Touch Bank

Touch Bank is retail online bank, the project of the Hungarian financial group OTP Group, began customer service in Russia with spring of 2015. Completed the work in May, 2018. Touch Bank worked according to the license OTP of Bank and is regulated by the Russian legislation on credit institutions.

• The start was given to the project in April, 2014.
• The first card is released on April 1, 2015.
• Completely cloud infrastructure.
• The project is closed in May, 2018 because of unprofitability.

Business model

Touch Bank — was independent banking business from the certain operating room, IT, financial, legal and personnel infrastructure. Touch Bank used remote model through online (cards were delivered to clients through couriers).

For 2015 at the Moscow office of bank about 100 employees worked.

The online bank had no departments. As the main platform of interaction of the client with bank served the Internet and other interactive channels of communications which provided carrying out all transactions round the clock, without the days off and queues, in convenient time, in any place.

The financial service Touch Bank represented a packet of products based on one bank card. He turned on deposits, the credits, convenient replenishment, transfers, payments and other opportunities for effective management of personal finance in real time.

History

2018: Closing of bank, transfer of 200 thousand clients to OTP bank

In May, 2018 it was announced that the project of separate digital bank Touch Bank of the Hungarian OTP Group in Russia will be closed. It will be integrated with main bank "daughter" of group — OTP-bank at which Touch Bank also was created. Experts believe that the decision was made because of unprofitability of the project against the background of the high competition in the market of financial technologies.

The solution to refuse completely development of the Touch Bank project as found out Kommersant, was accepted on May 8, 2018 on board of OTP Group. Active customer acquisition in digital bank will be suspended, but Touch Bank will continue to service the existing accounts and to work with the current clients. All technologies and developments of Touch Bank will be integrated into processes of OTP-bank. Process will come to the end until the end of 2019.

In three years of operating activities of Touch Bank attracted more than 200 thousand. clients, about 5.5 billion rubles of deposits also opened credit lines on 6.8 billion rubles. The bank had to reach payback by 2018-2019, however three years in a row was unprofitable.

OTP-bank 'Ü' explained that the credit institution is faced by a problem of the accelerated development of own digital platform that will allow to accept on service of the existing clients of the Touch Bank division. All products of digital bank in the first quarter managed to be brought 2018 to operating profit, the integration reasons — need to reduce operating expenses, assured there.

"Now in both structures many processes are duplicated — explained in OTP-bank. — the Optimal variant of development at the moment as for online banking, and card business of OTP-bank is consolidation of commands, processes and technologies".

Integration is intended not only to reduce costs, but also to accelerate a didzhitalization and development of remote channels of service, concluded in bank.

However, experts see other reasons of closing of the Touch Bank project. The director of the bank ratings of RAEX Ruslan Korshunov believes that the reason of such solution could become that circumstance that in three years the Touch Bank project did not come to a positive financial result. In addition to high operating expenses led growth of volume of reserves on problem loans which share for 2017 grew in the loan portfolio from 0.3% to 10% to a loss.

"For the first quarter 2018 of Touch Bank among large banks OTP Group only showed a loss — not less than 290 million rubles at recalculation from the Hungarian forint — mister Korshunov explained. — at the same time the size of its operating expenses for January — March made more than 450 million rubles, and reserves on the credits — 225 million rubles".

The associate director of group of the AKRA bank ratings Valery Piven also agrees that the unprofitability of the project became a basic reason of the made decision. At the same time the expert notes that the market of alternative banking services (digital banks) in Russia highly competitive.

"It is heavy to compete with Tinkoff bank in this market and taking into account that at the OTP-bank retail not bad develops, it does not make to implement the parallel project big sense" — he specifies.

In opinion, the managing director of NRA Pavel Samiyev, the decision on integration of Touch Bank into OTP-bank it is logical as allows to provide omnichannel approach in customer service and to optimize costs for development within one, but not two brands. The representative of large bank who wished to remain unnamed noted that it is more difficult to develop two brands in principle, than one, especially when one them is already widely known. According to him, it is obvious that decided to remove an excess link OTP Group.

2017

Growth of losses by 25% to 1.6 billion rub

The project of the Hungarian OTP Group is Touch Bank which specializes in customer service online, in 2017 increased a loss by 25% up to 1.6 billion rubles, follows from the reporting of group on IFRS (calculations at the rate of forint for December 31).

Losses of Touch Bank are sustained by the third year in a row, follows from the reporting of group: in 2015 and 2016 the bank lost 1.2 billion rubles. Results of Touch Bank did not meet expectations of a directed number of clients, turnovers and income, said in the reporting of group for 2017. The new management constantly works to reach target indicators of profitability, it is specified there. The bank at the end of 2017 was left by the project manager Andrey Kozlyar.

Selected 40 million euros for start of the new OTP Group project, in 2015 the group waited that the project will reach payback in 3.5-4, the Kommersant newspaper wrote.

