SBB Magazine 10

MAGAZINE small business banking magazine

AI in Banking Reshaping SME Finance

Let’s discover CEE region together!

Bank as a reliable partner for SMEs

Key takeaways from SME Banking Club events 2019

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PROLOGUE

Dear Reader, This year we will discover and examine in more detail how financial services for small business customers are developed in different markets in the Central & Eastern Europe region. In this issue you can read interviews with István Fetter, Head of the Small Business Division at CIB Bank, who offers some insight into the Hungarian market (pp.14-15); Arton Celina (CEO at BPB), who discusses what it takes to be a specialized bank for small businesses in Kosovo (pp.17-19); and Michal Pawlik (SMEO), who talks about the online factoring market in Poland (p.24).

Also, we’ve scheduled a series of events that will help you learn in detail how banks in Hungary are approaching SMEs — during a Study Tour to Budapest on March 30-31, and how FinTechs are approaching SMEs in different markets — during our Study Tour to Berlin on June 22-23.

In Berlin, among others, we’ll visit Spotcap, an online lender operating in five countries since 2014. Read our interview with their CEO, Jens Woloszczak (pp.28-29) Additionally, we plan to host a series of local events and webinars, which we will announce on our social media pages. Please follow us there.

Our 6th Annual SME Banking Club Conference will take place on November 25, in the beautiful Zofin Palace in the heart of Prague. The event will provide participants the opportunity to explore, among other topics, insights into the SME banking sector in the Czech Republic.

This year we are also launching the CEE SME Banking Awards — the only SME Banking Awards in the region! The best SME bankers from the CEE region across 5 categories will be awarded during the Awards Ceremony on November 25 in Prague. Join the Ceremony for free to celebrate it together!

As a separate topic in this issue, we focus on artificial intelligence in banking, as this is one of the biggest drivers for change in the financial service industry at the moment. Daniel Huszár gave a snapshot of the paradigm change in computer science decades and how exactly AI is changing factoring services (pp.10-11). We also talked with Erik Brieva (CEO at Strands) (pp.6-7) about how AI is transforming the customer experience in banking and dived deep into some of the most innovative technologies leading the revolution.

I wish you pleasant reading!

Sincerely, Olena Gryniuk CEE Regional Director at SME Banking Club

SMALL BUSINESS BANKING MAGAZINE

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CONTENT

3 5 reasons to read this issue...

of Trade 25 Digitalization Finance services

6 AI in Banking

– Alternative SME Finance 26 iFactor Platform on the Romanian market

AI is driving 8 How the banking revolution

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How AI changes SME finance

MAGAZINE SBB Magazine Magazine of SME Banking Club SME Banking Club Team:

it @K&H — an incubator 12 Start program launched

by K&H Group in Hungary Dateio enhances 13 How payment data

Andrey Gidulyan ceo@smebanking.club @AGidulyan

14 Spotcap: Reshaping SME Lending

Olena Gryniuk cee@smebanking.club @olenagrinyuk

that matters: 30 Banking Erste Group measures impact of its Social Banking activities SME Banking Club 32 BUM Conference 2019 Asia SME Banking Club 34 Central Conference 2019

CIB Bank: How to ensure better service quality in the small business segment

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Alexey Sayapin cis@smebanking.club sayapin.alexey

SME Banking Club 36 CEE Conference 2019

Guest Authors: Daniel Huszar Ivan Dovica Deepesh Patel

an ecosystem 40 Building for SME customers:

Design, layout: Alexander Kryachko

Roundtable in Prague

44 Study Tour to Budapest

Sources: www.smebanking.club

SME Banking Club 48 CEE Conference 2020

SME Banking Club operated by: Gidulyan Company Ltd, 61/31, Avtozavodskaya str., Kiev, 04114, Ukraine and GG Company Sp. z o.o. ul. Królewska 65a/1 30-081, Krakow, Poland

role of DLT on MSME firms 20 The in the international trade industry

SME Banking Club 50 CEE Conference 2020

www.smebanking.club www.smebanking.events

— Digital Factoring 24 SMEO for SMEs in Poland

51 About the SME Banking Club

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4

Citibank: Being the best bank for small business clients BPB: A bank as a reliable, long-term and trustworthy partner that meets clients’ needs

46 Study Tour to Berlin

For details of advertising please contact us at cee@smebanking.club

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Prague, November 25 #believeinsme

www.smebanking.events/cee

INTERVIEW

AI in Banking Olena Gryniuk talks to Erik Brieva, CEO at Strands, about AI strategy and how technology and data are changing the customer experience in banking.

Strands has been creating highly customizable digital money management software for financial institutions since 2004.

H

ow can banks make the most of AI technology? It requires a good on-site IT team, probably, the right corporate culture and availability of customer data. But what’s most important?

There is a 450-billion-dollar market opportunity for the applications of artificial intelligence in the financial sector. Banks are currently funding AI initiatives within their organizations, most of them oriented to obtain customer insights that will allow them to anticipate their customers’ needs and suggest the best course of action accordingly.

There are four essential ingredients to achieve an AI strategy:

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Erik Brieva, CEO at Strands © Joan Gosa 2019

• Relevant Data: You need to have access to a huge amount of customer data. Trillions of transactions and events happen every day in banking, and most of them contain hidden patterns and relationships.

• Use Cases: Understand what the needs are, as well as the desired results to cover those needs, and define the use cases of application.

• Appropriate Algorithms: Identify the appropriate algorithms to create valid models for the desired use cases.

• People: A good IT team with the necessary talent, experience, business mentality and corporate culture.

However, these ingredients are not sufficient to succeed if they are not effectively and efficiently combined. To make the most of AI technology, banks need to implement an AI platform that is integrated with their core and digital systems.

I have seen many banks trying to develop artificial intelligence software and applications by themselves, mostly unsuccessfully. Even though these banks have direct access to a vast amount of data, identify the use cases, know the algorithms and have put together a group of data engineers and data scientists, they haven’t come up with a solution that has a big impact on their business. This is why banks, instead of

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Artificial Intelligence trying to build their own AI technology, now plug-in an existing and proven platform that provides pre-configured rules and models as well as out-of-the-box actionable insights that they can use right away for their existing banking applications and operations. These banks will then be able to develop new algorithms and enhance such a platform in order to generate more insights and additional solutions.

Customer data is another topic for discussion here. On the one hand, data is not a problem these days, as banks have many data sources available to them, and thanks to Open Banking — getting the data has become much easier. On the other hand, banks need to have the proper infrastructure to support, acquire and analyze a vast amount of data, comply with all the regulations connected with the usage and sharing of personal data, etc. But are customers willing to hand over their data in order to be better served by banks?

What would you comment on here?

While there are some concerns regarding privacy regulations, we now know that consumers are willing to share personal data in exchange for personalized offers, to avoid noise and improve their financial wellbeing. At the end of the day, consumers want to feel special, want to be alerted, advised and even amazed by their bank and by other service providers. They crave new experiences. True value comes from understanding what the customer needs and helping them achieve it by presenting them with personalized, actionable notifications and recommendations of the best course of action.

Yet, many banks are still leaning on simple forms of personalization and therefore failing to engage increasingly demanding and techsavvy consumers. Bear in mind that studies show that around 75 percent of users aren’t satisfied with the level of personalization they currently receive. This means that banks are failing to create experiences that actually engage customers in any real way. AI-based financial technology generates deep customer insights that are valuable both for the bank and customers. Ultimately, it helps banks to empower people to better manage their life and business by making financial decisions in a smarter, more transparent and independent way. AI can unleash a substantial increase in revenue, and the key to unlocking this potential is none other than personalization.

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But, as mentioned above, for banks to be able to implement a successful AI strategy, they have to rely on third-party AI platforms and be able to feed them with reliable and massive data. And this is a limitation for banks because of regulations that prevent them from sharing personal or sensitive data. The solution is synthetic data. There are startups focused on generating anonymous insightful data given a sample data set. And they can generate billions of similar data, all the data that is needed to feed an algorithm and create reliable and effective AI models.

define the questions and analyze the data, but the technology will compound the bias in its logic, rendering it dependent on the whims and imperfections of the world. It is crucial that management teams understand the dire consequences that unfair bias can have, both on their business and on society at large.

Data scientists must scrutinize data-collection methods, look for any biases and work actively to diversify their datasets. Then, given a valid dataset, they can rely on a synthetic data generator to produce massive amounts of data that follow the patterns and relationships of that sample dataset.

In Strands’ Making It Personal eBook, you stress on the application of AI in the personalization of the way banks approach customers. Can you give some examples of what can be used by banks in better servicing SME customers?

SMEs are the backbone of the global economy and represent one of the biggest potential sources of revenue for banks, yet they are typically offered banking solutions designed with the retail customer in mind. Our in-house research shows that more than 60 percent of SMEs set cash flow management as one of their top three priorities to help them secure their financial future, but the banking solutions offered today by issuer banks do not address these unique requirements.

Data and algorithmic bias have been a hot topic at the latest FinTech events. Raising awareness about diversity and inclusion is often stated as a priority in many industries, yet many companies fail to set conditions for it. What are your thoughts on the matter?

In the artificial intelligence field, like in many overwhelmingly white and male-dominated tech spaces, efforts to implement diversity policies haven’t been entirely successful. This can lead to unintended consequences and hurt the ethics of AI-powered technologies.

Although deploying biased algorithms doesn’t necessarily entail a conscious intention to discriminate against specific groups, developers must act responsibly to ensure their software is as impartial as possible.

The problem with this is that even the most carefully constructed algorithms only have real-world data to pull from. Data scientists

At Strands we have been working to provide banks with an integrated platform of digital cash management and commercial payment tools specifically designed to benefit their smallto-medium enterprise customer base. Strands’ Business Financial Management (BFM) solution helps SMEs to better understand their finances, project their short-term cash flow, provide more liquidity to their business and engage on a different level with their customers. Our solution offers a comprehensive set of tools and insights to empower SME owners to achieve better and more efficient management of their cash flow and working capital needs, manage accounts payable and receivable, budgets and provisions.

It’s incredibly fulfilling to bring the power of AI-enabled solutions to SME users in order to allow them to predict income, expenses, forecast balances, receive personalized alerts and notifications, and recommend products and services that meet the immediate needs of their business.

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OPINION

HOW AI IS DRIVING THE BANKING REVOLUTION

A

rtificial intelligence (AI) is definitely one of the biggest drivers for change in the financial services industry.

In a few years, AI has made tremendous progress and is helping banks around the globe save on costs while changing the way they interact with their customers.

From enabling frictionless onboarding to preventing payment fraud, the uses of AI in banking are far-reaching. However, the real game changer is its capacity to deliver a robust personalization strategy. «By leveraging AI, banks can turn every interaction with their customers into a guided and meaningful conversation, transforming complex data into relevant customer insights in real time,» says Erik Brieva, Chief Executive Officer at Strands, a leading FinTech company that helps banks leverage Artificial Intelligence-based tech to grow customer loyalty and boost their bottom line.

This sort of interaction not only results in happy customers but impacts directly on banks’ core business and boosts return on investment. «To put it simply, AI helps banks know, help and monetize their customers from end to end, by providing smart product recommendations, targeted to those who need them most,» Mr. Brieva notes.

