Key strategic priorities for VTB group’s development in 2019–2022
The changing economic landscape poses new challenges for VTB Group as a whole. Competition for customers is heating up, while barriers to their movement between banks are breaking down, and competition from non-financial players is increasing.
The model for the consumption of financial services is being transformed, and the trend towards greater digitalisation of products and services is growing. Pressure on margins in traditional banking and stagnation in the banking sector continue.
VTB is focused on long-term and sustainable development, it has to adapt in response to new challenges, which means the evolution of the Bank’s business model, an increased focus on customers and their needs, acceleration of internal processes and optimisation of the Bank’s operating model.
Responding to the new economic environment, VTB Bank’s Development Strategy
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Customer usage of digital channels for their banking needs is expected to increase considerably: more than 50% of sales will be completely digital, and 100% of products will be available to customers through electronic channels by the end of 2022; more than 80% of service operations will move to remote channels. An important priority is the digitalisation of internal processes, which will involve, in particular, the transition to a completely paperless internal workflow while maximising the electronic workflow in relations with external counterparties.
- The Bank plans to build an advanced operational and processing platform based on a next-generation microservice IT architecture that will create competitive advantages for the Group in terms of the speed at which technological solutions are introduced and new services are brought to market. Investments in technological products will be aimed at creating leading solutions in such areas as the use of biometric identification platforms, robotics and advanced analytics; the virtualisation of processes based on artificial intelligence technology; the creation of a system of open interfaces for prompt integration with partners; and automation of the cloud infrastructure for the acceleration and scaling of capacities.
- Key factors will be accelerating the Bank’s response to market changes and customer demand and promoting values within the corporate culture such as innovation, engagement, commitment to results and teamwork. This new approach will be facilitated by initiatives to develop human capital: the creation of a pleasant working environment and attractive conditions for the top talent in the market, the systematic development of tomorrow’s leaders, ensuring productivity growth and competitive motivation, and a balance of team and individual success. The introduction and scaling of a new model of cross-functional teams will be an important driver for speeding up these processes.
Main development trends in the Retail Business
The Retail Business strategy envisages an increase in the client base by 50% to 18 million clients along with an increase in market share in retail lending to 22% and, accordingly, an increase to 35% in terms of the share of loans to individuals in the Group’s loan portfolio. Concerning retail customer accounts and deposits, the Bank plans to increase its market share to 20% on the back of faster growth in balances of current and savings accounts; their share in the structure of deposits from individuals will be greatly increased. Optimisation of the cost of funding and an increase in the share of customers carrying out transactions and customers with multiple products will ensure income diversification and above-market growth in terms of average income per customer.
- In November 2020, a new version of VTB Online was launched. It now operates at twice the speed, and transitions between sections are instantaneous – taking place in less than a second. Its maximum capacity has tripled. Now the application can handle up to 130 thousand active users per minute, and it will be able to handle up to 400 thousand concurrent sessions in the future. Fifty new functions have been added to VTB Online, including ATM withdrawals without a card, the simultaneous payment of multiple bills and customisation of the home screen.
- As of the end of 2020, some 10.1 million customers were using VTB Online, 93% of whom were users of mobile banking (9.4 million) and 14% – Internet banking (1.4 million).
- In 2020, the Bank achieved one of its key strategic goals in terms of large consumer purchases when it enabled customers to complete remote mortgage transactions. On 16 April 2020, the first completely remote mortgage transaction was carried out (jointly with PIK Group). In total, about 3 thousand customers completed remote mortgage transactions in 2020.
- A new VTB branch format was introduced based on a personalised customer approach. The new offices are efficient and convenient centres of financial knowledge and services; they also form part of a line-up of service access points that includes ATMs, the call centre, instant messaging and the mobile application. The operations of the new-format branch offices have made it clear that the use of smart technologies has boosted office efficiency by 40% while reducing floor space by 20–30% and, at the same time, shortening client waiting time by a third. The functional zoning system that was introduced enabled us to reduce not only the floor space of our branch offices but also to lower infrastructure costs by up to 22%. Our branch offices employ smart office technologies, which enable them to optimise the temperature, humidity, lighting and concentration of CO2. This reduces harmful emissions by 10% and decreases operating costs per square metre compared with standard branch offices
Main development trends in the Medium and Small Business
Goals of the Medium and Small Business global business line: doubling the client base among small and medium-sized enterprises with an increase in average revenue per client by 15–35% depending on the subsegment. This will be made possible, primarily, by increasing the transactional revenue of the business and developing remote and partner channels.
