Kapital Bank talks innovations



One of the leading banks in Azerbaijan, Kapital Bank plans to reach a completely new qualitative level in relations with its customers. In this transformation, the bank chose the IBM iX, the design and consulting division of IBM, as a partner.

Nahid Zeynalov, deputy chairman of the Board, chief information officer at Kapital Bank, Evgeny Sokolov, leader of IBM iX Practice in Central and Eastern Europe, as well as Ivan Losik, program manager and IBM iX customer experience and design practice leader in the same region, told in what this partnership is expressed and what they hope it will lead to.

- What are Kapital Bank and IBM iX working together on?

- Nahid Zeynalov - Kapital Bank is trying to change. In accordance with the strategic plan adopted in the beginning of the year, the ultimate goal is to become more flexible, fast, technological and multi-channel.
For this, the IBM iX consulting division was chosen as a partner of the bank. The project is divided into two parts. The first part included monitoring, auditing and analyzing the infrastructure and architecture available in the bank. It was necessary to make sure so that our system would work efficiently 24/7 so that it wouldn’t collapse or break. That is, it was necessary to prepare the base for future transformation.
The second part included creation of an omnichannel (integration of separate communication channels into a single system) front-end system, a platform that we are now developing and implementing together. We started this work in March. First of all, this will give the bank the opportunity to quickly develop and bring any new products to the market.
Evgeny Sokolov - First of all, this includes helping the bank to change approach to work, switching to the client-oriented approach, on which the created platform is based. At the same time, firstly, the time of launching any new product on the market is reduced by half, be it is credit, card product, etc. Secondly, it allows packing those products that aren’t yet available on the market, for example, a combination of a banking product with retail or insurance. At the same time, the space for this is practically unlimited, except perhaps by imagination.
The platform allows building such products very quickly, and the time for their development is reduced by 75 percent, the time of launching on the market is reduced from months to weeks. We set the task of switching to a 24-hour cycle - that is, in a day, a finished product, for example, a new mobile application, will already be at the disposal of the bank. This is quite real if you set such a task from the very beginning and approach it in stages. Of course, the culture inside the company, its technological equipment and resources are important.
Ivan Losik - We work as the customer needs it, we build the functionality that the customer would like to have. Then the customer is given a prototype, which is tested in beta version, which gives an idea of the future product, how it works in real life.
This approach is much more effective than when the product is developed and six months later, after its launch on the market, it turns out to be unnecessary.
Evgeny Sokolov - In order to effectively use the capabilities of the platform, first of all, we need the appropriate service culture and customer’s understanding of his or her client. This approach makes it possible to constantly rethink the idea, listen and hear the consumer and the market. This is a system-forming approach, because as soon as a bank or another customer begins to hear their client, all the rest is a matter of technology.
In order for the platform to work, it’s not necessary to sit in the office and invent a product, assuming that the bank client may like it, but proceed from the needs of people. They may not know what a platform, functionality and digital transformation are, but they know exactly what they need in their daily lives. Kapital Bank began to restructure its work precisely according to this principle.

- How does this happen? Are focus groups forming?

- Evgeny Sokolov - Yes, it looks like a focus group, but with some difference - we don’t compile any questionnaires, but we give people the opportunity to speak out, helping by questions. We need to find out what unresolved issues people have and what the bank can do to resolve them. As a result, a set of ideas is formed, some of which can be taken into development.
If the prototype is perceived positively, the development of the product begins, which is then tested again, but by a wider audience, then, if necessary, something changes and is adjusted. Each such cycle takes 3-4 weeks. But if it turns out that this development is unsuccessful and that it won’t be in demand in the market – that’s not a big problem.
Nahid Zeynalov - Something like a new banking culture is being created - a two-way road. It is possible to be a high-tech bank, but at the same time to work in vain, because the client isn’t able to perceive what this bank can offer.
Interactive communication with customers makes it possible to offer customers what they expect, and not something that the bank considers necessary. We can offer solutions that are very cool from a technical point of view, but at the same time, a pensioner, who wants only to facilitate the payment of utility bills, doesn’t get what he or she wants.