Why banks need to make it personal The aggregate potential cost savings for banks from AI applications is estimated at 447 billion dollars by 2023, according to a report from BI Intelligence. So far, machine learning has been mostly used by financial institutions to reduce operating costs in mid and back operations such as credit scoring or anti-money laundering.

However, AI still has to conquer the front end space, the domain of user interaction, where it can unleash a substantial increase in revenue.

The key to unlocking this potential is none other than personalization.

Consumers want to feel special. They crave new

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Artificial Intelligence

experiences. As The Financial Brand’s Jim Marous puts it: Personalization gives the impression that people matter on an individual level to the banks and credit unions that serve them. «This is despite the fact that most personalization is an automated process, made possible by the collection of massive data sets and increasingly sophisticated analytics,» Marous adds.

As is stated in many marketing guides, creating relevant and unique customer experiences is key to generating loyalty. Doing so has everything to do with good quality data, and banks own one of the most valuable data sets in the world: transaction data.

The first step in implementing a successful AI-driven personalization strategy is learning how to put all that data to work. Here’s where machine learning comes in handy. By reading and analyzing data through this technology, banks can build deeper relationships with their customers and provide them with personalized digital experiences.

In other words, through AI, banks can improve the financial lives of their customers and be more profitable.

Let’s dive in a little deeper.

Artificial intelligence-powered technology can help banks to: 1. Know their customers in a much richer way than traditional high-level segmentation.

2. Help those customers improve their financial life, regaining trust.

3. Monetize the interaction at the right time in the relationship.

Why is it so important to make it personal?

«Many banks are still leaning on simple forms of personalization, and therefore failing to engage increasingly demanding and tech-savvy

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consumers,» Strands’ CEO Erik Brieva points out, remarking that «true value comes from understanding what the customer needs and helping them achieve it by presenting them with personalized, actionable notifications and next-best actions.»

Banks should implement solutions based on advanced analytics and AI, extracting insights from data to offer the end-user a personalized service that assists them in making more informed financial decisions.

4 reasons to bet on personalization: • Customers expect it. Around 75% of users aren’t satisfied with the level of personalization they currently receive. This means that banks are failing to create experiences that actually engage customers in any real way.

• Customers are willing to give away data to get it. While there are some concerns regarding privacy regulations, around 60% of

consumers are willing to share personal data in exchange for personalized offers, to avoid noise and improve their financial wellbeing.

• Personalization simply helps banks sell more. By providing smart product and service recommendations, banks can monetize their customers from end-to-end. Information helps financial institutions develop new products, and target them to those who need them most.

• It’s key to engage SME customers. Artificial intelligence-driven financial management solutions provide a high number of business opportunities for SME banking institutions. SMEs are really keen on trying tools that help them automatically reconcile invoices and stay on top of their accounts.

A win-win proposition Implementing a personalization strategy is equally beneficial for customers and banks.

Consumers crave to be known, understood and rewarded for their loyalty. They want to build a trust-based relationship with their bank, feel like they are being cared for 24/7 and know that they have the best tools and experts at their disposal to help them make the best financial decisions.

To achieve this, financial institutions need to be extremely good at targeting products and services, and ensure that they only offer solutions that satisfy a specific need or that anticipate a given life event. Banks that pay attention to the psychology of personalization will undoubtedly get better results at connecting with their customers and succeed in building up trust and loyalty.

This article is an excerpt from Strands’ ebook «Making It Personal: How AI is driving the banking revolution.»

The full white paper is available for free download at https://strands.com/.

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OPINION

How AI changes SME finance

Daniel Huszár (efcom) during the CEE SME Banking Club Conference 2019 (Warsaw, October 22)

Artificial Intelligence (AI) is already impacting all of our lives. Prominent examples of current uses include virtual assistants, such as: Alexa, Siri and Google Assistant. Curated (Spotify) playlists based on individual musical taste are another. AI can analyze numerous types of data, such as language rules in order to be able to translate into another language or to recognize speech. Individual behavior is another interesting field, especially for risk analysis within financial products.

T

o understand how AI will impact the financial space, we need to first understand one of the biggest paradigm changes in computer science decades. I will illustrate this change with two examples of AI playing games against human players.

In 1997, an AI developed by IBM called «Deep Blue» beat chess world champion Garri Kasparov. Deep Blue was able to win through

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sheer processing power. Deep Blue was able to calculate 200 million moves per second using a method called decision trees. While this is an impressive feat, the AI did not really «learn» like a human would. The approach IBM used calculates probabilities of the best possible move, going through many possible iterations on the board — winning through «brute force».

The IBM team was allowed to change certain parameters of the AI between matches, acting as a guiding force. This bears a similarity on how

we handle big data in financial risk assessment today — by applying parameters and thresholds based on human experience.

Alpha GO — a new paradigm The year 2016 had another challenge in store for artificial intelligence: the 2,500-year-old Chinese game called «GO». This game cannot be solved by the brute force approach, because there are more possible moves than atoms in the known universe.

The team behind AlphaGo (London-based Deep Mind, acquired by Google) had to use a different strategy to «solve the game». After all, it had to beat the then best GO player in the world: 18time world champion Lee Sedol from South Korea.

In the end, AlphaGo won 4-1 against Lee Sedol under tournament conditions. Sedol remarked that the AI made unusual moves that no experienced human player would have ever made, because they are considered «bad» under the given circumstances. It turned out that the AI showed its creative genius with exactly this

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Artificial Intelligence kind of moves. Another famous player, Fan Hui, the European champion, remarked that the way AlphaGo approached the game taught him to be a better player.

The AlphaGo team used a technique called Deep Learning to accomplish this result. This neural network approach is much closer to the workings of a true self-learning system, like the human brain. Neural networks take a description of the Go board as an input and processes it through a number of different network layers containing millions of neuron-like connections.

To beat the strongest players, an AI «brain» needs to be trained. AlphaGo was trained using recorded moves of human players. After this initial phase, the AI mimicked these strategies and played thousands of games against itself.

Based on this training, AlphaGo is able to recommend the best plays in a given situation.

The crucial paradigm change is to let software write and improve itself based on experience (training), instead of human developers writing code.

Practical applications within trade and receivables finance In today’s world there are many possible applications for AI in the financial sector. One of them is the assessment of risk in factoring.

depending on a banks risk strategy. This parameterization is comparable to the IBM chess team who acted as a human adjustment to the AI by changing its parameters after each game.

This could be problematic in the future, because it is very inefficient to think of a rule for every situation or detail that the computer will encounter. Additionally, this limits us to past experiences with fraud. Ideally, we want the algorithm to find the necessary patterns and corresponding rules on its own. With vastly growing amounts of data, the challenge will be to continue making the correct risk decisions while handling higher and higher volumes of assets.

A true AI approach could help us to find new patterns that teach us new things about the «game» of financial risk. This could lead to immense growth, because we could scale and automate risk control to a much higher degree.

efcom offers a standard factoring solution: one of its modules is a parameter-driven riskmonitoring tool, which is able to tell whether an invoice is fraudulent or not.

Risk parameters for current solutions are all based on human experience of past instances of fraud. These experiences are translated into code and can be weighted using parameterization

Daniel Huszár, efcom Scan the QR code to watch Daniel’s presentation during the CEE SME Banking Club Conference 2019

During the «SME finance PAnel» Panel. From left to right: Michał Pawlik (SMEO), Christian Ruehmer (Q-Lana), Daniel Huszár (efcom), Auke Douwe Veenstra (Cloudlending at Q2), Michał Tusznio (ING Bank Śląski)

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COOPERATION WITH FINTECHS

START IT @K&H — AN INCUBATOR PROGRAM LAUNCHED

BY K&H GROUP IN HUNGARY

S

tart it @K&H is the largest corporate incubator program in Hungary — launched and backed by K&H Bank — that supports startups in their development. Its main goal is to support, strengthen and boost the Hungarian entrepreneurial ecosystem.

Unlike other incubators in Hungary, Start it @K&H is based on CSR, which means a „no share, no equity” model with free services for participants.

During the incubation period, participants are not involved in the bank’s everyday tasks or the focus of the Group’s investors or shareholders.

The bank supports startups with huge potential (usually at an early stage) for 6-18 months, by providing help with product development and finding investors for their plans:

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• 0-24h available working space in Budapest (280 sqm) and Győr (135 sqm) for selected startups so they can work on their ideas anytime; • 40+ mentors (who are experienced in the corporate world or in the startup ecosystem) can assist in development of the startups; • Throughout a detailed training program, with the help of experts, the participants can achieve practical skills needed for later stages of their ventures; • Regular networking events are key to creating and maintaining business connections with future investors and business partners; • The best startups have a chance to gain international experience during the incubation period: for example, by visiting international hubs of Start it @KBC (Belgium, USA, Czech Republic).

To participate for a min. period of 6 months, startups have to apply online and pitch their ideas on a Pitch Day. The jury for this event is always made up of mentors and experts in entrepreneurship.

There is no industry restriction on participating startups; the incubator is not solely fintech focused. Start it @K&H has helped 50 earlystage startups from 15 different industries since October 2017, attracting more than 4 million EUR of external market investment during this period. Currently 33 startups are active in the program, thus making Start it @K&H the largest corporate incubation program in Hungary.

More info: https://startitkh.hu https://facebook.com/startitkh hello@startitkh.hu

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Cooperation with fintechs

HOW DATEIO ENHANCES PAYMENT DATA Dateio is a fintech company founded in Prague (Czech Republic) in 2013. Ivan Dovica, Dateio’s COO & Co-founder, explains how payment data can be used for customer’s analysis and decision-making processes.

The digital disruption Challenger banks have been disrupting the banking environment for the last few years, but now the big players are finally realizing their power. Even the SME banking industry has welcomed a few new entrants. But how are the challengers changing the game? User experience.

They have developed easy and fun to use interfaces to which traditional banks haven’t yet adapted.

We know challenger banks mainly from the B2C environment but people in companies are still just people, therefore ease of use and friendly interfaces in SME banking has become very important too.

customers who are then forced to google the name of the merchants to find out if they are being scammed.

On the other side, banks have information about billions of transactions, yet they don’t know how to draw insights from them. Payment data enrichment helps both sides obtain insights from payment data and easily navigate with online banking interfaces.

Solution and benefits for SME’s Dateio has developed a technology that connects the payment data with information about the GPS location of the store, clear brand name, logo of the company and category which opens doors to new opportunities.

On the side of SME, benefits of enriched data start with simpler, easier, and thus faster, navigation for everyone involved starting with approval of payments to accountants.

By gaining insight regarding in which category and in which particular company’s employees are spending most of their resources, financial

departments can get a better understanding of costs, their attribution to individual companies, or even optimize them. Until now, determining this information regarding card payments was a difficult question.

Accounting can be more automatized by sending payments from chosen merchants directly to the accounting cost centers.

Also, security and overall spending control can be improved. GPS information helps with fraud detection such as when an employee is on a business trip in a certain location, but payments are happening somewhere else. A set of rules can be created so the employee card can only be used at certain locations, at a particular merchant or for a specific category.

