TECHNOLOGY HAS NO CHANCE AT INFLEXIBLE BANKS. A NEXTERNAL REVOLUTION IS ON ITS WAY
After years in the top echelons of international banking, Karel Soukeník had
had enough of the corporate environment and lengthy decision-making
processes. He believes that the latter prevent the introduction of modern
financial technologies to the extent possible in terms of quality. But at
CreativeDock he found the freedom to bring the most effective financial tools
YOU HELD HIGH-RANKING POSITIONS AT RAIFFEISENBANK AND SBERBANKA, WHERE YOU WORKED IN FINANCIAL TECHNOLOGIES, KNOWN AS FINTECH. HOW DID YOU END UP IN THIS SECTOR?
I have a typical banking career history. After an initially working as a consultant, I
started at Citibank and then switched to Raiffeisenbank. After about a year, I became
the chief finance officer there. We were working on big IT projects that ultimately
didn’t work out, but they taught me a great deal about life. I transferred to Sberbanka
and took up the combined position of finance and operations director, so I was also
responsible for IT. And I believe that this is the most interesting area of banking,
which is changing the most. But this isn’t easy at all and the banks are fighting
against it a lot.
Two factors complicate the situation. Historically, banks built up their IT systems 10
to 15 years ago and are unable to replace them today. They invested crazy amounts.
Writing off two billion crowns now and trying “again and doing it better” isn’t easy.
What’s more, regulators are imposing more and more rules on the financial sector.
Today, most of the budget goes on regulatory IT. At the bank, you’re spending a lot
of time dealing with regulation. The rest of the time you’re trying to keep the engine
ticking over. So that makes doing something interesting in such an environment very
DOES THIS MEAN THAT YOU THINK IT WOULD BE BETTER FOR BANKS TO GET RID OF THEIR EXISTING IT SYSTEMS AND START AFRESH?
Yes. At first, banks had first-generation IT systems [Editor’s note: one very
complicated, customised core system] and most of them switched to the second
generation [Editor’s note: SOA architecture with several specialised applications
integrated with ESB). Meanwhile, however, the third generation had arrived (Editor’s
note: micro-service architecture], which is more efficient and cheaper. However, few
banks, which had invested hugely in switching to the second generation, are brave
enough to admit that they didn’t get things entirely right and that they should start
from scratch. Especially when one or billion two crowns had to be written off. That
isn’t an acceptable decision. But from a purely technical point of view, it’s better to
RECENTLY, SEVERAL DOMESTIC BANKS INTRODUCED NEW INTERNET BANKING. BUT DOES THIS MEAN THAT SOME FINANCIAL INSTITUTIONS HAVE TAKEN THE PLUNGE, OR IS IT ONLY A SUPERFICIAL MOVE WITH NO REAL SIGNIFICANCE?
Online banking could, in many cases, be far better than it is. Clients should be able to
manage everything using their mobile phones and the internet, and combine the use
of both. And not just to make payments but also to make a product request on their
mobile phones and then complete this process on the Internet. Or, I should be able to
click and get advice from a video banker if I don’t know how to do something but
don’t want to visit the branch. However, transforming such ideas into reality isn’t
IS BANK INFLEXIBILITY THE MAIN OBSTACLE?
We need a team of people who know how to set it up and would rather not be told
what to do. They would do it in half a year. They don’t usually have such time.
Usually, there’s a more pressing project to deal with – and we’re back to regulation.
Or, we drop everything and work on upgrading or migrating an old system at the end
of its life. They don’t usually enjoy such jobs. It involves work on parts of projects that
don’t have the impact that they could have.
AS A CLIENT, NOT JUST OF A BANK, I’M OFTEN CONFRONTED WITH AN INNOVATION TO SOMETHING RELATIVELY SIMPLE THAT COMPLICATES LIFE FOR THE USER. AND IT’S DIFFICULT TO WORK WITH. IS THIS THE OUTCOME OF SUCH AN APPROACH?
