Banking as an industry is changing, with innovative tech-savvy businesses both entering the market and emerging from what were traditional financial services organisations.
In Europe, the second payments services directive (PSD2) has created a wave of opportunity for banks to offer a range of new products and services – but the rules are only part of a much wider, natural technological transformation for the industry. And customers are aware of the changes that are occurring, heightening expectations and putting pressure on banks to embrace technological advances.
TBI Bank – a major lender in Southeast Europe – isn’t just adapting to changing demands, they’re using technology to establish themselves as one of the leading digital challengers, and last year built a relationship with Provenir – a credit risk analytics and platform provider – to do so. Bobsguide caught up with Petr Baron, CEO of TBIF (TBI Bank), to find out how the bank is driving the change from traditional institution to digital leader and how technology partnerships fit into their strategy.
Tell us about TBI Bank.
TBI Bank is a regional lending champion. Last year we issued about 450,000 loans in the countries in which we operate, and this year we’re likely to cross over the half a million mark. We are an inclusive lender focusing on point of purchase finance and near prime financing products. We also offer small business loans and have deposit products to support our key lending activity.
We operate a phygital model in Bulgaria and Romania – which are our core markets – but we also have activities in Germany and Sweden and expect to be licensed in Poland soon.
We’re now focusing on a digital transformation journey to expand our product portfolio more into everyday banking, so customers will be able to access payments and lending solutions through a mobile first approach.
What does TBI Bank want to be for its customers?
We want to be a solution rather than a problem like people traditionally consider their banks to be. A key competitive advantage for us is providing financing to these customers, traditionally underserved by the banking industry. Our ethos is inclusive lending with the most frictionless experience – TBI Bank offers the right solution at the right moment.
We are part of a service-centric, customer-centric industry, which is going through its biggest transformation in history. Unless a bank is adding value in the chain of services, it becomes a component that can be easily taken out.
We need – and want – to add value. And if we are doing so, either through a better solution or by improving the lives of our customers by pooling their finances, and not just looking at them as static FICO scores, but as individuals, we believe we are creating opportunities.
On PSD2, what opportunities are you seeing?
If you look at our current business model, we are a pure lender. And as an inclusive lender, we’re able to operate in a more near prime segment where many banks don’t feel very comfortable.
But now with customers able to bank in a near-fully mobile environment without having to physically go to a bank branch, we’re able to extend the services that we offer. So, for each customer that has a loan with us, we’re also able to offer a current account and a payment functionality. There’s a new wave of banks and fintech disruptors building a whole new ecosystem of products around current accounts – and there’s huge opportunity there to partner up for the benefit of the customers.
With PSD2 we’re able to aggregate many banking relationships into one channel. That’s the process we’re building – with the technological support of solutions such as Provenir. That will transform us from being a purely loan-centric to a customer-centric business.
Looking at your digital transformation, what work has gone into making TBI less of a traditional bank and into a digital leader?
A lot of work, and a lot is yet to come. Thinking of our partner 11FS’s motto: digital banking is only one percent finished. Similarly, we are at the beginning of the process. Those who have not yet understood that digitalization is a journey are almost too late to the party already.
We’ve created a mind-set of innovation and devoting ourselves to solving customer needs and providing a wider range of opportunities. The banking industry has not really embraced innovation. By looking inwards banks are not utilizing the experiences of more advanced industries that can guide us. We, at TBI Bank, are trying to look outwards which is why we’re working with forward-looking institutions.
It all comes down to technology, following trends, and implementing changes faster than others. It’s about driving substantial technological improvements and standardising processes to cut as much waste as possible while utilizing technology from a data perspective. It’s a long journey, and we are lucky enough to be part of this exciting revolution.
As the technology changes and people change there are a lot of hurdles to get over. What advice would you give organisations who are going through similar transformations?
They have to be very open-minded to new ideas, very familiar with the industry, and prepared to admit that some investments will be futile. Some money will be lost in the process and this is something we bankers really hate, but it’s an inevitable part of the process.
But again, one needs to instil a culture in which they will learn new things and learn from mistakes. Banks have a good culture of protecting themselves, but they are increasingly finding themselves under pressure from very innovative organisations, and so it’s important to breathe in that innovative culture.
We as bankers have a lot of know-how around regulation, risk management and compliance, but we’ve also been held back in terms of the way we view customers. The world is changing, and people are looking at us as service providers and as a service provider you need to be excellent.
Tell us about your relationship with Provenir. What led to the decision to invest in this type of technology? And what value does it bring to your clients?
We’re very happy with Provenir – for sure we made the right choice when we chose them.
We were looking for a solution that is scalable across markets, that travels well, does not need much IT involvement or hardcoding, and is easily integrable. Provenir’s solution was probably our best and easiest IT integration: within a few months we were issuing loans. Of course, we’re on a constant path of rebuilding, redesigning, and improving our architecture, but it was a quick start.
Provenir has proven to be extremely flexible in terms of deployment and today, we are already doing about 140,000 applications per month. So Provenir has been very easy to scale, we can deploy scorecards much faster, and in a much more flexible way. We are almost one hundred percent automated already. It's about continuous improvement, so we've been able to launch risk-based pricing in Romania, and we are going to be launching dynamic application, too, and all that is supported by Provenir.