Main product of bank – debit cards, but in Russia you will not earn from them, the top manager of retail bank explains. Actively Touch Bank began to issue the credits from which just and it is possible to earn in 2017, its portfolio grew approximately from 330 million rubles for the beginning of year to 2.8 billion, follows from the reporting. The share of the credits delayed more than for 90 days grew: from 6.7 to 10%. In the II quarter the bank toughened standards of issuance of credits, is told in the reporting.

In 2017 at Touch Bank operating expenses almost grew by 20%, generally due to marketing, follows from the reporting. In the end of the year at bank attraction costs of clients grew, besides, the bank spent about 130 million rubles for an advertizing TV-campaign. In such projects everything depends on that how soon the brand will become recognizable and will earn a gossip hotline, the top manager of retail bank specifies.

At the project similar to Touch Bank, – Rocketbank (now works at the license of FC Otkritie, it is created in 2012) – in 2016 the loss made 234 million rubles, said in the reporting of FC Otkritie under IFRS. The bank did not open fresher data.

In two years of operating activities the full-fledged digital bank was from scratch developed and let into Touch Bank, the representative of "OTP of bank" says. Since 2018 Touch Bank begins a new stage of the development which main objective – to scale the current developments and solutions, it continues. Also emphasizes that the strategy of group in Russia still assumes focus on profitability of each issued product.

• +200,000 clients
• 300 cities of Russia
• Deposits and account balances: more than 5 billion rubles.
• Amount of open credit lines: 5.5 billion rubles.

The chief information officer Mikhail Aleksin - how the bank flew up on outsourcing also became an outsourcer

Mikhail Aleksin, CIO Touch Bank, at the TAdviser SummIT conference told on November 29, 2017 about an outsourcing role during creation and development of bank.

As of the end of 2017 Touch Bank has more than 200 thousand clients and delivery to 300 cities of Russia. Both of these indicators grew approximately twice for 2017. High growth showed also some other indicators, such as level of availability of financial services, delivery speed, etc., noted Aleksin.

From the decision on start of Touch Bank before issue of the first product in 2014 there passed less than 12 months. In it and also with rapid growth of indicators of activity, according to CIO, the bank was helped by wide use of outsourcing: IT infrastructures, examinations, developments, digital platforms, etc.

Mikhail Aleksin, director of information technology of Touch Bank

All IT platforms of bank are placed in a cloud according to the scheme PaasIaaS of outsourcing(s) are used in a format of providing capacities on demand. And it is convenient, notes Aleksin because, for example, during the periods of marketing activities of the requirement to performance of systems can increase on orders and close this requirement on own resources would be problematic.

At the same time, he says, in a part Paas/IaaS for bank there came the optimization era when Touch Bank closes permanent requirements after all at the level of own infrastructure, and on demand to use resources for the period of the marketing campaigns and actions.

Slide from Mikhail Aleksin's presentation

The bank actively uses also outstaffing – involvement of specialists for all cycle of production of a product, digital bank.

From the application software, for example, the CRM system is used on model of SaaS. Bank uses the solution of Salesforce.

Outsourcing is the already taken place and ripened model. At the same time, so far, in my opinion, at service providers the possibility of some customization of service as product limps. So far for service providers free market where they can issue a mass product is not exhausted. Nevertheless, the market of service providers was quite created, and in it there is so far an opportunity for an input of new players who have a chance "blow up" this market, enter to it something new, - Mikhail Aleksin noted

At the same time the bank not only actively uses outsourcing, but also went further: he became provider of services of outsourcing. For example, with Tele2 company the joint project for clients of the operator where the bank acts as service was created. In 2017 together with Tele 2 Touck Bank issued the co-branded bank card, having suggested clients of the mobile operator to issue it on special conditions.

On the same model the bank works with a number of large retailers, notes Aleksin. In 2018 the Bank as a Service direction will become one of strategic directions of growth of business of bank, expect in Touch Bank. It is going to develop it due to "competent partnership".

Advantages of cloud model

What advantages give clouds? ^[1]:

• Deployment speed
• Scaling options on the fly
• Minimization of a command
• Reduction of cost of an input
• Cheap exit-strategy

• Touch Bank IT is placed in IaaS a cloud of the Russian operator Tier3 – 100+ of virtual servers including without limitation the core banking system, accounting, marketing tools, etc.
• Also in a cloud of other provider the test environment - 4 environments which are complete or partial copies productive – 200+ of vServers is placed
• As CRM the solution of Salesforce is used

General architecture of an IT landscape of TouchBank

General options of a landscape of IT – DPC DPC is in Public Cloud IaaSPaaS (/)

• V-servers in production environment: 85/280 CPU, 770 GB, KVM
• Systems integrated by the uniform bus: 30+
• Services on the bus: 200+
• Amount of data: 28.5 TB

• Contact center – in a cloud Orange (PaaS)
• The main CRM – in a cloud of Salesforce (SaaS)

The commercial start of a product was supported by infrastructure monitoring: Zabbix Oracle •, PRTG, EM, Quest

• Amateur Dashboards
• The simplified indicators for business users

Standard problems with performance of banking applications

Standard problems of users and soprovozhdenets:

• Authorization problems in a system
• Problems with delivery of SMS passwords of confirmation of transactions
• Defects in the main banking system
• Decelerations of work of the front and bek
• Errors in interaction of banking systems
• Losses in processes of IBM BPM and the Uniform bus

