Olena Gryniuk talked to Arton Celina, CEO at BPB, about their transition to specialized banking for SMEs in Kosovo, their competitive advantages and challenges.
Olena Gryniuk: BPB 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. 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 above-mentioned 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 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.
OG: What is your segmentation of SME customers in the Bank? And how many SME customers do you have in your portfolio?
AC: 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.
OG: What are the main channels of SME customer acquisition at the moment?
AC: 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.
OG: What percentage of customers are acquired online and via RMs/branches? Do you plan to change this proportion? And how so?
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 user-friendly application.
In addition, we have introduced a new, state-of-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 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.
OG: Which digital solutions do you offer your SME customers at the moment?
AC: 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 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.
OG: 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?
AC: 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. 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 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.
OG: 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?
AC: 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.
|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 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.