- Do you work with pensioners, listen to them too?

- Nahid Zeynalov - Of course, Kapital Bank is one of the biggest banks in terms of salary and pension products in the country, therefore the bank also constantly focuses on this category of people. For example, pensioners prefer to immediately withdraw money and then go shopping at a store near an ATM. To change this approach, a different approach can be stimulated. If a client withdraws cash, then a client receives only money. If a client pays for purchases by a card, then a client receives some additional bonuses, a discount and so on.

What about the costs? It seems that you are going through trial and error? But is not it cost-based?

- Nahid Zeynalov – Once the bank also had the expenses for technical equipment, we just began to spend this money differently, but on the whole the budget did not grow much.
Ivan Losik - We see this as a more economical approach. For example, one spent, conditionally, 1,000 manat to put up a product for sale, brought it to the market, but customers say that this is not what they wanted. And here one spends 20 manat every two weeks until understands that this is not a desirable thing. So compare - six months and 1,000 manat or 20 manat and two weeks. The platform gives these possibilities - to rethink the idea while listening to the consumer.
Yevgeny Sokolov - I will add that the prevailing opinion about the transition to the digital technologies as a super-expensive process is fully wrong. There are no big investments because everything is done in stages. Everything starts from small steps, from a change in approach to the work, from the acquisition of new skills, including the ability to listen and hear the client. Money is spent more efficiently and in small volumes. The return is noticeable from the first steps.
Nahid Zeynalov - I will cite an example of the inefficiency of past decisions. The bank caught a trend in the market and considered that it is necessary to be prepared for it. What is being done? The meetings are held at various levels, at which, in the end, a decision is made to purchase hardware or software. The market situation may change till this complex and long process is underway. Huge money was wasted. Now we have a solution that will allow being more flexible and avoiding great losses.
Yevgeny Sokolov – I can continue to compare. Besides the pre-planned events, there are also such situations in the bank’s activity when it is necessary to make decisions quickly. For example, in case of any major sports event, the advantageous package offers may be made for the organizers of this event in a very short time. If the decision is made traditionally, the moment is likely to be missed. But in case of a new platform, the issue is resolved quickly and efficiently. In general, the ability to instantly respond to the market and quickly make the decisions is a huge source of income.

When do you plan to demonstrate the first results of this work?

- Nahid Zeynalov - We intend to launch a product entitled "Credit Conveyor" from October to November 2019. This will be our first new product as part of a transformation project. A client of the bank with an identity card comes to get a loan and no other documents are required. Nobody asks a client any questions. The system, having considered all data - salary, credit history, etc., determines which loan and under which conditions the bank can issue. If the client is pleased with the conditions, a loan is issued within 10-15 minutes.
Yevgeny Sokolov - We brought the duration of the decision-making process among a number of our customers to a few seconds. A client, applying with a request to the bank on the website or through a mobile application, waits for a few seconds while the system processes the client’s request. In case of a positive decision, the client can only confirm the transfer of funds to his/her account.
We are also working on this issue with Kapital Bank. We are creating a fully automated process to provide the consumer with the most favorable offers. Our task is to help to correctly recognize and categorize the consumer - to determine the level of risk and other necessary criteria by which decisions are made.
Nahid Zeynalov - When we talk about omni-channel, this implies that there is no need for the client to come to the bank. One can send a request through a mobile application and then one can get not only a salary, but also a loan at the ATM. That is, the process can be launched in one of any proposed channels and can be terminated in any other channel.
Yevgeny Sokolov - The omni-channel advantage is that if the connection is interrupted in any channel, the bank does not lose all this data and there is no need to launch the process from the very beginning. If the call to the call center is interrupted or the mobile application crashes, the bank will be able to "find" the client and help bring the request for getting a loan, card or any other product till the end.

- What will happen after one finishes work on creating an omni-channel system?

