CIO of Raiffeisenbank Andrey Popov - about digital transformation and a role of Agile in this process

Andrey Popov: Digital transformation is important for us, as well as for other players of the market. We universal bank also do not consider that we need to get rid of physical departments and also those pluses which geographical presence in the country gives. At the same time, we accurately understand that our business model has restrictions in regions where we are absent physically, and we want from these restrictions to get rid. Digitalization allows us to work with clients in any region irrespective of, there are we there or not.

Besides, digital banks have less operating costs, and it allows to implement more various programs of development.

We proceed from two main messages: we should become is better for clients and as commercial enterprise, should be profitable for shareholders. Without digitalization we do not see the future.

Andrey Popov: It is possible to look from two parties: there is a cover, and there is an internal contents. If to speak about a cover, then digital transformation is about client experience — both physical, and legal entities. The bank which can provide more services via different channels including digital, through open API, will make an impression of more digital. However, in addition to open API, internal transformation — change of business processes, works of commands, etc. is required. Transformation differs in it from automation of separate processes.

Andrey Popov: Digitalization assumes including Agile-transformation, change of the attitude towards that, what are you doing. The digital sphere locates to that more often and more to experiment, and not really loves when something is done long, trying to bring to perfect condition. Agile allows to try quickly, to check, receive a feedback from the market and clients — to understand, what we do is useful, or not. If there is a positive response, it is possible to bring to the market a new product or service much quicker.

Agile-approach requires reorganization of a command she could experiment more and quicker inform of the successful ideas the consumer. By the experience we see that it is impossible to rebuild work of a command if not to use practice and the DevOps tools meaning deep process automation of development, testing, integration, etc.

The next step is creation of Agile-commands which should be compact and cross-functional: in them there have to be developers and engineers, including maintenances, and representatives from business, i.e. all competences necessary for creation of a product. Reorganization of IT and all organization for these principles is what we pay much attention to.

Andrey Popov: No. We support Agile as culture in all bank and we promote implementation of its methodologies, but not all commands use them. About 20-30 commands from 80 are rather deeply submerged in Agile. The others now at different stages of transition.

We have healthy democracy without excesses. We want that commands made as much as possible decisions. Our practice shows that when the initiative goes down in a command on top and does not meet in it sufficient understanding, the effect of it appears less considerable. Therefore we are interested in that commands understood for what to them it and what in their case will better work. They should feel, try that suits them more.

When we speak about development of a product, about development of commands, key for bank, especially if there is a need for their scaling, usually we give preference to Scrum methodology. We for this purpose have all necessary institutes: Scrum-masters, Agile-coaches — everything to show, tell, provide resources.

Andrey Popov: The world constantly changes therefore it would be incorrect to speak about some home straight. I would place emphasis on what for us is important and that we do. Paradigm shift, inoculation of culture of Agile, an entrepreneurship that employees were not afraid to create new are important for us, to make mistakes. We need to create what builds up us from competitors, but does not align us with them. At the same time we do focus at a speed, expansion of employee competences not only in the areas which are for them the main but also in others.

In terms of client experience we have considerable progress on a number of products. I can note progress which was made by the command working with small and microbusiness on creation of digital services for this segment. Since the beginning of year we began to provide remote services in the cities where our departments are absent. At the moment we already work in 90 cities of Russia. Also I am glad to progress of our commands of online banking both for legal, and for individuals. We constantly update a set of services and we increase their quality. Besides, at the beginning of the next year we will release big, very important release.

Andrey Popov: For the last several years the budget of IT in general did not increase. It changed in structure, priority of projects, at the same time total amount remained at the same level. But transformation of the last year showed that in some cases, especially when you want to gain the maximum effect of a krossfunktsionalnost of commands, to allocate them with the greatest possible and reasonable degree of freedom, it is necessary to increase several the investment expectations in comparison with what was earlier.

In 2019 we are going to increase the commands involved in creation and support of new services. At the moment we calculate that growth by 2018 can be 15-20%. Need of growth is connected including with the fact that we want to direct a significant part of resources to the solution of the internal technical issues preventing to implement the new ideas with the necessary speed.

Part of investments the next year is connected with recurrence of development of technologies. There will be an updating of the "iron" park, expansion of DWH.

Andrey Popov: Raiffeisenbank for the last 7-8 years continues to develop actively in different economic conditions. In it a big merit of my colleagues in operational management who do a lot of things in the field of lean-transformation (lean production), process optimization. Optimization affected also IT systems. In many respects thanks to it the last 1.5-2 years we actively invest in robotization, replacement of often repeating mechanical actions by algorithmic assistants. In this direction we apply machine learning technology and artificial intelligence. We look at opportunities of optimization and in terms of support. At present our bank takes the leading positions on operational efficiency among banks of group Raiffeisen and also in the Russian market in general.

Andrey Popov: There is a lot of them. Our bank is not two years old, but more than 20, and there are systems which historically were not constructed so that to interact with each other with use of API or some services. In another or, for example, digitization of data from paper carriers employees should be engaged in transfer of information from one system. On such routine, mechanical points of joining of processes we first of all also turned robotization.

Here It should be noted that if the organization put in process optimization much before, then the effect of robotization, as a rule, not such big, as usual it is advertized.

Andrey Popov: We use it to improve our processes, for example, to optimize collection process: predict loading of ATMs that a system automatically determined what volumes of cash into what ATM need to be loaded. Also machine learning is widely applied in corporate investment business, in the capital markets to the analysis of behavior of participants and optimal pricing. Besides, it is widely used in the field of risk analysis and in CRM.

