The Future of Banks is Borderless: Petr Baron, CEO of TBIF (TBI Bank), talks to Bulgaria ON AIR
20.09.2018 Share +
Talking about the future is not easy, especially when it comes to finance – we like to rely on data because of the perceived certainty it gives us. Combining data and expertise makes predictions even more likely to happen. Featured on the September cover of Bulgaria on Air’s magazine, Petr Baron, CEO of TBIF (TBI Bank), uses both. He talks about the Bank’s evolution as the next gen digital lender enabled by the utilisation of the latest tech solutions for the banking sector. “TBI Bank’s vision for the future is to remain ever more focused on customers’ eviolving daily needs, which serve as the basis for the financial universe we live in”, he says. It looks like a long read, but you will take it in one breath :)
Mr. Baron, two years have passed since TBI Bank and TBIF were acquired by 4finance, one of Europe's largest companies for online consumer lending. At the time, it looked like an unlikely match. What were the advantages for your parent company in owning a bank, and what advantages does a bank get from the huge digital experience of 4finance?
Actually, it is a match made in heaven. There was an array of synergies that became possible when we started cooperating. TBI Bank was already successful on both the Bulgarian and Romanian markets. At the time we realised 4finance’s prolific digital expertise could substantially enrich TBI Bank’s offline business model, and vice versa. As a result, we added a lot of digital channels and data intelligence capabilities which TBI Bank was lacking. On another note, most of 4finance's business is concentrated in pure online loan origination, while TBI Bank also does in-store financing, finances small and medium sized businesses, gathers deposits, offers payments installments. We are digitalising all these business lines to offer a much wider spectrum of products as well as selling products which 4finance never had. Hence why this acquisition not only significantly strengthens its positions in Bulgaria and Romania, but also increases its product offering capabilities.
Those are the synergies in terms of product and channels mix. 4finance is a global company – can TBI Bank benefit from that?
Yes, we are unlocking operations across different EU markets – considering our belief that the future of finance is not only in specialised lending, but also in services that customers will be looking for across other European markets. We are developing a data- and AI-driven platform which will offer various other services – like performance finance management, insurance, loyalty, remittances and many other that can actually go beyond the realm of financial services and cover the rest of the universe of customer needs. But no matter what, current account comes central. The universe of finance revolves around customers’ daily needs, which equals to more and more payments, resulting in the increased need for accounts. Again, this was something that 4finance could not have as a pure lender, but TBI Bank can. Our strategic view – and we are talking five, seven years down the line – is for TBI Bank and its current account to be at the centre of customers’ universe, while other products can be provided either by us or by other best in class third party providers.
Many analysts say that banks nowadays are under threat by tech companies and startups that are going for their most lucrative business lines – from international money transfers to peer-to-peer lending. What should banks do to counter that and survive in a fully digital world?
I agree with that, to a certain extent. I believe in the end the whole system will be very much driven by customer needs. Even nowadays you can observe the speed of customer migration from branches to digital channels. Not yet so strong in Bulgaria or Romania, but across Northern Europe, Asia and even Africa. At the end of the day, the customer is king, and he seeks convenience. So I do believe that banks have quite a difficult game to play, namely because they are competing with small businesses that are specialised in the provision of one particular product. And they are specialised incredibly well. For a bank – being the financial equivalent of a supermarket – it is difficult to employ a one-size-fits-all approach and be great at everything. Of course, in many regions banks have been protected by regulation. But in terms if agility they are clearly losing out. They have been in a sort of a bubble for the last fifty years: Get bigger! More products! More profit! At some point, they have simply become inefficient. Nevertheless, they still have advantages – a lot of capital, regulatory support, a lot of customers. Therefore, we believe the ones who are quick enough to adapt to the complexities of the future will migrate to an ecosystem of a platform, where banks will offer their products, bearing in mind what is in customers’ best interest. The ones that fail to understand that will become almost utility providers: Ahead of them there will be Amazon, Google, etc., and they will stand in the corner receiving little commission, only making sure the system is up and running.
There are many countries which seem ever closer to the fully cashless society - Sweden and China, for example. Is TBI Bank interested in mobile payments?
Our role today is in lending – that is what we do. But as we build a future-oriented platform, we must think of that too. Our customers, of course, require payments. Whether we will do that ourselves or with partners, remains to be seen. You take a loan once a year, or once in three years. But you make payments daily. So for a bank to remain relevant, it has to offer payments. I mentioned that the current account will remain the nexus of customers’ financial universe. And what is a current account? It is a tool for making payments.
Speaking of accounts, recently there was an interesting survey in the U.S. amongst the so-called millennials. About a third of the participants in the survey said they believed bank accounts would be obsolete as soon as the end of this decade. And 70% of the respondents claimed they preferred going to the dentist than going to the bank...
That is true - most of the millennials do not visit the bank anymore. They do banking mostly online or via mobile. However, to do that, you still need an account, there is no other way. You might call it a bank account, a Google account or something else. But you are still going to need such a 'pot', because your money needs to be stored somewhere. To say there will be no accounts is idealistic. They might differ in nature and could be based on blockchain for instance. In China for example people do banking by using chat applications. In a sense, customers perceive Alipay or WeChat as their financial service provider, not the bank. They think that a messenger service is their account, but it is not. To make all that happen, at the end of the line there is still a bank account.
Let's go back to your business in Bulgaria. The past 2017 was a really good year for TBI Bank, what are your goals for 2018?