Ivan Dovica, Dateio

The Problem One of the main pillars which banking is based on is payments. It is surprising how such a key feature is being neglected in many ways, especially in the 21st century. Some of the fintech buzzwords are “big data”, “data analytics”, “business intelligence”, “AI”, etc., and yet banks are still not able to tell their clients trivial information such as where exactly we made a payment in terms of the correct brand name, location, etc.. How can we expect them to deliver any extra value out of the payment information?

On one side, the bank clients must still be decoding imprecise payment strings in their payment history and face the banking interface accounting system from the ’90s. This confuses

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Scan the QR code to watch Ivan’s presentation during the CEE SME Banking Club Conference 2019

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INTERVIEW

HOW TO ENSURE BETTER SERVICE QUALITY IN THE SMALL BUSINESS SEGMENT Olena Gryniuk (SME Banking Club) talked to István Fetter, Head of the Small Business Division at CIB Bank (Hungary), about competition on the Hungarian market and how they are servicing SME customers at CIB Bank.

can calculate themselves the best deal based on their given data and chosen product features, and receive a non-binding indicative loan offer.

We also use our award-winning mobile app to sell products for our clients.

W

hat is your segmentation of small business customers in the bank, and how many small business customers do you have in your portfolio?

Small entrepreneur customers include individual businesses, business associations or small-scale agricultural producers with less than EUR 1M net annual revenue, managed within the Retail Division of CIB Bank. In certain cases, we also manage in this segment clients with higher net sales. We have almost 55,000 small business clients, which represents more than 10% of the Hungarian market. We have a different segment for companies with net sales amounting to between EUR 1M and EUR 50M; they are managed under the Corporate Division.

What are the main channels of acquisition of small business customers at CIB Bank at the moment?

We have an omnichannel acquisition strategy, so we use advanced CRM, IT and other models to acquire new small business clients.

However, the most powerful way to get new clients is still based on personal contact and recommendations, i.e. word of mouth remains a key driver. CIB Bank has 64 branches with more than 85 small business banking advisors.

Besides having branches all over the country, we have set up an Acquisition Team to contact prospective clients instantly, to serve them and to provide them with a flexible, tailor-made service even at the client’s premises. We analyze

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all available data on our potential clients, which enables us to offer them pre-filtered loans, suitable account packages or POS offers. We have a dedicated Small Business Team at our Call Center (CIB24), which is also responsible for acquiring clients via cold calls besides our small business advisors. One of our strategic goals in 2019 was strengthening and deepening cooperation with third parties (mortgage and insurance partners) to further broaden our sales team, just as we had already successfully done in our Consumer Segment. Thanks to these efforts, now there are more than 20 contracted partners’ agents, which is like having several thousand more colleagues to acquire new clients. It is increasingly important for customers to have the possibility to consider various options and to have a trusted aggregator or advisor to find them the best deal. We put a great deal of emphasis on acquiring new customers through digital channels as well. We use Google AdWords and aggregator sites to make CIB Bank more visible on the market. We have a unique online platform (Small Business Loan Offer Generator), where small businesses

Which digital solutions do you have right now for your small business customers?

We have a wide range of digital solutions for small businesses, such as the CIB Mobile Application, CIB Bank Online, CIB Internet Bank, Business Terminal, eBroker and CIB Mobilbank.

Our responsive CIB Mobile Application can be used both on iOS and Android, and all relevant banking functions are available within the app (e.g. free notifications about transactions, balance queries, current account(s) and transaction overview, transfers, savings handling, etc.). Our internet banking platforms are also easy to use and are available almost on every device (PC, tablet, mobile). A web browser is all that’s required to arrange for the most important banking operations. Our recent analysis shows that 87% of our clients have been using at least one digital channel, of which 77% do so on a regular basis. 68% of our customers use the CIB Mobile Application, of which 75% use it frequently. Basically, all payments are done online in the small business segment, and CIB Internet Bank is the strongest channel in terms of online payments. We also have a state-ofthe-art treasury platform, through which small business customers can immediately receive the quotes they require.

What are the main challenges banks are experiencing on the Hungarian market in the area of services for small businesses?

Do you feel the competition from Fintechs?

The most important and challenging question is how to ensure better service quality in the small business segment. The name of the game is who is going to own the client relationship, whose digital platforms are going to be used and who gets the clients’ most important assets, namely their time and attention. It is by far not only being the cheapest and fastest, but sending

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Hungary

that message in clear language, after having completely understood your client’s needs, and keeping your word both in terms of quality and deadlines. There is strong competition among banks on the Hungarian market, in which you must have a clear vision on how to reach clients, earn their trust and fulfill their expectations.

Fintechs do not provide more advanced solutions to clients; however, they are able to provide certain services faster or at a lower price.

These are important considerations, but not enough in the long run, where a trusting, strong relationship makes all the difference. However, banks have a lot to learn from Fintechs and should further decrease margins and complicity in all areas, including products, processes and communication.

What is the main advantage of CIB Bank on the market? Why are small business customers choosing to open an account with you?

CIB Bank has a stable, international background thanks to our Italian parent company, Intesa Sanpaolo, which is one of the largest banks in Europe in terms of market capitalization. A lot of

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great initiatives and ideas are originated by them, which can be easily implemented generally by sharing best practices and working together with other subsidiaries. CIB Bank has branches all over Hungary, so we’re easily accessible to clients throughout the country. In 2018 we introduced a new client service model in our branches, which enables us to transform the process of opening an account into a pleasant journey for the customer, where they are greeted by a dedicated employee upon entering their branch, who then helps them find the most useful channel to manage their finances. We have worked up a set of various current accounts (CIB Partner current accounts) for small businesses, which can be chosen according to the client’s individual characteristics.

What does CIB Bank do in terms of highquality customer service?

We continuously train and develop our banking advisors. We have a unique program, the Small Business Academy, which ensures that our advisors provide real solutions to our clients’ well mapped and thoroughly discussed needs. The Academy has 3 different modules, and every module focuses on different topics. The skills our

colleagues pick up during these modules makes them unique on the market, which ultimately benefits our clients.

Visit CIB Bank HQ during the Study Tour in Budapest on March 30-31, 2020. For more details, visit pp.44-45 *The above information is incomplete and is intended solely to raise awareness. The detailed terms and conditions of the products are contained in the prevailing list of conditions and in the General Terms and Conditions.

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INTERVIEW

BEING THE BEST BANK FOR SMALL BUSINESS CLIENTS Marcin Woźniak, Commercial Bank CEE Head at Citibank, talks to Olena Gryniuk about working with the SME segment at Citibank

H

ow many banks in Citi Group (and in which countries) are involved in servicing SME customers here in the CEE region?

In the CEE region, Citi serves SME customers in Poland, Russia, Czech Republic, Slovakia, Hungary, Romania and Turkey. We have local teams on the ground in these countries and provide clients with a full range of banking products.

What is your segmentation of SME customers in the Group?

We actually do not use the term SME at Citibank or in our Commercial Banking segment. We address different client needs by allocating them to either the Emerging Corporate segment, which covers smaller clients, managed by the owner or owner’s family or Mid Corporates, who are usually professionally managed and use more complex services. Our Emerging Corporates, clients with annual sales from USD 5 mln up to USD 100 mln, are probably closer to the definition of SMEs in CEE. What is the Group’s strategy for servicing these customer segments in the coming years?

We would like to be the best bank for these clients. The way to achieve that is to have the best bankers in our teams, an outstanding service model and record turnaround time for onboarding and lending in the industry. We also plan to digitize our processes to be able to respond faster to customer needs.

What are the main acquisition channels for SME customers at the moment?

In our acquisition process, we do not use any channels other than RM and we do not plan to. We carefully prepare ourselves for each and every client meeting so that we know what their needs might be and what we should offer. We don’t want to become an online supermarket for prospective customers. We want to offer the services of our best-in-class bankers who are able to tailor a proposal to client needs and advise on possible solutions and options. We do not acquire and do not plan to acquire our clients via online channels. Of course, there are some customers that send us inquiries through our webpage contact details or Facebook profiles, but this is not going to be a strategic channel for the client segment that we would like to acquire.

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Which digital solutions do you have right now for your SME customers?

Apart from the obvious electronic banking solutions, we are able to provide our clients with an online FX platform where they can trade foreign currencies online, book FX forwards and options and use our information services. The platform also has a risk management module that helps our clients to manage their FX risks. In addition, we offer our clients integration of electronic banking with their ERP systems offering multiple variants and advancement levels. We are adopting digital signatures where possible to digitize the documentation that we sign with our customers. Our clients are able to switch transactional communication with us into a simple file exchange, where all the transactions, confirmations and statements can be exchanged directly between client and bank servers without any human intervention. Our digital solutions allow our clients to have access and transact with Citi on all of their accounts, not only if they work with us locally, but also in other countries.

FEBRUARY 2020

Kosovo

A bank as a reliable, long-term and trustworthy partner that meets clients’ needs Olena Gryniuk talked to Arton Celina, CEO at BPB (Bank for Business), about their transition to specialized banking for SMEs in Kosovo, their competitive advantages and challenges.

B

PB is a specialized bank for SMEs in Kosovo. You’ve undergone a transformation process to adapt the bank to that format. What were the main challenges you experienced during that process? And how exactly does this differentiate you on the market in the eyes of SMEs in comparison to other universal banks?

BPB is a local bank in Kosovo primarily focused on Micro and Small enterprises and households, with a vision of being a reliable, long-term and trustworthy partner that meets clients’ needs, generates sustainable growth and adds value for all the stakeholders. By the end of 2016, BPB shifted its market strategy and approach completely by realizing its vision to become the bank of choice on the SME market. Hence it was of utmost importance we put the client at the very center of the banking ecosystem and we are very keen to use the latest technological developments to advance our services and introduce innovative solutions to best benefit our clients. At the same time, we place great emphasis on properly screening our clients and ensuring full compliance with applicable law and regulations.

As a bank oriented towards Micro and Small businesses, we based our business model on the development of our clients in terms of both financial and non-financial services.

SMALL BUSINESS BANKING MAGAZINE

During the last three years, BPB continued to demonstrate that it aims to be the bank of choice for our target clients. With its strategic shift in positioning towards the market, BPB was able to unlock the full potential of upper Micro and lower SME clients, including the agro sector, where BPB holds a 15% market share. Apart from providing access to finance, BPB analyzed all market developments, then applied the best possible approach to assist clients in their business development, while playing a crucial role as a catalyst in support of this client profile. The abovementioned sectors comprise more than 90% of business entities in our country. Even though the domestic economy includes a variety of activities, it is dominated by Micro and Lower SMEs, which play a vital role in Kosovo’s economy, and are the biggest providers of employment opportunities.

As a result, BPB’s strategy proved to be correct for Kosovo. The structured methodology of the bank towards clients and staff increased even more after we accepted our role in the development of the economy, by defining clear goals and actions to excel in our objectives. Aligning head office personnel with front office staff enabled

the bank to serve our targeted categories efficiently. Furthermore, we managed to offer the service while following excellent customer service practices, determined to build upon the strengths of BPB staff. As a result, the bank prudently orchestrated the necessary steps that should be taken to ensure that the strategy we had adopted was as successful as anticipated.

