Vice-President of Russian Bank Otkritie: Worst of the Crisis Not Over Yet

Vice-President of Russian Bank Otkritie: Worst of the Crisis Not Over Yet

Vice-President of Russian Bank Otkritie: Worst of the Crisis Not Over Yet

The FINANCIAL -- Russians are still trying to adjust to life with cheap crude. However, the worst of the crisis is still expected to arrive. Empty commercial spaces available for rent or for sale have become a common sight in Russia. The business community, expecting to overcome the recession in a short period of time, has already exhausted their resources. The ability to adapt to changing conditions is the only way to overcome the existing difficulties. 

In his interview with The FINANCIAL, Boris Dyakonov, Vice-President of the bank Otkritie, CEO and Co-founder at Tochka, which offers traditional banking services to enterprises, provided his estimation of the Russian economy and how businesses are dealing with the crisis.

“We are still trying to adjust to what is going on. Some say we have not seen the extent of the crisis yet, others say we have overcome it. My estimation is that not all of the aftermath has been realized. I expect some kind of postponed effect, like when you are still falling but have yet to hit the ground. There are many uncertainties right now. What I see is a lot of empty spaces in Russia where before there were shops or bakeries. This means that there used to be many businesses which have now closed down. Such businesses were feeding the entire families of their owners, those of their employees and the banks as well. The impact has also extended to the owner of the space, who used to get income from renting it out. If the commercial space was purchased with a bank loan, now they cannot pay the interest rate. So, we are seeing a whole chain that is suffering from the existing situation. When walking down the street I see lots of signs saying ‘For Rent’ or ‘For Sale’. Statistics are an abstract thing, one cannot feel them. However, this is what I am seeing with my own eyes. Unfortunately no positive trends have been noticed yet. There is nothing the banks can do in this situation; they are just absorbing all these impacts and learning how to exist in such conditions,” said Dyakonov.

Dyakonov heads the Russian Bank24.ru. In 2014 the Bank lost its license, officially, because of questionable transactions. Former pastor and programmer Dyakonov is considered to be a new generation banker in Russia. With his team and employees from Bank24.ru Dyakonov established the company Tochka, which is a service bank for its clients. The main segment of its clients are SME businesses.

“After losing our license many great things happened around us. We received huge support from our clients and also our partner banks. At the same time I was awarded the title ‘Banker of the Year’. We thought that we would not survive, however we managed to resume our work and become stronger. Overall the situation was a Black Swan theory for us. Nassim Taleb, author of the Black Swan theory, has also published a book - ‘Antifragile’. The main message of the book is that some things benefit from shocks; they thrive and grow when exposed to volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty. There is no word for the exact opposite of fragile. He calls it antifragile. Antifragility is beyond resilience or robustness. The resilient resist shocks and stay the same; the antifragile get better,” said Dyakonov.

Q. What has the ongoing crisis taught businesses?

A. The main lessons of the crisis are to react faster and be flexible. There is no one recipe here. The only thing to do is to exist less in a zone of dejection, but understand that all of this will pass away and dissolve with time. If we consider the previous crisis in Russia, it did not have an impact on all businesses, and everything was soon restored. Currently we are dealing with a more complicated situation, although many people thought it would be restored soon. As a result they have already spent all their resources, used up all their ‘fat reserves’, which would otherwise be used for restructuring. I would like to recall in this instance a certain motivational tale - ‘Who Moved My Cheese’ by Spencer Johnson. The main message of it is that sometimes situations change permanently, and the ability to adapt is important for one’s survival. Simply regretting the loss is a guarantee of failure.

Q. Tell us about Russian entrepreneurs - what are their main distinguishing features?

A. If you gather them around a table they will get acquainted with each other very quickly, exchange contacts and sell each other and me their products. They are wildly active. It is like there is a nuclear power station inside them. If you but pause for a moment - a slight gap in the conversation - you'll be buying any virtual PBX.

When you’re in a bad mood all you need is a meeting with an entrepreneur, everything becomes great after that. One such person wildly inspired me. I spoke with him delicately about how there was a crisis, a reduction in demand, etc, and asked how bad it was with his business. He responded: if my company made up 100% of the market, the crisis would indeed have affected me. However, as my market share is so small, I manage to grow normally even in a shrinking economy. So, they are able to see opportunities.

Entrepreneurship in Russia is still like a young wine. It is developing.

Q. The majority of post-Soviet states had to deal with the ugly legacy of the influence of criminal authorities. Fortunately Georgia has beaten it. How is the situation in this regard in Russia?

A. It is fading, like smoke. Lots of people have travelled abroad. They are now running businesses with the bourgeoisie in a very civilized way. A part of society has not had to grow up in this atmosphere. They can look into one’s eyes and smile sincerely. They are alive and are not afraid of their emotions. This number of people with these outdated manners is becoming smaller, in both the streets and the business environment.

Q. How have the demands of the SME sector been changing from year to year?

A. 15-20 years ago people were glad to carry out transactions via their PCs. Now they expect to get all their services from their mobile devices. The story of Uber is a good example. When they were first launching their services the company questioned people about how many minutes they expect their taxi to take to reach their destination after ordering it. The majority of respondents said that ten minutes was an acceptable amount of time for them. So Uber started delivering taxis in seven minutes. Two years later the company ran another study. And the majority responded that they wanted their taxis to arrive in five minutes. This is human nature. We always expect improvement of quality, faster services and cheaper prices.

Q. During your presentation at SME Banking Club you said that every business should always ask itself what the market will lose if I were to not exist tomorrow. Don’t you think that most of the businesses are focused on profit and care less about the values that they bring to society?

A. Profit is always a result. It is not a “raison d’etre”, or sole purpose of being. There is a banal explanation for getting profit, it means making things cheaper, then consumers can pay and create value. Being focused on figures will lead to failure sooner or later as this dims a business’s vision. In this regard SME is a good example. They do not have the luxury of going deep into figures and tables. They see their consumers directly.

I believe that there is always room for taking services a step forward and being a bit more useful to your customers. The analogue is mobile operators. One can just receive and deliver text messages. In addition, it is also possible to inform subscribers regarding the weather and warn if it is going to rain today and not to forget one’s umbrella. The key step is looking for valuable things in such banal issues. Due to many analyses and experiments we have learned to add values to our services to benefit, and gain favour with, our clients.

Q. Considering the ongoing difficulties within the Russian economy, are you witnessing less involvement of the banking sector in implementing innovative services?

A. Those who realise that there is no other option, try to find financial resources for implementing technological know-how. Maybe the scale of investments is not equal to pre-crisis figures, but they are still trimming the sails to the wind.