How does a medium-sized commercial bank make headway in digital transformation, improve digital sales capabilities and roll out new products in cooperation with fintechs? We sat down with Márk Hetényi, Deputy CEO for Digital, Retail and Strategy at MKB Bank in Hungary, to get his lowdown on present and future developments, changing customer expectations and looming competitive threats from tech giants.

Mark Hetenyi, MKB Bank
Mark Hetenyi, MKB Bank

Digital transformation at MKB Bank is reaching a major milestone with the replacement of legacy systems. Could you tell us more about this? How will customers benefit from the change?

That’s right, we’re nearing the completion of replacing several systems and will be going live with the new ones in early July. We are replacing our core system and another ten structures, including those for credit processes and the central customer database, which will all be integrated into the new core system. This will help us get a 360-degree view of customers more easily, from a single system.

As a result, customers will see faster transactions, for example, in processing credit or opening accounts. Banking has been something of a black box process for customers, but this change will bring more transparency and efficiency, and services will become more comfortable. We’ll offer tablets at our branches for signing forms for more procedures than other banks, making most of our in-branch processes completely paperless.

Upgrading IT infrastructure will also help us with product development, as we’ll be able to bring new services to market more quickly, not to mention our planned accession to the instant payment scheme. And we’ll be able to develop new products and services with fintechs and other firms more smoothly, partially using APIs. This transformation will open up new possibilities for customers in the next six to twelve months, when we’ll start launching new solutions and services with fintech partners on a regular basis.

Of course, banks may follow different strategies for digital transformation. There are banks, for example, which opt for some niche developments and then try to convince customers that they’ve become digital. Other players fully upgrade or transform their front-end systems. But this can only be a temporary solution, as future developments will sooner or later come up against some barrier.

By modifying our IT infrastructure and core system, we’re trying to go all the way. This will hopefully give us an edge in digital transformation. We’d weighed all our options and went for the big bang method of introducing most elements rather quickly, at the same time. Introducing elements step by step or in phases may require more time, and we didn’t want to burden our bank with extended projects, taking many years – especially as digitalization is evolving at such a fast pace.

What are the next steps in MKB Bank’s digital transformation and how are you planning to develop your digital sales capabilities? What are your overall targets in digital banking?

We actually managed to advance our capabilities while we were preparing for the ongoing system replacement. The bank’s already launched a mobile application, online account opening and a payments application. After replacing our core system, we’d like to focus on developing digital customer journeys. We have a strategic target to make all possible products digitally available to customers, and turn at least half of our clients and product use digital by 2020-21. We still have room for development at the moment, but our goal is to significantly increase digital penetration in payment, credit, investment, and even insurance products and transactions.

Eventually, we’d also like to assist customers in achieving their financial goals by digitally assessing their transactions, savings or life events with their consent, of course. Using proper data analysis and setting up fintech partnerships can help a great deal with this. In general, the transactional approach is increasingly shifting to a digital ecosystem approach, where banks provide valuable advice and support to customers to reach their goals – should it be buying a house or saving up for a holiday – perhaps by teaming up with a fintech or a third party.

All in all, managing transactional and other types of customer data responsibly could lead us to come up with new types of services. Customers are becoming more and more conscious about how, where and why they share their data, but their trust in banks not misusing their data is still largely intact. Building on this trust, we can provide additional value to our customers in exchange for them sharing more of their data. We have developments in the pipeline that are aimed at delivering additional value, including a joint project with W.UP using the Sales.UP solution to generate in-depth data-driven customer insights.



Responding to changing customer expectations can be a challenge for many incumbent banks. What shifts do you experience in customer demand when it comes to banking products?    

Customers now expect to have on-demand access to credit. Take consumer loans, for example. They would like their bank to promptly satisfy their demand without them having to go to a branch. That’s why we’re seeing a strong digital development in the market of unsecured loans. Investment services is another important area. Customers now expect, for example, to have a digital dashboard to visualize their current portfolio and transactions. And some investment advisory services may now be replaced by robo-advisors. The expectations of corporate customers are also changing, businesses would like to integrate invoicing and bookkeeping systems, and demand is increasing for faster and more transparent digital experiences in credit application processes.

More and more banks team up with fintechs, which are no longer seen as rivals to financial institutions, while tech giants, such as Amazon or Google, are expected to become dangerous competitors in banking. How do you see the future role of fintechs and what to make of the threat from big techs?

Banks and fintechs are destined to work together. MKB Bank, for example, currently co-operates with 14 fintech companies through its incubation program. Based on our experiences, investors financing fintech ideas don’t want to fund activities that banks have already spent huge amounts on, like customer acquisition, operations, marketing and branding. This also pushes fintechs to seek partnerships with banks. And it’s more and more difficult for fintech start-ups to stand out from the crowd, catch customers’ attention and develop their ideas on their own.

As for big tech firms, I can see two issues at the moment. If we look at Amazon, it can build business strategies on its integrated supply chain without bumping into any sensitive data use issues, as data is available from different pockets or players for certain products and services. So, yes, Amazon could be seen as a threat, even in banking. But other tech firms, like Facebook and Google, build their business model on centralizing user information. This will become a problem sooner or later, partly because customers are getting more conscious of their data. Several tech companies may have to rework their data policies and business models in the near future. The questions is: is it OK for a single big company to collect and centralize data from a huge number of people or should it be broken up?

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