Apart from daily activities, the bank made sure to plan and accomplish major milestones that demonstrated the bank’s determination to contribute to the market.

In this respect, we have streamlined processes for SMEs, making us the fastest bank in the market regardless of having the highest labor intensive business model. Having always in mind the triangle of staff, clients and shareholders, we have specifically addressed our market challenges thanks to policies and procedures for creating the best possible SME Packages. As a result, we apply and assess client needs rather than client requests through a structured method called Credit Limit Service, where we assess and approve the short- and long-term needs of the client accordingly. Apart from process optimization

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INTERVIEW

Arton Celina, CEO at BPB

and advancements, BPB has invested heavily in infrastructure as well. Nowadays, SME clients have complex needs and expectation from a banking partner, so we consulted with our clients and reshaped our branches in terms of structure and formations. BPB is present in all regions of Kosovo with Main Branches, Service Centers and Service points, by offering 24/7 areas in main branches where clients can independently carry out all their banking transactions. In addition, we introduced Business Corners in 7 Main Branches that are equipped with the latest touch screen PCs. Business corners are one-of-a-kind environments in our market because they are located within branch premises where clients can interact with a business Client Advisor and independently carry out banking transactions.

What is your segmentation of SME customers in the Bank? And how many SME customers do you have in your portfolio?

Our current segmentation in SME business lines consists of: • Micro Business Clients with annual turnover up to 500,000 • Small and Medium Business Clients with annual turnover of 500,000 to 2 million Currently, we serve a broad client base consisting of 6,850 loan and non-loan clients of which 4,250 are credited and use our wide range of credit and non-credit services

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What are the main channels of SME customer acquisition at the moment?

Though Human Interaction Channels continue to shrink and we are very keen to expand our reach through Omni channels, our main market advantage is BCAs (Business Client Advisors).

Currently, we employ one of the most prepared team of BCAs with an average of 5-8 years of experience in the banking industry, which gives us a solid position with respect to market developments and expectations.

What percentage of customers are acquired online and via RMs/branches? Do you plan to change this proportion? And how so?

Current acquisition of BPB clients via the Web Application is around 10%, all of which are requesting access to finance that usually has a 20-30% success ratio. Though we are preparing to expand our points of contacts through different channels as well as ATMs, by preparing a Credit Scoring infrastructure where clients will be able to communicate and request banking services.

This will be possible because the bank has significantly invested in technological and digital services in multiple areas. Leading is a completely new E-banking platform that stands above other platforms in terms of user interface and features available for PI and Business profile users. In addition to functionality, the dashboard can also be configured according to user preference. It

is accompanied by an advanced secure mobile token application, making it easier to use and far more personalized than those requiring physical token devices, while featuring the highest security levels.

Likewise we introduced the new M-banking application that delivers the ultimate experience with its easy and personalized interface. M-banking enables clients to carry out all transactions and review account related information, with an advanced, yet very userfriendly application.

In addition, we have introduced a new, stateof-the-art, touch screen ATM-fleet, produced

by NCR. They’re all equipped with self-service features that enable our clients to perform several services, including a deposit service which proved to be one the most important time-saving features for our clients. We have equipped some of our strategic business clients with deposit cards so that they can quickly/safely deposit their daily turnover. In a further advancement, starting in May, the bank will introduce deposit reasoning for business entities, enabling them to distinguish their deposit types.

Although BPB is determined to offer advanced electronic services, in parallel we made sure to provide a cutting-edge environment in our branches. Tailor made Business Corners were introduced in all of our main branches throughout all 7 regions in Kosovo. In Business

FEBRUARY 2020

Kosovo Corners, clients can access touch screen PCs and initiate E-banking transactions, in addition to having an ever-present business client advisor to tend to all their needs.

Simultaneously, the bank has recently introduced a new self-service area — Non-Stop Banking 24/7. The area is designated for personalized use and is accessible 24/7. It provides privacy and a wide range of equipment for carrying out all banking transactions and accessing services independently. The zone is equipped with a deposit ATM, touch screen PCs and an online phone directly linked to our call center.

Withdrawals, deposits and money transfers are just a few of the transactions available to clients in these self-service areas.

free in terms of service and transactions, and that the invoice has a built-in no-interest waiting period, which was carefully measured in transactions performed through our bank. We are proud to have provided a Business Ecosystem for our banking industry that enables both the bank and clients to dare and ask for more from their banking and business partners. This win-win situation has started to pick up and new Micro clients are joining the bank to get their supplies through the club.

BPB has already introduced a specific Suppliers Club whose members include the largest suppliers and we have just finished signing up members from another industry to provide supplies for more than 100 clients for which the bank has approved limits for invoice payments.

Which digital solutions do you offer your SME customers at the moment?

In crediting SME clients, data analytics proved that one of the main barriers to growth in the micro sector is their inability to create scales for their supplies and create a mark-up on their sales through better supply prices. The competitive advantage was missing in many cases. We found a solution to this problem by creating specific arrangements with large suppliers and negotiating deals with them on behalf of our micro clients according to the industry they operate in.

So the cluster approach service that we called the Supplier’s club was introduced for the first time in our country, and proved to be one of the most innovative business platforms for our client profile. Our experienced Business Client Advisors, accompanied by business managers in the head office, negotiated better terms and deals for our clients to show that we are interested in both financing and providing flexible and advanced banking for their business transactions. As a platform, it empowers the bank to link suppliers with buyers. By being a client of our bank, Micro clients can achieve better value in terms of pricing from their suppliers, while suppliers gain a channel to communicate with our micro clients in groups that are managed by us. As a bank, we settle their invoices as an intermediary in financing micro client working capital in a fast and efficient process flow. It works through a platform connected to suppliers in the same industry and all of them have access to the approved limits of their buyers via SMS notification. Additionally, the SMS channel provided for these transactions works both ways by enabling the Micro client to initiate, confirm and inform the supplier that a payment has been made. It is worth mentioning that the platform is

What are the main challenges banks are experiencing in the local market in the area of services for SMEs? Do you see Fintechs as competition?

The main challenges in our market and overall in the Balkan region are related to whether we will be able to adapt our financial institutions instead of experiencing disruption in financial services.

SMALL BUSINESS BANKING MAGAZINE

chain) and the emergence of Fintechs. In this regard, we are working on an important project to open up our systems through the development of Application Programming Interfaces (APIs) which would enable the bank to harvest the best technology to the increased benefit of clients and achieve greater agility and faster deployment of innovative market solutions. The next step is introducing M-POS and wallet payments, where we are preparing our core banking through the development of API interfaces to accommodate new developments. Wallet payments and M-POS will help our clients to have faster access to cash and increase our banking potential with them.

What are the main challenges for SMEs in Kosovo? And how do you help them to overcome these challenges and grow their businesses as a bank?

We conducted a survey with more than 200 SME clients that indicates that SMEs face and struggle to overcome similar challenges in order to sustain their development. In this regard, we have divided these challenges into internal and external factors.

Internal

External

Debt collection

Price oriented competition

Small Market (limited opportunities)

Lack of the Rule of Law

Access to new markets

Fiscal evasion

Low margins

Political stability

Lack of specific trainings

Inability to plan long term

Rent Costs

Technological changes

Formalization

Access to macroeconomic information

As a result, the main challenge involves facing severe difficulties in attempting to transform our business, with the constant aim of increasing financial inclusion. Hence all banks should be aware of the services offered by Fintechs, especially since PSD2 is already implemented in some countries. We should be able to predict how we and Fintechs can coexist in the same environment. Therefore we have a different approach toward such service providers by being open to cooperating and having in mind one specific objective: better serving our clients while remaining financially stable.

BPB recognizes the increasing expectations of clients as well as the opportunities and challenges posed by increased use of smartphones and mobile devices in general, the latest developments in technology (particularly block

As a result of our survey, we have already invited several possible strategic partners to join us in piloting a specific training package that will help business owners to address those challenges.

We have received a positive reaction, but also previously coordinated several activities to address these challenges during our operations by providing adequate credit and credit services.

We believe that the fact that BPB is a home bank for Upper Micro and Lower SMEs shows that we were not afraid to take the long road to success. Internal analyses show that SMEs in our portfolio have increased in equity by 27.5% and in sales by 19.5%, indicating a healthy trend in the growth of the businesses, while Micro businesses have grown in sales by 24.3% and in equity by 23.4% compared to the previous year.

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OPINION EVENT

THE ROLE OF DLT ON MSME FIRMS IN THE INTERNATIONAL TRADE INDUSTRY Deepesh Patel, Director of Partnerships & Marketing at Trade Finance Global (TFG)

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n September, the Asian Development Bank (ADB) released the results of the 2019 rendition of their annual Trade Finance Gaps, Growth, and Jobs Survey. The survey indicates that the Trade Finance Gap has held place, remaining at its daunting $1.5 Trillion.

The barriers to trade finance, and largest drivers for the maintenance of the gap, remain predominantly unchanged from previous years surveys. KYC and AML requirements remain the most cited barrier, with high transaction fees, and low credit ratings rounding out the top three. Micro, Small and Medium sized Enterprises (MSMEs) remain disproportionately affected by these and other barriers, experiencing a 45% rejection rate on proposals, much larger than the 17% seen by multinational organizations.

This limited access to financing for MSMEs inherently lowers their economic participation, and consequently their job-creation and growth prospects. While these challenges remain paramount, Distributed Ledger Technology (DLT) holds considerable promise for alleviating some pressure.

The Promise of DLT Perhaps the most widely known and oft cited opportunity for DLT in the trade and shipping space is its ability to streamline tedious processes, driving efficiency and slashing costs. In partnership with the World Trade Organization (WTO) and the International Chamber of Commerce (ICC), Trade Finance Global conducted a survey of DLT experts in the trade industry in an attempt to flesh out the industry perspectives of the challenges and benefits faced. When asked to list their top three benefits for DLT in the trade finance sector, 44 per cent of respondents to this survey using or developing DLT indicated gains in speed and efficiency as being part of their top three, and 35 per cent indicated cost reductions. These trail

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behind only transparency, with 55 per cent, as the most indicated benefits.

The immutable and distributed nature of DLT instills trust through a direct, digital, and transparent environment. Real time, trusted data flows, enabled through a combination of cryptography and digital signature technology, have been touted by many experts as facilitators for automated and simplified practices such as KYC, AML, and risk assessments. The cost savings for this digitization is twofold: automating the current labour intensive processes and reducing risk by making illegal practices such as Trade Based Money Laundering (TBML) increasingly more difficult to pursue. In general, expert views support those held by the mainstream media that DLT presents a tremendous opportunity

to cut costs and improve efficiency in the trade and shipping space.

How DLT will impact MSMEs The generally cited benefits for the trade industry adopting DLT, seem to apply particularly to MSMEs. For firms in this category, there are two distinct benefits that emerge.

First, is its ability to instill a bi-directional sense of trust. The first direction is from the MSME to their bank. By recording business data on a DLT network, MSMEs will become more transparent to potential financiers, opening new financing options that they may currently be locked out of. The other direction is from the MSME to their counterparty to a transaction. In a lot of cases,

FEBRUARY 2020

Trade Finance

Figure 8: Key benefits of Distributed Ledger Technology (Source: TFG, ICC and WTO Blockchain for Trade Survey, October 2019.

