external contractors and on own employees means, for example. Outsourcing also bears in itself risks of leakage of knowledge outside, but, on the other hand, if to look at those who depend on internal commands which can blackmail the company then the situation is not better, and I observed it repeatedly. Our strategy assumes the balanced approach to use of internal competences and external resources.
By the way, MKB is an example of bank which did itself much, without using external examination, and the failure which took place in 2018 – direct result of too big concentration of development of insourcing. The internal command for many years gets used that all issues are resolved by 2-3 methods, 2-3 technologies. They do not bring any additional technologies. It is dangerous to the organization.
In turn, I would not entrust outsourcing management of any functions, it always should be inside. It is possible to involve sometimes consultants who will tell how it would be possible to make this or that in a different way from the point of view of management, but completely it is impossible to give control on outsourcing. Also on outsourcing you should not give any strategic things, such as development of strategy of the company.
How many employees work in the MKB IT block now? How you are going to change this digit in the next years?
Sergey Putyatinsky: For March, 2019 about 600 people work for us, and, probably, the state will grow up approximately for 10-20%. First of all we are interested in developers, testers and strong managers - i.e. in those who are able to manage development and development well.
Due to what advantages can MKB compete for the personnel in information technology field with the largest national banks and the IT companies?
Sergey Putyatinsky: First, we have no bureaucracy in division of IT. Earlier in bank there were difficulties with decision making, but I put already a lot of effort into that decisions were made much quicker and without excessive hierarchy. Secondly, we have many interesting challenges. Huge transformation, and people who participate in it is started, "are very strongly pumped over" professionally at all levels – from developers and testers of the specific systems, finishing the people managing big blocks of development and testing, implementation of business initiatives, implementations of modern technologies.
About banking of the future
In January the vice-chairman of the Bank of Russia Vasily Pozdyshev in an interview to the Izvestia newspaper expressed opinion that in three years all bank retail will pass into "digit". It is how real, in your opinion, such perspective? And whether is going MKB to reduce number of physical offices about advantage of online banking?
Sergey Putyatinsky: Efficiency evaluation and reformatting of network of departments permanent process: we reveal gainless or low-profit departments and we close them, but at the same time we open departments in those places where we see perspectives. Transfer process of interaction from clients in online in which we are engaged will make still a part of offices gainless since less clients will go there, less products will be on sale there. But the total failure from classical network will not be. Whether other players entirely "will pass into digit", it is difficult for me to comment as all have strategy and resources.
What your relation to a fintekh? What financial technical-startups impressed you or interested recently?
Sergey Putyatinsky: Without the advertizing purposes, I personally was impressed recently by the startup of Scorista providing services risk analytics for financial institutions. In general my relation to financial technical-startups positive, but it is necessary to be able to work with them: find them, it is correct to set a task and formulate the purposes. And it is important to be able not "kill" this startup when you begin to work with it as the culture of the large company and a startup differ. There are many questions and problems, but still ready answers how to debug interaction with them, in the market is not present.
If to transfer a startup command on a full-time basis of the large company, it will run up because they got used to live in flexible hours, got used to free clothes style, lack of hierarchy, etc. And if to purchase the intellectual rights to their product, then it is unclear how to replicate it on the current business. But at all these questions, of course, to try to work with startups it is necessary and it is necessary to look for opportunities for application of the appearing products.
What your plans of cooperation with the financial technical-companies?
Sergey Putyatinsky: We select several startup accelerators which we want to enter. At the beginning of a year different acceleration programs are started. We formulate the tasks and we expect to find under them either technological solutions, or the ideas for new financial products or products for improvement of a back office. Together with ours retail and corporate blocks we watch with whom we potentially could work. It is new day us the process started only a month ago.
We are ready to support technology startups, we are going to hold several hackathons for search of the technology ideas, relevant for us.
What basic changes, in your opinion, will happen in interaction of banks and clients in the next 10 years?
Sergey Putyatinsky: I think that emergence of an opportunity to recognize the client by biometric parameters will become one of basic changes: on the person, on fingerprints, etc. Until the identifier is separated from the person, it is the passport, a card, the smartphone, something else. So what needs to be carried with itself. And in the future banks will learn to use biometric parameters of the person as the universal identifier, and, including, far off. Images of the person, identification on a retina, on a voice, etc. will be used. It precisely will appear within 10 years.
Also, I think, in 10 years physical offices of banks will remain, but them will be very little. It as with bookstores: books are on sale online, a part of bookstores is closed, but they remain. The main volume of interaction of banks with clients will go to online. In my opinion, it is two main changes of the future.