Bigbank, one of the consumer loan market players, is not just bigger than the others, but seems to be more serious than some of the rivals. Focused fully on responsibility and transparency in crediting, the bank specialising in loans has set eyes on its further growth. At the helm of the bank stands Martin Länts, the chairman of the Board of Bigbank. He took his time to speak and share his thoughts with The Baltic Times.
I saw you neatly taking notes at a recent high-profile business conference in Riga. Is there something that always gets your attention?
There is always something to look for, as every day brings new things and, yes, surprises too. Of course, one of my focuses currently is also the updated regulations regarding prevention of money laundering and terrorist financing, a hot topic locally and internationally. Luckily, we mostly operate in a different segment, which is not that much predisposed to money laundering as, say, the payment service sector or the currency exchange. The bulk of Bigbank activities is all about taking in term deposits and providing loans. Our focus is set firstly on the private customers’ segment, and therefore, is the core of our business now, but we also lend to business customers for real estate developments.
The topic of money laundering and its tackling has especially been acute in Latvia after one major bank was closed down here. As a result, many new and additional anti-money laundering measures have been enacted by the Latvian authorities. Needless to say, Bigbank, as a major creditor with a good reputation, needs to keep an eye on all the regulatory changes, implement new ones and ensure the effectiveness of internal control measures.
How much harder has it become for Bigbank to operate in Latvia after ABLV Bank self-liquidated?
Of course, it has had an impact not only on Bigbank, but on the whole banking sector in general. It took us some time to develop new and/or additional automatic controls to make sure we follow all the updated regulations pertaining to anti-money laundering and prevention of terrorism financing. We, for example, enhanced the scoring procedures of each customer, updated guidelines on how to assess each customer in the short and long term, how to notice suspicious activities etc. Yet the changes by the Latvian banking regulator, Financial and Capital Markets Commission (FKTK), did affect us little, as we, as I said, work in a different segment of the financial market. I am very glad that, today, Bigbank can compete on par with all the traditional banks regarding consumer financing and term deposits in the Baltic region. It makes me happy to know that many people prefer us over them.
Operating in nine countries with quite different regulatory mechanisms must pose a challenge for you…
Our business mentality is embedded in our corporate culture, which is about valuing its reputation and the name, being able to objectively assess all the risks and being responsible for all actions along the way. In a word, we seek to keep our risks as low as possible. Notably, Bigbank has mainly grown on its own capital – we have two private persons, Estonians, as the owners of the bank. This sets us apart in principle from the other loan lenders out there.
Despite the more stringent lending rules in the game, Bigbank succeeded in having loans past-due for more than three months drop from 6.8 percent in 2017 to 3.3 percent by the end of 2018. What is the reason for that?
It is a result of the huge change we made in our business strategy. The essence lies in changing the way we offer our products. Until recently, we had many customers who were denied loans by their home banks. Today, we operate equally with universal banks, meaning that we can offer the same, or, in many cases, better loan conditions, to our customers, often digitally. Importantly, at the same time, we changed our focus from the subprime customer segment to the prime customer segment. In order to attract such customers, we need to be better than traditional banks in every aspect of our business, starting with better customer service and faster loan issuing processes together with more attractive product conditions. We have come a long way in that respect and fortunately, as our business results show, the consumers in all three Baltic markets have noticed that as well. Of course, also the good health of the Baltic economies has been one of the factors in issuing more loans. In addition, salaries are going up and salary growth prospects are good for the entire year of 2019 and beyond. Nonetheless, as our vision is to become the most recommended digital financial service provider in all countries of operation, we are continuously seeking to improve in order to provide better services tomorrow than we did today.
Yet the Baltic economies did slow down a little in 2018. Did that reflect on the Bigbank performance?
No, it did not. The overall picture looks very good not only for the Baltics, but for many rapidly emerging markets, like China and India, too. Notably, the forecast for the whole Baltic region is even better than for most other EU countries in terms of GDP and average income growth. Investment returns in the Baltic real estate sector are higher than elsewhere. Yet the interest rates remain stable, which boosts local economies. In addition, we have the European Central Bank fuelling the European Union member states’ economies with pretty cheap loans. So, the outlook is still really promising.
Is Bigbank going to increase interest rates this year?
No, we do not plan to do so. Having said that, I have to notice that lending has increased significantly over the last couple of years and the growth of salaries constitutes quite a big pressure on employers. The question one should ask is this: where is the next growth coming from? It is not coming from cheap money, nor from higher salaries – that is obvious to everyone. I want to see what actions the Baltic governments will take to keep up the pace (of growth). What are their actions to support local entrepreneurs to increase productivity along with the rise of salaries, etc.? The consumer confidence index is very high now – some say it is at an all-time high, but the entrepreneurs’ confidence index is not that high. In fact, many businesses predict not such prosperous times ahead. Hence, we will have to wait and see how events occur. Especially what happens in the United States and China, what the fallout from the taxation war and the Huawei accusations will be.
What does Bigbank do in withstanding the competition from fully digital fin-tech companies? Aren’t they in a better position?
One of the principles stated in Bigbank’s 2017-2021 strategy is that we do not compete with the fin-tech sector. Due to the nature of our activities, we cannot aim at a leadership in the fin-tech sector, so we have to focus on our primary activities and, yes, cooperate with fin-tech where we can. Having said that, we eagerly look for our own opportunities in the digital era, some of which I see coming from using the technological advancement that the best fin-tech companies have. Specifically, digital solutions can be used in many fields of our operations, be it on-boarding customers, customer identification, scoring customer financial solvency and much more. With major investments in our new banking system (called Nest) – we are investing 22 million euros over a period of 3 years into building our own banking technology system – we are now in a quite favourable position in terms of our technological capabilities. We are now using the new core system Nest to its full capacity in Finland, Sweden, Austria, Germany and the Netherlands and Lithuania, while planning to launch it in Estonia and Latvia later this year. The new banking system is a lot more advantageous, a lot easier to run and, importantly, more transparent than the old one. Many banks are falling behind in development so far. We also used to have many physical offices throughout the Baltics, but today, due to the overhaul of our automated and digital processes, and a new banking system, we closed most of them. We now have just one office in Tallinn and none in Riga and Vilnius, for example. We have transformed our business model fully – we went digital and automotive as much as we could. We want our customers to be able to use all our services without leaving their homes. As mentioned before, our goal is to become the most recommended digital financial service provider in the countries in which we operate. I am sure we are headed in the right direction.