Responses from corporates, banks, consultancies and vendors, n = 202)

MSME customers feel inclined to turn down a transaction either because they do not feel comfortable with it or they are obliged to a prepayment of 100% before they have proof that the goods are ready, a particular obstacle for often liquidity-strapped MSMEs. Utilizing DLT platforms, and their enhanced transparency, will ensconce MSMEs with the confidence to follow through on more transactions that they are currently nudged to shy away from.

The second argument in favour of MSMEs benefiting from DLT is that it opens financiers to providing financing on smaller transactions, which often come from smaller firms. This stems from the idea that, while trade is a very paper cumbersome industry, the amount of paperwork required remains relatively stagnant even as the ticket size of a transaction increases.

From the financier’s perspective, the answer of where to allocate limited resources, like due diligence researchers, is easy to determine when costs are equivalent throughout all allocative possibilities. One can simply devote resources to the highest ticket items available,

SMALL BUSINESS BANKING MAGAZINE

until there are no more resources left to allocate.

Often, without DLT, the limited resources leave MSMEs underserved. However, DLT promises to drastically increase speeds, reducing what used to take hours or even days, into mere seconds.

This means that the amount of work required to finance each transaction goes down, freeing up more time and resources to apply to more transactions. This will inherently allow financiers to lower their threshold for accepting tickets and serve smaller firms. This means that MSMEs will benefit from receiving financing where previously they would have none.

Conclusion MSMEs face many daunting challenges in an international trade environment populated by larger, established peers. The existing means of international trade and trade finance leave these MSMEs vastly underserved and underfinanced.

DLT networks are promising to address many of these challenges are poised to help level the playing field for MSMEs by improving transparency and efficiency.

Written by Deepesh Patel Trade Finance Global Deepesh Patel is Director of Partnerships & Marketing at Trade Finance Global (TFG). In this role, Deepesh leads efforts in developing TFG’s brand, relationships and strategic direction in key markets, including the UK, US, Singapore, Dubai and Hong Kong. This includes TFG’s fintech platform and blockchain projects. Deepesh regularly chairs and speaks at international industry events including at the World Trade Organization Public Forum, The Telegraph’s Future of Trade & Export, BCR Consortia, TXF Geneva, Excred Commodities, as well as FCI and ITFA’s Annual Conference.

He is a regular contributor to specialist trade journals and is Editor of the publication ‘Trade Finance Talks’. In addition to his work at TFG, he is a strategic advisor for WOA, a board member of ITFA’s Emerging Leaders Committee, and sits on the Fintech Working Group of the Standardised Trust.

Prior to TFG, Deepesh worked at Travelex where he was responsible for the cards business and the Travelex Money app in Europe, NAM, UK and Brazil.

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Professional All inclusive All information and advice are provided by experts with banking experience at managerial positions in various areas a stipulation which is confirmed by the recommendations of banks’ top managers.

You will receive comprehensive support in all key areas (reports, events, recommendations and networking, news and information), necessary for the development of SME segment.

Unique You get access to detailed analytical reports on markets, annual studies; access to the information that is not available anywhere else on the market.

Profitable It costs you â‚Ź 6 per day. Also, you can save up to 50% on additional services of SME Banking Club.

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CIS & Caucasus SME Banking Report 2018 SME Banking Outlook for CIS & Caucasus region and detailed analysis per countries: Armenia, Belarus, Georgia. Kazakhstan, Ukraine. Banking Groups Overview for CIS & Caucasus region in SME Banking segment Language — Russian

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Ask for your copy at cee@smebanking.club

INTERVIEW

SMEO — DIGITAL FACTORING FOR SMES IN POLAND You acquire 70% of your customers online, and you have a fully digital automated decision-making process and disbursement. How much money have you invested in IT systems?

Technological innovation is key to SMEO’s position as an industry leader in Central and Eastern Europe. We’ve invested EUR 1.1 million in R&D and technology. But that figure only tells part of the story. Anyone can pump investment money into a complex system. At SMEO, we understood the traditional factoring product well enough to target areas for optimization and efficiency. So, we use the technology in ways that actually drive revenue and improve the customer experience.

SMEO is a factoring company in Poland, providing purely online factoring services to SME customers. SMEO has worked in the Polish market since 2018, winning almost 2,000 customers and processing invoices worth over PLN 180 million. Olena Gryniuk talked to Michal Pawlik, CEO and CoFounder at SMEO, about the company’s 2019 results and future plans.

Michal Pawlik during the CEE SME Banking Club Conference 2019 (Warsaw, October 22)

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as 2019 successful for SMEO? What were your main achievements?

First, our turnover this year was tremendous; we processed invoices valued at over PLN 180 million. Also, we were able to establish a successful partnership with Santander Leasing.

This deal is already generating significant revenue for both Santander and SMEO. In one of your presentations, you showed the statistic that only 10% of entrepreneurs in Poland know what factoring is. And 4% of SMEs use factoring in Poland. For other markets in the CEE region, this percentage is even lower. How do you deal with that?

How do you educate small businesses?

We believe that educating our market is the key to our success. That’s why we spent more than EUR 1.2 million on marketing in 2019.

We know that the knowledge gap won’t be closed overnight, but we also know that once entrepreneurs understand the value of our product, they immediately want access to it. This explains the incredible growth we’ve seen. All it takes to educate the public is time.

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Who is your customer exactly? Can you describe the profile of your average customer?

At SMEO, we view any viable firm as a potential customer. For some financial institutions, entire industries can count themselves as persona non grata, for example TSL (Transport Shipping and Logistics). Often, banks and institutional lenders treat them unfairly. We don’t.

Now, we are focused on small and medium sized firms. This is a market segment that has been historically underserved by financial institutions.

But these businesses are the lifeblood of our economy. As a macroeconomist myself, these dynamics are important to me. They are our foundation! At SMEO, we aim to treat them with the respect they deserve.

What is the maximum amount you finance per customer?

Customers have a limit of EUR 60,000, or PLN 250,000. As of the fourth quarter of 2019, SMEO provides financing in both currencies: PLN and EUR.

The other 30% comes from partners. Who do you partner with? And do you do this as a co-branding project or white label?

We believe that the way forward for many FinTechs is to seek out partnerships and the accelerated access to clients they represent.

SMEO has developed both co-branding and white-label partnerships. We have more than 10 active partnership agreements. Most of these are with financial institutions and IT companies.

How many people work in SMEO? How many of them are IT personnel?

We have 35 employees. More than 30 percent of our workforce is in IT. Now you work on the Polish market. Have you been thinking about expanding SMEO to other markets in the CEE region?

Our plans for expansion depend on partnership agreements that I can’t talk about in detail right now. Nevertheless, our home market is Poland; we are focused on improving our offering here and reaching our 2 million businesses. This is a very entrepreneurial country, which means there’s a lot of room to grow at home.

Scan the QR code to watch SME Banking Club’s Webinar featuring Michal

FEBRUARY 2020

Trade Finance

DIGITALIZATION OF TRADE FINANCE SERVICES The Overview of the digitalization of trade finance services for SMEs in the CEE region

I

n the digitalization of trade finance services, it is essential to focus on both short-term improvements in processes and long-term innovations such as blockchain.

Still, most documents connected with trade (invoices, bills of lading or inspection certificates, etc.), remain in paper form. For companies involved in trade, this volume of paperwork is challenging, especially for small businesses that have neither the time nor the resources for bureaucratic procedures, which is why they try to avoid such complex paperbased documentation processes in banks. For banks, such manual processes only pay off with corporate customers. As a result, SMEs remain underserved in this area.

The only way for banks to increase the portfolio of LCs or guarantees issued to SME customers is to simplify and speed up processes and make interaction with the bank seamless for customers. And that means automatization and digitalization.

Automation and digitalization not only make it possible to streamline bank processes for customers but also to process documents more efficiently, as well as eliminate and auto-correct errors.

To take a look what is happening in this area in the CEE region these days, I’m turning to a study devoted to online banking solutions for SME customers, which we launched last year at SME Banking Club.

The scope of the study involved an analysis of 100 parameters of online banking solutions from 25 banks that work with SMEs in the CEE region (covering Poland, Romania, Bulgaria, Hungary, Serbia, Slovakia and Czech Republic).

With this set of 100 parameters, we are setting a kind of benchmark for the main functionalities that banks should have for the SME segment.

And what we see in the region as a result of this analysis is that in the area of trade finance products 30% of analyzed banks implemented an

SMALL BUSINESS BANKING MAGAZINE

online Trade Finance module, which includes the following functionalities: • List of Guarantees • Guarantee details • Templates • Reports • Letter of Credits list • Export/Import of LCs • Templates In ING Bank Śląski, a customer can apply for a Guarantee or LC via online banking, see the list of existing products, their expiry date, etc. Also, the bank implemented e-Guarantee, which is an electronic version of the standard bank guarantee securing a company’s transactions.

A customer can verify the compliance of signatures placed on the e-guarantee through the bank’s application and receive confirmation in the form of a pdf file.

In Ceska Sporitelna in Czech Republic, the main functionalities are also available for the customer online.

More details are available in the Full Study. Join SME Banking Club to get access us at cee@smebanking.club The transactional module in online banking solutions includes an overview of account

Trade Finance • •

Guarantees,

•

Export Documentary Credit,

•

Discount products with Receivable Purchase Application,

•

Order for collection payment.

balances, transfers in a local currency, and international and domestic transfers in foreign currencies and this is implemented at most analyzed banks. So, this has become a musthave.

Implementing the Trade Finance module gives a competitive advantage to banks. This definitely provides added value to customers and empowers them with self-service banking, which will generate new revenue streams.

With respect to the topic of long-term innovations and applying blockchain in trade finance, a separate article is needed to cover this. Some individual companies and consortia are working on trade finance-related blockchain solutions. A number of banks have invested $107 million into R3, a consortium developing distributed ledger technology for financial companies. So, we’ll see more cases of its application very soon. In recent news from the CEE region, this past January ING Bank Śląski (Poland) announced the issue of an electronic Letter of Credit using blockchain technology, by which it secured the delivery of goods to the Polish company Granulat Sp.j. from a counterparty in Asia. I’m also sure we’ll see more and more partnerships with FinTechs in this area as well.

Olena Gryniuk CEE Regional Director at SME Banking Club.

ING Business

Import Documentary Credit,

Online Banking for SMEs - CEE 2019

Figure 1. Trade finance module in ING Bank Śląski in Poland.

Extract from the Online Banking for SMEs Study by SME Banking Club (2019)

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INTERVIEW

iFactor – Alternative SME Finance Platform on the Romanian market

Cosmin Curticapean, CEO and Co-founder of iFactor

iFactor is an online platform in Romania that aims to become the first online B2B marketplace, bringing together investors and SMEs looking for alternative financing.

Olena Gryniuk talked to Cosmin Curticapean, CEO and Co-founder of iFactor, about the Romanian market, the company’s achievements in 2019 and future plans.

