It seems nowadays that banking battles have moved to the technology arena as Israeli and foreign banks boast about their new apps, state-of-the-art online digital services, and technological innovations. Against this backdrop, “Globes” interviewed Bank Bank Hapoalim (TASE: POLI) EVP Head of Application Development Avi Kochva to discover whether this is a merely a marketing trend or the start of a change in concept in banking.
“Globes”: Is it possible to say that technology has revolutionized banking?
Kochva: “I am not sure that ‘revolutionize’ is the right word, but there is no question that technology is changing the face of the world, and is necessarily a factor for major changes in the banking industry. These changes began 15 years ago, with the introduction of direct channels, initially via PCs, and subsequently via tablets and smartphones. A deeper change is now underway, expressed in collaborations, which until now were unacceptable in the banking world. These collaborations are based on new financial and banking products, a few of which are created in-house by the bank, but most are created by startups. The paramount objective of these products is to shorten the distance between the customer and the service provider and to give the customer a much wider choice than in the past. At the end of this process, we will have created for customers who want them, a new and complete customized digital ecosystem.”
How is this change expressed at Bank Hapoalim?
“The modern bank must turn outward, changing from a traditional bank to a smart financial global hub or aggregator a vendor which offers a full range of products and services, including those that it produces for which it provides services. Naturally, it is also based on technological skills that will allow the bank to become a global financial platform for its customers, a one-stop-shop for banking and financial needs in Israel and overseas.
“Take an example from retail: China’s e-commerce giant Alibaba, where buyers purchase all kinds of goods for an astronomical annual amount of $170 billion, and it does not have even one store. Another example is portals, such as Uber, which does not have a single cab, but connects customers and drivers. Both are based on cooperation, and this is the direction in which banks are headed.
“A bank that wants to stay relevant in the new world will have to greatly increase the choice it offers customers, which will take place through collaborations. For example, let’s assume that our Israeli customer wants to buy real estate in England and take out a mortgage. Currently, he must open a bank account in England to get the mortgage, but we become a hub, we can give him everything he needs through collaborations with British mortgage providers. This is just the tip of the iceberg, one tiny example among many of what we will be able to do in the near future. There is an almost infinite number of products and services that we can offer through collaborations with many and varied parties.”
If that is the case, you are implying that a fundamental change is underway in the bank’s traditional functions.
“Banks in general, and Bank Hapoalim in particular, will continue to fulfill their traditional functions, because there will be customers who, for various reasons, prefer working in the old way, and we must respect their wishes. But it is true that there will be some important changes in the bank’s operating concept. Traditionally, banks were measured on the basis of their income, return on equity, number of customers, and so forth. Today, competition is spreading to another arena technology. Until now, this spread was mainly expressed in the use of direct channels, and I am pleased to say that Bank Hapoalim is the leader in this arena in Israel. But, in the near future, it will mainly be expressed through new collaborations. The world’s best analysts share this assessment, and I am proud to say that we were agile enough to see the trends and prepare for them.”
When you talk about expanding choice, do you mean, for example, that Bank Hapoalim will allow a customer to receive financial services from a third party?
“We want to allow our customers to see offers for financial services and products from other banks, and not just in Israel, but from all over the world. Obviously, we will strive to achieve a result that, after the customer examines and weighs the range of options, he will decide to buy our product or service, But the advanced services that we will offer, some of which will be based on existing technology or technology that the bank is developing in-house, and some on technology that is expanded or accelerated through collaborations with start-ups, which will show the customer a digital banking world that will offer him a new kind of service experience which is very suited to a large part of the contemporary clientele.”
Will the changes that you are planning include interfaces with social networks?
“Yes. Absolutely. Social networks are an integral part of the ecosystem I mentioned. Today’s customer is more active than in the past; he asks friends, obtains recommendations, and consumes a great deal of information, some which is not reliable. We will improve the information search capability that we will make available to our customers, through the use of Smart Data, the next stage of Big Data; in other words, not just the accumulation of vast quantities of information, but a smart and accurate analysis of it. For this purpose, we are studying the customer’s needs, who he is, what he likes, when, how much, and for whom it is intended, and it is then possible to provide him with accurate, correct, and relevant information. Most of the answers exist online, but the sorting and analysis of them in a way that will allow the customer to optimally apply it is the challenge facing us.”
From the technological aspect, how are you preparing for these changes?
“I cannot disclose our detailed plans here and now, but I can definitely say that we are working hard to build a technology infrastructure, which will allow us to undertake the necessary measures, i.e. to offer different kinds of collaborations from day one. It is reasonable to assume that, initially, we won’t shoot in every possible direction - that is how it is when you are a pioneer but the infrastructure that we will develop will allow us to study, change, and improve on the run. The changes are mostly a function of listening to customers’ needs.
“The first signs can already be seen. We are developing an Open API (an application that interfaces with different programs and sites) and orientation in the cloud. These developments will be the basis for a very advanced technology infrastructure, which will allow collaborations with fintech companies and start-ups that we find and serve as their planning partners with the objective of offering their products and developments as additional services to our customers. As part of this effort, we are also initiating and hosting events and competitions, such as cathon, BankApp, and SmartUp, where start-ups and entrepreneurs are invited to show us their ideas. A start-up which offers us a product that we think is suitable will become our partner and be included in our hub and also be included in our application store, which is similar to Apple and Google’s app stores for iPhone and Android users.