- Nahid Zeynalov - The purpose of collaboration with IBM iX not only is to create an omni-channel system. Kapital Bank is developing a new culture of the project development process, approaches to solving any issues related to banking. Ultimately, we strive to rely only on ourselves.
Yevgeny Sokolov - Absolutely right. We help the customer to change and sincerely rejoice when he can continue to act independently. Because then you can discuss new areas of cooperation.
Nahid Zeynalov - I can say for sure that the cooperation will not end there. Our plans are to build a separate independent unit. It will be a digital laboratory, an IT factory, call it what you like, where all the accumulated experience of collaboration will be applied and developed. It will be located in its own building, where the atmosphere and principles of the approach to work will be different from traditional ones. We decided that combining two business cultures - traditional and new, which arose in the process of working together with our partner, will be quite difficult.

- That is, they do not get along together?

- Nahid Zeynalov - This is not the case. We intend to introduce new work and management practices throughout the bank. But this process is phased and evolutionary. The transformation will take place gradually, so that the introduction of innovations does not become a shock and stress for people, and so that they can accept them and easily adapt to them.
Ivan Losik - It means that banks want to change and learn how to respond quickly to the market. The question is who will be able to do this among the first. The creation of such an independent laboratory will make it possible to carry out these changes and clearly demonstrate that the bank is in the trend of such changes.
Yevgeny Sokolov - In fact, the most important issue remains a change in people's thinking, readiness for new approaches. It is not about purely external visual changes, customs, etc. And here we need a phased approach. People need to see how it works and realize the results, and not just hold a declaration of plans in their hands. The readiness of company management to change is very important here. Quite often, we are faced with the fact that, having adopted the update program, the leadership is “delayed” in the old paradigm.
In the situation with Kapital Bank, it is gratifying to see the management team understanding what the planned changes can give for the development of the bank. Another important point in the phased development is the right to make mistakes. This encourages people to experiment, search for new solutions, without fear of dire consequences in case of failure, since we are talking about a phased movement forward.
Ivan Losik - Analysts and developers, the people who are responsible for the products, want to communicate with customers differently, work differently. The most important thing is to do everything together. The "national team" of Kapital Bank and IBM iX not only works together, but also has a rest together - plays football, tennis. This creates a huge effect - a single team operates, united by common interests, and everyone is responsible for the final result.
Nahid Zeynalov - Previously, I would give instructions to subordinates when they approached me. Now, I visit our team more often, I watch the discussions, and I participate if they give me the opportunity.
Yevgeny Sokolov - Actually, the novelty we are talking about does not require guidance. The team has an understanding of the problem, seeks solutions and corrects miscalculations. At some point, it becomes clear that people who directly develop products and are in contact with customers are well aware of what they need. And the task of the leader is to create comfortable working conditions and direct it in the right direction. And this new role is much more complicated, it makes the manager go beyond the comfort of the usual business.

- Tell us about your Kapital – lab...

- Nahid Zeynalov - A team has already formed that is working on writing an omnichannel platform. This is a group of specialists - developers, designers and analysts who work together and have developed as a team.
From the outside it may seem that there is some kind of randomness. In particular, no one defined the tight time frame of the working day, there is no dress code, etc. But inside the team, their own rules have already been formed. For example, there is an understanding that you need to come to work at half-past nine, otherwise the whole chain will stand idle if someone does not do their work on time. Sometimes people can work late, because you may need to finish at certain time.
Ivan Losik - Two months ago, the team’s effectiveness was two times less - there was a period of adaptation. But already in the third month, when the team was formed, a synergistic effect began. Now, after 5 months, 9 developers are doing more than a traditional team of 20 specialists. The team environment, responsibility and mutual assistance - all this positively affects the result.

- How is the search for personnel for such a rather unusual team?

- Nahid Zeynalov - We already have experience in attracting capable undergraduate students. Since 2018, we have been attracting students through an internship program and 12 of them have become employees of the bank. The plans include the creation of an academy for training specialists for the banking sector. This academy will be part of the IT factory, where, together with IBM iX, we will train the young ones, not only specialists, with all the necessary skills and knowledge, like Agile, Scrum, Design Thinking, etc. All this, from the beginning of our career will help us to instill a new culture of doing business, so that in the future we will already select the very best among students.
The project that we are doing now is just the beginning of the story of the great transformation of Kapital Bank, the results of which you can see in the near future!