- In 2020, a new Internet bank was created on an omnichannel platform with a unique design, a foundation for the integration of products, a universal marketplace, a navigation system and an intelligent assistant. A new Mobile bank for business, VTB Business Lite, was created with an improved design and expanded functionality: simplified payments to individuals and expanded limits (interactive training, prompts for the automated filling of payment fields, etc.)
- The VTB Business QR mobile application was launched for individual entrepreneurs (including the self-employed) and legal entities offering basic functionality (with plans for further expansion of functionality). The application enables users to quickly and easily accept payments from individuals for products or services through the Faster Payments System using a QR code.
- The Cifra mobile application (digital accounting) was launched, which covers all the needs of individual entrepreneurs related to the calculation and payment of taxes as well as reporting to the Federal Tax Service.
- The Bank made it possible for individual entrepreneurs (single-person executive bodies) to open a current account in person in just 20 minutes.
- The VTB Kassa product was developed and piloted in a number of regions. This is a comprehensive solution that enables customers to accept payments in cash through bank cards or by using QR codes from the Faster Payments System, to issue sales receipts and to transfer payment-related information to the Federal Tax Service online. The formalities can be completed in one visit to a Bank office. As part of the service, customers receive a ready-for-use online cash register that is registered with the Federal Tax Service and that comes with a fiscal memory device as well as an agreement with a fiscal data operator.
Main development trends in the Corporate-Investment Business
VTB’s strategic vision for its Corporate-Investment Business implies the development of its existing business model with a special focus on an individualised client approach based on industry specifics and an understanding of client needs, expertise and partnerships to resolve financing challenges of any size, as well as unchallenged leadership in the investment business.
The goals for the development of the Corporate-Investment Business global business line are to maintain leadership positions in investment banking services for corporate and institutional clients, to ensure better-than-market growth in current account balances and fees and commissions for transaction products, and to create, together with the Retail Business, conditions for a breakthrough in the investment products market for individuals and, by the end of 2022, to have secured at least 25% of this market.
- In 2020, VTB played an active role in state programmes to support the Russian economy, in particular by financing companies in strategic sectors and providing loans to replenish working capital, interest-free loans to pay wages and loans for the resumption of business operations at 2% interest, among other measures. In total, VTB provided financial assistance to 75 groups of leading companies (about 30% of systemically important enterprises).
- The pandemic and remote work dictated the need to transform internal processes. For example, the first guarantee deal with a customer that was signed remotely was completed in 2020. Internal processes were greatly optimised and simplified, which made it possible to reduce the time from the submission of a customer request to the disbursal of funds.
- In order to improve the effectiveness and the digitalisation of credit products, the Digital Credit platform was launched. The Bank plans to develop this platform in order to greatly reduce the costs associated with the lending process, shorten the time period for issuance and increase satisfaction with the process among the Bank’s clients and employees.
- In 2020, as part of the development of round-the-clock online payments, a standard service was introduced to enable payments from individuals to corporate clients using the Faster Payments System; new customers were connected to the service as it was rolled out throughout 2020.
Оne of the key areas for VTB Group in terms of the implementation of its Development Strategy is the reinforcement of synergies among its global business lines.
With respect to the development of investment products, the line of investment products available to individual customers through the mobile application was expanded in 2020: these include participation in initial and secondary public offerings on Moscow Exchange as well as over-the-counter placements, investment consulting services and portfolio analysis. The VTB investment management platform was integrated into the Yandex Plus service and the RBC interface. The Bank made it possible to open VTB brokerage accounts remotely and to buy and sell public federal loan bonds through Post Bank brokerage accounts.
As part of the Bank’s housing construction initiatives, a digital housing ecosystem was built – online search, transactions, secure payments, registration, mortgages – for individuals, developers and realtors. In the context of financing housing construction using escrow accounts, pursuant to Federal Law No. 214-FZ dated 30 December 2004, the calculation of interest rates on loans was automated.
As part of the Urban Environment and Transport initiative, a pilot was successfully carried out, whereby card payments for trips on the Moscow Metro were made based on biometric facial identification.
A key condition for the successful implementation of the strategies of the Bank’s global business lines and for development in the digital economy is the creation of an advanced operational and processing platform that involves efficient processes for operational support, business support and information systems that ensure a high level of automation and stability.