“This is the place to call people with ideas, new ventures, and more mature ventures to come and participate in our competitions. We are now launching with “Globes”, for the third consecutive year, the SmartUp competition in which four promising start-ups will be selected to receive advice from experts from Bank Hapoalim, incubators, and accelerators. This year, the winning companies will also receive mentoring from well-known start-ups in the same field. We urge start-ups to hurry up and sign up. In the second circle, we aim to develop ventures with many potential partners, such as foreign banks, large technology companies that offer financial solutions, and websites that offer P2P loans.”
These changes will require a change in the bank’s DNA. How can this change be implemented on a large enough scale at such a big and conservative bank?
“We may be perceived as a slow and convoluted organization that tries to avoid risk. When it comes to our financial conduct with our customers and keeping regulations, we are indeed cautious and conservative, but when it comes to business thinking, development, and adopting technologies, we are the trendsetters, pushing ahead with all our strength. Our division has the full backing of the bank’s CEO, who, together will all the management and directors, has adopted the direction I’ve described. There is a general understanding that we’re entering a new era, and that we need to change to adapt to this era, and that we have the skills and resources to do it.”
Besides building the future, what are your main day-to-day challenges?
“At any given moment, Bank Hapoalim’s Technology and Computer Division is working on more than 300 projects. Some are pure business, some are engaged in meeting regulatory requirements, and some deal with infrastructures. We constantly launch innovative products, such as applications, a smart watch, and, of course, the digital branch, which will be a world-class innovation, the BE Online bank, innovative ATMs, and more.
“A major project that we’re about to complete is the migration to a new data center. We have obtained the building, we’re laying the communications and systems, and we’ll soon move to the new premises. We will do this in several stages, to avoid affecting the floor work and availability of the bank’s systems. The division has also drawn up a technology strategy plan, which is specially adapted to the bank’s business plan.”
If you could describe your work in one word, what would it be?
“Customer value. We are constantly seeking in Israel and overseas the most innovative products, the most advanced technologies, and the most interesting collaborations to realize our vision and path to bring significant financial value to our customer and move them toward financial freedom.”
“Globes” and Bank Hapoalim’s SmartUp3 competition
“Globes”, Israel’s business newspaper, and Bank Hapoalim are launching the SmartUp competition for Israeli start-ups for the third consecutive year. As part of the competition, “Globes” correspondents will track the four winners, which will receive assistance from experts at technology incubators and accelerators and high-tech advisers at Bank Hapoalim, on the basis of the understanding that many companies with good and breakthrough ideas get stuck in the starting gate and fail to realize their potential.
The program is intended for Israeli companies that have closed at least $100,000 in initial financing. Every company chosen for the program will receive three months of advice from high-tech and business experts in a range of subjects that affect new start-ups, such as marketing, financing, personnel management, and going abroad.
All the contenders have to do it register at the special page at the “Globes site Smartup3 - and tell us why your start-up should participate. This year, in contrast to the past, two programs have been built: a general program for companies engaged in a range of content besides financial technology; and a fintech program, for companies developing financial technology products and services with the potential for changing and improving our lives. The program participants will receive a start-up package from Bank Hapoalim, including a bank account at preferred terms, and a NIS 20,000 grant.
This year, to high-tech and business advisers will participate in the program, who will provide close advice for each of the companies. The four winners will be advised by executives from top Israeli high-tech accelerators and incubators: Nielsen Innovate; 8200 EISP; Explore.Dream.Discover; and Moneta Seeds.
The Explore.Dream.Discover incubator is one of Israel’s most active incubators, which, in the past four years, have invested in more than 20 media, mobile, internet, software, and cyber companies. It is owned by Plus Ventures, part of the Moldawsky Group, and 2Bangels, owned by the Cheshin family and which currently has 16 portfolio companies.
The 8200 EISP entrepreneurship program is the initiative of veterans of the IDF Intelligence Corps Unit 8200. 8200 EISP was founded in 2010, and is considered as the first accelerator to operate in Israel. The program is a non-profit philanthropic venture which seeks to leverage the extensive network of Unit 8200 veterans to help new entrepreneurs from varied backgrounds, including those who did not serve in the unit.
The Nielsen Innovate incubator is the result of a collaboration between global information and measurement company Nielsen Holdings NV (NYSE: NLSN) and Partam Hi Tech Ltd., the investment arm of real estate mogul Igal Ahouvi. The incubator operates in the new media, internet, data analysis, consumer, and advertising industries, utilizing the business ties of Nielsen Holdings to help its portfolio companies and entrepreneurs.
The Moneta Seeds incubator was founded in 2015 to invest in fintech, internet, mobile, bid data, and other companies. It is co-founded by managing partners Adoram Gaash and Meirav Har Noy.
Published by Globes [online], Israel business news - www.globes-online.com - on August 6, 2015
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