What Commercial Banks Will Look Like After COVID-19

The Chairman of the Board of Jýsan Bank, Aybek Kayip, shares his opinion on the future of the Kazakh banking system

The Kazakhstani banking system is resilient enough to cope with the pandemic as well as lower oil prices [which existed prior to the onset of COVID-19 in the country] and there is no reason to expect a credit crisis similar to what we saw in 2008 and 2015 [in the last quarter of 2020]. All banks are showing fairly good results and have been for almost three years now given that those financial organizations with bad assets have since left the market. This was also backed by regulatory reviews as well as AQRs [Asset Quality Reviews] conducted by foreign consultants. That’s why I believe that Kazakhstani banks are prepared to face the potential knock-on effects of COVID-19.

When the bankers are trying to estimate the market or economy they look first at the borrowers. Even though the pandemic has increased risk for banks while simultaneously reducing customers’ purchasing power, we won’t see nearly the same effects as were wrought during the 2008 and 2015 crises. Instead, I believe the economy will rebound next year. 

When the pandemic hit the country, banks sharply revised their borrowing rules to avoid loans being issued to the wrong customers. They always do this if the economic situation is uncertain. Kazakhstan has a lot of national programs aimed at supporting business activities and I think that the banking system will be able to manage all these new risks. 

The risk management in Kazakhstani financial organizations was the main concern for years, but now we have a healthier and more stable banking system. Banks have learned from past crises and improved their risk management strategies. 

Kazakhstan may not have a large population, but it has a lot of banks. And, so, I believe that this highly competitive environment as well as free access to additional financial reserves makes the Kazakhstani banking system very resilient. Banks will be forced to go further in developing new products and services. For example, Jýsan Bank is creating a complete banking eco-system in order to cover all client needs. 

Banks follow the client 

As a result of the quarantine, banks became more diversified and flexible. For example, the volume of online transactions in Jýsan rose by 60% during the first few months of the lockdown. The small and medium-sized businesses also increased their demand for online services by 50%. Concerning transactions in foreign currency, we passed the peak in May and now are returning to pre-crisis levels. When the government lifts all residual quarantine measures, then all banking operations are likely to be fully restored, signaling the complete recovery of the entire economy.

The vast majority of entrepreneurs and people have begun to adjust, live and return to work in this new reality. Many of our clients were able to adjust their business models and start selling online, making deliveries and implementing remote services wherever possible. And, of course, customers are growing more accustomed to these changes in business. 

In general, there are three groups of banking system clients: the first group consists of those who do not use online banking, the second group includes those who use online services occasionally and the third group are active mobile app users. However, during the pandemic almost all customers took advantage of online banking. 

This shift in consumer behavior will impact financial organizations that had previously tried to offer their services online. For example, some have already rebuilt their apps to provide clients with a wide range of products all in one place.

Where there’s demand, there’s supply 

Currently, many Kazakhstanis prefer to use investing tools as an alternative to in-person banking. However, these tools are more complicated and the company’s staff should be trained to work with new customers and their capital. You should also have a license and a big team of professionals. That’s why some banks decided to avoid private investments. However, Halyk Bank and Bank Center Credit have reported very good results. Jýsan Bank and our affiliated company, JýsanInvest, are also developing interesting investment products. 

Labor market 

The digitalization of the Kazakhstani financial system was boosted by COVID-19 and the quarantine. However, all these technologies are introduced gradually and, of course, the state played a very important role. For instance, the Agency for Regulation and Development of Financial Market was able to assess the situation very quickly and all necessary paperwork was readied in a very short period of time; that became the legislative foundation for many new online banking services.

Last year, Jýsan Bank announced its plans to introduce new digital services with fewer physical facilities. COVID-19 has accelerated this trend.

For now, our scoring system can automatically process up to 70% of all client loan applications and the role of humans in the decision-making process is steadily decreasing. It seems to me that this is a global trend. I mean, less staff is not a COVID-era phenomenon; rather, it’s a very real transformation at the core of the traditional banking model.

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