4th Industrial Revolution – Marković: Exciting Times Ahead for Banks

How will the banking of the future look, how ready are Croatians for digital banking services, are just some of the topics that Relja Marković, Executive Director of Digital Transformation and Application Development at Addiko Group, reveals ahead of the 4th Industrial Revolution conference.

Marković will deliver a lecture titled “Digital Evolution for Banking Revolution” at the Lider conference, which will take place on May 17 at the Branimir Center in Zagreb.

What key changes does blockchain bring to the banking sector?

Some research indicates that the financial industry will be one of the top 10 industries most affected by blockchain. Time will tell if this is the case, but the fact is that blockchain is more than just a trend, much more than the technology on which cryptocurrencies operate, and an element that definitely needs to be taken into account.

The application of technology is significant; recording changes in ownership, for example, the organization of cadastres which I believe London is already working on, verification of diplomas, passed professional exams, certificates, tracking raw materials, logistics, automation of public administration, monitoring treatment, long-term tracking, and recording of ballots… Therefore, various companies such as IBM, Microsoft, Amazon, Nestle, Unilever, or Renault (“vehicle maintenance booklet…”), as well as banks like UBS, Commerzbank, Caixa, Barclays, are working on the development of blockchain technology from various aspects.

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How do you assess the current situation of Croatian banking in relation to the 4th Industrial Revolution?

Banking in Croatia is an extremely highly regulated system, which requires significant efforts and resources from institutions, all aimed at providing a comprehensive service. The financial sector must keep pace with the times and recognize the needs of today’s users and respond to them in the most adequate way, and a major challenge that banking faces today is the accelerated pace of changes in consumer demands and preferences. We are witnessing that digital transformation is all around us and affects all business segments, including the financial sector.

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Each of the eight new technologies (IoT, robotics, 3D printing, AR/VR, autonomous vehicles, blockchain, drones, and AI) provides opportunities, not necessarily all to the same extent and with the same potential and benefits for the provider and the user of the service, but in any case, they must not be neglected. The first step that needs to be taken is to realize that we cannot move forward without embracing new technologies, which automatically means that investments in infrastructure and IT systems are needed at all levels, which must go to a higher level.

Automation under the influence of new technologies will definitely continue in all spheres, including banking, and this is good news for banks, but also for clients. A key part of Addiko Bank’s business strategy is further and continuous digitalization and investment in modern technologies, where we see some benefits such as better insight and understanding of clients, interaction with clients, better risk management, greater security for banks, but also for clients, and increased operational efficiency.

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Now, the question is at what stage of industrialization some industries in Croatia have stalled. The banking industry is perhaps slightly above average, but with a lot of room for improvement. Banks have always invested significant resources in IT and the introduction of new products and services. This was somewhat put aside when the crisis hit and when the primary focus was on meeting demands related to increased regulation. In the meantime, technology has advanced significantly, and a large gap has emerged between the former banking business model and today’s demands, and fintech companies are entering that space to fill that gap.

How will the banking of the future look, what new options and services will be introduced?

To remain relevant, it will need to be faster, more intuitive, and client-centric. Banking is actually a very innovative sector, with some innovations that we take for granted or consider normal, and at the moment they were introduced, it was a revolution, such as checks, credit cards, ATMs… As key drivers of modernization and breakthroughs in the 4th industrial age, I see a clear strategy, leadership from the top, interaction of all departments within the organization, strategic partnerships, and client-centricity.

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Addiko Bank has defined its evolution and is implementing it through six transformative blocks; with the development of digital capabilities, through the optimization of operational business, through the improvement of technological infrastructure, the introduction of new digital platforms and unique products, through better data analysis aimed at greater interaction and better understanding of users, through the introduction of more innovative processes, through the application of advanced technology (AI, robotics, etc.), and through embedding digital DNA into corporate culture. We are modernizing while simultaneously creating value for our clients.

How ready are Croatian consumers for digital banking services? Are there more clients who have embraced the charms of technology in the banking sector or those who still value traditional cooperation more?

For some simpler services, such as payments and simple loans, technology will increasingly enter the ‘banking sphere’. Although there is a noticeable shift towards digital banking every day, when it comes to a ‘more complex’ product, such as a 30-year mortgage, you will probably prefer to go to the bank. However, the internet has initiated the transformation from physical, counter banking to electronic, desktop banking, and smartphones and tablets have opened a completely new dimension – mobile, which may not appeal to all generations today, but in a few years will certainly bridge the generational gap.

Younger generations do not want credit cards, do not carry wallets, let alone cash, and it is questionable when they last visited a branch; they do not like banks in the traditional sense, as evidenced by the Millennials Disruption Index. So what can be offered to such users at a time when various studies predict that in three years they will conduct 85 percent of their interactions with companies without human interaction? An intuitive user experience based on the latest digital technologies.

Since 2015, Addiko Bank has been systematically working on transforming and improving the user experience by introducing new, unique products such as payments via Viber chat, digital Express branches, establishing more intuitive processes and interactive platforms, and recently also software robotics into everyday operations.

Croatians are very open to new technologies. This can be seen in internet penetration, smartphone usage, and consumer habits. In any case, exciting times lie ahead for banks, where today, probably for the first time, we are not even aware of what is possible and what will be in 5 or even 10 years.

Will it be banking through biometrics, virtual branches, a new revolutionary model based on artificial intelligence, or something else… – the future will show. What is certain and what we already see is that users will be the biggest winners in terms of speed, quality of service, and price (packages), as new technologies and self-service platforms will empower them.