DIGITAL TRANSFORMATION USUALLY BEGINS FIRST OF ALL WITH THE BANKING SECTOR. THIS IS DUE TO THE FACT THAT THE BANKING SYSTEM IS THE MOST SUSCEPTIBLE AND ADAPTIVE TO EXTERNAL FACTORS OF INFLUENCE. THE CONTINUOUS PROCESS OF THE EMERGENCE OF NEW TECHNOLOGIES PROVIDES NEW OPPORTUNITIES FOR FINANCIAL SECTOR CLIENTS TO INTERACT WITH EACH OTHER, THE GROWING CLIENT FLOW USES MORE AND MORE CHANNELS FOR OBTAINING BANKING SERVICES THROUGH NEW PLATFORMS AND BANKING ECOSYSTEMS.
AIZHAN MUSINA, CHAIRMAN OF THE BOARD OF KYRGYZKOMMERTSBANK AND A SPECIALIST WITH MORE THAN 25 YEARS OF EXPERIENCE IN BANKS IN KAZAKHSTAN, KYRGYZSTAN AND RUSSIA, TELLS ABOUT THE TRENDS IN THE DEVELOPMENT OF DIGITALIZATION IN THE BANKING SECTOR OF THE KYRGYZ REPUBLIC AND THE EXPERIENCE OF TRANSFORMING KYRGYZKOMMERTSBANK INTO A DIGITAL BANK.
AIZHAN MUSINA, CHAIRMAN OF THE BOARD OF KYRGYZKOMMERTSBANK AND A SPECIALIST WITH MORE THAN 25 YEARS OF EXPERIENCE IN BANKS IN KAZAKHSTAN, KYRGYZSTAN AND RUSSIA, TELLS ABOUT THE TRENDS IN THE DEVELOPMENT OF DIGITALIZATION IN THE BANKING SECTOR OF THE KYRGYZ REPUBLIC AND THE EXPERIENCE OF TRANSFORMING KYRGYZKOMMERTSBANK INTO A DIGITAL BANK.
– Ms. Musina, please tell us about the latest trends in the development of the banking sector in Kyrgyzstan.
– Digitalization is confidently moving forward in Kyrgyzstan. The state pays great attention to the transition to digital information platforms, such as credit and address bureaus, the base of social contributions and others, which enable the population to have remote access to various information. This greatly facilitates the work of banks in terms of assessing the solvency of customers and accelerates the provision of financial services.
There are factors that are decisive in the transition to new technologies – this is the cost of spending on them and the level of preparedness of the population for them.
The banking sector of Kyrgyzstan is represented by 22 banks, but the level of digitalization, as well as the size of assets, capital and other indicators, of course, are different.
There is an interesting trend in global banking practice, and Kyrgyzstan is no exception – not all banks are eager to move urgently to digitalization. Banks that have a consistently high profit margin, well-established traditional service, familiar to large regular customers, and a large customer base formed over the years, do not need to "run into numbers". And to certain extend it is quite justified.
In addition, both in the world and in the banking practice of Kyrgyzstan, there is a feature associated with the eastern mentality – the population of small towns and villages likes to go to the bank, communicate with managers, get advice. This is a kind of personalized service, especially valuable for the older generation. And since there are local traditions, this service will still be in demand.
At the same time, almost the majority of Kyrgyz banks have embarked on the path of digitalization, providing the population with new mobile solutions. Of course, there are leaders among them who are rapidly conquering the market with innovative digital products. Thanks to this, digitalization is moving much faster, and progress is obvious.
– In Kyrgyzstan, the majority of the population still uses cash. What is the reason, in your opinion?
– I think it is a matter of time and the appearance of large players on the market with the best mobile solutions and platforms that will provide convenient services to the population, will seriously motivate them to switch to non-cash payments.
In digitalization, everything depends on finance: the more resources you have, the more of your solutions you can digitize – both for customer service and within banking processes.
In the near future, due to the growth of the country's economic indicators, there will be more opportunities to invest in new technologies, which will allow banks and fintech companies to deploy a large number of remote channels for non-cash payments at an accelerated pace.
– And how do you assess the policy of the National Bank of the Kyrgyz Republic in terms of digitalization? Many commercial banks complain that the regulator conducts an excessively conservative policy in this regard. What do you think?
– For second-tier banks, perhaps this is a conservative policy. But I believe that on the part of the National Bank, this is a clear and completely justified strategy – to digitize and transfer a large share of the country's payment turnover to non-cash. For example, from 2015 to 2017, all banks were required to install POS terminals everywhere. In some cases, it was unprofitable, because each terminal cost about $ 300, and sometimes it was necessary to put it at points where only 2–3 transactions take place per day. Then the National Bank and the Tax Service provided privileges for the purchase of banking equipment for banks of the Kyrgyz Republic. Despite the fact that it was unprofitable to cover all retail outlets with POS terminals, the National Bank still supported and actively implemented this initiative.
Now all banks are obligated to accept payments via QR codes and place them in all retail outlets so that it is convenient for citizens to pay in a non-cash way. The decision is correct, but it is more interesting for commercial banks to develop QR codes based on their processing, and in Kyrgyzstan only three banks, including Kyrgyzkommertsbank, have their own processing.
– By the way, about processing. Why did Kyrgyzkommertsbank decide to switch to its own processing? Despite the fact that the National Bank strongly recommended banks to switch to their own processing, almost no one has been able to do this for several years.
