Interview with the vice chairman of the board of "Home Credit Bank" Sergey Scherbakov

Sergey Scherbakov: We select a number of technologies which, in our opinion, already now give the chance to compete with other banks. First, it is Big Data and Artificial Intelligence. Strategically important technologies have a purpose — to give to the client new value. Big Data and artificial intelligence help to know and understand better our client and to offer that it is really necessary for it.

The second direction having for us strategic value - all this that belongs to Mobility. We proceed from the concept "mobility everywhere": i.e. products and services are provided in 24/7 digital channels. Our purpose - to be where it is convenient to the client, worldwide and at any moment.

The third is UX/UI. It is impossible to call it technology in pure form. It is approach to how we build design of our applications. And it is very important as provides convenience to the client. We can develop mobile applications, we can use Big Data, but if it is inconvenient to the client, then by it it will not be demanded.

One more direction is Open API. It is technology base, the platform which helps to solve our internal architectural problem with the legacy old legacy-systems. And than these systems it is harder and harder, we should do more costs to those on their upgrade. And it is necessary to understand that it is investments into low technologies. The only way to solve this problem – to cover system legacy with open API. Such approach allows to separate the front office from middle-and a back office the interface layer, both, as a result, more flexibly and quickly to develop IT architecture in general, having reduced dependence on legacy of systems. It is a "internal" part of Open API.

The second part - Open API which we do for our online partner. It gives them access to services of bank. In our strategy — cooperation increase with business partners, with the financial technical-companies. It will allow them to use our credit services in the applications and products. And we, in return, will be able to integrate products and services of other companies into bank services.

And, at last, biometrics which is valuable to us as technology too. It provides the speed, simplicity and accuracy of identification of the client, including remote identification.

The culture of Agile, customer-oriented approach and methodology of design-thinking are in a basis of competitive bank. All these components focus us on the client, on what is valuable to him, and build work of all bank around the client.

So it is necessary for bank to be ahead of others? It is necessary to be customer oriented, be professional, modern, to use new approaches and technologies, to be flexible, to be integrated with partners. And, if to say how it has to be arranged to IT inside - it is necessary to be automated. And here we develop as the key direction everything, as for DevOps. I will tell about it in more detail a bit later.

Sergey Scherbakov: Now noise around startups ceased. As far as I know, those who invested even personal money in startups earlier try to approach this fashion more pragmatically now.

For the banking sector a potential threat is posed by already available fintekh. The same Google, figuratively speaking, and at us - Mail.ru, "Yandex" and others. They own modern technologies, they are fast, they have a big customer base, they well understand the clients. If permit to provide to such companies financial services — potentially it will create threat to banks. And so perspective startups will be quickly integrated with the acting players of the market (fintekha or banks). Both those, and others now actively monitor the market — look for the valuable ideas and try to purchase them.

Summarizing, I consider that financial startups will not kill banks. Already developed financial that poses a certain threat for banks, but so far they are constrained by legislative restrictions.

Sergey Scherbakov: In the majority of the developed western countries and in the certain countries of Asia financial services in digital channels are more demanded. There penetration of the Internet, smartphones, and, as a result, demand of remote links is higher, than in Russia. One more moment is a technological leadership of the western companies: there is a difference in an education system which in many respects defines what quality people come that for technologies they create and as quickly.

The third factor is lower administrative barriers to business in the West. The fourth is the infrastructure supporting innovations both on state and on private levels. And the fifth factor is higher competition in banking sector in the West. Perhaps, still the sixth - there softer legislation regarding remote identification, and opportunities for providing remote services in the West is significantly more.

Sergey Scherbakov: Yes, of course. We participate in the pilot of remote biometric identification, together with the Ministry of Telecom and Mass Communications and Rostelecom. Now we prepare for piloting of technology of collecting of biometric data in bank departments and their sendings to EBS and after this also remote identification of clients when using of our products and services. At the pilot's stage when the client comes to bank department, we  will suggest it to be registered in a Unified identification and authentication system and to take off biometric data for registration in EBS that he could receive further bank services remotely. The pilot project should pass in the first half of 2018.

Sergey Scherbakov: It is still big question. There is a hitch: if clients go to bank departments, it means that they do not use our mobile applications. Means, to them comfortably to receive services "in the regular way", and remote service is not really interesting to them.

Now at 46% of our active clients mobile application of bank is installed. We show those who prefers to go to departments and we tell how conveniently and just to use the application. Therefore I would not do premature estimates. On this question the pilot about whom I mentioned above will give the answer.

Sergey Scherbakov: About two months ago we transferred four startups which are selected according to the results of the first acceleration program to a phase of pilots. They are concentrated on issues of personification, communication, relevant for us, with the client, biometric verification, machine learning. Together with these startups we develop new approaches to customer interaction, to personal data processing. In these projects there are, for example, sensing technologies of a voice and its transfer to the text.

Sergey Scherbakov: Of course. These are call centers: client service, remote sales. We analyze the text of a talk, intonations. On the basis of these data we draw conclusions about quality of our services.

Concerning purchases of startups: so far I cannot tell what we are going someone to purchase, but also I do not exclude such opportunity in the future.

Sergey Scherbakov: I share opinion of other banks on the future of artificial intelligence in banking sector. Artificial Intelligence technologies are inseparable from Big Data as data are a basis at which artificial intelligence technologies can work. And these two technologies in our bank already develop — as independently, and in interaction with the financial technical-companies.