This is how decisions are made at big companies. Managers feel obliged to
demonstrate their added value, and to make decisions on and approve everything.
Instead of testing a prototype on customers and finding out what real clients need.
Five different committees will discuss the proposal and send it to headquarters. You’ll
end up with 50 ideas, resulting in a decision that has nothing to do with the client.
Somewhere, in committees in Vienna, they’re dealing with what kind of button is
needed for an app for mums on maternity leave in the Czech Republic. But a 55-
year-old manager really isn’t capable of commenting on that. However, companies
aren’t willing to give up their decision-making. The manager would lose his raison
d’être. And that’s where the crucial difference is between how big businesses work
and how startups work.
AM I RIGHT IN THINKING THIS IS WHY YOU QUIT THE CORPORATE WORLD
AND JOINED CREATIVEDOCK?
Yes, it was. It really holds you back when you know that there’s a better way to do
something but you’re unable to do it. The other problem is that it’s very difficult for
corporations to recruit staff. People aren’t stupid and know very well the environment
in which the bank operates, and that every decision will take a long time to go through a crazy rigmarole. At CreativeDock, I receive 10 times more CVs; people are
much more creative, and they get much more enjoyment out of their work. No one
needs to check if they’re spending eight hours or less in the office. They work hard
and enjoy it because they can get their ideas across. At the bank, I received 10 CVs
in one quarter and what’s more from people who weren’t really the very best. In
contrast, in one month I held 50 interviews at CreativeDock. All of them were smart
and enthusiastic about things.
THIS BRINGS US TO THE KEY QUESTION: WHAT EXACTLY DO YOU DO AT
We’re working on two things in parallel. First, we have investors for whom we’re
doing specific projects. And we’re also working on our biggest fintech project. It’s
about building a fintech solution enabling clients to manage their money on their
mobile phones. This product is aimed at millennials, young people who want to do
their banking without dealing with branches and bankers. Ultimately, our goal is to
obtain a bank licence to operate across the European Union. I’m not a fan of
excessive regulation but we can’t deny that the EU environment is becoming very
standardised. Thanks to that, we can take a project that was devised in the Czech
Republic and introduce it across the borders. Besides the Czech Republic, we’re also
thinking about the Netherlands, for example, and other EU countries.
WHAT DO THESE PARTICULAR PROJECTS FOR CLIENTS INVOLVE?
Before, banks had a monopoly on data about clients. Their banking history is unique
and was available only to the customer’s bank. Concerning a loan application, the
bank had a huge advantage because it alone could offer the loan with advantageous
conditions. Today, we have the PSD2 directive, which isn’t completely successful
from a technical perspective but has enabled market liberalisation. If the customers
consent, we’ll have the permission to look at their accounts and make an offer as
favourable as that of their existing banks. This is a game-changer. It enables
Fintech’s companies to do better scoring and put together tailor-made offers.
HOW DOES IT WORK IN PRACTICE FOR CLIENTS? DOES THIS MEAN THAT IN AN APPLICATION I INDICATE HOW MUCH I NEED TO BORROW, AND THE BANK IMMEDIATELY LOOKS FOR THE BEST OFFER?
Today, such search engines already exist but aren’t tailor-made. If I don’t know
something about a person, I can’t tell them for sure if and under what conditions the
bank will lend to him or her. However, if I’m familiar with the applicant, I can advise
him or her where to get the best conditions. All that will be needed is the applicant’s
permission and power of attorney.
WILL CLIENTS BE WILLING TO GIVE THEIR PERMISSION TO USE DATA?
In most cases, yes. Today, this isn’t a popular option. But it’s a given, because these
days, clients are being constantly pestered with offers that aren’t suitable for them.
There are people who don’t want someone to verify them. But in my experience, for
many, that doesn’t matter if you give them a tailor-made product in return.
