About how the RA banking system differs from the Russian banking system, that technologies are the driving force of the RA banking system, and what plans Ameriabank has regarding market consolidation, Ameriabank's Assets, Liabilities and Capital manager told in an interview to "Банковское обозрение" magazine. Hovhannes Khachatryan, head of the management department.
— How does the RA banking system differ from the Russian banking system?
— The first difference is that there are no state banks in the RA banking system, it is completely private. Because of this, there is fierce competition. There are international banks on the market ("HBS", "VTB", "Credit Agricole", etc.), with which local banks compete effectively. Among them is Ameriabank, which is a private bank and has been leading the market for several years.
The second difference is that the regulation is much stricter in Armenia, due to which there have been no cases of bank default in the last 16 years. The late 1990s and early 2000s can be characterized as a period of "purging", as a result of which regulation became even more stringent.
Our market is more liberal than the Russian one, for example, there is no currency control. The lack of bank financing of large government infrastructure projects can be seen as both a positive and a negative aspect. In other words, in this sense, banks are more protected from risks.
From the point of view of technological development, the leaders of the Russian banking system are more developed. We have a lot to learn from them in this regard. This is perhaps explained by the more conservative approach of the country's leadership to various innovations, as well as, in individual cases, the heads of various banks.
— Have special relations been formed between the RA and RF banking systems?
— We have very good relations with our partners in Russian banks. Despite the fact that the economies of our countries are inter-integrated, I would not say that the RA and RF banking systems are in close interaction. VTB Bank's presence in the Armenian market is small, it mainly includes the retail sector.
When designing the data management center, we asked for backup space with a growth outlook of another 3-4 years.
— The next question concerns technologies. This year Softline company built a data processing center for Ameriabank. What kind of banking services is it for?
— Today, the banking system is undergoing radical changes. It is already clear that banks will not be limited to selling only financial services. For example, the Russian Sberbank has already appeared on the market as a platform through which the client can use a huge number of services on a one-stop basis. The task of the bank is to offer the client such services that the latter will most likely buy. Business analytics, artificial intelligence and other related technologies and approaches are used for this purpose. Banks have accumulated huge amounts of data. We see and understand the need to process that data quickly and sophisticatedly as we realize what the future holds. Of course, first of all, this refers to the most advanced solutions in the field of retail products, online lending, mobile banking and other remote channels. At this point, it is important to be able to work with existing data and enrich it using information from different sources. All this, in turn, creates new requirements for working with data, for applications designed to process them, as well as for the productivity of computing and network equipment.
Big data can also be used for marketing decisions and setting credit limits. Scorecards can also be improved with these technologies. The infrastructure created as a result of the opening of the new data processing center will allow all of this to happen. When commissioning this project, we asked the consultant to provide spare space and capacity for installed equipment, center engineering, and network bandwidth with a growth outlook of another 3-4 years.
— Is loan decision-making now automated?
- Partially. The decision-making process for some products is fully automated. We want to make more decisions in an automated way and apply this method not only to individuals, but to SMEs. The experience of our partners (including Russian partners) shows that perfect scoring algorithms not only exclude the human factor (this is obvious within the automation process), but also reduce the bank's risks.
— Can information technology be considered an important factor of competition?
— They are still not considered an important element of competition in our market. Along with all this, customers dictate their terms to us based on their requirements and daily habits. If in the past it was necessary to make efforts to get them to start using certain technologies, today they are already demanding innovations, because the customer base is younger and more technologically literate. All these mobile apps, online banking services, personal transfers are a must-have part of banking services for customers, especially the growing generation. Moreover, Armenian banks still mainly work with old service mechanisms. Some banks are not in a hurry to acquire new technologies. This applies especially to small banks, for which making such a decision is very difficult and expensive. Such expenses are not always justified. However, the future is in any case new technologies, and one fine day when they will no longer be indispensable, the lagging banks will not be able to acquire and implement the entire range of the latest technologies in one day. The information technologies of the banking sector must be constantly improved and together with the customers, reach a level that can be registered in 10 years.
Regarding the use of remote services by legal entities, there are still no specialized appropriate decisions in Armenia.
— The European Bank for Reconstruction and Development (EBRD) has a share in the capital of Ameriabank. Is the impact of the EBRD felt in any way?
— In addition to the EBRD, the Asian Development Bank (ADB) also has a stake in the capital of our Bank since February 2018. These organizations are of great importance for local (for example, Armenian) financial markets, because they set high standards of activity, which need to be met not only to get credit, but in the best cases to have a share in the statutory capital. The high standards set relate to risk management, management and financial reporting, and corporate and social responsibility. Even if they don't directly teach us how to meet those standards, we simply constantly improve ourselves to meet their demands. Since our Bank plans to make a primary public placement in the near future and go to international platforms, this is the level of transparency and regulation that we are used to working with the mentioned organizations. Sometimes they organize information exchange with other banks (EBRD partners). We often have guests from Russian, Central Asian and other banks, and our specialists, in turn, make return visits to the mentioned financial organizations. Everything is interesting to us, we are constantly learning, and EBRD and ADB allow us to exchange experience.
— Does Ameriabank plan to establish a presence in other countries?
— We have never hidden our ambitions to enter the Russian and Georgian markets. There were real attempts, which, unfortunately or fortunately, were not successful, and we concentrated our efforts in Armenia. It gave its result. we have been leading the corporate sector for years with a one-third market share. Now we are starting to take leading positions in the SME and retail lending sectors as well. It should be noted that the opportunities of the Armenian market are quite limited. On the other hand, the economy of our country is relatively stable and more predictable in the medium and long term. However, nothing is ruled out. After the consolidation process in the RA banking sector is completed, and it ends in our favor, a redistribution of resources may take place, and the process of entering foreign markets will begin. We may come back to this question soon.
— Banks in Russia often enter other markets, including non-bank ones. Is Ameriabank taking any steps in this direction?
— We are a financial institution, our capabilities and strengths are concentrated in the financial sector. At the moment, we have no intention of trying our hand at other fields. However, theoretically, I do not rule out attempts to enter any other non-banking market. However, in any case, we will not direct our resources to an area that we cannot cope with. There are types of cooperation between financial and some non-financial organizations that are considered as synergies (for example, in the field of telecommunications). In this case, the merger is not necessary, there can be a close cooperation. But now we are still fighting for the title of absolute leader in the financial sector.
— What is the percentage of use of remote services at the moment? Which service option is preferred: visits to the bank or online service?
— One third of the bank's customers actively use our mobile application or internet banking, one part (25%) quite actively for the purpose of making transactions, the other part simply to monitor accounts and receive information. However, this indicator is growing very fast. Regarding the use of remote services by legal entities, there are still no specialized appropriate decisions in Armenia. For large companies, this issue is not critical, but there is a demand for remote services among a significant number of small and medium-sized enterprises, and we should be able to meet this demand in a short time.
Source: "Банковское обозрение"