OpenWay and AK BARS Bank, one of the top 20 banks in Russia and general partner of the 2013 Universiade in Kazan, Russia have recently implemented a number of innovative projects together. The results have been amazing: in a short time the bank has attained a new level of payment service based on contactless technologies and new delivery channels. The director of “AK BARS” Bank’s processing centre, Artur Khabibrakhmanov, shares the secrets of a successful partnership between bank and vendor.
«AK BARS» Bank is the largest bank in Republic of Tatarstan, one of the most developed regions of Russia, and it was the leading bank services’ provider during the Universiade 2013 that recently took place in Tatarstan. What innovative products were prepared and how will they fare in the future?
The bank had a complex task to create a payment infrastructure for the Universiade’s participants and guests, and the bank’s team began work on this long before the event itself. In addition to ATMs, payment terminals, transaction kiosks and standard card types, a number of innovative issuing and acquiring products were developed. For example, we developed a number of issuing products based on multiservice cards including both contact and contactless bank products, transportation offers and a loyalty programme, as well as an identification application that served as an entry pass to Universiade sites and a ticket to competitions, all on one physical medium.
I would say the most interesting product created for the Universiade is a contactless “wallet”, the first to be implemented in Russia. Physically it consists of a Watch2Pay wristwatch and two renewable prepaid MasterCard cards with a limit of up to 15,000 rubles. The first card, with a magnetic stripe, is used to replenish the account, and the second, a chip card, is for the watch; both are linked to the same account. Contactless payment is made with MasterCard PayPass technology at merchants, restaurants and cafes, filling stations and terminals with payment services. We set up several thousand such locations in Kazan and there are several million worldwide.
The second product is NFC sets that we issue jointly with mobile operators. The set includes a telephone supporting NFC technology and a SIM card linked to a bank card. The linking is done in WAY4 processing system used by “AK BARS”. Payment is made using a mobile phone.
Of course, we also offered guests non-renewable prepaid cards that can be given as gifts. Among these, I’d like to single out the “Guest of Kazan” card. This card for 1 or 2 people could be used to obtain discounts at museums; they also contained a transportation application that guests of our city could use to pay for public transportation.
Meal cards for volunteers are also noteworthy: 20,000 Universiade volunteers could use them for lunch at “McDonald’s”. This international chain has specific and strict requirements and its own acquirer. Nevertheless, we were able to provide a payment service using the WAY4 platform issuing programme, ensuring compliance with requirements for service time, points of service and meal costs.
The entire payment infrastructure was built based on widespread use of contactless technologies. Now, after the Universiade, this infrastructure continues to work for the Bank’s clients and guests of Kazan. Accreditation cards that were part of the accreditation badge at the Universiade can be used as regular bank cards (and retain their multiservice functionality). The majority of almost 200,000 cards issued for the Universiade can be further used by Bank clients, and the same is true for devices installed by the Bank for the Universiade. Our developments will continue to grow (many of them will be put to market in the near future), and of course, we hope to use them in upcoming large events such as the world aquatics championships in 2015 and the FIFA World Cup in 2018.
You mentioned WAY4. How long has the Bank been using WAY4? How you build a relationship with the vendor?
I came to the Bank in 2004, and at that time a processing configuration was implemented in which the OpenWay solution was one of the elements (authorisation and back office), and a different company supplied the front office solution. At that time such a configuration was warranted by limitations on computing capacity and communication channels, which made it possible to separate processes of device management and settlements. But as client demand developed and grew, it became clear that tighter integration between front and back office processing was necessary. Clients were requiring more complex bank products, to obtain account statements and make various payments. This all lead to breakdowns in the business logic between the systems, making it difficult for the bank to work efficiently in creating new products and services. It was decided to move to a single system that would unite everything - both acquiring and issuing - in one core. OpenWay’s WAY4 solution was chosen as this system.
The OpenWay solution supports a large number of transaction types: both those that are made directly through payment systems and those that are not regulated by payment systems, and which are the majority in the Bank’s business. Moreover, OpenWay is tried and true on the Russian market and we often use the experience of other banks when implementing – this guarantees reliability and quality client service. Also, WAY4 is scalable, which is very important to us, as a fast-developing bank.
How would you assess the technological partnership between the Bank and the vendor? What does its success depend on?