DOESN’T THIS INVOLVE A RISK? I DON’T MEAN HACKING BUT RATHER
ROBOTS AT BANK. AS A RESULT OF SOME UNFORESEEN ERRORS, THEY’RE
UNABLE TO BEHAVE RATIONALLY AND REFUSE BULK LOANS WITH MORE
DEBTORS, OR ON THE CONTRARY APPROVE THEM? SOMETIMES, THIS
HAPPENS DURING TRADING ON STOCK MARKETS…
Human beings must be at the centre of everything and ongoing analytical work. It’s
not as if someone has introduced a scoring module that would provide loans for three
years. It just means that there will no longer be an army of people in the bank who
will assess each loan manually and individually. Instead, there will have to be a small
group of people who will assess what has passed through approval, what hasn’t, and
if anything has got away or been missed. The intuitive human brain can do many
things better than any machine, and I don’t believe that it will be replaced by artificial
intelligence in the foreseeable future.
AND WHAT ABOUT THE ETHICAL PERSPECTIVE OF SCORING? THERE HAVE
BEEN REPORTS THAT THE FACEBOOK PROFILES OF LOAN APPLICANTS HAVE
BEEN CHECKED. WHAT POSSIBILITIES EXIST, AND HOW FAR CAN WE GO
The technical possibilities are huge, so it’s more about the ethical issue. The client
must always know what data I’m using and what for. In such circumstances, most
people will then be willing to provide their consent. I’m personally willing to provide
bank statements if I get an interesting offer at the end of it. But I wouldn’t allow my
medical records to be looked at. The technical options for analysing data and how we
use it today are more extensive than you can often imagine. The technology won’t tell
me what cell phone the client has used to fill in the application. But if I know that this
person has always bought the latest type of phone over the last five years, that
already tells me something about the applicant. But he or she must always be aware
of that and provide consent.
EXACTLY. MY ACCOUNT PROVIDES INFORMATION ABOUT MY SPENDING HABITS, BUT ONLY A FEW PEOPLE KNOW THIS STRAIGHT AWAY.
Yes, that’s why GDPR makes sense and why many companies that weren’t taking it
into consideration are now experiencing problems. Technically, you should always
have “data kept in a safe” or “safe data” separate. No one should know that a Karel
Soukeník exists, only a number 12534621, who has such a mobile phone and
purchases this and that item. Nobody, even the company processing the data, should
be able to access the safe data. Whenever such information should be linked to
general data, consent and checks are needed. But this is a significant change in
technical design. Until now, banks or retail clients had safe data always linked to a
specific name, phone number, and address.
WILL BRICKS AND MORTAR BRANCHES STILL EXIST IN THE FUTURE?
My opinions are changing about this. Even recently, I thought the banker was
irreplaceable. Irreplaceable probably, and likely to remain available for most of the
population. On the other hand, for me, it would be enough just to use video and
tablets for my banking today. I don’t need face-to-face contact. And in time, artificial
intelligence will come, and what the banker at the branch can do, the machine will be
able to do. For some clients like me, this is a viable option. But many people won’t
trust a machine.
WILL WHAT WE’RE SEEING IN CLASSIC ONLINE COMMERCE OCCUR? RETAILERS THAT STARTED OFF ONLINE ARE NOW ACQUIRING BRICKS AND MORTAR SHOPS, AND TRADITIONAL SALES STAFF AND THE WHOLE BRANCH ARE INCREASINGLY BECOMING ONE.
This symbiosis already exists. The bank represents trust, which is difficult to
replicate. But it doesn’t have the ability to deliver a technological solution quickly and
effectively. Fintech firms can be faster, have greater drive and determination, can use
the latest technology and don’t have so much baggage from the past. Conversely,
they don’t have the trust that banks have. A small, unknown fintech company will
always struggle with the fact that clients won’t put their trust and money in it. Thus,
symbiosis is very likely. So, the institution providing a mortgage will be the bank. But
the agency processing it and advising on how to choose one will often be the fintech
SEVERAL TIMES, YOU’VE MENTIONED REGULATIONS THAT COMPLICATE THE
DEVELOPMENT OF FINTECH. YOU’VE ALSO GIVEN MORE POSITIVE EXAMPLES. WHAT OBSTACLES ARE THE REGULATORS PLACING IN THE WAY OF DEVELOPMENT?