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iFactor is an online platform both for SMEs that need to finance their invoices and investors looking for diversifying their asset portfolios. Can you tell us more about iFactor? iFactor, as a technology company, envisions a world of innovation, digitalization and cuttingedge technologies, where all legitimate SMEs should have options for their trade finance needs. We are enrolling lenders/buyers from the traditional financial space, banks and NBFIs, as well as private investors, companies, and private individuals. iFactor aspires to offer SMEs a comprehensive range of price competitive technological and flexible finance solutions for working capital needs. iFactor’s first deployed financial product

is factoring and will be followed soon by SME loans. iFactor’s innovation doesn’t only relate to technology, but also to the business concept. iFactor gives customers (both sellers/borrowers and buyers/lenders) the value of the best product at the click of a button.

Was 2019 successful for iFactor? What were your main achievements?

Some of our achievements in 2019 included: • Expansion of our team; • Development of a new version of the workflow engine based on RPA; • Entering post-revenue by acquiring SME customers; • Graduating the Startup GrowPad KPMG Spherik Accelerator;

FEBRUARY 2020

SME Finance • We have obtained clearance for Private Investors to become buyers on the iFactor platform, through a process led by KPMG and supported by the NBR (National Bank of Romania), and we are proud to be the first company on the romanian market to have this documentation approved; • We were admitted into the Scale up Innovix BCR acceleration program from which we will graduate in March 2020. Based on this program, we were selected to pitch in the Startup Grind global conference Silicon Valley on February 11; • We successfully organized the AI in Finance Hackathon and deepened our partnerships with great companies such as CFTE London, KPMG Romania, Bank Transilvania, UiPath, Microsoft, Saltedge, Netopia and others.

How many entrepreneurs know what factoring is on the Romanian market?

Fortunately, enough to start our business, but unfortunately not enough for a sustainable economy. Our market study in 2018 showed that between EUR 150,000 and 2 million yearly turnover, 47% of entrepreneurs know or properly understand what factoring or invoice discounting is.

How do you deal with that? Do you try to educate small businesses? And if so, how?

Our strategy regarding entrepreneurial and financial management education is basically to target our customers’ business growth instead

of sales conversion. We took this approach as we are focused on SME needs and not on the financial product since we are engaged in future technology and innovation instead of today or yesterday’s finance. This translates into using the best technology to convert traditional and alternative data into creditworthiness. Banks have tried to educate entrepreneurs for ages by investing lots of money and the result is still unsatisfying. Therefore, we try to have a 360° approach to SMEs for better access to liquidity. After their first debt rounds, they can join our educational program to gain skills and understanding of how to grow their businesses.

Based on our model of collaborating with SME banks, we are doing shared events on the topic of their platforms and customer base. We organize webinars and meetups in partnership with Rofin.tech, CFTE, Founder Institute and others.

Who is your customer exactly? Can you describe the profile of your average customer?

Our Go to Market strategy splits our customers into 3 target profiles based on a specific timeline.

In Eastern Europe, we target companies with EUR 200,000 to 2 million turnover with some differences based on geography, industry, etc.

What is the maximum amount you finance per customer?

As we also have banks as lenders on the platform, we do not have a maximum cap.

What are your channels for customer acquisition? How many of them do you get via online channels?

We acquire customers through introducers, partner bank databases, online channels and also through direct sales. Online channels are now at only 35% but we aim for them to become mainstream.

How do you cooperate with banks?

We have adjusted our technology in such a way that we can basically offer smart leads to banks, reducing their processing costs and time to decision.

Through our platform they can offer tickets as low as EUR 1,000 for a very short period of time.

How many people work at iFactor? How many of them are IT personnel?

At the moment, IT accounts for 5 of our 12 employees and for some specific capabilities the extended IT team is 10 people.

Now you work on the Romanian market.

Have you considered expanding to other markets in the CEE region?

We plan to expand first in the UK and DACH in the year 2020, but we are also looking to Poland and the Czech Republic around late 2021.

We are aware that the European fintech landscape is dynamic, so we are always exploring and interested in opportunities.

Part of the iFactor’s team

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INTERVIEW

SPOTCAP:

RESHAPING SME LENDING Olena Gryniuk talks to Jens Woloszczak, Founder & CEO at Spotcap, about their omnichannel approach in different markets and plans for the future.

Spotcap is an online SME lender, operating in five countries, that lent more than EUR 400M in credit lines since 2014.

online marketplaces and affiliates. These play a major role in our strategy, as a large portion of SMEs still consult with financial experts on their funding options. These partnerships are supported by content marketing, PR and SEM channels.

Last, but not least, rather than compete head on with traditional institutions, we take a more collaborative approach in markets where we do not operate yet— we provide our technology to financial institutions looking to digitize their SME offering, thus extending our business model to include Lending-as-a-Service (or LaaS).

Service partners as it enables a higher level of automation regarding lending decisions.

Could you share some of your achievements since you launched in 2014, e.g. how much you lent, your default rates, etc? What are your 2020+ plans?

Since our launch, we’ve lent more than EUR 400M in credit lines with low single-digit default rates and have an NPS score of over 70%. Our default rates have been below market averages as a result of our leading risk assessment approach.

Jens Woloszczak CEO & Founder at Spotcap

Y

ou have been providing SMEs with funding since 2014 and have launched operations in multiple markets such as Spain, the Netherlands, the UK as well as Australia and New Zealand.

What are your main reasons to enter these markets?

At Spotcap, we look at opportunities across the globe following our mission to empower small businesses with tailored finance. Each market is unique, and provides a different set of opportunities and challenges. But as a rule of thumb, we entered these markets based on a combination of their size both in terms of number of small businesses and the credit market, the regulatory and banking environments, the balance between interest levels and credit defaults, as well as access to data for our risk assessment.

What was your go-to-market strategy in those markets, and what has worked best?

We have found that an omni-channel approach is most successful. As a direct lender, we set up both online and offline distribution partnerships, collaborating with intermediaries such as brokers and accountants, as well as

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Could you explain which types of SME customers you target across markets?

We target a wide range of micro and small businesses, most of which are limited companies across both asset-heavy and assetlight industries. We also offer financing to sole proprietors with a “light” version of our origination process for smaller tickets, which has particularly interested our Lending-as-a-

For 2020 and beyond, we plan to enter new markets, particularly in Europe, through partnerships based on our Lending-as-a-Service model with banks and other fintechs.

Can you tell us more about your bank partnerships, how have they evolved and what is your role in them? Do you offer white-label or co-branded solutions?

FEBRUARY 2020

SME Finance

Half a dozen institutions from five countries have already selected Spotcap as a partner in their digital transformation during the last 18 months, with the intention to offer a best-inclass digital loan product to both existing and new SME customers. Some examples include our partnerships with BAWAG Group in Austria and Zip Co in the ANZ region with more announcements to come shortly.

Our role differs in each partnership, as it’s tailored to the institution’s specific needs, but mostly we provide a white-label technology solution, as well as expertise as a direct SME lender.

Your product Spotcap LendSuite — a Lending-as-a-Service platform — seems to cover all aspects of a digital lending journey. Could you please explain which components it has, and what is unique about them?

Spotcap LendSuite is our proprietary Lendingas-a-Service platform made up of numerous modules that facilitate onboarding, data processing, decisioning and servicing — all of which allows us and our partners to make credit decisions within 24h. A summary of each: • Onboarding: Our onboarding technology includes multiple white-label web properties that allow customers to apply online in a few minutes. Customers need to submit some basic details, and our application forms fetch the rest through API connections with authorised third parties. Our KYC/AML checks confirm their identity and legitimacy, abiding with both local and international regulatory standards. To finish their application, customers can connect their bank account, upload PDF versions of their documents, or connect their accounting provider.

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• Data Processing: As customers upload their documents, our technology automatically recognises and processes them, extracts the relevant information and supplies it to other parts of the lending platform. Through machine learning, our algorithm can learn to recognise multiple types of documents, such as P&L and bank statements, and can be applied across multiple languages and geographies.

• Decisioning: Our underwriting models generate a credit score for each customer immediately after they apply. A dedicated underwriting dashboard displays important insights, such as trends in income and expenditure, available balance over time, and how regular administrative payments are. For simple cases, our technology can fully automate the decisioning process and deliver a response to the customer, while analysts can use the dashboard to assess more complex cases in less than one working day.

• Servicing: Banks can introduce multiple cost reductions by optimizing their workflows with automation. For example, we developed a highly scalable system that works as a secondary layer on top of Salesforce. Based on information from customer interactions, the bank’s funnel structure and service level agreement, the system automatically generates, prioritizes and pushes tasks to multiple departments.

At which stage of the process are humans involved (if any)? What percentage of credit decisions are made fully automatically versus the ones where underwriters are involved?

This depends on the institution’s strategic priorities. If the bank’s aim is to focus on a fast response for smaller tickets, for example up to EUR 50,000, our platform is able to fully automate the end-to-end origination process and deliver a decision to the customer in under one minute.

Larger tickets usually involve manual reviews by experienced underwriters.

What are the primary data that you base your decisions on?

We use multiple data sources such as credit bureau data, financial data, bank account data as well as information from regional databases (such as fraud). Over the past years, we have found that the category with the highest predictive power for unsecured loans is transactional data from the applicant’s business bank account.

Our risk assessment models use transactional data to calculate a default probability score, signaling how likely an applicant is to default on a potential loan. In addition, they produce a recommended credit amount for applicants who stand below the bank’s risk threshold.

While we have included these features in our end-to-end platform, we also offer Business Bank Account Insights ML, which is a more flexible option. Through an API call or a dedicated portal, banks can upload transactional data in CSV files and receive the same insights in a PDF report. This allows them to pre-score leads and filter out rejections in a more streamlined process, without having to reconstruct their entire system.

Visit Spotcap HQ in Berlin during the Study Tour on June 22-23, 2020.

For more details, visit pp. 46-47

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SOCIAL BANKING

Banking that matters: Erste Group measures impact of its Social Banking activities • Social Banking activities helped to create and preserve almost 45.000 jobs across CEE • Since its launch, 30,000 clients were supported with financing, education and/or mentoring • Erste Social Banking supports starting entrepreneurs, microfinance businesses, social organisations and people in financial difficulties • Financing efforts are combined with financial education to ensure sustainable financial well-being Erste Group is systematically growing its comprehensible Social Banking programme in Central and Eastern Europe (CEE): The 2nd impact assessment of social banking activities, based

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on methodology developed in cooperation with the Vienna University of Economics and Business, measures the impact of the social banking efforts on local communities. More than 19,000 people in financial difficulties, 7,000 small farmers, 3,100 entrepreneurs starting their micro-businesses in areas with high unemployment and poverty and 600 social organizations across CEE accessed offerings of Erste’s Social Banking. Overall, Erste dispersed a total of EUR 235 million in loans across CEE, with EUR 65 million provided in 2018/2019 alone Thus, Erste lives up to its believe that growth must be inclusive. While the overall poverty rate in CEE has decreased by 6% since last year, 14 million people in Erste’s core markets Austria, Croatia, Czechia, Hungary, Romania, Serbia, and

Slovakia are still at risk of poverty. A majority of these can barely make ends meet, cannot cover unexpected expenses or lack basic household amenities such as heating or proper sanitation.