Andrey Popov: Raiffeisenbank actively participates in Association of Financial Those (AFT) which the Central Bank together with market participants created two years ago. When we meet colleagues from Group Raiffeisen, they often are surprised to that, how deeply in Russia the regulator is involved in creation of new opportunities in the market in comparison with other countries. Experiments and attempts of creation of the new systems, for example, using blockchain technology, very positively influence development of technologies in banking. Recently we sent the first electronic mortgage on a mortgage to the decentralized depository system constructed on the MasterChain platform. Many market participants, and as a result — faster, convenient, safe and economic process worked on the project.

I personally like what does the Central Bank in this direction. It is difficult work as it requires building of good interdepartmental interaction. And it is, in my opinion, that area in which it is worth investing more. But the fact that the Central Bank helps market participants to create the new services necessary to clients, definitely very positively. Of course, after these initiatives also requirements of regulators to volume, quality, the detail level of information provided by banks grow.

Andrey Popov: Registration and accounting of electronic mortgages in a blockchain is an excellent initiative. More transparent and clear for participants this process would be made by an ogranization of direct interaction of Rosreestr with the MasterChain platform. Now it happens through SIEI (the channel for vzaimodeysivya to gosdarsvenny bodies).

Creation of the single biometric system (SBS) and also start of processes of collecting of biometric data — the perspective project not only the Central Bank, but also other regulators. It will open new opportunities both for clients, and for banks. At this stage if to consider purely utilitarian requirement of banks far off to identify clients, a system too large-scale. To perform this function, would be to permit enough use of the means of video and audio communication sufficient for a certain level of identification.

In order that service of remote identification developed, in my opinion, bigger involvement from large players of the market who have more than 50% of clients and of which more than 70% of P2P of payments are the share is necessary.

Creation of a system of fast payments will promote gain of the competition in the market that in turn will positively affect consumers: they will receive the cheap and stable service which is not limited to the fact that the user is a client of some certain bank.

Our experience of participation in AFT shows that the big role in the areas of work of association, structure is played by a feedback of banks, including, ours. During the second half 2017 and at the beginning of 2018 enough time for minor questions was spent. As an example, rates for the system of fast payments for which still in fact infrastructure was not created were discussed.

Andrey Popov: We observe high rates of penetration Internet and Raiffeisen Online mobile bank among our active clients – individuals. In our bank it makes about 63%. At the same time there are more than a half of clients who use Raiffeisen Online, do it through mobile application. Such trend is observed by all leaders of the banking market. If to speak about legal entities, then it is necessary to treat different segments of business apart. Big corporations have a need for integration of Internet bank into ERP processes, and, naturally, the Internet bank enjoys bigger popularity.

Medium business in this plan is more similar to large corporate, and here small and micro business are drawn towards patterns of individuals and want to use convenient and functional mobile bank more and more.

Andrey Popov: In certain cases the Russian clients are more focused on technologies, than in the USA and Europe. In the USA, for example, the paper check address which makes still considerable share is still used. On the level of penetration of a number of electronic means of payment we overtook many countries long ago. Apple does not open detailed statistics, but, I think, Russia precisely in the countries TOP-3 by the number of payments via the Apple Pay.

Projects in the field of biometrics and the system of fast payments are in Russia at a stage of study and only begin to be implemented. Nevertheless, we expect that distribution of remote identification will create premises to that the client could without leaving the house to open the account in any bank, and a possibility of fast payments not only between individuals clients, but also between natural persons and legal persons will allow to make practically any purchases instantly.

The movement in the direction of open API by the principles which are used in Europe would create the good level of the competition between classical banks and new players, such as "Revolyut", for example, which "threaten" to enter the Russian market.

Andrey Popov: Markswebb estimates online banks, relying on the accurate and clear system of indicators. No, occasions not to trust them to researches. But, of course, we do not want to be on the ninth place, we want to be better and higher in rating, and actively we work on it. We consider that we are worthy top positions.

Andrey Popov: Failures happen at all banks. Systems sometimes break. We build process so that first of all it was possible to predict a possibility of failure and to prevent it beforehand. At the same time we improve processes so that as soon as possible to react and recover service and thus to minimize influence of failure on our clients.

In certain cases, when there is very serious accident as we had it, unfortunately, in the spring, without significant infrastructure changes to permit it very hard. It, perhaps, the biggest that at us happened for the last few years. But with what speed service as a result was recovered, considering scale of accident, shows that the bank coped with failure not bad.

We want that clients did not feel effect of failures even if they happen, and by the number of failures until the end of the year we put a metrics at the level of zero. The end of the year is always peak load, the volume of payments usually increases by 2-3 times. Especially it is relevant for the last two weeks of December. Therefore a part of summer and a big half of fall we carried out stressful tests of a number of systems, especially those which the front come for increase in loading. At the moment we are satisfied with results of these tests and we consider that we are ready to the peak period.

Andrey Popov: Our researches show that for a number of segments of our clients it is important to understand that the bank physically exists. First of all, it is important, strangely enough, for clients individuals. Therefore we see available physical offices big advantage – we do not lose direct contact with those clients to whom it is important.

We consider that our current network numbering 182 departments adequately represents bank in the country. We do not see need it on a substantial scale to reduce or increase. We are going to develop digital services, improving at the same time and physical departments.