As part of the development of the technological elements of the VTB platform, 12 technological programmes were launched in 2020, the key results of which were as follows:
- the share of mortgage applications submitted through digital channels increased threefold;
- express loans and express guarantees for small and medium-sized businesses were introduced based on the technologies used for the credit conveyor;
- there was a 24-fold reduction in the time needed for an individual entrepreneur to open a current account;
- the productivity of remote banking services for legal entities in terms of payment orders for customers and the provision of statements increased more than tenfold;
- in the area of artificial intelligence, a graph platform, a geo-platform and a model development and application platform were introduced in 2020;
the first microservice platform in Russia for complex automation of all channels of communication with customers was developed; the following services were introduced on the platform:
- a new mobile bank for the Retail Business, which was included in a rating of the top five mobile financial applications;
- the time to bring new technological products to market was reduced by 87.5% (from 240 to 30 days);
- the first products for customers of the Medium and Small Business in the context of remote banking services (opening and maintaining accounts, cash transactions, currency control, deposits and others);
- a qualitative leap was made in terms of the reliability and availability of systems – system availability increased to 99.87%, including scheduled maintenance work. The number of crashes was reduced by more than half, and the time needed to correct them was also reduced by more than half.
In accordance with the 2020 data management strategy:
- the performance of data warehouses doubled thanks to their migration to state-of-the-art platforms;
- online analysis of business performance was enabled;
- centralised platforms for the execution and management of data models were put into commercial operation;
- the process of purchasing and loading external data sources into Bank systems was centralised.
The following initiatives were carried to improve information security:
- an Information Security Monitoring Centre was created to ensure early detection of cyberattacks and an immediate response to ongoing attacks on the Bank’s automated information systems;
- information exchange was established concerning threats and new versions of malicious software with FinCERT competence centres, the National Coordination Centre for Computer Incidents and international information security incident response centres;
- a process was put in place to inform Group companies about current threats based on aggregated data from various sources.
In 2020, the Bank continued to develop its employer brand. For example, VTB Bank was named one of the top 10 employers in Russia according to Forbes for the second year in a row and one of the top three employers in the banking sector according to HeadHunter, FutureToday, Universum and Best Company Award.
At the end of 2020, a large-scale programme called Career Paths was launched for employees in the Bank’s regional network; the programme is aimed at creating a comprehensive and effective system for promoting employees within the organisation, developing and retaining highly successful personnel and shortening the period for their onboarding in new roles. VTB’s career portal, www.vtbcareer.com, was updated. The updated website integrates VTB’s values, which are also shared in the form of success stories involving Bank employees. The Bank’s specialised career portal was visited by more than 600 thousand unique users during the year, more than 40 thousand of whom responded to vacancies at the Bank.
In early 2020, the coronavirus pandemic demanded a considerable acceleration of the introduction of remote working arrangements, and the Bank’s IT departments undertook the huge challenge of putting infrastructure in place for such arrangements to work effectively. In the future, work will continue on the introduction of flexible and hybrid working arrangements in those Bank divisions where such arrangements allow employees to perform their work without compromising quality.
In 2020, the Bank applied a lean
A portal called Gravitation was launched for working with ideas and suggestions from staff. The main goal of the portal is to provide employees – regardless of their rank or position in the Company – with an opportunity to share labour-saving ideas aimed at optimising work processes and to suggest innovative ideas for the development of the Bank and its products. Since the beginning of 2020, more than 20 thousand employees have joined the portal (33% of the Bank’s entire workforce), and some 2.5 thousand ideas have been published.
Pursuant to the instructions of the Government of the Russian
Sound management of the quality of the customer experience is one of VTB Group’s top priorities. In 2020, VTB’s Customer Experience Quality Centre rolled out a full-scale system for measuring the quality of the customer experience across all global business lines. The system is used to conduct regular assessments of the loyalty of customers in the Retail Business, Medium and Small Business and Corporate-Investment Business global business lines.
The leaders of the streams and channels operated by the three global business lines are constantly studying feedback from customers to improve the processes of communicating with them and to make the Bank’s products and services more competitive. More than 700 thousand VTB customers share their opinions every quarter through regular surveys on the quality of VTB’s service.
During the reporting period, automated research services were launched that enable VTB product teams to test product and service ideas on the target audience quickly and independently, and to take customer feedback into account in the decision-making process at all stages of the product cycle.
