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TECHNOLOGY HAS NO CHANCE AT INFLEXIBLE BANKS. A NEXTERNAL REVOLUTION IS ON ITS WAY

Updated: Oct 12, 2018

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

to perfection.


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.


WHY? 

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

difficult.


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

rebuild everything.


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

easy.


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

CREATIVEDOCK? 

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

ETHICALLY?

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

company.


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

academics.

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

works.


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