Author: HG-Figyelő Magazin external article
For banks, yet with flexibility
Hungarian ApPello Ltd., which has an annual revenue of HUF 1.5 billion, one-third of it from abroad, and employs more than 100 people, delivers stable, effective and at the same time flexible banking software systems. The company actually started up two decades ago with just three employees.
The economic stimulus measures of the reopening are inducing domestic financial institutions to implement a number of changes, so risk assessment is now a key factor. In the meantime, bank revenues from lending are declining in a low interest rate environment, thus the outlook is clear for all banks: costs must be cut. These days, the best way of achieving this is through digital developments. ApPello Ltd., with more than two decades of banking IT experience, is building its latest strategy to meet this very challenge.
Founder and owner-managing director of the innovative tech company Béla Vér joined Inter-Európa Bank as a new IT graduate in 1992. At that time, Inter-Európa was a key driver of transformation in the banking sector. Shortly thereafter, the founder supplemented his qualifications with an MBA in economics, then with his banking experience he quit the bank and, in 1998, founded ApPello. Naturally, as well as his IT knowledge he also needed excellent banking connections, managerial skills but above all else, hard work and dedication. The small venture grew into a large company so today, Béla Vér is no longer directly involved in programming although he continues to coordinate strategic planning and setting out the directions of growth. Of course, the end solution is always the result of combined thinking with the team.
Today, it is strange to look back on the fact that the banking IT enterprise launched with only three employees, they developed several core systems but the demand for customization soon became apparent in the banking sector, thus began the development of supplementary modules. The founder transformed the company supplying ancillary activities into a product-based enterprise where software licences for premium products and, of course, the related services are the main sources of revenue. The other decision that was reached relatively early on was the shift towards digitalization of lending processes. Lending is the most profitable segment of banking, therefore financial institution decisionmakers are far more willing to spend on software development that supports lending.
The main product, the ApPello Digital Platform, a complex and sophisticated high-end software package with up to 100,000 man-hours behind individual modules, was finally put together from the initially stand-alone-type modules. The system can be imagined as a multi-layered cake: the platform, that is, the bottom layer, the base of the cake, is the same for all clients. This base layer accounts for approximately 50% of functions. On to this are added the layers developed for the given specialist area, for example, credit monitoring or factoring. Right at the top of the cake we have the cream, that is, the local modifications, local integrations, the most refined layer of customization. There is a client where this layer has to be coordinated with up to 25 other banking systems, so at this level flexibility is absolutely critical. This is where the particular strength of the product lies. At this level, bank clients are capable of implementing modifications themselves without the need to call on support from developers. What is more, the ApPello system is completely open, it communicates with all programming languages and is compatible with all other systems. Furthermore, it is characterized by a sophisticated design and ergonomics. The company works with its own UX team and it not only endeavours to maximize the customer experience but also to develop a user-friendly and ergonomic interface for back-office staff.
The parameterizability and openness of the system is reflected in the number of tenders it has won. Here in Hungary, and with the exception of the largest bank in the country (which has not yet joined the client list), they have business ties with virtually every bank (K&H, Erste, Raiffeisen, Unicredit, Budapest Bank, CIB, Takarékbank, Sperbank, Magnet Bank). In addition, they are gradually expanding into neighbouring countries. Their first target was the Czech Republic, where they have several banks among their clients, including two of the largest Czech banks: Česká Spořitelna and Komerční Banka. Export activity accounts for about half of the current revenues of HUF 1.5 billion, although this can vary from year to year depending on the prevailing projects. The management of ApPello has made no secret of the intention to win over Western European banks in addition to Eastern and Central Europe institutions in future, and Middle Eastern Arab countries are also looked on as a potential client profile.
“Today, we are no longer a startup, nor are we such a giant that we are unable to adapt and catch up with the very latest technologies. It was always our aim to employ state-of-the-art technology but the system should be easily customizable and adjustable. Clients have also given us their feedback that in this respect we are leading the field.”– says Béla Vér.
Thus the IT development entity, which started out with just three people, has today achieved a dominant position among the flexible, fintech medium-sized enterprises in the Central-Eastern European region. And it has done this at a time when constant cost cutting and short-term regulatory changes are placing increasing pressure on the banking sector; it is a major bonus if a client is able to modify certain functions without the need to call in developer support.
Today, the company’s products span the entire lending process chain: this includes both the back-end and front-end parts of lending, debt rating, risk management, credit monitoring and collection management, but they also supply solutions for auxiliary tasks related to the core banking system, for example, the cash management module that also uses AI, which has won a top professional award.
As to the future, this is seen as developing in two directions: on the one hand, marketing as a cloud service, and on the other hand, a much faster implementation process. The fact is that in the case of traditional, mature banks, implementation still largely occurs on an on-premise basis, the implementation cycle is relatively long and the project progresses more slowly due to the bank’s convoluted decision-making processes. It is the openly-stated intention of the enterprise to be able to count as one of its clients the mega-bank taking shape in Hungary and to have products that outstrip the competition. For example, the risk management module is an extremely strong product and the flexible decision-engine module guarantees continuous adaptation in today’s volatile regulatory environment. These processes are demonstrated live, on-site, within the framework of various workshops.
Meet with AI
Besides deploying AI and neural network-based machine learning, and in addition to the abovementioned cash management control, last year the company also set out to develop an AI credit assessment and loan proposal app with a total budget of HUF 500 million. The project is expected to last three years and its initial implementation will begin to roll out in late 2022.
The number of employees that approached one hundred dropped off slightly in the first period of the pandemic, but since then new staffers have been brought in to replace the layoffs, indeed, the team has been expanded. According to the founder, there has actually been a quality upgrade with even greater emphasis given to selecting and retaining the best workforce. The idea is to bridge the IT labour shortage with motivational targets and a competitive bonus system, training courses provide an opportunity for continuous learning development for programmers, while managers in senior positions have been strengthening the team for 5-10 years.
Aside from the transition to remote working, which, admittedly, is not a major challenge for an IT company, there has been no significant change at ApPello resulting from the pandemic. Indeed, since its onset they have actually won several commissions. All banks are developing new strategies for the post-Covid period, especially in the area of lending, and government decisions have sparked intensive lending programmes. Béla Vér believes there is likely to be huge movement on the credit market, and he adds: ApPello is ready for the challenges ahead.
This article was published with ApPello CEO in tthe most prestigioues business weekly magazine in Hungary, Figyelő Magazin. The original article is in Hungarian, this is a direct translation.