Job creation in local communities through supporting small businesses, entrepreneurs and NGO Erste’s Social Banking programme collaborates closely with a broad variety of local partners — offering a set of measures ranging from access to finance up to mentoring and training. This collaboration ensures that funding translates into sustainable and measurable social impact — such as the creation of 15,000 new jobs

FEBRUARY 2020

Social Banking and the preservation of 30,000 jobs across the region.

Since its start, Erste’s Social Banking financed 3,100 starting entrepreneurs and almost 7,000 microfinance businesses in order to fight unemployment in rural areas across CEE. For a third of entrepreneurial clients, a start-up loan meant a path from unemployment to their own business — not only for themselves but also for others: On average, every starting entrepreneur creates two further jobs in a local community.

50% of these entrepreneurs report that starting or expanding their business without Erste’s support would have been impossible. In addition, Erste disbursed to these clients more than EUR 160 million in loans

to preservation of 10,500 and creation of 2,300 new jobs in social sector, 60% of which were created for socially excluded.

«Many NGOs and social entrepreneurs have poor access to financing as their business models are per definition not profit-oriented and thus unattractive to mainstream banks. They have scant support from the state and difficulties in accessing EU subsidies.

The development of the civil society is limited when NGOs and social entrepreneurs, who deal with some of the most challenging issues in our society, lack adequate funding. To meet their needs, we provide working capital loans, bridging loans and investment facility loans», states Peter Surek.

«One of the most difficult tasks for microbusinesses is raising finances to get their ideas up and running. For women entrepreneurs the hurdle is even higher, as they need to battle against gender bias, too. With our help, they can start and successfully expand a generation café in Vienna, a sheep farm in Romania or organic baby clothing business in Croatia», explains Peter Surek, Head of Social Banking Department.

An additional growth of social banking impact was achieved by services provided to social organizations across CEE. The number of financed organizations grew by 50% y-o-y, from 400 in 2017/2018 to more than 600 in 2018/2019. Overall volume of loans increased from 41 to 72 EUR million. More financing led

Financial education to ensure sustainable financial well-being As the level of financial literacy remains generally low across CEE, Erste’s education programmes help clients to achieve sustainable, long term improvements in their financial

health. Erste’s efforts for financial inclusion started with Zweite Sparkasse, a volunteer-run “bank for the unbanked” founded in Austria

by Erste Group and ERSTE Foundation in 2006. The 2nd impact assessment shows that financial inclusion programmes in Austria and Slovakia helped over 19,000 people in financial difficulties in partnership with local NGOs. 76% of low-income clients report that they can now pay regular expenses on time.

Business skills and financial advisory are crucial also for Erste’s entrepreneurial clients: 8,500 participated in training and mentoring programmes using various formats from online tools to individual support. In, 2,600 social organizations participants benefited from business training and capacity building. 9 out of 10 supported social organizations reported that they can now better fulfill their social mission, serving over 123,300 socially excluded beneficiaries across CEE. Erste Group is the leading financial services provider in the eastern part of the EU. Around 47,000 employees serve over 16.7 million customers in almost 2,400 branches in 7 countries (Austria, Czech Republic, Slovakia, Romania, Hungary, Croatia, Serbia). As per the first nine months of 2019, Erste Group had EUR 252 billion in total assets, posted a net profit of EUR 1.22 billion and had a tier -1 capital ratio (CET-1, Basel III, phased-in) of 13.5%.

Our approach to Social Banking We foster Starting Entrepreneurs

We support Microfinance Businesses

WITH

WITH

Working-capital loans Start-up loans AND PROVIDE

SMALL BUSINESS BANKING MAGAZINE

Bridge loans Investment loans AND FACILITATE

Cash flow assessment Financial advisory

to create and preserve jobs in rural areas

We stand by People in financial difficulties

WITH

Working-capital loans Investment loans AND OFFER

Business trainings Mentoring

to create new jobs

We empower Social Organisations

Capacity building Networking

to expand their social impact

WITH

Special accounts Housing micro loans AND CONDUCT

Debt advisory Financial education

to reach financial stability

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EVENT

From left to right: Oleg Klymenko (OTP Bank, Ukraine), Dmitriy Lazarchik (System Technologies), Sergey Sheko (Alfa Bank Belarus), Svetlana Shapovalova (Alfa Bank Belarus), Tatyana Kirishun (CS Ltd), Andrey Gidulyan (SME Banking Club)

BUM SME Banking Club Conference 2019 Andrey Gidulyan (SME Banking Club)

Kyiv, September 20 For the eighth time, SME Banking Club gathered SME Bankers in Kyiv (Ukraine) at the BUM SME Banking Conference 2019, which was held on September 20 and devoted to financial services for SMEs in Belarus, Ukraine, and Moldova.

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Diana Grigoryan (Earlyone)

FEBRUARY 2020

Event

From left to right: Andrey Barkov (Hope Ukraine), Andrey Kopyl (Hope Ukraine)

From left to right: Evgeniy Metzger (Ukrgasbank), Sergey Lunegov (Belinvestbank), Andrey Gidulyan (SME Banking Club) Sergey Sheko (Alfa Bank Belarus), Svetlana Shapovalova (Alfa Bank Belarus)

From left to right: Evgeniy Metzger (Ukrgasbank), Aleksandr Bukovinskiy (ESKA Capital)

Lidiya Kuliba (GfK Ukraine)

Juliya Kislukhina (PrivatBank)

Scan QR code to view more photos

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EVENT

Central Asia SME Banking Club Conference 2019 Almaty, November 12 For the second time, SME Banking Club gathered SME Bankers in Almaty (Kazakhstan) at the Central Asia SME Banking Conference 2019, which was held on November 12 and devoted to financial services for SMEs in the Central Asia region.

From left to right: Aleksandr Nikolenko (Tascombank), Nikolay Adeev (Abanking), Damir Kakiev (Alfa Bank Kazakhstan), Andrey Gidulyan (SME Banking Club)

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FEBRUARY 2020

Event

Valeriy Siroshtan (Renome Smart)

Juliya Yasinskaya (Belagroprombank)

Stanislav Orobinskiy (Promsvyazbank)

From left to right: Shokhruh Kamarov (National Bank VED of Uzbekistan), Murod Iskandarov (National Bank VED of Uzbekistan), Andrey Gidulyan (SME Banking Club), Alexey Sayapin (SME Banking Club) Olga Rudenko (VISA)

Mikhail Medko (Ukrgazbank)

Anton Kim (ForteBank)

Scan QR code to view more photos

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EVENT

CEE SME Banking Club Conference 2019 Olena Gryniuk (SME Banking Club)

Warsaw, October 21-22 For the fifth time, SME Banking Club gathered SME Bankers in Warsaw (Poland) at the CEE SME Banking Conference 2019, which was held on October 21-22 and devoted to financial services for SMEs in that region (#CEE19).

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FEBRUARY 2020

Event | Day 1

Boyan Byanov (Raisin)

Jakub Makurat (Ebury)

Mariusz Topรณr (Mobiltek)

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Gareth Aled Davies (Vintom)

Dmytro Syvolap (Upswot)

Scan QR code to view more photos

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EVENT

During the Ecosystem Roundtable Michał Pawlik (SMEO)

Michał Tusznio (ING Bank Śląski)

John Mark Williams (Agile Business Consortium)

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FEBRUARY 2020

Event | Day 2

Adam Jano (Budapest Bank) Maria Cenusa (ICG)

During the Agile Workshop Auke Douwe Veenstra (Q2 / Cloudlending Solutions)

Christian Ruehmer (Q-Lana)

Charles-Alexandre Gamba (ITDS)

Scan QR code to view more photos

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EVENT

Building an ecosystem for SME customers: Roundtable in Prague On December 5, 2019, SME Banking Club (Poland), together with Charlie-India (Hungary), organized a Roundtable in Prague (Czech Republic) to discuss the building of a productive ecosystem for SME customers with local banks.

O

lena Gryniuk (SME Banking Club) stressed that adding convenience to daily banking operations is no advantage enough to give banks a competitive edge.

The analysis of online banking functionalities for SME customers in the CEE region shows (Online Banking for SMEs Study, SME Banking Club 2019) that primary transactional operations and access to information about

Shortened version of the Study is available via the link

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customer bank accounts, such as an overview of account balances, transfers in local currency and international and domestic transfers in foreign currencies, are implemented at most of the banks analyzed. So, this is a standard functionality available to SME customers in any bank. Meanwhile, providing non-financial services, combined within the ecosystems that help entrepreneurs develop their businesses, is becoming a decisive criterion for small businesses when choosing a bank.

Watch the video presentation here

Integration of Value-Added Services (VAS) will become a must next year. 30% of banks in the region have integrated e-invoicing and online accounting services into their online banking systems. Integration of a BFM (Business Financial Management) module gives SME customers the option to analyze their account and expenses, but also to forecast cash flow and manage a company’s liquidity. For the bank, this module provides the option to cross-sell working capital lending products and factoring precisely at the moment when a customer is in the red.

Business rationale for banks to provide non-financial services to SMEs: • Each bank must create its own business case and value proposition in a market. Nonfinancial services (e-invoicing, accounting, BFM) are a part of the value proposition

A snapshot of the Study: Online Banking for SMEs Study for the CEE region

FEBRUARY 2020

Event • Cross-selling opportunities. Banks can offer new bundles of packaged services in which established traditional and new e-invoicing services are deployed together.

Factoring and financing solutions contribute to revenues from lending.

Business rationale for SMEs to have nonfinancial services (e-invoicing, accounting, BFM, etc.) from banks: • Automation of SMEs’ everyday tasks.

Banks are able to integrate e-invoicing with payments in many creative ways (e.g. e-banking, file transfer, authentication and call centers, etc.). Due to the growing popularity of electronic banking, there is an automatic economy of re-use and repetition.

This facilitates reconciliation processes and reduces errors.

• Small businesses spend up to 50% of their time on non-core activities, which can be automated. Banks can increase SMEs’ productivity by providing subscriptions and/or connections to productivity tools.

• Banks can provide invoice financing, factoring and credit enhancement facilities.

• Banking channels can meet legal compliance and authenticity/integrity requirements

From left to right: Olena Gryniuk (SME Banking Club), Katalin Kauzli (Charlie-India) during the Roundtable in Prague (Dec 05, 2019)

See the full SME Banking Club presentation

CASE STUDY: BESPOKE INVOICING SERVICES BY BANKS: POWERED BY CHARLIE-INDIA ACCOUNTING VIEW PARTNER ALARM

MANAGING INCOMING INVOICES

Receive and process digital invoices

QUICK ONLINE ONBOARDING

PARTNER DATA ONLINE INVOICING

RECORDS ON INCOMING AND OUTGOING BILLS

Transactions and invoice matching

Issue digital invoices

AUTOMATIC TAX REPORTING

ACCESS TO TRANSACTIONAL BANKING DATA

PAYING INVOICES WITH TRANSFER

FINANCIAL DASHBOARD

QUICKPAY

BANK 2 Store invoices

Pay invoices

Access to bank transaction data

Accounting integration

FINANCIAL ANALYSIS

Case Studies of Ecosystems for SME customers powered by Charlie-India in Hungary

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The beginning of the Open Banking era provides new opportunities to connect with bankschallengers, multi-bank platforms and Fintech companies.