So we apply them in the course of adoption of credit solutions. For assessment of solvency of the client in online channels today we have enough five biographical fields. And already in the nearest future we are going to estimate credit risk of the acting clients without filling with the client of information fields at all.

Thus, if the client visited our website or the website of our partner, and we could identify him — that we can offer him a suitable product at once.

Sergey Scherbakov: Yes, it in study. But already decision making process on five fields in the request for the POS credit in online stores of partners works. Level of the irrevocable credits in our bank — 4.2%, is a historic low. And it is specific practical result of application in our Big Data and Artificial Intelligence bank in decision making process on the credits.

Sergey Scherbakov: We also use this technology on the online platform "Goods by Installments" when we integrate data on goods of partners. The same goods can be described by absolutely different methods at different partners, and a task of our robot – to make so that these, maybe, even tens of goods could be found by search, and different descriptions came down in one a form simple, laconic and clear to the client.

In processes of CRM these approaches are used for preparation of different individual offers to the client.

Sergey Scherbakov: I would use data of Gartner from a recent conference in Barcelona here. Analysts of Gartner predicted the following trends in the horizon till 2022: IT expenses percentage of revenue will increase. Expenses on one employee will also grow. And concerning a ratio of CAPEX and OPEX, Gartner predicts the further shift of IT expenses towards operating rooms. If now their share makes 75%, then will reach 90%.

If to speak about expenses and to divide them into three parts – maintenance of the current business, its growth and transformation, then now this ratio makes 70-20-10%, and in 2022 the ratio of 50-25-25% is predicted. It is connected with the fact that Gartner predicts moving of IT infrastructure to a cloud and decrease in investments into own data centers.

Sergey Scherbakov: Own developers are in staff of bank and in remote development centers (these are the independent companies). So we actually autstaffy part of employees of these remote development centers. On outstaffing partially analysts, developers, more — testers. The share of salaried employees makes about 50% of all development.

Vendors and the external companies work with us only on separate projects when we need special skills which are not in bank. During the project we create own competence center — it can support and accompany the solution implemented within the project. It gives us flexibility and optimizes expenses.

We do not consider options of creation of the separate IT companies because we are already the IT company. Our purpose is a digital transformation. We want to become bank-fintekhom, and for this purpose we are going to integrate IT and business within cross-functional teams on the basis of the culture of Agile and methodology of agile development, but not to be separated into separate companies. We do not see value in formal separation.

Sergey Scherbakov: In bank there is a special division responsible for change management. It collects initiatives from any division in bank, and its task – to estimate them (what to make that to implement it how many it will cost what systems need to be changed, etc.). Then the decision is made already at the level of committee of managing directors. It concerns those ideas and initiatives which are implemented within waterfall-process.

Within Agile we already have 10 commands, and still about the same form. Here decisions on the sequence of implementable tasks are made by a command.

Sergey Scherbakov: We expand practice of application of philosophy of Agile and methodology of agile development. On Agile we develop almost all frontal solutions. The first condition of Agile-development is a value of the solution for clients. The second condition – responsibility of a command which can be structurally recorded as some separate an IT landscape component, and in a separate product.

The command through SCRUM cycles issues the result necessary for the client. So the commands developing such products as "My credit", Mobile bank, "POS online" work, for example. There are some more internal applications which are used by our own employees.

There is a number of projects where we cannot do it. For example, some infrastructure projects, or such as implementation of Smart Data. It is technology which will provide vision of the client by "360 degrees" and data integration from different sources. Without development and deployment of this architectural concept we cannot make the client the proposal really qualitative online. The complete architecture will not be developed, implemented yet, Agile is inapplicable. And where we can yield result, using a flexible cycle, to quickly issue result, we can use also Agile.

Sergey Scherbakov: We use Open Source in bank: it is PostgreSQL, the Hadoop elements which are used for Smart Data and also Apache Kafka. We look at what is in this segment, but we adhere to a responsible approach as the most important for us is reliability of bank and services for clients. Our approach to Open Source - to check everything, to test, approve, pilot, and only after that to apply in specific solutions. Now we have about 40 microservices which use Open Source. But so far I cannot tell that this mass application.

Sergey Scherbakov: On the critical systems we use Oracle. It is the standard of group checked by time and scale of our business. Providing performance and reliability  of enterprise-level, even under the most high loads during seasons of high sales. So far alternatives to change Oracle for something else is not present.

Sergey Scherbakov: Here we do not limit ourselves, but we approach responsibly and with common sense, I so would tell. It to tell "here we will apply Open Source, and here we will not be", no. If it is reliable, it is possible to apply.

Sergey Scherbakov: I will begin with the second — we experiment with this technology. There are internal pilots concerning possible creation of programs of loyalty, likes, dislikes on internal social network. These pilots are necessary to understand technical aspect of a blockchain and "get the hand". However so far we do not see what value the technology can give to clients on whom our bank is focused. A lot of things rest against the legislation.

Sergey Scherbakov: In 2009 we implemented a sensing technology of persons in credit process: photographed the client, identified among them swindlers on the basis of "black list". This approach is familiar to us long ago. We did not solve yet whether we will use a sensing technology of persons in ATMs. The biometrics in general is interesting to us, we will develop this subject.

Sergey Scherbakov: Probably, if we had at the moment no ATM network and we created it from scratch, would spend money for equipping it with the most advanced technologies. Or if it was talked of upgrade of the existing network. But now for us it is not critical. We have today no task to develop or to considerably upgrade ATM network. Therefore there is today no need to invest in recognition of clients via ATMs.