– If we talk about the market as a whole, then despite all the advantages of its own processing, not everyone can switch to it. First of all, it is very expensive. But there is another more important problem – there are not enough qualified specialists in our market who can do this. There is a strong shortage of personnel in this direction. While bank employees can be found and poached, this is not possible for processing specialists.
If we talk about our bank, then for us processing is a great opportunity in terms of personalization of payment card services, expansion of the product line in various digital solutions and, of course, ensuring the security of customer payments. In addition, digital technologies are developing with might and main, and in one way or another any banking technologies are connected with processing. The bank's shareholders have adopted a strategy for the development of digital customer service channels, and processing opens up huge opportunities.
– And what new opportunities did customers get after your bank switched to its own processing?
– We have the opportunity to provide customers with unique conditions that no one else on the Kyrgyz market has.
In 2021, we released the KKB mobile application, thanks to which customers can perform many operations online, without going to the bank. Money transfers, payment for hundreds of different services, online registration of bank cards and much more are available in the application.
As for the unique conditions, Visa Gold cards are now available to our customers, which can be ordered online, and the service of these cards is free.
– Digitalization is confidently moving forward in Kyrgyzstan. The state pays great attention to the transition to digital information platforms, such as credit and address bureaus, the base of social contributions and others, which enable the population to have remote access to various information. This greatly facilitates the work of banks in terms of assessing the solvency of customers and accelerates the provision of financial services.
There are factors that are decisive in the transition to new technologies – this is the cost of spending on them and the level of preparedness of the population for them.
The banking sector of Kyrgyzstan is represented by 22 banks, but the level of digitalization, as well as the size of assets, capital and other indicators, of course, are different.
There is an interesting trend in global banking practice, and Kyrgyzstan is no exception – not all banks are eager to move urgently to digitalization. Banks that have a consistently high profit margin, well-established traditional service, familiar to large regular customers, and a large customer base formed over the years, do not need to "run into numbers". And to certain extend it is quite justified.
In addition, both in the world and in the banking practice of Kyrgyzstan, there is a feature associated with the eastern mentality – the population of small towns and villages likes to go to the bank, communicate with managers, get advice. This is a kind of personalized service, especially valuable for the older generation. And since there are local traditions, this service will still be in demand.
At the same time, almost the majority of Kyrgyz banks have embarked on the path of digitalization, providing the population with new mobile solutions. Of course, there are leaders among them who are rapidly conquering the market with innovative digital products. Thanks to this, digitalization is moving much faster, and progress is obvious.
– In Kyrgyzstan, the majority of the population still uses cash. What is the reason, in your opinion?
– I think it is a matter of time and the appearance of large players on the market with the best mobile solutions and platforms that will provide convenient services to the population, will seriously motivate them to switch to non-cash payments.
In digitalization, everything depends on finance: the more resources you have, the more of your solutions you can digitize – both for customer service and within banking processes.
In the near future, due to the growth of the country's economic indicators, there will be more opportunities to invest in new technologies, which will allow banks and fintech companies to deploy a large number of remote channels for non-cash payments at an accelerated pace.
– And how do you assess the policy of the National Bank of the Kyrgyz Republic in terms of digitalization? Many commercial banks complain that the regulator conducts an excessively conservative policy in this regard. What do you think?
– For second-tier banks, perhaps this is a conservative policy. But I believe that on the part of the National Bank, this is a clear and completely justified strategy – to digitize and transfer a large share of the country's payment turnover to non-cash. For example, from 2015 to 2017, all banks were required to install POS terminals everywhere. In some cases, it was unprofitable, because each terminal cost about $ 300, and sometimes it was necessary to put it at points where only 2–3 transactions take place per day. Then the National Bank and the Tax Service provided privileges for the purchase of banking equipment for banks of the Kyrgyz Republic. Despite the fact that it was unprofitable to cover all retail outlets with POS terminals, the National Bank still supported and actively implemented this initiative.
Now all banks are obligated to accept payments via QR codes and place them in all retail outlets so that it is convenient for citizens to pay in a non-cash way. The decision is correct, but it is more interesting for commercial banks to develop QR codes based on their processing, and in Kyrgyzstan only three banks, including Kyrgyzkommertsbank, have their own processing.
– By the way, about processing. Why did Kyrgyzkommertsbank decide to switch to its own processing? Despite the fact that the National Bank strongly recommended banks to switch to their own processing, almost no one has been able to do this for several years.
– If we talk about the market as a whole, then despite all the advantages of its own processing, not everyone can switch to it. First of all, it is very expensive. But there is another more important problem – there are not enough qualified specialists in our market who can do this. There is a strong shortage of personnel in this direction. While bank employees can be found and poached, this is not possible for processing specialists.
If we talk about our bank, then for us processing is a great opportunity in terms of personalization of payment card services, expansion of the product line in various digital solutions and, of course, ensuring the security of customer payments. In addition, digital technologies are developing with might and main, and in one way or another any banking technologies are connected with processing. The bank's shareholders have adopted a strategy for the development of digital customer service channels, and processing opens up huge opportunities.
– And what new opportunities did customers get after your bank switched to its own processing?
– We have the opportunity to provide customers with unique conditions that no one else on the Kyrgyz market has.
In 2021, we released the KKB mobile application, thanks to which customers can perform many operations online, without going to the bank. Money transfers, payment for hundreds of different services, online registration of bank cards and much more are available in the application.
As for the unique conditions, Visa Gold cards are now available to our customers, which can be ordered online, and the service of these cards is free.