In Russian banks, technology to implement new functionality and offer new products is developing rapidly in order to retain existing clients and attract new ones. This means that OpenWay, like any other successful vendor is often a trailblazer in innovation and this involves a high workload. In implementing new functionality for the demands of business, OpenWay does not always have the necessary experience, but we also don’t always have this experience in something new either. However, the bank's practice of implementing innovations jointly with the solution vendor in past years has shown that together we can carry out even the most complex projects. Of course, this creates a dependency of the Bank on the vendor. And this dependency is present in our Bank also.
At the same time, we have quite broad capabilities provided by the solution vendor. For example, we independently created all issuing products for the Universiade, using OpenWay tools. We practically didn’t contact the developer, basic consultation was enough. For example, the WAY4 Product Inspector allowed us to build credit product portfolios on our own.
I think each party should do what it does best: the vendor should create good software, the bank should offer clients services based on these products. This kind of relationship promotes our common business.
How do you see the development of processing as a whole? Until recently, the concept of Internet or mobile banking didn’t even exist. Do you think “classic” banking on its way out?
It’s true, several years ago, there was only one standard for cards. But now the boundaries of card use are really fuzzy: there are virtual cards, NFC, and watches, for example. It’s easy for a card to simultaneously be a wallet and an ID card and a transportation pass. That said, the core and the platform on which relations between the bank and client are built remain the same. And consequently, the solutions offered by the vendor will continue to work. Processing is being modernized, new products are being created. But, of course, remote channels are coming into their own. People are essentially lazy and if they can stay on the couch, they will. I think that the next popular tendency in remote banking service will be automatic payments. They make it possible to manage but not to trace basic expenses – housing, phone, petrol… This will all be paid automatically and all cardholders have to do is create templates, or have someone do it for them. As far as I can see, the client is interested in remote banking services becoming a system for financial management.
On the topic of processing modernization, you probably mean technological migrations. Have you undergone migrations with your vendor?
The very first and longest migration was to EMV processing. At that time, in addition to modernization of the core and software, we had to replace and modernize the terminal network and this process included certifying the solutions of vendors supplying devices and software for these solutions.
Next, in preparation for the Universiade, we migrated the ATM controller to WAY4 since we needed to support additional functionality for a significant number of ATMs in Kazan. And now we are completing migration of the remaining devices and fully going over to the WAY4 single platform. Moreover, together with OpenWay we are significantly expanding our Web banking capabilities: for all intents and purposes we’ve built a new one, only taking best practices connected with client preferences from the old one.
What is the “old” Web banking?
We used the Web banking of one of the most widespread vendors in Russia, and were totally satisfied with it, but we began to find we were missing existing tools that are widely available in OpenWay. We are talking about various additional balances, statement types, work with limiters, templates and much more requiring significant integration expenses if a third-party solution is used, but are easily resolved when using OpenWay Internet banking. On the basis of Web banking we also plan to develop mobile banking: we will definitely release a client application.
We’ll be honest: all vendors are interested in the further penetration of their products in the bank. What may be the next step?
I’ve already noted automatic payments, for which there may already be mass demand in the near future. It’s possible that the resources of large integrators may start to be used, which would allow information about client payment requirements to be united in one place. For example, today many payments are processed separately: some companies process utilities payments, others, communications services, and possibly, the bank will need an integration pool for a specific client. This will assist both parties: the bank in collecting all the client’s payments and balances and the client, in managing his financial history. Gradually the need to physically come to the bank will disappear, but the financial institution will remain in the life of the client.
One way or another, the majority of consumer activity is connected with money – planning vacation, purchases, payments and more. And in the battle for the client, the bank that can perceptibly save not only the client's money, but time, will win.
When I’m asked what the card business should expect in the future, the communication service business comes to mind. The first time I came to a telephone exchange, there were all sorts of wires going from the exchange in different directions, telecommunications racks taking up entire buildings. Not much time has passed, but there is no longer any need for these huge buildings: the exchanges themselves use relatively small facilities and communications providers offer clients more than just voice communication services.
The card business is similar – it’s not only a service for withdrawing cash at ATMs, but also a myriad of other financial services based on remote channels. And, possibly, the big buildings occupied by banks today won’t be needed any more, and a client going into a bank office of the future won’t see any people there: remote services offered by the banks will be sufficient.
Industry: Bank retail
Project: Electronic payments, prepaid cards, contactless, payment processing software migration
Project Implementer: OpenWay