Tinkoff Bank optimizes expenses with SAS®
Bank uses SAS® for cost-benefit analysis to streamline processes, maximize profit
To better understand costs associated with its banking products, customer segments and client service channels, Tinkoff Bank chose SAS® as a specialized solution to allocate expenses using activity-based management (ABM) methodology.
"Maintaining transparency of our business processes’ management has remained a priority as our business has been growing and our business model has been getting more complicated," said Pavel Tokarev, Vice President for Finance and Strategic Planning and Deputy CFO of Tinkoff Bank. “Full-scale ABM solutions require big data loads about bank operations and customers. After careful analysis, we implemented SAS beginning in late 2013. We were impressed by SAS software’s capabilities and the ease of integration into our existing infrastructure.”
Glowbyte Consulting, a SAS Russia/CIS partner, assisted with organizing data loads, developing methodology and adjusting the resources-cost centers interaction model. The system’s financial model evaluates investments in a particular acquisition channel, a customer segment or a banking product. The bank can then adjust the rate/interest policy more precisely, based on actual information about customer behavior, and react quickly to market changes for better profitability.
Tinkoff Bank’s basic SAS ABM model comprises five main units: resources, business processes, activities, products and channels. More than 30 groups of calculated indicators influence prime cost calculation. The system encompasses the entire bank structure, down to department levels and working groups. Bank expenses are thus sufficiently – but not excessively – itemized, and product costs traced.
"We achieved the level of itemization we needed in order to understand the cost structure faster and more accurately,” said Tokarev. “Now we justify investment decisions and trace their consequences. We can understand different projects’ contributions to the current financial result, make corrections to product lines, optimize processes, detect problems and find ways to save resources. The finance department ordered the system, but the results are increasingly popular with the managers of practically all bank departments.”
The system’s first calculations helped to detect and eliminate faults when evaluating efficiency of the bank’s departments. "We saw right away where and why inconsistencies at expense allocation arise,” Tokarev said. “For example, some departments take into account VAT and Uniform Social Tax while others don't, making it hard to compare efficiency. We also found cases where expenses weren’t included, since it was assumed that another department was claiming them. SAS helps us to implement unified principles of calculating expenses and prime cost across the entire bank, eliminating inconsistencies in accounting reports."
The bank’s managers use SAS to improve financial indicators and optimize internal processes.
"We started off solving basic issues. But in the near future, we plan to expand our use of SAS,” said Tokarev. “In particular, we’re working on conducting stress testing using the results of calculations from this system. We will be able to better understand how any external event (for instance, changes in laws or rates) will influence our profitability. In another example, comparative testing will help us select cost-optimal marketing activities.”
This past September, Tinkoff Bank began using SAS to calculate the complete financial model monthly. This will allow the bank to better trace all dynamics and give additional feedback to managers. Tinkoff Bank is planning to further itemize expenses by breaking them down by customer and interaction channel. It will also add new products and derivatives to the system, along with development and marketing.
About Tinkoff Bank
Tinkoff Bank is an innovative provider of online retail financial services operating in Russia through a high-tech branchless platform. The bank was founded in 2006 by a Russian entrepreneur Oleg Tinkov to service clients in the credit card market. In 2009, the bank started to attract retail deposits, and is a member of the national deposit insurance system. As of 1 November 2014, the bank issued 4.8 m credit cards. According to the Bank of Russia data as of 1 October 2014, Tinkoff Bank controls 6.7% share of the Russian credit card market. Net income of the parent company TCS Group Holding PLC, which includes Tinkoff Bank and the insurance company Tinkoff Online Insurance, amounted to RUB 2.8 bn in 9M 2014 (IFRS).
In 2013, The Banker magazine, the world's premier banking and finance resource and Financial Times Group member, named Tinkoff Bank the Bank of the Year in Russia. In 2012, Global Finance magazine and Banki.ru portal presented Tinkoff Bank with the Best Internet Retail Bank in Russia award. In 2014, the internet bank of Tinkoff Bank was deemed the most effective in Russia by Markswebb Rank & Report agency. Tinkoff Bank is a member of the deposit insurance system (starting October 2008, the system has guaranteed each depositor of member banks the payout of RUB 700,000 on deposits and current accounts, including interest income).
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