Delivering for Turkish SMEs: Kuveyt Turk

Abdurrahman Delipoyraz, Executive Vice President of SME Banking at Kuveyt Turk, outlines his bank's continued focus on their SME customers. 

How integral are SME clients to your institution’s overall strategy? And how would you define key aspects/features of your SME banking strategy?

Even if it is known that SMEs are not big companies in terms of annual turnover and number of employees, it is no secret that they are the backbone of Turkey’s economy because of three main reasons: domestic and international production, employment, and remarkable contribution to GDP. Therefore, being a small company does not mean having a small effect on the economy; on the contrary, they can be seen as small giants. However, when we look at the other side of the coin, SMEs face several difficulties in the global market to compete with innovative and high value-added products. Also, internationalization and being able to survive in the volatile economy brings about serious financial obstacles. At this point, Kuveyt Turk aims to help SMEs promote their activity in the economy and to overcome obstacles not only in financial terms but also by giving them a competitive advantage in the global world. In other words, Kuveyt Turk shapes its own strategy based on a win-win plan to provide sustainable growth and help others to grow in the environment which leads us to call our SME customers our business partners.

There are three main sectors in the Kuveyt Turk; namely retail, SME, commercial and corporate banking. All these sectors are distinguished by an annual turnover. Approximately 1000 RMs in the SME sector serve our customers in our nearly 450 branches. Total credit volume of SME customers was 3.5 billion USD in 2020. Also, answering the questions of who our customers are and what their expectations are gives an idea about the people who are not our customers yet. Therefore, Kuveyt Türk follows a strategy to widen its SME customer segment. It includes reaching more small enterprises instead of covering big companies in the SME segment since these small ones have several handicaps in reaching loans, standing security, and adapting the volatile economy. Hence, Kuveyt Türk SME sector strategy does not prioritize bigger companies but supporting small ones to contribute to the economy. With this approach, in 2020, new customer numbers were approximately 70,000 with more than 100 different sectors.

Profiles of these customers differ from crafts (tailor, farmer, repair shop) to manufacturer or exporter which leads to different risk potentials for different sectors. However, it is not a disadvantage for Kuveyt Turk because the bank draws up strategies to have different hats to meet with the needs of these customers from varied sectors. To clarify these needs and give personalized service to our customers, the SME department has vital responsibilities: following the sector dynamics, adaptation with economic conjuncture, fulfilling the needs of customers/companies. With this concept, SME strategy mainly includes improving itself in remote banking and entering new sectors, collaboration with FinTech especially in cash management and pre-accounting applications, eliminating routine work portfolio managers to give them a consultant role. The aim is providing services centrally via digital channels and reaching every remote corner of the country.

To provide these connections, Kuveyt Turk analyzes a customer's needs and helps them to make their trade ecosystem sustainable and resilient in the volatile economy. In a nutshell, Kuveyt Turk initializes to promote their customers to the upper world leagues and support them to become more stable.

Can you briefly describe your sales and service model of the whole SME Banking business?

As it is known, technology improves at the speed of light which means even if Kuveyt Turk has a wide branch base, it should reach to every remote corner of the country via digital channels instead of physical branches. As it was mentioned before, Kuveyt Türk’s initial aim is providing a sustainable trading ecosystem for smaller companies to compete with bigger ones and providing flexible solutions for adapting companies to a dynamic trade ecosystem. So, product scale is shaped from this perspective. As an example, supply chain finance, leasing, tools for foreign trade products, etc. helps companies to regulate their cash flow. From this point, the sales and services model of Kuveyt Turk can be investigated from the perspectives of digital services, customer satisfaction, and financial gains. Digital services for SMEs include loans without going to a branch, managing their investments, making their payments and facilitating to manage their cash flow of their own stores. Especially in light of the pandemic, digital channels increase in importance meanwhile Kuveyt Turk also gives importance to the investments in this field.
 