Katalin Kauzli (Charlie-India) presented the case of OTP eBIZ – the first ecosystem for SME customers launched in the CEE region two years ago.

Access the full Charlie-India presentation here

Charlie-India’s mission is to convert all invoices into an automatically processable form and decrease the proportion of paper or pdf invoices, which can only be processed manually.

And as online banking payment transfers by B2B customers are made based on invoices, it makes sense to integrate an e-invoicing module (which allows customers to not only issue invoices in electronic format, but also to receive invoices from counterparties (even from different e-invoicing systems, and also transaction matching for customer’s invoice data) into the online banking and mobile banking to business

ACCEPT AND PAY INVOICE

Accepting and paying an invoices in two clicks

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FEBRUARY 2020

Event customers, which will allow customers to pay received invoices with just two clicks of a mouse and without entering all the invoice data into the transfer form. This functionality works in the OTP eBIZ platform when a customer receives an invoice in their Invoice Inbox, allowing them, with just two clicks of their mouse: (1) accept the invoice and (2) pay it (see Pic.3), which is essential for SME customers for two reasons. The first is, of course, time-saving and automation of customers’ back-office activities. And the second is a psychological one: nobody likes to pay invoices, so the faster the process, the better.

Ideally, it should be seamless for the customer.

Charlie-India is currently testing communication between OTP Bank’s platform and the platforms of other Hungarian banks (See Image 4). Banks are not integrated with each other, and they communicate invoice data via a secured email protocol and a standardized invoice data structure. Invoices sent and received this way can be processed automatically and paid with just two clicks of a mouse.

Also, Charlie-India is working on adding to that ecosystem not only banks but also ERP companies, e-invoicing companies, and large invoice issuers and enterprise customers (such

as service providers, etc. because they can also benefit from automating the invoicing process).

The idea is to send invoices via banks as service providers, and when you have invoice content in a bank as an invoice platform, people will use it. And the more users, the more payments will be made, and this is where the banks can earn: processing the payments and cross-selling additional financial products based on invoice

data (overdrafts, invoice financing, factoring, etc.).

In November 2019, Charlie-India began providing the opportunity to participate in a real-life simulation in order to show banks what it is like to be able to work with fully accessible digital invoice data and how the bank can use it if all invoice data is available digitally.

The simulation aims to demonstrate that the existing payment ecosystem can be extended and connected to invoice data exchange.

All interested banks are invited to join the simulation.

As a result of the simulation, banks will see how they can integrate invoicing systems, and how banking customers will be able to send and receive invoices among one another and exchange invoices with customers of other banks and invoicing systems.

If a given bank wants to proceed with a reallife project, the test environment can be turned into a real project with no additional development required in order to arrive at an MVP, which can be later tailored to that bank’s individual requirements. Apply to take part in the simulation by contacting Katalin Kauzli from Charlie-India using the details provided below.

CASE STUDY: HUNGARY - SETTING UP AN INVOICING&PAYMENT ECOSYSTEM Invoice and invoice data

Customer invoice data generated at the bank

SME

Payment and payment data Customer Invoice data matched with payment data

Supplier invoice and invoice data

BANK 2

SME

Payment and payment data

Payment data automatically generated from supplier invoice data at the bank

Case Study of an Invoicing & Payment Ecosystem in Hungary

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EVENT

STUDY TOUR TO BUDAPEST MARCH 30-31

Learn about the best practices of banking solutions for the Micro & SME segment in the area of customer acquisition, lending, and building the ecosystems.

During the 2-days Study Tour to Budapest on March 30-31 we will visit leading Hungarian banks to learn how they are: • Creating Ecosystems for SMEs • Approaching SME customers • Launching Startup cooperation programs Learn best practices, ask your questions, and enjoy Budapest! Join us!

To get the detailed agenda, please email us at cee@smebanking.club

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FEBRUARY 2020

ATTENDEE’S INFORMATION Mrs. Ms. Mr. / First name

Last Name

Job title Institution

VAT ID number

Address Tel Email

Twitter account @

Assistant’s information (or person in charge of the registration) First name Tel

Last Name Email

PRACTICAL INFORMATION DATES The Study Tour will start on Monday, March 30, at 9.00 and will end at appr. 19.00 on Tuesday, March 31.

REGISTRATION FEE €1200 for financial organizations — representatives of non-members

VENUE Head offices of Hungarian banks

____________________________________ SME Banking Club members receive a 20% discount for all tickets

LANGUAGES All sessions will be held in English ACCOMMODATION Each participant must pay the cost of his or her accommodation directly to the hotel before departure

PAYMENT Bank Transfer Credit Card Date____________ Signature_____________

REGISTRATION The registration fee covers participation in the Study Tour, transportation during the visits, lunches, dinners, and coffee breaks. Registration must be paid in full before the event.

CANCELLATION All cancellations must be received in writing. A 20% cancellation fee will be charged for all cancellations received before March 15, 2020. Full price cancellation fee will be charged for all cancellations made after that date as well as for delegates that are unable to attend unless a substitute delegate is provided. Substitutions are accepted at any time.

Please send this registration form by email at cee@smebanking.club Or register online at https://smebanking.events/event/study-tour-to-budapest-2020/

Organizer’s contacts: Olena Gryniuk, +48733404985, e-mail: cee@smebanking.club

EVENT

STUDY TOUR TO BERLIN JUNE 22-23

Learn how SME-Focused FinTechs approach small business customers.

During the 2-days Study Tour on June 22-23, we will visit FinTechs, headquartered in Berlin and providing services to SMEs in different countries in the region, to learn how they: • Approaching and onboarding SME customers purely online • Transforming SME lending, how they’re doing it purely digitally, and the steps they take to keep the risk of bad debts in check • Creating ecosystems for SMEs • Cooperating with banks Learn best practices, ask your questions, and enjoy Berlin! Join us!

To get a detailed agenda, please email us at cee@smebanking.club

46

FEBRUARY 2020

ATTENDEE’S INFORMATION Mrs. Ms. Mr. / First name

Last Name

Job title Institution

VAT ID number

Address Tel Email

Twitter account @

Assistant’s information (or person in charge of the registration) First name Tel

Last Name Email

PRACTICAL INFORMATION DATES The Study Tour will start on Monday, June 22, at 9.00 and will end at appr. 19.00 on Tuesday, June 23.

REGISTRATION FEE €1200 for financial organizations — representatives of non-members

VENUE Head offices of FinTechs based in Berlin

____________________________________ SME Banking Club members receive a 20% discount for all tickets

LANGUAGES All sessions will be held in English ACCOMMODATION Each participant must pay the cost of his or her accommodation directly to the hotel before departure

PAYMENT Bank Transfer Credit Card Date____________ Signature_____________

REGISTRATION The registration fee covers participation in the Study Tour, transportation during the visits, lunches, dinners, and coffee breaks. Registration must be paid in full before the event.

CANCELLATION All cancellations must be received in writing. A 20% cancellation fee will be charged for all cancellations received before June 05, 2020. Full price cancellation fee will be charged for all cancellations made after that date as well as for delegates that are unable to attend unless a substitute delegate is provided. Substitutions are accepted at any time.

Please send this registration form by email at cee@smebanking.club Or register online at https://smebanking.events/event/study-tour-to-berlin-2020/

Organizer’s contacts: Olena Gryniuk, +48733404985, e-mail: cee@smebanking.club

#CEE20

FinTechs

Digital SME Banking

Cooperation Models Between Banks & FinTechs. Pitches of FinTechs focused on SMEs

How to transform the business into a new reality

SME Banking Ecosystem

CEE SME Banking Awards 2020

The building of the ecosystem is becoming a key competitive advantage

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Where the SME Banking community comes together to honor the best of the best in 2020

How AI is driving the banking revolution AI in Banking. Making it Personal.

Use cases

Unique Venue Beautiful ZoďŹ n Palace in the heart of Prague

FEBRUARY 2020

ATTENDEE’S INFORMATION Mrs. Ms. Mr. / First name

Last Name

Job title Institution

VAT ID number

Address Tel Email

Twitter account @

Assistant’s information (or person in charge of the registration) First name Tel

Last Name Email

PRACTICAL INFORMATION DATES The Conference will begin on Wednesday 25 November at 08.15 and will end at appr 22.30 with the Gala Dinner VENUE November 25, all day: Žofín Palace, Slovanský ostrov 226, Prague, Czech Republic LANGUAGES All sessions will be held in English ACCOMMODATION Each participant must pay the cost of his or her accommodation directly to the hotel before departure REGISTRATION The registration fee covers participation in SME Banking Club Conference, documents, lunches and coffee breaks. Registration fees must be paid in full before the event.

as for delegates that are unable to attend unless a substitute delegate is provided. Substitutions are accepted at any time.

REGISTRATION FEE €1000 for service/solution providers €700 for financial organisations - representatives of non-members €0 for SME Banking Club members* * according to membership terms ____________________________________ All registrations are strictly individual.

In a case of registration more than one participant from one company the following discounts are provided: Third and next participant - 10% discount for all tickets.

PAYMENT Bank Transfer Credit Card Date____________ Signature_____________

CANCELLATION All cancellations must be received in writing. A 20% cancellation fee will be charged for all cancellations received before 01st of November 2020. Full price cancellation fee will be charged for all cancellations made after that date as well

Please send this registration form by email at cee@smebanking.club Or register online at https://smebanking.events/cee/

Organizer’s contacts: Olena Gryniuk, +48733404985, e-mail: cee@smebanking.club

EVENT

SME BANKING CLUB CONFERENCES 2020 JOIN THE CONVERSATION ON DIGITAL SME BANKING

Tbilisi | May 21-22 SME Banking Club Digital Forum 2020, dedicated to the development of digital banking services for SMEs in the CIS and the Caucasus regions

Kyiv | September 24-25

Prague | November 25

SME Banking Club Finance Forum 2020, dedicated to the development of financial services and products for SMEs in the CIS and the Caucasus regions

6th Annual SME Banking Club Conference 2020 will take place in Prague. Join a unique event focused on the SME Banking in the CEE region and CEE SME Banking Awards 2020

For more details please go to www.smebanking.events

ABOUT

the SME Banking Club

The SME Banking Club was established by a team of former SME bankers in 2010.

The SME Banking Club organizes regional SME banking conferences on an annual basis (one regional conference in each region where it has a presence) that bring together financial institutions, technology companies and development finance institutions to share knowledge, spur innovation and promote the growth of SMEs in the region.

For details about our regular events, featuring expert professional guidance and exclusive panel discussions, visit www.smebanking.events.

SME Banking Club members benefit from access to detailed analytical market reports and annual studies.

This information is not available anywhere else in the market.

Regions of operations: Central and Eastern Europe, CIS countries, the Caucasus region and Central Asia.

Representative offices in Ukraine and Poland.

We invite you to stay in touch and join our online platforms: our website, www.smebanking.club; our LinkedIn page; and our Soundcloud page, which offers unique knowledge resources.

Join the SME Banking Club network for events and ideas that connect and inspire.