Ukraine’s Approach to Digital Transformation for Banks

Guest post by Hanna Khrystianovych, Fintech Program Manager at Sigma Software Group

The UK and Ukraine have a long history of business relationships. The UK is already one of our biggest partners, with the volume of trade reaching £1.5 billion in 2019. In 2020 the two parties signed a major political, free trade, and strategic partnership agreement which should only amplify and boost our cooperation.

Ukraine digital transformation
Hanna Khrystianovych

We also have a lot in common when it comes to innovation, especially in the financial services industry. For example, one of the founders of the UK’s fastest growing financial super app Revolut, is Vlad Yatsenko who is from Ukraine. And the founders of Ukraine’s sensational digital bank Monobank are now trying to repeat this success in the UK. They are building Koto, a new fintech startup that provides stress-free credit options via a convenient app. In 2020, they raised £1.3 million in one investment round.

Talking about traditional financial institutions, Privatbank, the largest bank in Ukraine in terms of number of clients, asset value and loan portfolio, has been disrupting the industry for over a decade. More than 10 years ago, they became one of the first banks in the world to use one-time SMS passwords. Later they introduced such products as the payment mini-terminal, entering Internet bank accounts via QR-code, online encashment, as well as dozens of different mobile apps. Many other banks in Ukraine now digitize their relationships with their customers using messenger apps and mobile applications as communication, sales and service channels.

So, we have a lot of experience when it comes to digital transformation. Let’s find out more about it from the Ukrainian point of view.

Three Stages of Digitalization in Ukraine

When we talk about the digitalization of Ukrainian traditional banking, there are 3 key points worth mentioning.

1. APIzation

The first one is the so-called APIization of the banks from within. Often banks have a long history, many systems on board, and processes and data that is locked in monolithic software. In recent years, Ukrainian banks have focused on creating a layer of internal APIs and learning to develop and work with them. Some market leaders have even succeeded with external commercial APIs. Such APIzation is the first step to digitalization.

purple and pink diamond on blue background
Photo by Rostislav Uzunov on Pexels.com

It allows banks to improve current and launch new services and products faster based on customer experiences. This allows them to speed up their “metabolism”, so to speak.

Many leading banks in Ukraine have already gone through this stage. So from a technological point of view, this step has already been taken.

2. Focus on the customer

The second point, which in terms of digitalization is interesting and crucial, is the focus on the client. In the past, there was restrained competition between banks, but everyone could occupy their own niche. Today we see several neobanks appearing every year. This new client experience greatly increases the competition for classic banking. It takes a tough, strong incentive to change something with entrenched approaches.

The Top-10 leading banks in Ukraine today are studying the customer experience, building a customized client journey, measuring NPS, controlling quality, and working with customer complaints instead of ignoring them as before. This feedback from customers is implemented into new services, which can be done because they have already passed the first stage.

From a technological and technical point of view, they are able to incorporate this feedback into the development of new products and services. Of course there’s always room for improvement, but a start has been made.

3. Culture and mindset change

unrecognizable woman demonstrating light bulb in hands
Photo by Anete Lusina on Pexels.com

Maybe the most important point involves changing the entire approach to working with changes, products and services.

Classic banks have always been very strict and bureaucratic. Projects took years to implement. Just a couple of years ago, the average project time frame was two years, which is way too long. The client expects that if they didn’t like something today, someone will fix it tomorrow. At this time, banks are working on some huge projects that focus on goals  everyone has forgotten about. That is why Ukrainian classic banks for many years existed in isolation from reality.

So in order to change the mindset, a move from a project to product mentality is necessary. When we care about the client and focus on fast delivery of valuable features, it is one of the key aspects of the whole journey.

It’s also important to at least try to have cross-functional knowledge. When we did digital transformation, I discovered that when people from business teams start thinking more and study things about IT, they understand technical details. After they understood what API was, over time all of them became API thinking people. At the same time, the IT team understood more details about the business. Such cross-functional thinking helps make changes much faster. I would suggest not just focus on one domain, but to try and be open to knowledge from other domains. We live in a world where everything is mixed, and it’s very good if you’re open and flexible to acquiring knowledge from different spheres.

In Ukraine today, many banks are not only following the path of technological digitalization, but also working on their internal culture, the culture of working with the client, the product, colleagues, and with changes. One can feel a certain start-up spirit. There are fewer barriers and more feedback. We are not afraid to say what we think. Against the backdrop of this feedback, cool ideas emerge that can then conquer the market. This provokes more and more innovation like an avalanche.

Final thoughts

Any digitalization of any business is like a workshop. An analogy would be similar to having a cool bike. Achieving top speed depends on the equipment and technology being used. But if you don’t know how to pedal, or you don’t have a clear goal in your head or if you don’t have a champion mentality, then even on a Pinarello you won’t get far.

Today the banking market in Ukraine is not that big with just over 70 banks. There’s a group of leaders that have already gone in the direction of digitalization. Now the context is too favourable for all this to work out. We are now in the process of adopting legislation that inherits the PSD2 regulation. Since the state now focuses on helping banks to digitalize, the regulation is not as strict, and the complexity of innovation is significantly lower than in other  European countries, Ukraine can expect quite aggressive growth in the entire industry. All this will provoke financial inclusion, where more and more people get access to different financial services. This will lead to the mass digitalization of banking in Ukraine.

But Ukraine had already done many things in terms of Open Banking even earlier, simply because the market was technologically and in all other senses prepared. That is why Ukraine can offer its British partners breakthrough technologies, working business models, and super-talented people. Ukraine is, in a sense, still a sandbox where various experiments have been and are being conducted. Over the last decade we have learned how to make a lot of interesting projects and services, and we are ready to share these with our partners. 

We truly believe there’s never been a better time for UK businesses to explore Ukraine’s potential, especially in the fintech industry. To find out more about amazing Ukrainian startups and companies, tune in on July 15th to the first UK-Ukraine Fintech Summit.


About the author:

Hanna Khrystianovych, a Fintech Program Manager at Sigma Software Group. Hanna has over 15 years of Telecom and Banking experience working with complex strategic change implementation, and building functions from scratch. She occupied the position of Head of Project Management Office and was in charge of all organizational changes such as: bank mergers, digital transformation including IT architecture reconstruction, scrum implementation, and creating cross-functional product teams.


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