Breaking down tech overhauls with CKV’s chief digital officer

Centrale Kredietverlening (CKV), a family-owned Belgian savings and lending bank, is in the midst of a technology overhaul so it can connect to more of Europe’s savings marketplaces.

Emmanuel Lambert, CDO at CKV

The bank has revamped its front-end with nCino’s cloud banking platform, whilst it is still in the process of replacing its 25-year-old legacy back-end with US fintech Mbanq’s banking infrastructure.

Implementation of nCino’s solution took a year and was initially meant to go live last month but the bank decided to take April to do “deeper testing with real cases”.

“Once the digital transformation is completed, we want to build out a network with third parties to maximise leads and extend beyond our classic broker network,” chief digital officer (CDO), Emmanuel Lambert tells FinTech Futures.

“We want to double the business number with the headcount flat,” says Lambert. By outsourcing technology to nCino and Mbanq, CKV can cut its costs and innovate with individual licence fees rather than with more people.

“As a small bank you want to put investment into parties which are going to make a difference to the bottom line,” says Lambert.

CKV serves roughly 450 independent brokers as direct clients in France and Belgium. Part of its offering enables brokers to provide mortgage-backed loans to people which traditional banks would deem to be too high risk. Currently, the bank issues roughly €200 million in mortgage-guaranteed loans across Belgium and France.

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Credit conditions have tightened in Belgium this year. As of 1 January 2020, the central bank has asked banks and insurance companies to be “more cautious about granting loans with a very high loan-to-value ratio” – that is, the amount borrowed with the mortgage loan in relation to the value of the property.

CKV, being a bank which takes on high-risk, often temporary – two to three year-long – mortgage-backed loans, is likely feeling the squeeze of this change, hence why it is looking to bulk out its savings business with avenues for profit abroad.

This leads us to the other part of the bank’s business, what it calls its “competitive” savings products. Currently its Saving Account rate stands at 0.10%, whilst the benchmark interest rate in the Euro Area was last recorded at 0%, according to Trading Economics.

ING, one of Belgian’s popular high street banks, offers an easy-access ‘Orange Savings Account’ with a base rate of 0.01%, whilst fellow incumbent Belfius’ base rate for its regular Savings Account is also 0.01%.

So whilst 0.10% might not sound very competitive, in Belgian’s current banking climate this is actually a better rate than many high street banks are offering.

CKV wants to use the tech it’s investing in to extend its savings network to European marketplaces. The bank already works with Raisin, the first pan-European savings marketplace, and Deposit Solutions, a German-based open banking platform connecting banks and depositors.

CKV wants to use the tech it’s investing in to extend its savings network to European marketplaces.

These marketplaces allow CKV to compete with banks in other European countries such as Malta and Lithuania where interest rate competition will vary, rather than just competing with local incumbent banks such as Belfius, Rabobank, and ING.

“We can source money competitively from alternative platforms like Zinspilot or Raisin, and balance this with the fees we have with local agents,” says Lambert.

In the next five years, the CDO says the bank wants to connect with more third parties like these which can source the bank deposits for a smaller price tag.

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In February, Raisin confirmed the strategic placement of more than €20 billion with banks based in 25 different countries, showing just how big the opportunity is for small banks like CKV to tap into this ecosystem.

CKV’s total assets under management jumped from €663 million to €932 million between 2017 and 2018. For one of the smallest banks in the country with just a 0.09% share of its domestic market, this 40.52% leap in assets is impressive.

Lambert says the reason for the increase is down to how competitive the bank’s offering is compared to high street banks, but the massive spike compared to previous years where assets flat-lined between 2014 and 2016 seems to be reflective of more than just a consistent competitiveness.

According to its 2018 end of year results, the banks’ loans to customers went up from €536 million to €739.8 million, and loans to banks went up from €118.5 million to €176.2 million between the two years.

Lambert also mentions the growth mentality held by the bank’s CEO Rudi Deruytter, who is behind the lender’s ambitious “double the business number with the headcount flat” strategy.

When asked who its direct competitors are, Lambert only mentions one Belgian bank – Europabank. A subsidiary of Crelan, the seventh largest bank in Belgium by assets (€20.4 billion) in 2018, Europabank is significantly bigger than CKV.

Lambert also mentions Maltese savings and investment bank MeDirect, which holds a notably smaller €2.98 billion in assets, putting it in closer leagues with CKV.

For CKV – the 40th largest bank in Belgium (out of 128 banks) – it seems some of the bigger opportunities to be had are abroad and not necessarily at home, hence its digital strategy hinging on investing in tech which can connect it to the wider opportunities of the European market.

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