TAdviser review: Digitalisation of banks 2022

The digitalization of banks in 2021 was widespread. A large number of initiatives and programs aimed at providing digital services have been launched. Two years of the pandemic led to an explosive increase in demand for online services. Banks in response to this challenge were actively engaged in the development of IT solutions, - says Yuri Kolbasin, partner of the Digital Economy League, director of Big Data.

In 2022, the digitalization market has changed beyond recognition, "says Alexander Filippov, director of business development in the financial sector of CROC. - The priority of banking organizations is now not so much the development of new IT projects as the need to ensure the continuity of current business and customer services. In this regard, the focus has shifted to import substitution of products of Western vendors that have left the market, since disconnecting at least one component of the IT infrastructure can lead to adverse consequences. As we can see, all players cope with the task.

The first half of 2022 presented Russian business with many difficult tasks, the banking sector was no exception. Sanctions, asset freezes and an outflow of private deposits have all caused serious losses to the industry. The main change was the need to direct work in the direction of ensuring sanctions sustainability and take into account the possible actions of international IT solution providers when further planning work in the long term. In the second half of the year, there is a systematic substitution, adjustment of strategies for future periods. The importance of Russian cloud services has sharply increased, most of the projects carried out are implemented on IT solutions that are not subject to threats from international IT corporations. Financial organizations pay great importance to the development of their internal IT divisions, there is an aggravated struggle for qualified personnel in the labor market, "she says.

As part of the new paradigm, financial market participants are forced to revise long-term and short-term strategies. Currently, the main priority for banks is to preserve critical software by increasing their own expertise and creating internal competence centers that allow maintaining and developing the systems used without the participation of the vendor. This path is mainly followed by commercial banks. If we talk about financial organizations with a high share of state participation, then the option of preserving Western software does not suit them, therefore, in search of alternative solutions, they turn to the Russian market, the expert says.

We admit that this restriction in the future can increase market demand for domestic cloud services, - explains Pavel Kondratyev-Sapunov.

Plans to increase the level of digitalization did not slow down, the part, on the contrary, accelerated, - adds colleagues Vladislav Ignatenko, head of Finance and Banks at Norbit (LANIT Group of Companies). - We can say that banks are using the current situation to jump in terms of digitalization.

First of all, banks continued to invest in those products and business areas that could potentially bring them maximum profit. On the contrary, a number of areas of digitalization have completely lost their relevance: for example, the development of work with Visa, Mastercard systems, the development of international business for those who had branches in Western countries. On the contrary, the solution of information security problems in connection with a large number of hacker attacks on banks sharply gained great relevance. Not only the development of products to replace the departed is relevant, but also the replacement of cloud services, the use of which has become impossible. In general, the priorities of many companies have changed significantly, - says Yuri Ovcharenko, President of IT One Group of Companies.

The use of open source software in a "commercial shell" as an alternative to quasi-monopoly American IT solutions is an approach that Russia takes after European countries and China. Already, the developers offer OS and DBMS, the basis of which is open source software adapted for domestic users - a Russian-language interface, documentation, training, support, etc., she says.

The first trend and largely determining the rest is a complete change of leaders in all areas of IT due to the departure of Western manufacturers, - says Alexander Filippov, - All solutions banking organizations now choose not according to Gartner's Quadrant, but based on experience and expertise (both their own and technological partner) and their requirements for the functionality of the solution. In addition, there is a feeling that customers, on the one hand, do not have the opportunity to make forecasts for the near future and solve problems based on the current situation, on the other hand, they are working on building longer-term strategies for organizing the IT landscape and infrastructure, building a reliable foundation based on domestic solutions for further development.

In the context of dynamically changing external factors and general economic pressure, firstly, priority is given to projects that have a short and confident return horizon. Secondly, the speed of making changes to the digital landscape becomes extremely important - it is necessary to have time to respond to challenges before the situation changes and the previous steps become irrelevant, he notes.

