Innovative transformation will determine the future of Armenian banks 
Media Room
Exclusive interview (continuation) of Artur Hambardzumyan, Head of Innovations and Quality Unit at Ameriabank CJSC, to ARKA News Agency.

ARKA – What is the role of technological development in the banking system of Armenia?

A. Hambardzumyan
– New technologies play a double role in the banking system of Armenia. On the one hand, they help to solve the business efficiency problem by reducing the cost of operations and creating new possibilities. On the other hand they urge banks to keep abreast of the times. As the attitude and lifestyle of clients evolve, banks cannot but change themselves and change their service channels and methods. There is a definite market segment where new technologies are a must for all clients. Meanwhile, there is also a considerable layer of population for whom these technologies are not available. That is why we cannot say that in the nearest future we will totally shift to online servicing and it will be the only channel; there are such things as generation preferences and comfort. For this reason while shifting to new technologies banks have to bear in mind a considerable number of clients who are used to live communication in the process of servicing. As to technologies themselves, they create great possibilities for banks and the latter have to follow these trends to ensure the desired level of comfort for new generation clients who do not imagine their lives without modern technologies.

ARKA – What is the level of technological development of Armenian banks as compared with other countries?

A. Hambardzumyan
– If we compare the level of technological development of Armenian banks with that of developing and developed countries, with Russia, for instance, we will see that Armenian banks follow the “catch-up” model of modernization. Of course, there were cases when certain products appeared on our market earlier than in Russia, for instance ArCa online, payments via virtual cards, but generally we still lag behind in terms of technological development. For instance, mobile banking has only recently been introduced by Armenian banks, while it has been actively developing in many of the CIS countries for a number of years. At that, mobile applications are currently offered by very few Armenian banks. This proves that we are trying to catch up rather than keep in the front line in terms of technologies. On the other hand, figures demonstrate that internet and mobile banking are not yet as popular in Armenia as one might expect. Of course, banks may say that the market is not ready for distance servicing, but on the other hand there was no quality offer either. If mobile banking had been introduced earlier, who knows, currently the number of its users might have been considerably greater.

ARKA – What is the reason for technological backwardness of Armenian banks?

A. Hambardzumyan
– The problem lies in their current technological infrastructure. In this respect the main problem of Armenian banks is their dependence on definite local suppliers of banking solutions. Thus about half of Armenian banks use the Armenian Software as a main automated banking system platform. Other banks, among them a number of major ones, use another local solution – Elsoft. Some use their own developments or software developed by parent companies. The National Processing Company, too, has its own share of blame in low rate of technological development. Although local suppliers do try to update their solutions pursuant to their own development strategies, under certain conditions we fail to quickly react to, implement or borrow new technologies. Historically we have a model where free play in terms of IT solutions is limited by growth rates of the suppliers available on the market. Shift to larger international suppliers, who offer cutting-edge solutions, requires big investments, yet local banks lack the required volume of business. Here we face a deadlock: you do not buy expensive software because either you can’t afford it or such costs are not justified, and the local supplier’s offer is outdated. So, the technological capability of Armenian banks itself hinders introduction of state-of-the-art products. The size of business should enable implementation of innovations and the market should be big enough to ensure adequate ROI. So it all comes back to consolidation of the banking system and looking for new markets. Unless the market offers some possibilities no serous investment in innovation will be made.

ARKA – What is the demand for new information technologies in the banking system of Armenia today and what new banking products will appear in the nearest future?

A. Hambardzumyan
– In terms of service channels there is a certain market segment which wants quick and easy servicing, so that all banking questions are solved without having to visit the bank, either from the workplace or wherever else you are (for instance, on vacation) in 24/7 mode. Technologies also follow this trend of development. Currently in Armenia self-service channels are on the trend such as internet banking, mobile banking, call centers and high-tech ATMs and POS terminals. In other countries such channels appeared earlier and unlike our market have a great number of users. In Armenia, on the other hand, they are new and I hope that in some 2 or 3 years client servicing will be oriented mainly to distance servicing channels. Among actively developing areas are payment channels, e-commerce and on-line payment terminals, which are widely offered by Armenian banks. The main competition today is for on-line payments. Thus payment operations are one of the spheres that are experiencing intensive development. Of course we hope that in the nearest future individual payments (the so-called P2P “Person to person”) will start developing as well, and people will be able to make remittances via mobile phones by the mobile number or other identification feature. But here the bank should determine its position where on the one hand it will simply issue cards and on the other hand carry the role of an entire infrastructure acting as gateway for online and mobile payments market. This is the reason why payment channels will be popular. They will serve as one of the directions of transformation the Armenian banking business will undergo.

