New Challenges and Opportunities Awaiting Banks and Insurance Firms Behind the Corner
Bulgarian banks to seek to harmonize with the Eurozone, while insurance companies will look for technological realization of new business models and better utilization of IT resources
Bulgaria’s joining to the EU set the efforts of the Bulgarian bank community to integrate the payment systems in the country with the Union’s payment practices and standards. The national system component of TARGET2 (TARGET2-BNB) started as of 1 February 2010 in the sphere of large payments, points out Dimitar Kostov, Member of the Governing Council of the Bulgarian National Bank and Deputy Governor in charge of the BNB Banking Department.
The accession of the national bank community to TARGET2 is an important stage in the integration with the payment system in the Eurozone and the reduction of the system risk in the bank sector, and provides the participating banks with the opportunity to carry out real-time euro transactions.
The system servicing client’s payments in Euro BISERA7-EUR began functioning at the time of the TARGET2 launch. It processes transactions in euro in accordance with the standards of SEPA, and the settlement is done in TARGET2. These conditions allow the connection of BISERA7-EUR to other similar systems in other EU members. “The first step was made with the system’s connection with SEPA-Clearer – Deutsche Bundesbank’s system for small payments, which ensures a mutual exchange of credit transfers between the bank communities of Bulgaria and Germany in a reliable, fast, and financially efficient way,” explains Kostov.
During the following years we will see a continuation of the efforts to harmonize the bank market with the Eurozone by: the introduction of the XML standard for client payments in BGN through the small payments system in Bulgaria; the harmonization of the local business practices with the standards of SEPA; the implementation of the SEPA schemes for the public administration’s budget payments while keeping the current amount of information they carry.
The deeper integration with the European payment systems facilitates the addition of new participants in the finance sector and further activates competition. More diverse bank and non-bank products will be offered in the future. “The integration of the different business management systems (from ERP to SRM, CRM, SCM, portal solutions, etc.) will lead to a complete enfoldment of the business processes and service and satisfaction improvements, hence to better competitiveness for every bank. The introduction of new technologies will stimulate the implementation of new bank products. For example, the mass penetration of mobile Internet and end-user devices will drive the development of mobile payments. More customers will look for products offering e-money and mobile payments. Also more and more paperless services will enter the market at the expense of the classical services involving paper and office workers. It is not far from now when business people’s entire offices will fit in their pockets,”says Kostov.
According to him, the importance of information security will get higher with the evolution of IT in the bank sector. This trend concerns security and access to data, as well as physical data storage and the integrity of information arrays. Also a growing number of financial institutions are starting green campaigns. “Along with the moral satisfaction, the building of green data centers brings serious financial benefits,” Kostov emphasizes. “The idea is for them to become much more energetically efficient through innovative technologies. A number of new technologies are available for this purpose, i.e. IT assets management, server virtualization, cooling solutions, etc.”
In the insurance business
the market competition and the economic upturn are the main engines when it comes down to the implementation of IT, according to Nikola Raikovski, VP of IT at Allianz Holding Bulgaria. “In the pre-crisis period were implemented the systems, supporting the core of the insurance business – for risk assessment and evaluation, insurance policies administration and damages processing.”
In the post-crisis period the corporate IT in the financial sector will never be the same again. When summed up the projections for low growth rates, the introduction of new and stricter regulations of the financial sector and the anticipation for growing market competition and customer requirements outline a complex and developing frame in which insurance companies have to work and come up with new IT strategies. Thus Raikovski expects active changes in the following areas:
Technological realization of new business models for the insurance enterprises.
This includes: technological enfoldment of sales and service operations, which are genetically burdened with complicated processes and multicomponent rules, forms and documents, and so are still partly or ineffectively integrated in the existing systems; technological integration of business partners for product distribution (brokers, agents) and for client services (repair shops, delivery partners), which due to the nature of the insurance business have a main role in the connection with end customers.
Modernization and optimization of the available technologies and systems.
This encompasses: modernization of the existing IT architecture trough consolidation and virtualization of IT resources; IT assets life cycle management for stabilizing and reducing the operating costs and increasing service security. In this context Raikovski expects that operating efficiency will improve by adopting new system solutions in the areas that are critical for insurance operations – business process management, document management, service integration, alternative channels. He also projects that the internal IT potential (hardware and software assets, IT staff), as well as the external IT resources and services will see better utilization.