 Kuveyt Turk established its own digital transformation and innovation directorate in June 2018. The main responsibilities of this department are fintech collaborations and open banking (API) side. They met approximately 120 fintechs in the past 2-2.5 years. 36 of them were related to the SME side. Initial improvement fields from the fintechs are pre-accounting integrations, collection services, POS, and payment services. Fintechs are actually customer-centric enterprises which adapt themselves to the dynamic needs of customers. So, it is clear that customers demand systems which are easy to manage with just one click. To support them, Kuveyt Türk currently has more than 80 API services in its own API Market which facilitates working closer with the fintechs. Thanks to these API services, collaboration is built with several fintechs for SME customers
 
 From the customer satisfaction perspective, thanks to our wide customer base from all over the country, Kuveyt Turk has the capability to understand their varied needs and gained insight for years. Customers are evaluated depending on different parameters which result in their efficiency, value segment, credibility, portfolio management and personalized pricing strategy. All these systems have different parameters such as income and expense of customers, transaction density on channels, volume of money on deposit, loan volume, credibility measures etc. All of these internal and external systems are designed to satisfy customers and to fulfill their needs. On the other hand, new customers are always a priority, and for this reason, the best price is offered when they first arrive. In addition to the high importance given to customer loyalty, the connection with our existing customers is also being prioritized by cross-sell methods. From year to year, the average number of our active customers and the number of product usage has increased.
 
 The last component of this model is the financial gain. Kuveyt Turk, in terms of assets, is one of the top 10 banks and the first bank among participation banks in Turkey. Kuveyt Turk owes this success to its systems which work based on artificial intelligence, know-how on working in a volatile economy and deposit structure. Structure of the deposit is advantageous for Kuveyt Turk since its checking accounts cover all deposit accounts by a ratio of 70% which is highly different from the market average. Customer efficiency is evaluated and measured after every transaction of customers by the system which helps the bank when there is a need to change customers’ way of working depending on regulations and based on protecting customers’ rights.

Could you highlight three key projects your institution has delivered to SME costumers within the last 2-3 years? Have all of these projects been digitally-based?

As mentioned before, the importance of payment systems increase day by day in the world and also in Turkey. Especially with the increasing volume in online shopping and consumer behavior changes, our business partners try to improve online payment infrastructures in case of planning to receive payments.
 
 To help facilitate receiving payments and decrease dependency on POS machines, CebimPOS is a mobile solution which Kuveyt Turk developed. It is one of our latest innovations for SMEs and is also a first in the banking sector. With this application, Kuveyt Turk enables tradesmen and SMEs to make easy and inexpensive collections by converting their smart mobile phones into POS devices. With its customer-friendly design, CebimPOS supports all smart mobile phones and enables payments from all credit and ATM cards regardless of the bank. CebimPOS service, which does not require any fee, can benefit all private companies and corporate customers that do not have the obligation of ÖKC (payment recording devices). Although our customers can apply to CebimPOS through Kuveyt Turk branches for now, it will be available for our mobile application soon.
 
 On the other hand, Kuveyt Turk aims to act proactively rather than just wait for customers to come to the bank and tell portfolio managers their needs. At this point, the goal is determining needs before they become needs. To reach this aim, Kuveyt Turk analyze customer behaviors in terms of their periodic turnover, loan usage trends, eft transactions, credit card payments, cash flow etc. Depending on these data, there are target customer lists based on the existing strategy of the bank. These dynamic target customers can be reached by their portfolio managers and it facilitates portfolio managers to be ready for their customers’ needs and prepare a required product scale for them. Apart from sharing the list with portfolio managers, if there is a need on direct communication with the customers, they are informed via mobile and internet branches with the technology of real time data processing, thanks to the bank’s improved campaign system.
 
 Last but not least are Online Finance and Online Letter of Guarantee. Both of these focus on making the loan process as easy as possible via digital channels without needing to go to branches or sign papers. Application is approved on the same day and payment is done to the related seller. On the other hand, rates of this product are less than other traditional ones since it eliminates the human effort in the loan process. Especially in the pandemic, customers use this product to protect their health while they continue to manage their work. All in all, Kuveyt Türk customers fulfill the needs for their cash and non-cash loans anywhere they are.
 
 Apart from these projects, making opening an account for enterprises/legal entities on digital channels without needing to go to branches becomes compulsory. For now, Kuveyt Turk has the capability to open an account for the retail customers called “Senin Bankan”. “Senin Bankan” means “Your Bank” in Turkish. Thanks to the success of “Senin Bankan” with five years of experience, Kuveyt Turk gains knowledge on such platforms. Now, the vision is covering the legal entities to make it easy to open an account far away from physical branches too. It is vital for the modern world especially for the new generations since their banking behavior differs from their parents. When they enter the business world and set up a company, they will still need to work with the bank. However, they do not prefer to go the branches so making strong digital channels becomes compulsory. Within this scope, Kuveyt Turk is not too far from the finish line on this project. Especially, farmers which live in rural areas will be able to use this technology and will become customers of Kuveyt Turk.

What were the immediate first steps your SME Department took internally to cope with the pandemic crisis and respond quicker to clients? How have you been helping your SME customers face the impact of the Covid-19 crisis?