Firstly, this is a serious revision of the applied and infrastructure landscape of information technology. The fact is that the suspension of the activities of the largest vendors representing proven and well-scalable products will require changes in architectural approaches to reduce business continuity risks (primarily component failure risks), as well as maintaining the ability to scale and modernize IT. Now new Russian products will be integrated into the IT landscape on other architectural principles. The second trend is a native transition to the so-called lego design of banking players. It is possible that due to the transformation of the IT landscape, banks will activate the course to separate their business units with building self-sufficient information environments for them, which will be associated with the landscape components of other business units by means of service integration, the expert believes.

The creation of a prototype of the digital ruble platform was completed in December 2021, recalls Yagubtsov. - It is planned that it will become another form of money in addition to the cash and non-cash ruble. The issuer and operator of the digital ruble platform is the Central Bank of the Russian Federation, and customers open wallets and conduct transactions on them through financial organizations. Why does the state need it? Firstly, to increase the stability of the payment infrastructure, the transition to online settlements and the creation of new products, for example, a letter of credit between individuals, and secondly, control over the spending of funds. As long as there is cash in circulation, it remains almost invisible to the state - this creates a shadow economy, due to which the state does not receive taxes in the budget, and contributes to corruption.

Currently, there is a discussion about who will issue the CFA. As far as I understand, the Central Bank of the Russian Federation does not yet have a final opinion, they want to try several options and see how it will work, the expert continues.

Now is the very moment when the creation of technology overtook product development. Smart contract technology can be used to reduce the cost of transactions in the purchase of goods, services and materials and increase the transparency of the process for supervisory authorities. But in order to prepare and change the legislative framework for the use of smart contract technology, it is necessary to assess the commercial component, which is now in question. In addition, the problem also lies in the mentality of people who work in organizations. For most of them, this is a very sharp jump, like from a disk phone immediately to a smartphone. They do not understand what smart contracts are and how to work with them, the expert concludes.

The R&D budgets of many banks were cut as a priority back in March 2022, so budgets for serious innovation are limited. Banks expect the lifting of restrictions on the circulation of cryptocurrencies and the introduction of a digital ruble, but so far this has not happened, "says Leonid Vasilenko, CEO of OpenDev.

Steps are being taken in this direction, he says. "Banks are also interested in software and hardware complexes (PACS) on an import-substituting base that can withstand maximum loads in banking systems and at the same time meet all reliability and security requirements. In addition, the development of the Support Centers for the remaining foreign solutions in operation will continue: today banks are solving this problem together with system integrators.

In the coming years, apparently, we will see a sharp change in the landscape of domestic IT vendors and startups. At the moment, the situation is such that there are a huge number of experts on the market who have switched from Western IT companies to Russian ones and are able to strongly develop current products or create new ones from scratch. At the same time, "at the moment" many domestic solutions are not full-fledged analogues of Western, but allow you to assemble, as a designer, a custom solution for specific tasks of the customer, depending on the scale and maturity of the business. If we talk not about innovation, but about the real needs of the financial sector, then we see projects to replace analytical platforms BI and tools, including for working with big data, the need for changes in the means of communication with clients (contact centers, chat bot platforms, speech synthesis systems). The innovation is rather that projects can be made on the solutions of different market players, due to which it is more difficult to link several systems at once or make them more open for "customizations" and further improvements, which was more difficult to do with vendor products. But here the main thing is to take the burden possible and really assess the forces and resources, as well as choose a reliable technological partner, - he concludes.

The trend of the transition to a micro-service architecture has remained, because this allows you to more economically dispose of equipment and reduce the requirement for servers without losing the performance of the application system. Import substitution spurs the process of replacing/dividing monolithic legacy systems into microservices/modules of Russian developers. At the same time, IT outsourcing allows banks to attract specialists with unique experience in import substitution in a short time, "summarizes Eduard Dolgalev.