ARKA – Ameriabank was acknowledged as the most innovative company of the year at DigiTec 2015 Business Forum. What did the bank do to win that prize? What cutting-edge technologies have been implemented?

A. Hambardzumyan
– Ameriabank has been focusing on the innovations I specified above for several years already. Note that our technological development faced the same limitations that often hindered introduction of innovations. Yet we will do our best for the clients to feel comfortable and get more opportunities to bank.
The distinctive feature of our servicing is the multichannel approach when the bank offers to the client all possible service channels. We have introduced cash-in ATMs, established a Contact Center which enables not only to solve current problems of clients but to make banking transactions. This Center serves as a distance banking channel by phone and actually substitutes a bank branch. In March of the current year we introduced mobile banking for IOS and Android and recently also for Windows; it is totally integrated with the internet banking we had introduced back in 2009. We have already successfully updated our mobile applications by adding new functions and possibilities. Our mobile banking is rather developed in terms of transactions; it enables you to perform practically all kinds of payment operations as well as manage card and current accounts. Physical tokens generating authorization keys are replaced by mobile application called “AmeriaToken”. We have also introduced the service of fraud-monitoring for our clients, which enables to identify and block suspicious card operations automatically in 24/7 mode. Wherever they are, whatever their problem, our clients can just call us at any time of the day and all their questions will be answered. We also have been actively promoting e-payment terminal to boost development of e-commerce in our country and to give the businessmen (merchants) an opportunity to offer their services online. E-commerce is as yet a fresh trend in our country and in this regard we try not only to offer these services to our clients but sometimes act as a pioneer in innovative solutions. This is the reason why DigiŠ¢ec acknowledged us as the most innovative company of the year.

ARKA – What are the bank’s plans for further innovative transformation?

A. Hambardzumyan
– Ameriabank will go on developing distance service channels despite the limited branch network in contrast to other banks. It is a fact that alternative service channels will be a priority for us, and by that I mean not only mobile banking, but the full range of self-servicing facilities, including branches fully based on self-servicing. Another development trend requires enhancement of our role in cash and online payment market, card business and payment infrastructure. Recently a new service has been launched which enables clients to make instant transfers from any Visa, Master or Arca card to Ameriabank cards and accounts through our website. This is a worthy alternative to fast money transfer systems. It enables you and your friends and relatives to transfer funds to Ameriabank clients from any country worldwide without leaving their desk.
We will do our best to make all new services available to our clients in Armenia via new technological platforms and make Ameriabank the main player providing the relevant infrastructural component. The market is, of course, a small one and we will be behind global developments since major global players are not much interested in the Armenian market in terms of its potential.

ARKA – In your opinion what is the main competitive advantage of a high-tech bank today?

A. Hambardzumyan
– The bank with serious and developed IT platforms and solutions will have a considerable competitive advantage. There is an opinion according to which banks are being transformed into IT companies. That is why now we are actively searching for alternative solutions for our informational and technological infrastructure that will ensure flexibility and enable us to timely react on new demands of clients and catch the possibilities of increasing the scale of business. So, the banks paying much attention to investment into technologies and other innovations will have a long-term competitive advantage.
It is important to consider innovations in banking broadly, not only in terms of solutions for clients. When we speak about innovative transformation we mean a broader concept, i.e. technological development of the bank’s infrastructure, governance methods, internal systems and business-processes which in their turn determine the level of the bank’s efficiency.

ARKA – How can the banking system regulator contribute to the development of high-tech banking?

A. Hambardzumyan
– The regulator should assist in this process. From January 2015 the Central Bank has started to gradually toughen the requirements to statutory fund (shift to Basel III). From 2018 all intangible assets, including investments in IT systems, will be deducted from regulatory capital. All this, not to mention the minimum capital norm of AMD 30 bn, will limit the possibilities of small-scale banks to invest in their infrastructure. This might be the trend in international banking practices, but such requirement will hardly boost investments in technological development of banking in our market. I think we need to find definite triggering methods and ways together with the regulator. Here we mean not only the local market but also the possibilities of Armenian banks to participate in global competition for client, since banking has long since obtained global character. For this reason it is necessary that banks become well-equipped technologically. The regulator, of course, is not the most important aspect of technological development, but in any case it may both hinder investments as well as contribute to attraction of them. 
Updated 29.09.2015, 9:42
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