The pandemic, unfortunately, resulted in income loss, high credit risk, problems in cash flow, decrease in annual turnover, unbalanced funding structure and increased cost. To overcome all these problems, Kuveyt Turk made arrangements; repayment schedules, and option for postponing the payments of loans in favor of customers. The pandemic officially began in March 2020 in Turkey. After announcement of BRSA, the risk departments of Kuveyt Turk took action and built up a totally new system to postpone the payments and control them. Firstly, customers sent their financial structure and any document showing if they need restructuring of payments. All these applications were evaluated and for most of them postponing was approved for 3 months. Kuveyt Turk supports its own business partners during the pandemic. On the other hand, when postponed payment dates has come, more than 95% of customers completely paid their installments and showed their goodwill too.

During the pandemic, thanks to changes in the organizational structure of the bank, Kuveyt Turk has the capability to fulfill these needs rapidly. With the organizational structure change, the marketing and sales departments were divided into two different departments. Marketing departments’ responsibilities are shaping the strategy, controlling the performance of the products, making product management and understanding the requirements of the market. On the other hand, sales departments are obligated to communicate with customers via portfolio managers, satisfy consumer needs and implement the strategy coming from marketing departments. Our new organizational structure has increased agility and resilience of the bank.

Thanks to Kuveyt Turk’s strong position in liquidity, applying all of these solutions does not bother the positive outlook for loan growth. So, Kuveyt Turk also does not lose lending appetite in the market and continues to support SMEs. Also, thanks to our online finance product, customers do not have to come to the branches to use loans. Instead of this they have benefited from online finance options with the more reasonable rates than the other loan products. This provides a preference to use mobile and internet branches rather than regular branches. Apart from online finance, credit cards and other digital solutions facilitate to meet with the customers’ loan needs.

All in all, even if it is challenging to manage all processes; experiences and knowledge on crisis management of Kuveyt Türk helps us to deal with the crisis with business partners.

From your point of view, what will the future bring for the SME Segment? What will SME banking look like five years from now?

Let’s look at five years ago, most of us did not have any idea about neobanks since there was just one neobank in the World in 2010; however, now, more than 350 neobanks have been established and continued their operations. So, dreaming is the first requirement but with an acknowledgement of realities. Today, the banking sector is like a data castle which means privacy and protection is at the maximum level. So apart from serving the financial products, banks become the center of data protection. With the improvements in the usage of data, altering the needs and behaviors of customers and new entrants like fintechs to the finance sector, three main concepts will come to the sector.
 
 First of all, there will be an increase in automation and less dependency on human power in 5 years. Even now we can hear the footsteps of the change but in five years, financial and customer models augment its influence in the process of decision making and application of these decisions from end to end. As an example, today, call centers, one of the most used direct channels with the customer, requires serious human effort, are also developing and becoming more automated day by day. At Kuveyt Turk, we also launched “Selim” which is a digital assistant. However, its role will be changed and widened to decrease the work load on the call center and eventually, the usage of the call center will become just optional instead of being a must, thanks to the digital assistant Selim.
 
 Second, the new entrants called fintechs. I do not think they are new anymore since their adaptation took a short time and have had a considerable impact on the sector. The important point for banks is detecting needs and choosing the right fintech to cooperate with. So, from my perspective, cooperation with them will not be a competitive advantage but will be compulsory. We will even see fintechs act as small banks. So, to survive, banks should use their trustworthiness and adaptation to regulations while acting agile to adapt themselves to dynamic customer needs and behaviors.
 
 Last, is communication. From the primitive man to today, communication has been a vital need of humanity. Even if the age is the technology age, consumers sometimes desire to see, talk or feel another person instead of a machine. From this perspective, physical branch concepts and bank employees’ role will be changed. Banks will become the place to drink a coffee and talk about your investments with the bank employee in the concept of the cafe bank branch with the soft music at the backside. They will be far away from cold, serious and structured places and turn into soft and relaxed places. Most of us know the example of Spotify and gramophone record. Yes we prefer to listen to music mostly with a music application in our daily lives, however, the taste of gramophone record is different since it feels special. So banks should offer to their customers services with both technological and personal interaction.
 
 All in all, in five years time, the banks will survive in the finance sector only if they can adapt themselves into new and dynamic trends in 3 main concepts: less dependency on the human power, cooperation with fintechs, and adaptation of communication trends. Of course these 3 concepts should be based on the highest data protection and efficient data cultivation principles.

This interview will appear in our upcoming report "SME Banking in Turkey: customer first". Pre-order your copy now!