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ARMENIA'S COMMERCIAL BANKS IMPROVE THEIR TECHNOLOGICAL BASIS

Banks and high technologies are part and parcel of each other. Financial deals are an excellent soil for high tech systems and financiers are always among the first to respond to IT novelties. The banking is the second most active user of IT after the military with its colossal high tech spendings. So it appears that there is always plenty of room for a bank to improve its technological infrastructure. In this overview an ARMINFO correspondent highlights the current level and the prospects of IT development in Armenia's banking sector in terms of both inter-banking automatization and bank-clientele relationship. Representatives of the most active Armenian banks give their views of the advantages of own automatization systems and their advanced foreign analogues adjusted to local conditions.

Some Armenian banks are now beginning to show worthy competition to HSBC BANK ARMENIA with their modern bank technologies and IT novelties, says HSBC Bank Armenia CEO Nick Gilmour. "I am impressed to see what kind of banking IT my Armenian colleagues are using today," he says. HSBC Bank Armenia is also trying to introduce new technologies. Each year HSBC Group spends several billions of US dollars on high tech. The HUB system the bank has used since 1996 has been designed by HSBC Group IT experts. This system is operated by HSBC Group offices in 79 countries. It is cheaper to maintain and easier to operate as it can control the whole work of a bank this including forward deals. HSBC Bank Armenia does not use the Internet-Banking and Telephone Banking services. Gilmour says that their introduction in Armenia is impossible because of the low quality of the phone communication. Instead the bank applies Hexagon, a system allowing clients to check up their accounts and to transfer money without leaving their offices.

UNIBANK prefers to work with local software producers. This allows higher flexibility - any changes in software are made much quicker, says the bank's automatization executive Ruben Nalchajyan. Developed by LSoft company the bank's "Operational Day" system has been exploited since the bank's opening in 2001. LSoft is kept constantly informed of any change necessity and effects them immediately. Recently the bank installed the Bank-Client system enabling "remote" clients to reach the bank's server from their offices and to carry out money transfer and other transactions. Also internet-operated is UNIstream, a very quick and efficient system of momentary money transfers. Unibank is actively developing these directions but is also planning to introduce services allowing to open a banking account and to order a credit card via internet, says Nalchajyan.

The Bank-Client system is highly in demand by Unibank's clientele but not generally in Armenia. This is due to many factors but mostly because of the low quality of the country's telecoms. "If each client enjoys cheap and good internet access this will open up endless development opportunities for the sphere," says Nalchajyan.

The modern dynamic and highly competitive banking business is urging banks to expand the spectrum of their services, to raise their quality and at the same time to reduce their price. This first of all refers to "out-bank" services or Distance Banking Services, says Tigran Voskanov, banking technologies development executive of ARMENIAN DEVELOPMENT BANK. This is the very purpose of the bank's BS-Client v.3 system. Designed by the Russian company Bank's Soft Systems this technology consists of three subsystems - Bank-Client, Internet-Bank-Client and Telephone-Client - each capable of working both independently and in complex.

Shortly the bank will start exploiting the Bank-Client and will finish testing the Telephone-Client. The system has a very valuable capacity - it can not only solve bank's present and future tasks but also "prompt" drastically new types of business such as E-Commerce and internet-payments.

The hardest step has already been taken - the bank has introduced the Bank-Client system this implying involvement of a big number of clients wanting to have the system installed in their offices. Voskanov says that the system will become increasingly popular in Armenia as the bank is not going to stop at the achieved and is simultaneously working to introduce Telephone-Client and Internet-Bank-Client for both legal and physical clients. "Our goal is to make a wide range of our services quick and easily accessible for our clients," says Voskanov.

He says that high attention is paid to security. Security is the most important factor for both the bank and the client. ADB protects its DBS system by external cryptographic means. It also has its own systems of traffic protection - authentication, authorization, record-keeping as well as administrative and inter-network shielding. The bank's system is protected by a Russian version of cryptographic protection widely used in Russia, CIS and Baltic states.

Armenia's banking system applies IT products much more actively than the other spheres of the country's economy, says Garnik Tatevossyan, IT executive of INECOBANK. But if one compares banking automatization in Armenia and abroad the country is lagging far behind. INECO has own system designed by own IT specialists. "Our bank is the biggest consumer creditor in Armenia. We work with a big number of physical entities on an installment basis." "We were not satisfied with the programs existing on the local market at that time (1998). While own automatization system has given us flexibility and quickness in responding to local IT developments." Tatevossyan says that the Central Bank obliges the commercial banks to supply information to the Credit Register so as to insure themselves against risky deals. "The data is sent automatically. As far as I know only three banks work like that - Armeconom, ACBA and we. These banks have their own automatization systems," says Tatevosyan. He says that despite being old INECO's Bank-Client subsystem is not at all worse than its newer counterparts. Nevertheless the bank is planning to introduce a new version of Bank-Client allowing server connection through both internet and phone. "Today we use only phone - our experts say it is safer," says Tatevosyan. The renewed system will be launched in 3-6 months. Concerning plans Tatevosyan says that his department is ellaborating a completely new service allowing bank operations through cellular phones. In June INECO and United Payment System ArCa are to test a Virtual Accounts system. This will first of all concern the payment of consumer credit debts via internet. Installments can be paid on INECO's web-site.

ARMECONOBANK's software system covers almost all the bank's activities - bookkeeping, bank accounting, client services - making them almost 90% automatized. This allows to enhance service culture to higher quality and efficiency standards, says the chief of Armeconom's automatized systems introduction and exploitation department Vardan Gspeyan. He says that since 1995 the bank has been operating Bank's Operational Day program designed and installed by the bank's own programmers and embracing the whole spectrum of the bank's activities. This is a highly reliable system allowing to collect data and compile it into necessary reports. The program has been constantly improved and now meets all the modern standards of bank automatization. Gspeyan says that the bank's different divisions have developed and installed subprograms like Depositary, Amortization, Clearing Center, Wages, Income-Expense. By the end of this year the bank is planning to install an improved version of bank's Operational Day. In 2000 Armeconombank installed HomeBank, a "home-made" Bank-Client type subsystem allowing extra-bank transactions. This year the bank is going to install some new banking software, next year software like Internet-Bank and Telephone-Bank and to develop E-Commerce. Gspeyan says that bank automatization in Armenia is on medium development level. All of the Armenian banks work with software bought from specialized firms or designed on one's own. He says that the local banking software market is quite limited. There are several specialized firms offering modern banking automatization programs to some local banks. This means a certain risk not to mention the fact that developing banking technologies and changing bank legislation set a pace these programs can scarcely keep up with.

Hence new banking technologies appear to be increasingly growing in importance for both the bank who gets quickness and efficiency and the client who get convenience in managing their financial flows. No doubt IT-armed banks will enjoy bigger popularity as they will be accessible from any type of communication starting from internet up to sever-connected mobile phone. Service diversity is also an interesting factor. Banking e-services range from consumer credit repayment and account opening to order of a credit card via internet. Thus the Armenian banks have quite a serious IT toolkit. Bank experts say that the sphere is on the rise now - actively designed and installed are new automatization systems and client service mechanisms. True Armenian banks are yet a long way from HSBC Group spending billions of US dollars on IT but progress can be seen already today.

Vyacheslav Khachatryan, ARMINFO, 30 June, 2004