Olga Dergunova, VTB Bank’s deputy president, hails a new era of co-operation in Russia’s banking industry, not just bank-to-bank but bank-to-fintech and, importantly, bank-to-regulator. Joy Macknight reports.

Olga Dergunova

Russian banks, like institutions across the globe, are feeling the heat from growing and changing customer expectations. The pressure is intensified in Russia by the general public’s high adoption of sophisticated and modern technologies. For example, the country is ranked 25th in the world for smartphone penetration, with 54.7% market share, according to Newzoo’s 2017 Global Mobile Market report.

“[Clients] want us to provide services that are 24/7, paperless and smart. And they want us to be very proactive – they don’t want to come to the branch any longer,” says Olga Dergunova, deputy president and chairman of the management board at VTB Bank. She reports that 36% of VTB’s clients are already using Apple Pay, Google Pay or Samsung Pay services.

Modern moves

The country’s banks are responding by modernising and replacing their legacy technology systems and processes. According to Ms Dergunova, who is overseeing the digital transformation of VTB, being a digital-first organisation means three things: minimising paper-based bureaucracy; providing reliable 24/7 services; and developing technology-driven solutions to serve client needs. These solutions must be competitive at a global level due to the numerous international banks operating in Russia.

Before focusing fully on its transformation journey, the bank spent much of 2017 merging VTB24, the group’s retail banking arm, with VTB Bank. The banking group merged up to 20 million clients onto the single balance sheet. “It was a huge project but one that went smoothly,” says Ms Dergunova, who managed the comprehensive integration of the group’s IT platforms. This year the bank is concentrating its resources on delivering greater client satisfaction and improving cost control.

Career history: Olga Dergunova  

  • 2016 VTB Bank, deputy president and chairman of the management board
  • 2012 Russian Federation, deputy minister of economic development
  • 2007 VTB Bank, member of the management board
  • 1994 Microsoft Russia and CIS, president and CEO

To advance its digitalisation agenda, VTB is experimenting with new technologies, which Ms Dergunova believes will bring results in the next two years. “We are investing in and piloting projects with artificial intelligence [AI] and machine learning, as well as distributed ledger technology [DLT] and biometrics,” she says.

Specifically, VTB has deployed AI and machine learning to calculate credit risk; it is rolling out biometric authentication in its mobile application, call centre and retail offices, which provides better service and is a reliable way to verify clients, according to Ms Dergunova, and reports already seeing “impressive” results. The bank is also piloting the use of DLT for letters of warranty and plans to move into production mode by the end of 2018.

VTB is currently developing a new mobile application for its retail clients, which it plans to launch by the beginning of 2019. It is also planning to launch an open application programming interface hub in 2018/19.

Working together

VTB, alongside other Russian banks, is working proactively with the country's regulator, the Central Bank of the Russian Federation, to create a legislative framework for the banking industry as it develops and proves the application of these new technologies. “We are working together to make banking solutions available for the marketplace as a whole,” says Ms Dergunova. She believes that this signals a new era of bank-to-bank, as well as regulator-to-bank, co-operation in Russia.

There is also increased engagement between banks and the fintech ecosystem. For example, Ms Dergunova is VTB’s main liaison point with the Skolkovo Foundation, which is responsible for much of the innovation environment in the country.

VTB reviews fintech start-ups and their ideas on a quarterly basis, with help from the Skolkovo Foundation and other institutions, such as the Russian Venture Company. The bank also attends technology industry events, where it can engage with start-ups on specific themes. “The challenge is not to attract start-ups or review their proposals, but how to integrate these ideas into the development programme of a big organisation,” says Ms Dergunova.

To foster integration, VTB has created cross-functional teams with both business and technology leaders to review fintech offerings. The aim is to develop a concrete roadmap on which products and within what timeframe these solutions could be integrated. “We learned lessons about joint decision making early on. Previously, we were looking for solutions separately from the business leaders. Now we are expecting better integration results due to these cross-functional teams,” she says.

Understanding fintechs

Ms Dergunova does not underestimate the challenges start-ups must overcome when working with an incumbent institution. “A large organisation has its own bureaucracy, which a fintech needs to comply with once the solution goes into production and integration begins,” she says. “Coping with the bureaucracy is quite difficult for young start-ups trying to reach the minimal viable product stage, whereas more mature start-ups have already applied their resources to a certain level of bureaucracy.”

While changing the procurement process to address start-ups’ needs can help address these issues, Ms Dergunova says there are unavoidable legal and regulatory restrictions, especially for a state-owned bank such as VTB. “We face greater transparency and regulatory rigour than colleagues in the pure commercial arena. Therefore, we need to balance between the ease of dealing with us and complying with government requirements. But we are moving as fast as we can.”

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