I’m both a supporter and an opponent of regulation. Take GDPR for instance. It
makes sense to protect client data from misuse. But the way GDPR is implemented
doesn’t help. Large corporations have invested tens of millions, under the threat of
fines, to comply with the directive. But most companies (especially those smaller
firms, for which the penalty of “worldwide turnover” isn’t significant) won’t even bother
to adhere to the complicated rules. From a customer perspective, I feel just as
uneasy because a large swathe of the market isn’t complying with GDPR and I don’t
know who. It would help if the opposite approach is taken. A certification authority
could be set up that does certification, similar to Czech Made. It would tell people that
a company is compliant with GDPR and that it has good client data protection
processes in place. As a customer, I would then be able to choose. And companies
should have positive motivation. The same is true of the PSD2 directive I was talking
about. The intentions are good, but how it has worked out in practice is a great pity.
Regulation – yes, but the problem is that the regulations are drafted by a group of
WE’VE DISCUSSED A NUMBER OF FINANCIAL TECHNOLOGY OPTIONS. BUT IS
THERE ANY IMPORTANT TREND THAT YOU HAVEN’T MENTIONED?
A new generation of IT development is emerging, which is wiping out the existing
one. The current world has programmers, IT project managers, and IT analysts.
People who have made names for themselves in the IT world and are waiting for
opportunities in the business world. The IT language and the business language are
different, so business analysts are needed to interpret them.
This is changing today. Technology means that it isn’t just IT people who do
development. IT is beginning to be about innovative thinking and processes, about
who can put themselves in the client’s shoes better. Success in the IT world is
beginning to be driven by marketing and process capabilities.
Personally speaking, when I was thinking about my future in IT, I wasn’t looking to
join an IT company. I decided not to contact the traditional players and instead joined
CreativeDock, where there’s a group of people in constant communication with
clients. This is a new IT generation. It isn’t yet visible now, but in two or three years
there will be a big revolution.
THE CLICHÉD IMAGE OF AN IT GUY AS A RATHER ANTI-SOCIAL PERSON
SPENDING EVENINGS ALONE AT THE COMPUTER IS BECOMING A THING OF
THE PAST. NOW, MUST SUCH PEOPLE LEARN TO COMMUNICATE MORE AND
PUT THEMSELVES IN THE SHOES OF THE GENERAL PUBLIC?
It won’t disappear completely, and this community of individuals will continue to exist.
These clever specialists will shut themselves off in their rooms, where they’ll immerse
themselves in their own worlds to develop new platforms. And the platforms will allow
people who aren’t familiar with IT to build software. If I want to create a website
today, I no longer need to know the programming language or to write scripts. Even
users with limited ability can create a nice site by themselves. This will carry through
to the general IT world. And it won’t only be about the web but also about creating
programmes. And the programme will work and have logic, and a developer won’t
need to be behind it.
WHAT HAS THIS REVOLUTION UNLEASHED?
It needs very powerful hardware, but it already exists, and performance is improving
every year. As brute strength, i.e. raw computer performance moves through IT, it
makes it possible to develop software a different way.
IN THE FINTECH FIELD, BLOCKCHAIN TECHNOLOGIES, ON WHICH CRYPTOCURRENCIES OPERATE, ARE A HOT TOPIC. WHAT DO YOU THINK ABOUT THAT?
I must admit that I’m no fan. The revolution is approaching from elsewhere, and the
significance of blockchain is exaggerated. There’s an army of enthusiasts who think
that blockchain will wipe out everything. And then there’s an army of sceptics who
think that it’s a craze that will fade away again. I’m in the sceptic camp, just as I don’t
believe in cryptocurrencies. And I don’t think bitcoins will change how the world