Błażej Szczecki - Przyszłość Systemów Centralnych - Fireside Chat

Hi, good morning everyone. And with me, the host is Wojtek Mach, General Manager of GFT Technology. Hi Wojtek.

Thanks for the question. I think the future of core systems depends a bit on the situation of each individual bank. In the case of Bank Pekao S.A., we conducted a deep analysis a few years ago—exactly two years ago—on what to do next with the core system. Three options were considered: first, modernizing the current system; second, building a whole ecosystem, not just the core system, but the entire IT ecosystem as a so-called greenfield; and third, outsourcing. Theoretically, we could have considered doing nothing, but from a business perspective and maintaining competitiveness, we immediately rejected that option. After this deep analysis, where we considered a dozen criteria—for example, speed, time to market, ensuring proper resources, attractiveness for business—we decided on an option we called 'Deep Transformation.' In our case, at PKO, Deep Transformation means that we treat the core system as a tool to be somewhat marginalized. What does that mean? It means it should be a tool that works stably and securely, while being invisible to our employees—like a bank kitchen, a deep engine room, like on a ship. A deep engine room that, apart from engineers, no one should look into. That's why we focused on omnichannel, building it with modern technologies to ensure time to market for our clients and business partners. We see this layer as a competitive advantage, the ability to build an attractive customer experience. The core is secondary here. So that's the direction we're developing: marginalizing the core system, surrounding it with attractive satellites that communicate effectively with the core.

Well, Wojtek, to answer that first perspective: we considered whether to build a completely new core and then switch over. But that would mean stopping business development for 4-5 years, which is unacceptable in today's times. So we rejected that option. The second option you mentioned—theoretically, it resembles building a speedboat on the side where we experiment. That could be one of those modern core types, like Thought Machine or Mambu, where we experiment and gradually add new modules. That's certainly an option; we don't rule out using such islands on the side to ensure attractiveness for our employees, to learn these new technologies and this core, because maybe it will be a Kodak or Nokia case if we don't take care of these competencies early enough and miss the trend. That could end with us being excluded from the role of leader we aspire to. So that's a possible path. But we decided on a slightly different path: we are modernizing our core and building many satellite systems, and we are actually changing all layers at PKO that existed before 2017, including the treasury system, process management systems, and the data management layer. So we are pulling these layers out of our core, which ran on old technology on mainframes that were inflexible. That's why we built a data lake, why we are currently investing in data analytics technologies, and we are placing them in the cloud to gain competitive advantages in the omnichannel layer, the data management layer, and the process layer. That's our hope, that's our aspiration.

It's hard for me to advise without knowing the specifics of individual banks. So let me share some thoughts. For existing banks that have legacy and a comprehensive offering, it's quite difficult to go the neobank route, which starts from scratch and decides which services to offer and then chooses the right tools. Here, there are existing tools and services that clients use, and continuity must be ensured. When starting a new business line, you could consider, for example, putting a new product on a cloud-native solution. As for which layers, from our perspective, we see the biggest gains from the cloud in the data layer: data analytics is a native environment for analytics, with high computing power, expanded capabilities for using data, and the ability to collect external data. I see great added value there. The second area where I see great added value is the front end: tools for direct customer service, whether mobile banking, internet banking, or perhaps tools for branch or contact center customer service. The condition is that it must be an omnichannel solution, because customers are used to—or are becoming more used to—that. If they interrupt an activity like a credit application, they should be able to continue it in another channel. The client should decide, not the bank.

Are there banks that can answer, 'I don't need a new core'? I think there are many such banks. Are there banks that can answer, 'I don't need the cloud'? I'll answer provocatively: there are no such banks. And it's not just about functional issues. We all struggle with the issue of human resources, building an environment that is attractive to our employees. The cloud has become a component that can attract talent—technological talent, but also business talent—so they can quickly learn new solutions and quickly implement and realize their ideas and dreams. In that sense, the cloud becomes a central element of building long-term competitiveness for banks. So in this context, I see the cloud as a future asset. The technological part is simpler; we can handle it. But the human aspect, the process aspect—these are the things we should remember when using cloud technologies.

Thank you.