'Digitalisation reduces costs by up to 50%'

"Digitalisation reduces costs by up to 50%"

In the latest edition of the magazine Computerworld, CREALOGIX CEO Oliver Weber talks about the digital maturity of Switzerland as a financial centre, open banking and plans for the future. Read an abridged version of the interview here.

CREALOGIX was founded 25 years ago. You weren't with the company back then. What job did you have 25 years ago?

I moved to Switzerland for the first time 25 years ago. In Baden I had a job in the finance department of the ABB research centre. Here I was quick to come into contact with scientists. I was impressed by the progress that had been made in thinking of how steps in production could be automated and digitalised.

For example, flow production - coating and populating circuit boards - previously operated via a punchcard-based system. At that time it had just been replaced by a computer, which was a huge change for production and the employees. Huge stacks of punchcards were now obsolete, because a computer could control the system just as well. Employees had more time for other work and the acceleration in production was huge.

Doing away with punchcards could also be considered a digital transformation. How would you define digital transformation from a modern perspective?

Digital transformation is a significant change to the business model. From my perspective, no stone should be left unturned, however we are still at the beginning of this process. There are two factors driving this development: first, the consumer, who uses digital channels as a matter of course. Second, the fundamental change to existing processes and structures within a company. Here, in the financial sector for example, there is an enormous amount of latent potential. While front-end development is largely the same across all banks - in short: they all offer a modern interface - in the back end, there are huge disparities when it comes to digital maturity. By my reckoning, costs will sink by 30 to 50% in the coming years thanks to digitalisation.

For a reduction in costs of that size, a lot must happen in the back end.

Correct, there is a lot of modernisation to be done in the back end. However, the technology to do this is already at hand. Fintechs like Mambu or Thought Machine have implemented alternatives to the traditional core banking systems in the cloud and are attracting big names as a result. In the near future, Swiss banks will increasingly entertain the idea of using a fintech instead of continuing to rely on a traditional provider. I expect there to be very significant change in the coming years.

What level of digital maturity does Switzerland have as a financial centre - also in comparison to other countries?

First of all, the Swiss financial centre is very attractive. Large margins are generated with high-priced products here, which makes it an interesting market for fintechs too.

However, I would not call the Swiss financial centre a pioneer of digitalisation. From an international perspective, Swiss institutions are in the middle of the pack. There are already Banks in Germany that have made significantly greater progress with regards to the digital transformation. One of our key accounts is an example here: Deutsche Kreditbank DKB. Currently, it has 4.5 million customers and is set to grow even further.

Conversely, in Switzerland, many banks are still convinced that they are better suited to developing all products and functions themselves. The resistance of IT departments to external developments is so large that cooperation or integration simply will not take place. I see this as the biggest obstacle for digital transformation in the Swiss financial centre.

What role does CREALOGIX play for the neobanks?

We develop platforms, like that of DKB, but we also do front-end development for flanking brands or digital consultation solutions. Consequently, our clients are no longer primarily IT departments; over the last few years we have increasingly been working with the business side of companies. They decide which areas are invested in, in order to approach new target groups, serve specific markets, or offer new functions. In this area we have now become partners with the banks.

You are now talking to business directly?

We have become familiar with a world in which IT was our central point of contact. For three years now we have increasingly been dealing with the business side of operations. They set the specifications, such as those needed for a new front end, for example. IT then decides whether the budget will be used for developing resources in house, a partner or a supplier like us. If the business side is responsible for the budget, however, IT is not always the first point of contact.

Open banking is one of the growth areas for CREALOGIX. What role does open banking play in Switzerland?

Generally speaking, open banking is an outstanding opportunity for banks to be much more successful than they are today. The ecosystem at DKB mentioned previously is a model example: banks and fintechs unite on a single platform, in order to offer consumers the greatest possible added value. The goal of open banking is to keep the client at the centre of what we do. They decide who manages their financial data, oversees their investments and safeguards their pension. This means that, from the client's perspective, not much has to change: their local bank can continue to run their accounts and manage their finances. However, now they can also collect information from third-party accounts and present the client with an enhanced overview for the purposes of financial planning.

The open banking implementations were very lucrative, though not especially spectacular. Is there a project that has really inspired you?

I could name a few. What I found fascinating, however, was entering a market that was completely new to us. We participated in a tender for a platform for development banks and were able to win out against the competition. A cooperation of seven development banks chose CREALOGIX, because they found our banking platform impressive, they were confident in our specialist and security expertise and appreciated our high standards. However, business on this scale with development banks was new to us.

What solution did you implement on behalf of the development banks?

We built a single platform for the development banks from six German states, in which the various requirements for the development funds of the six states are stored. Each state, for example, has different requirements for funding applications for housing subsidies or business startup loans. These cases are covered on the modular platform, which can be expanded as required to suit the needs of other states or funding purposes. But first, we will start with the six clients for whom we will operate, manage and maintain the platform over the next ten years.

For me, this client use case is so noteworthy, because it is a perfect example of our new business model: a platform-as-a-service, which now generates recurring revenues for us. Second, this case shows that within just twelve months we are able to tap into and serve an entirely new clientèle. We have certainly invested a lot, but we see in the EU alone, for example, a target group of more than 250 development banks.

What concrete plans does CREALOGIX have for the future?

Together with our technology partners IBM, we are currently developing a solution for "conversational banking". The artificial intelligence "Watson" can help banks to improve and streamline customer services. Similarly, Watson will help advisers to present complex investment products to clients.

However, Swiss banks are somewhat reticent to present their clients with AI. Even simple applications such as ordering a bank card or a notification of a change of address, for which AI could be a great help, are still seldom used here. There are potential cost savings in this area of at least 33% and almost 90% of standard requests could be answered by a computer, 24/7.

You can find the full interview written by Mark Schröder from Neue Mediengesellschaft Zürich on the Computerworld website (only available in German).

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