The tasks facing implementation of a new monitoring system

• Fast isolation of problems
• Minimization of sweep rate of solutions of a problem
• Deep diagnostics of work of service (to the Java code level)
• Increase in the quality level of providing service
• Performance review of the application from the point of view of the user

You watch an implementation project of Dynatrace Application Monitoring here:

Implementation of monitoring of Dynatrace had to solve the list a zadachprezentation ^[2]:

• Performance measurement by the deep analysis of accomplishment of the application: time of execution of specific methods, the arising errors, the analysis and average time of a response of the application server and its components
• Identifications and the analysis of serious architectural defects of service during load tests or from detailed information on runtime, on errors and other metrics, on the basis of real transactions of users
• Localization of problems with detailing to the specific used methods (the transaction accomplishment duration, quantity slow, % of the interrupted transactions, etc. metrics)
• Possibility of conversion of the detected methods from technical requests in business operation, such as "search", "payment", etc.
• Sending notifications on problems and reduction of time of the solution of incidents
• Safe information transfer for debugging to developer partners
• Storage of statistical data of profiling

О TAdviser SummIT

The TAdviser SummIT conference took place in Moscow on November 29, 2017 and attracted more than 400 participants. Principal themes of an action are IT plans of the largest companies and state departments of Russia for 2018, perspectives of development of digital economy, IT products and services. Within a plenary part and five thematic sections more than 60 reports and public discussions were heard. The action took place in 5 Digital October halls.

Шаблон:TAdviser Gallery 2017 2

2016: 120 thousand clients

• The customer base – more than 120,000 clients, 60% actively use services of bank
• Gain of the customer base – for the last three months (November, 2016 – January, 2017) the bank on average attracted about 12,000 clients a month.
• Attraction sources – advertizing promotion and an organic gain, Touch Bank does not use promotion among clients of OTP of Bank in Russia
• The volume of the raised deposits and client funds – more than 4 billion rubles
• Annual rate on a deposit – since January, 2017 a progressive rate in 7%, 7.5% or 8% per annum depending on storage life of means (30, 61 and 90 days).
• The volume of open credit lines – 2.5 billion rubles

Most of clients of Touch Bank (71%) – men aged from 25 up to 45 years, living in Moscow, St. Petersburg and million-plus cities. And though Moscow (+ area) and St. Petersburg (+ area) win first place by the number of clients, the top ten of the cities does not exceed 40% of the general customer base of Touch Bank, the remained 60% fall on towns which residents, in lack of technological solutions of traditional banks, are ready to try digital.

Clients of bank generally use the card for daily purchases and payments: 40% make more than 20 purchases a month, spending at the same time  nearly 33,000 rub. The average bill of POS transaction is about 1,600 rub, at the same time 23% (December, 2016) of all purchases are contactless payments by the card with PayPass technology. A ratio of POS transactions to receiving cash – 49% against 51% that demonstrates that the Russian consumers are quite ready to use cards instead of cash.

Holders of the Touch Bank cards open deposits online – in Internet bank and mobile application. The deposit term is not limited, as well as an opportunity to fill up and display means at any time, charge of percent is performed daily on balance on a deposit. For December, 2016, the average amount of a deposit in Touch Bank was  more than 220,000 rub against  164,000 rub on average in the market.

2015

Loss of 1 billion rub

The loss of Touch Bank which is online the platform of Russian "subsidiary" of OTP at the end of 2015 made 4.84 billion Hungarian forints (1.05 billion rubles). According to the results of the IV quarter 2015 the loss reached 2.06 billion Hungarian forints (478.6 million rubles), having jumped up twice in comparison with result of the III quarter 2015.

The bank announced availability of service to devices with Android OS

Software interface Touch bank, 2015

The Hungarian financial OTP Group started in Russia bank without offices Touch Bank (works according to the license of OTP-bank) in 2015. Initially it was planned as the independent project of digital-bank which purpose — to create a technology platform and a product line for the subsequent implementation in processes of other OTP Group banks.

On September 1, 2015 Touch Bank announced availability to clients of bank of the application for smartphones on the Android platform.

Since August 27, 2015 owners of smartphones under control of mobile operating system Android, clients of Touch Bank, got access to mobile application for management of calculations and purchases.

From the mobile phone transfers from the map on the card, between the accounts, in other banks and budget organizations are available to the user to payment of services of telephony, the Internet, housing and public utilities, penalties, taxes and fees.

On the C of June, 2015 clients of Touch Bank are owners of iPhone, can use mobile application on the IOS platform.

Touch Bank plans development of mobile bank to the level of autonomous bank service when for commission of any transaction or to the client there is enough action with the card only of mobile application, at the same time the Internet bank will become optional.

2014: Investment of $10 million into the IT platform

In 2014 the OTP Group invested more than 10 million euros in Touch Bank. Principal amount fell on the capital investments in development of modern IT solutions and also on investment into the capital for ensuring activity and accomplishment of regulatory requirements for the capital. Total investment is 40 million euros.

Notes