VTB continued to develop its system for assessing the quality of its internal services; two Bank-wide surveys were conducted concerning employee satisfaction with the quality of the Bank’s internal services, with more than 15 thousand employees taking part. Each survey evaluated about 60 services. Based on the results, the service owners gathered the information needed to further improve and streamline internal banking processes. According to the surveys, employee satisfaction increased 22 p.p. in 2020 from a year earlier.
The main areas of cost optimisation and improvement of the Bank’s efficiency are simplifying processes related to standard operations, automating and roboticising routine functions and processes, increasing transparency and reducing costs, managing non-core assets, reformatting the network, and centralising and regionalising homogeneous functions.
In 2020, a model was developed for assessing operations at points of sale; a set of initiatives was developed and implemented in full to optimise the administrative and management costs of the network . Some 3.9 thousand workplaces were optimised (+1.5 thousand workplaces optimised in 2019). Sale and lease cancellation of the Bank’s unneeded real estate assets were implemented.
Developing a sustainable development strategy
Most of the initiatives included in the various sections of the strategy under development are already being implemented at VTB.
VTB provides financing both for energy services and for projects in the field of renewable energy. At the moment, we are No. 1 in factoring for energy services. A large number of projects have been financed for the construction of medical, sports and tourism infrastructure facilities. VTB Bank is a key financial partner of Mother and Child Group (MD Medical Group). The Bank was involved in the development of hospitals in Samara, Tyumen, Ufa and Novosibirsk. In addition, on 16 September 2020, the second phase of the Lapino Clinical Hospital (the Lapino-2 surgical facility) was delivered with the help of financing from the Bank; this was one of the largest projects in the healthcare sector in the Russian Federation. More than 10 projects have been completed for the construction of toll roads and airport infrastructure. The multifunctional sports complex VTB Arena was built. A transport payment platform is being introduced in Moscow and St. Petersburg.
Responsible investment funds were launched in 2020; these funds involve asset management in line with ESG principles. VTB Equity Fund: Responsible Investment, an open-end fund of market financial instruments, is intended for customers with an aggressive investment strategy. The fund’s strategy is aimed at long-term capital growth by investing in shares from Russian issuers that have high growth potential and that, at the same time, have been analysed and meet ESG criteria. VTB Bond Fund: Responsible Investment, an open-ended fund of market financial instruments, is intended for conservative investors. The fund’s strategy is aimed at investing in corporate bonds from Russian issuers that have integrated environmental, social and governance factors into their production process.
VTB is implementing several projects aimed at engaging customers in ESG initiatives. For example, in collaboration with Post Bank, the Give the forest to a friend! project is ongoing; the aim of the project is to restore forests in Russian nature reserves. Over the six years of the programme’s existence, more than 4 million trees have been planted. In addition, in June 2020, the Bank, together with the Russian Society for Nature Conservation and with the support of Mastercard, launched a project called Mission: Clean Water, which is aimed at helping clean up more than 146 bodies of water in eight federal districts of Russia. Programme participants can choose one or several federal districts of Russia and set up one-time or regular donations of their bonus rewards to the Mission: Clean Water project. Each participant’s support for a body of water is presented through a visualisation that gives the participant a chance to learn new facts about Russian nature and to receive useful environmental advice.
In addition, the Bank greatly expanded its eco-cards project, issuing 12,970 such cards in 2020, along with 342 thousand digital cards and 5 million cards with paperless PIN envelopes (45% of all cards issued).
Work is under way to make the most popular types of social payments available through the Bank’s digital channels, and also to support the development of public superservices.
The Bank is taking part in several significant educational projects, including managing the endowment funds of Russia’s largest universities. The Bank provides support to higher education institutions and also for applied and fundamental research, including through its strategic partnership with the Graduate School of Management at St. Petersburg State University, which involves support for and the development of research centres at the Business School, the launch of online courses for managers from Russian companies and an online educational programme called Management Essentials.
Charitable projects in the environmental and social spheres are being carried out. VTB participates in a WWF project for the conservation of big cats in the Russian Federation. Throughout the project (since 2016), extensive work has been done to protect and monitor snow leopards, Amur tigers, and Amur and Persian leopards. Thanks to the project, the population of big cats increased by around 25% in the period from 2012 to 2020. The Bank provides annual charitable assistance to the Russian Geographical Society (promoting geography and preserving Russia’s historical and cultural heritage); some RUB 200 million in support has been provided since 2017.
To coordinate and improve charitable activities in various regions of Russia, VTB Bank registered, in April 2020, the