The past year was indeed very strong, marked by records on many fronts for us. TBI Bank has for a third year been rated most efficient and profitable in Bulgaria (K10, 2018). Additionally, TBI was also ranked amongst the highest rated banks in the Asset Quality Review conducted by the Bulgarian National Bank. That was not surprising for us – even before the acquisition, the bank was in very good shape, well capitalised. This year we are going big on transformation, on launching new products across both markets – Bulgarian and Romanian. In July we also launched online deposits in Germany. We have big plans based on our belief that the future of customers’ financial universe is without limits. Of course, our home is in Bulgaria, and we have an excellent, innovative team here. Sofia is becoming a fintech hub and we are excited to be part of that.
Finding talent in Bulgaria can be tricky after years of massive emigration. How do you deal with that?
It is difficult. But we are still fans of building a local skill set. We do invite people from abroad as well. To attract talent, you need to be proud of what you do and showcase why. We participate in events, we speak at conferences, we go there and try to find the right people who want to be part of the TBI family. Actually, our participation in such events has been rewarded by remarkable success: Nearly 20 per cent of our colleagues at our Headquarters in Sofia have studied abroad and have then come back to live and work in Bulgaria.
There is another Bulgarian paradox. You already mentioned that Sofia is now one of the leading fintech hubs in Europe. Yet, Bulgaria has the lowest share of online banking users in the EU, at just 5 per cent. What is the explanation of this contradiction? Is it a contradiction actually?
It is a contradiction, to an extent. In reality, markets that are heavily offline tend to make big leaps and go straight to mobile. I think Bulgaria will go in that direction as well and will simply skip certain stages of the digital evolution. As for the importance of the fintech market here, Bulgaria is one of the smallest European markets. The result is that most fintechs have to operate abroad. Their advantage is that they are operating business-to-business, not business-to-consumer, meaning they can use local top talent to develop products in Bulgaria and then sell them worldwide.
Nevertheless, I think what is happening in Sofia is great. To have a truly creative environment takes time, because there are many factors involved: Talent, investments, government, regulators... The entire ecosystem has to move in one direction simultaneously. And the fact that we already have it moving in that direction here puts us ahead of many others.
You have already mentioned that you launched online deposits in Germany. What are your expectations there and where will this expansion lead you afterwards?
Our priority markets are still Bulgaria and Romania. As a group we are constantly on the look-out for opportunities, especially in view of the fact that 4finance operates across 17 countries. We have talks with other partners that we are collaborating with regarding research and development opportunities in other European markets, I cannot mention where at this stage as I prefer to talk about solid results. Presently we are building up our home base by offering the right products. We test them here, domestically first, get them going, then get to scale. Once that happens, we will be ready to go elsewhere too – as a platform business. We are very careful, because we are bankers after all. Don't forget that (laughs).
TBI Bank is creating a platform that grants consumers access to credit entirely online and through a mobile app. Does that bring a higher risk for you? There are many fintech startups which are amused that banks still use face-to-face interviews to rate loan seekers’ credibility. What is the role of Big Data in all that?
It depends on what customer segment you are looking at, on what kind of relationship with the customer you have, on what data you are able to collect, etc. As per this, we benefit substantially from 4finance’s expertise. It is a risky segment – unless you know how to deal with it. A lot of raw tools need to be implemented and a lot of data points need to be covered in order to make an intelligent decision.
Are you planning other innovative services for the Bulgarian market?
Yes, our goal is to offer many innovative services over time. We will launch online POS business in Bulgaria very soon. We already did that in Romania last year and it has been very successful. In Romania we are also launching a Merchant Cash Advance product which, again, nobody has offered across these markets. And we are bringing online credits for small businesses to Bulgaria as well. All these are plans for the next few months. Next year we are planning much more, but let’s do it one step at a time. Innovation is moving faster from year to year. And unless you build a culture of innovation in your company – sometimes that can be painful, I admit – you cannot keep up. Eastern European markets are tricky in this sense. But there are some that are developing phenomenally fast. I live in the United Kingdom and can honestly say that when it comes to financial innovation, it is behind Russia for example. And Russia is way behind China. The U.S. is lagging behind Europe, and this is why all these challenger banks – Monzo, N26, Revolut - are now going to the U.S. So different markets are moving at different speed. But eventually they will all finish at the point where the customer is free from the traditional banking mentality. A decade ago, there was a bank advertisement in the UK pointing that British people are more likely to go to prison than to change their bank. And British banks were very smart in catching the customer at a young age – as young as 16. When I was a student there, I was offered 200 pounds cash just to open an account. Because they knew that if they get me, it is for life and they will make much more out of me in the long run. Now this ownership of the customer by the bank is starting to erode and the customer is finally free. Our role is to ensure that TBI Bank fits into this new culture of free and borderless thinking.
You have a rich background running companies in environments as diverse as UK, Russia, Ukraine, Macedonia. Where does Bulgaria rank amongst those? What are your personal connections with the country?
Well, my name is very well connected to Bulgaria as I found out when I first came here [Petar Beron was a very important educator during the Bulgarian Renaissance, editor's note]. Previously I have worked for TBIF in Ukraine. Ivo Georgiev, my boss at the time, was Bulgarian and he taught me probably most of what I know now about retail banking, I have huge respect for him. I have another connection too – my grandfather was stationed in Bulgaria during World War II. And I have a lot of friends here. On the professional side, I really enjoy the opportunities the market gives us – to grow as a company together with our customers and improve further. I believe what we are doing is for a good cause – not only for the organisation but the industry also. At the end of the day, you have to enjoy what you do. Only then will you feel much better about yourself, because you will love going to work, you will be looking forward to the new day when you wake up. That is the magic of transformational projects where you can add value and where you can have a committed team. We, at TBI Bank, have that mindset, that drive. So it is a true pleasure being here.